FOR IMMEDIATE RELEASE:
July 25, 2003

FOR FURTHER INFORMATION CONTACT:
Peter Aseltine (609) 292-4791

NEWARK — The Attorney General is suing a Monmouth County company, alleging the company and its principals cheated consumers out of thousands of dollars by falsely promising them the “American Dream of Home Ownership” even though they could not afford to purchase a home through conventional means, Attorney General Peter C. Harvey and Division of Consumer Affairs Director Reni Erdos announced today.

The eight-count complaint, filed in Monmouth County Superior Court, names Paragon Educational Services, Inc., formerly of Red Bank, and its principals, Frank Perez, of Middletown, New Jersey, and Manual Prieto of New York State. The suit also includes unnamed individuals and companies that may have worked with the defendants.

New Jersey alleges that Paragon preyed on vulnerable consumers by perpetrating a scheme in which they solicited individuals with low incomes or credit problems into purchasing an educational program, saying in their ads that people who qualified for the program would be able to buy a home without having to pay down payments or closing costs.

“The dream of home ownership should not turn into a nightmare because of deceptive business practices,” Attorney General Harvey said. "We must protect the public from schemes which promise the world, take citizens’ money and deliver nothing."

A typical example of what would occur would be the following: A consumer would respond to a Paragon ad thinking it would be a good program for him, since he had bad credit. A sales representative would come to his home to explain the program. The consumer would pay a $125 “financial evaluation fee” and be approved. He then would be told that he needed to make four “enrollment” payments of $950 each, which the representative would collect in person each month. He would be told to go out, find a home, and bring the information back to the company. A month after completing all the payments, he would be advised that he was not approved for financing. The consumer would attempt to contact the company to no avail. The consumer would end up not only without a home, but out nearly $4,000.

“Owning a home is the American dream,” Erdos said. “Targeting unsuspecting consumers looking for home ownership with a program that never works is reprehensible.”

The state’s complaint alleges that the company, through its newspapers and fliers, lured customers into believing they had little or nothing to lose by investing in the program. After responding to the ad, consumers were asked to pay the $125.00 "financial evaluation fee," to determine if they qualified to participate in the Paragon Educational Services Program. They were told that if accepted into the program, the evaluation fee would be applied to an additional enrollment fee, referred to as “tuition,” that would entitle the consumer to be educated on how the program worked. That tuition fee would be $2,000 or one month’s household combined gross income, whichever was greater. Consumers were required to pay the tuition by cash, money order or certified check.

The complaint further alleges that the company did not always provide consumers with executed documents; verbally advised consumers to disregard the information concerning education in the documents; and told consumers that the service being provided to them was home ownership. Consumers were advised that the tuition paid would be credited towards the purchase of their home.

The State’s complaint alleges that the contract entered into between Paragon and the consumer reads that the consumer may select a real estate agent of his or her choice when, in fact, the consumer could only deal with real estate agents approved by Paragon. Those agents did not work with the consumers and often did not show consumers ten properties. As a result, consumers could not provide the defendants with ten rejected offers, which would entitle them to a full refund of all monies paid, according to the signed documents.

The Division of Consumer Affairs received more than 60 consumer complaints from people who signed up for the program and said they did not receive the promised educational materials, were not given refunds when they requested them and were unable to purchase homes. None of the complaining consumers was able to purchase a home utilizing the company’s program.

The eight count complaint alleges the company misled consumers into believing that:

• they could afford to buy a home if they could afford to pay rent;
• they would be able to purchase a home despite the fact that they had bad credit or had previously filed for bankruptcy;
• they could choose the home in the location where they wished to live;
• there was a 100 percent money back guarantee if consumers were unable to purchase a home.

The State’s complaint seeks an order requiring the defendants to stop their alleged unlawful activities. The suit also seeks to have the defendants pay restitution to affected consumers and civil monetary penalties, costs and fees.

Deputy Attorney General Beverly A. Lapsley of the Division of Law is handling this case for the State.

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