A group of companies has again been fined for running a fraudulent subscription ring for major newspapers and magazines that affected nearly 70,000 people.
Operated mainly out of Oregon but affecting thousands of New Yorkers, the New York Attorney General Letitia James said New York’s State Supreme Court awarded those affected by the scam total restitution of $16 million, including penalties. The scam was run by a collection of companies in the two states under holding company Orbital Publishing Group Inc., selling subscriptions to some of the most high-profile and well-known media operations that were either falsely priced or procured. These included newspapers The New York Times, The Washington Post, The Economist and The Wall Street Journal, and magazines The New Yorker, Entertainment Weekly, Forbes, The Nation, Time and National Geographic.
“The subscription to New Yorkers’ hard-earned money is canceled for these deceptive magazine and newspaper companies,” James said. “This decision sends a message that, as the nation’s media headquarters, New York will not serve as a safe haven for those who aim to cheat, scam and defraud our consumers. This is an important victory for the millions of New York consumers who could have been victims in the future.”
The New York investigation was prompted after the various media companies learned consumers were being solicited for subscriptions without their knowledge. Despite sending cease and desist letters to Orbital and its many affiliates, the letters were purportedly ignored outright.
Orbital operated nine individual companies with names like Publishers Payment Processing and Associated Publishers Network. Lydia Pugsley, who owned another Orbital company, Adept Management Co., has also been found liable as an individual in the New York case. In an action earlier this year in Oregon, Jeffrey Hoyal and Dennis Simpson were found to be the leaders of the scam and behind the sending of “millions and millions” of paper mailers to people around the country that were fake, but made to look like they came directly from the publications. They were hit with a $9 million judgment, according to court records, although each man was said to have made an estimated $15 million from the scheme.
According to the New York investigation, the Orbital companies operated by pitching people “the lowest rate available for subscriptions” to major publications, while in reality subscribers were often being charged “more than double the subscription rate charged directly by the publications.” In many instances, Orbital would actually effectuate a subscription on a consumer’s behalf, but would “pocket the difference” between the actual subscription price being offered directly from publishers and the price Orbital was charging. In other cases, Orbital would make money by prompting renewal subscriptions before a subscriber even needed to renew, taking the money for itself.
Now Orbital has been permanently enjoined from operating and the New York Supreme Court ordered it to pay more than $16 million in penalties, restitution and legal costs. Orbital is also facing an enforcement action by the Federal Trade Commission. While all the parties involved seem to have avoided any jail time, they have all been prohibited from working in any subscription-related field.