Defendant in Subscription Fraud Lawsuit Sues Former Business Partner
Partner allegedly embezzled $5 million from defendant and another partner.
In May 2016, the Federal Trade Commission (FTC) filed a complaint in U.S. District Court in southern Oregon against dozens of third-party subscription companies who allegedly defrauded consumers of more than 375 publications nationwide by charging inflated renewal rates. Dennis Simpson, now living in San Diego, was named in that lawsuit along with business partner Jeffrey Hoyal and dozens of individuals and companies. Simpson has filed a $5 million lawsuit in Jackson County Civil Court against Hoyal, alleging he embezzled millions from Simpson and another partner, reports the Mail Tribune.
According to the Mail Tribune, Hoyal misappropriated more than $6.3 million revenue that was supposed to have been split among the partners. Instead, Hoyal allegedly breached his fiduciary duty over 15 years of their business relationship, transferring two years of profits from their subscription business called Mail Industries. According to the lawsuit, Hoyal paid the $6.3 million to Breeze Enterprises, a company he solely controlled. The lawsuit makes additional allegations against Hoyal not related to the subscription scam.
In the FTC action, Simpson and Hoyal have denied the subscription scam, saying they were consultants but did nothing wrong personally. According to the FTC lawsuit, the subscriptions were paid to the newspapers, but the price charged was as much as 40 percent higher than the publications would have charged.
The FTC said consumers also complained about fake notices, delays in receiving the publications, receiving the wrong publications, and paying twice for the same subscription. The publications who were misrepresented in the fraud scheme include The New York Times, The Wall Street Journal, the Denver Post, Forbes and others. In addition to the FTC lawsuit, which is still pending, attorneys general in four other states – New York, Minnesota, Missouri and Texas – filed similar lawsuits.
The FTC has not updated its website with a status update, but in February , FTC consumer education specialist Colleen Tressler published a blog post about how to keep track of magazine subscriptions, which is good advice for any subscriber:
- Keep a running list of subscriptions including account numbers and expiration dates.
- Understand that a renewal notice is not a bill or an invoice. It is a reminder that your subscription will expire soon.
- Pay attention to where the offer is coming from – the subscription company itself, an official representative or an unrelated third party. (Be sure to read the fine print.)
- Consider auto-renewal and pay with a credit card.
Though the FTC’s lawsuit in Oregon is still pending, it remains a cautionary tale for consumers as well as subscription companies. Knowing who you are dealing with and questioning renewal rates, particularly when they seem exorbitant, is a smart practice and don’t hesitate to contact the publisher directly if something seems amiss.
It is interesting that Simpson filed a suit, alleging embezzlement from his partner. While the allegations may or may not be true, it draws more attention to Simpson. He seems to have gotten plenty of that already, and none of it good.