State Attorney General Hardy Myers filed a lawsuit this month against four California corporations, claiming they advertised "free" English-language instruction courses and later charged exorbitant shipping and handling fees.
Moreover, the lawsuit filed in Marion County on behalf of eight Oregon victims accuses the defendants of demanding additional money for products the consumers never ordered or received.
It also says the defendants falsely represented themselves as third-party debt collectors and lawyers.
"In all cases, the victims owed the defendants nothing," the petition says. The suit seeks civil penalties of $1,175,000 for 47 alleged violations of the Unlawful Trade Practices Act and asks that the defendants be permanently barred from advertising or conducting business in Oregon.
Named in the suit are Dulce Ugalde and four companies: Tono Records, Promo Publishing, Promo Music and Millennium Three Corp. Attempts to reach the corporations and Ugalde for comment yielded disconnected phone numbers.
The Federal Trade Commission's Bureau of Consumer Protection said the alleged operation spanned into 12 states, the Statesman Journal newspaper reported.
"It's possible there are others that we don't know about," Sarah Schroeder, a spokeswoman with the FTC's consumer bureau in San Francisco, told the newspaper.
Myers got help from four Willamette University law clinic students who worked the case for more than a year.
The students learned of the alleged fraud from the Department of Justice after the targeted victims submitted complaints.
"The defendants targeted people who are marginalized and vulnerable, who aren't proficient in English, who don't know their rights, and who are least likely to complain," said Jared Boyd, a third-year law student.
One customer was Patricia Salgado, 35, of Mount Angel, who ordered the free course but agreed to pay $149.99 for shipping and handling. Salgado paid with a bank card.
Salgado says that was the start of a constant stream of harassment, misrepresentations and threatening letters.
In April 2006, more than two years after receiving the English-language course in the mail, Salgado said, she was again contacted by the company.
"They told me I had never paid for the course and that they had filed a lawsuit against me," Salgado said in Spanish. "They told me they would stop the lawsuit and keep it from going to a judge if I paid $996.76."
Salgado said she told the caller that she didn't have the money and thought the course was supposed to be free. But, Salgado said, the caller insisted the money was owed and the debt would appear on her credit report.
In a separate call from the company, Salgado said she was told the lawsuit would be dropped if she paid $350. She paid the money with a bank check.
"Like a little child, I learned a lesson the hard way," said Salgado, who's taking English classes at a community college.
AG: 'Free' English lessons a scam