Open Season
In promising that there would be more to come, the assistant attorney general proved as good as his word. Management at Penguin Windows found out the company was being investigated two weeks after they learned of the investigation into Evans Glass. Four months after Evans Glass signed its consent decree, the attorney general’s office filed a formal complaint against Penguin Windows, one of the largest companies in the home improvement industry, specializing in triple-pane vinyl windows.
Soon under investigation were Harley Exteriors, West Coast Vinyl, Seattle’s Best Home Improvements, Energy Exteriors and, later, Northwest First Choice. Ultimately, complaints were filed against all these companies, with specific allegations varying from one to the next. All signed consent decrees conceding to the attorney general’s office the right to monitor their business activities for compliance.
Zurlini, Washington’s assistant attorney general and the person leading the investigation and filing charges, says that once the window replacement industry came to his attention, he concluded that practices such as big price drops and exaggerated claims of energy savings were standard issue, making a significant minority of companies within the industry suspect. He theorizes that whatever one company did that made it successful was quickly adapted for use by competitors, soon becoming an “accepted practice” that companies mimicked “to stay competitive.” He also claims that far from singling out just large companies, his office can and will identify and prosecute individual proprietors who deceive consumers. What’s clear, though, is that big home improvement companies make obvious targets.
So why didn’t companies change their methods after receiving Zurlini’s letter? D.S. Berenson, a partner in Johanson Berenson, a Washington, D.C., law firm that represents home improvement companies all over the U.S., says that many companies use similar marketing and selling methods, methods that have been in place for decades. He speculates that the prospect of having to change those methods proved overwhelming. “So, on receipt [of the letter], you either don’t take it seriously or you can’t take it seriously because you’re not aware of any other way to conduct the business,” he says. “Or you adopt a wait-and-see attitude,” which is apparently what many of the window replacement companies that got the letter chose to do.
“We all knew it was coming,” says Penguin Windows general manager Vaughan McCourt, “but we had no idea how severe it was going to be.”
Win or Lose, You Lose
All six companies chose not to fight the complaint in court. “It would be like trying to catch a falling knife,” Berenson says. A company can’t win in court, he adds, “unless you have an awful lot of time and money and attorneys that know what they’re doing. And it will involve publicity that is not beneficial to the contractor. Win or lose, you lose. Because at the end of the day a newspaper may print a story saying you’re completely exonerated. What do you do, put that in your pitch book?”
In effect, a consent decree entitles the attorney general’s office to dictate management changes. For example, according to McCourt, the attorney general’s office wanted the company’s entire sales presentation “retooled from beginning to end.” Telemarketing scripts had to be rewritten to eliminate terms such as “free estimate” and “no obligation.” Penguin Windows’ 40% energy-savings pledge was altered. Companies can say that customers may save 40% but not that they will save 40%. A word is the difference between legitimate and deceptive. “The amount of things we had to change was titanic,” McCourt says. Penguin Windows asked for 90 days to implement the changes. The attorney general insisted on 30 days. The agreement specified 60 days. Like Evans Glass, Penguin Windows saw cancellations rise due to the publicity.
And while Penguin Windows struggled to cooperate, another company ? Energy Exteriors, of Tacoma, Wash. ? simply paid the assessed legal costs and closed.
The Great Disconnect
State consumer protection laws, Berenson says, “are drafted very broadly. And the problem with that broad language is that it means what you think it means when you go to court.” So that while the legitimacy of various marketing and sales tactics can be weighed and debated, “at what point do you cross the line into misleading a customer or misrepresenting a product? It depends on your point of view. And they [the attorney general’s office] have subpoena power.”
Dave Yoho, a veteran industry consultant, columnist for this magazine, and author of the book Why Buy Replacement Windows? says that intensified competition propelled some companies to engage in practices that brought them into disfavor with regulatory authorities. In most cases, he maintains, these practices were “dumb and sloppy” rather than illegal. But from a business standpoint “dumb and sloppy is as bad as illegal,” Yoho says.
He also believes that since the attorney general’s offices in the various states share information, companies outside of Washington may sooner or later find themselves subject to investigation. Some owners in other states are all too aware of that possibility and have taken steps to make their companies less vulnerable. Fred Finn, president of Euro-Tech, a window and siding company in suburban Chicago, says that his company has steadily moved toward smaller first-night discounts and promises “substantial energy savings” rather than a specific percentage. He also insisted that Euro-Tech make it clear to homeowners, who might ask, that the company uses subcontractors to install. Implying that installers are employees when they’re not was cited as deceitful by the Washington state attorney general.
Over the course of the last 20 years attorney general investigations into home improvement companies have been launched in states including Michigan and Ohio. But a major difference today is the presence of online review websites. Some, such as Ripoff Report, bristle with wronged customers, outraged former employees, and competitors launching anonymous attacks. These helped point the Washington attorney general’s office toward specific companies, a fact that has particularly annoyed some people at the companies targeted.
“The biggest problem I have [with the investigation],” says McFarlane formerly of Evans Glass, “is that he [Zurlini] doesn’t do his homework. He grabs at whatever catches the light.”
But once in the light, window companies have found they have little to fall back on in their own defense. And once they sign consent decrees, they can find themselves caught between the attorney general’s intense and ongoing scrutiny ? which can seem like an investigation that never ends ? and the adverse publicity that comes with a civil complaint.
According to Berenson, any company’s scripts, training manuals, pitch books, and contracts ? all documents ? should be examined by lawyers experienced in home improvement law, then updated and their language made legally “bulletproof.” A second, essential line of defense, as Evans Glass discovered too late, is measurable levels of customer service. Good customer service practices produce positive reports, and positive reports neutralize the image of a corporate predator fielding an army of tin men. So, for instance, unlike other companies hit with civil complaints, Penguin Windows includes links from its website to GuildQuality, a third-party vetting service, which surveys customers on their experience. Thousands of customers responded and more than 95% rated themselves as satisfied or extremely satisfied with their windows and service from Penguin Windows. “If we’re such a bad company,” McCourt says, “how could we have a satisfaction rating of 96%?”
Even so, the company has lost 40 or 50 sales reps and is up against the fact that the negative publicity is still out there. It has prompted a top-to-bottom reexamination of paperwork and practices that has lately worked to reverse the decline in sales brought on by the civil suit and its ramifications. “We’ve become a stronger company,” McCourt says.
