QuakerCard operators settle with 35 state AGs

It is not uncommon for graduates of the Wharton School to be recognized for their entrepreneurial skill and marketing savvy. But when those talents draw the scrutiny of law enforcement officials from coast to coast, the results stand far from fame and fortune. Such is the case of Matthew Levenson, Chris Cononico and Michael Vaughn, three 1997 Wharton graduates who in 1996 founded University Student Services -- the parent company of the now-defunct QuakerCard, the popular local debit card service that abruptly shut down its operations in May. But now, thanks to a recently-signed agreement with 36 state attorneys general, University Student Services has folded completely. In doing so, company officials resolved widespread allegations of fraud and deception with thousands of students across the country receiving refunds from the company. When the QuakerCard burst onto the scene two summers ago, the company's founders were plagued with charges of misleading Penn students and their parents into thinking that the card was affiliated with the University. However, within a year of its founding, according to Levenson, "significantly" more than 3,000 students had stored money on the card, which was accepted at several dozen local merchants and eateries. University Student Services came under fire again this spring, when -- calling itself as the National College Registration Board -- it advertised a $25 "Campus Card" to 1.8 million high school seniors in an April 8 mailing. While the Campus Card -- like the QuakerCard -- is not affiliated with any university, the NCRB told students that the $25 card is "required" for a range of services and discounts nationwide, regardless of what school the student attends. A brochure accompanying the letter featured a card with the University of Michigan logo and the company's World Wide Web site -- now removed from the Internet -- and also displayed the names of hundreds of colleges. Officials at the University of Michigan and several other schools denied any connection between the advertised card and their respective institutions and in some cases requested investigations of the unlicensed use of their copyrighted logos. However, trademark violations would be the least of the worries for the Campus Card's purveyors. While their offer would bring in thousands of dollars of revenue, it also resulted in scores of calls and complaints to state and local consumer protection and law enforcement agencies. Many allegations of fraud were based on the fact that the Campus Card was not affiliated with any banks for its purported debit card services. Nor were there advertised discounts that required any card aside from the identification issued by most schools to their students. However, Levenson did say that the card would have enabled students to buy textbooks at a discount from an on-line retailer. According to Karen Cordry, an attorney handling consumer protection issues with the National Association of Attorneys General in Washington, D.C., the effort of the various states followed the pattern of other recent suits, such as those brought against America On-Line, Sears and the nation's tobacco companies. "One state or two states will hear about it," she said, adding that states will combine their efforts as complaints trickle into the different attorney generals' offices. "Usually there are two or three or four or five states that take the lead." In this case, officials in New Jersey -- home to the Princeton-based National College Registration Board -- spearheaded the inquiry into University Student Services. "We began the investigation, and as other states started to voice concerns, an executive committee of seven states was formed," said Genene Wiggins, a spokesperson for the New Jersey Division of Consumer Affairs. Officials in Florida, Iowa, New York, Ohio, Pennsylvania and South Dakota joined the New Jersey representatives in negotiating the settlement with the Wharton graduates. Under the terms of the July 8 agreement, the NCRB will repay the $67,025 it collected from the 2,681 students and parents who paid $25 for the card. Additionally, the company will give back about 3,100 uncashed checks and the U.S. Postal Service will return between 5,000 and 7,000 pieces of mail held at the Princeton post office since May. University Student Services and the National College Registration Board are also prohibited from doing business for three years. "They're out of business, for one thing, which they were ready to do early on," said Senior Deputy Attorney General J.P. McGowan, who handled the case for Pennsylvania. "If they should ever go back into business or do something such as this, they would open themselves up to some substantial fines." The Assurance of Voluntary Compliance and Discontinuance stipulates that each of the defendants are subject to $30,000 in civil penalties to each of the 36 states affected -- or more than $1 million each -- if they violate any provision of the agreement. In a series of press releases, the attorneys general involved in the settlement proclaimed victory over the alleged forces of greed and deception. "I'm happy we stopped this company before more parents and students were defrauded," Maryland Attorney General Joseph Curran said. "The marketing of these cards was not only misleading, [but] there were serious doubts at to whether the cards themselves were even worth the paper they were printed on." New York Attorney General Dennis Vacco was less subtle about his belief in the company's intentions. "In reality, it was nothing more than a rip-off," he said. Several attorneys general -- most of whom are popularly elected -- particularly emphasized students in their own states who were defrauded by the Campus Card. "[The] NRCB gets an 'F' for trying to cheat Minnesota students with its Campus Card scam," Minnesota Attorney General Hubert Humphrey III said. "As consumer counsel for the citizens of Virginia, I will not tolerate any activity that threatens to mislead students and parents, particularly during this important time in their lives," Virginia Attorney General Mark Earley said. University Student Services officials could not be reached for comment. But Henry Feintuch, managing partner for KCSA Worldwide -- the New York City-based public relations firm which represents Levenson -- insisted that the turmoil created was unintentional. "The company is hoping to end the confusion they created on the marketplace and move forward," Feintuch said in May.

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