Settlement will end three years of litigation with restitution to consumers

(DENVER)– Attorney General John W. Suthers today announced the settlement of a major consumer protection case filed against General Steel Corporation more than three years ago. Under the settlement, General Steel will pay $4.5 million while continuing to adhere to a previous injunction requiring more responsible sales practices.

“In order for the free market to function properly, advertisers must be held accountable for the accuracy of their pitches,” said Suthers. “I am pleased to bring this long litigation to an end, and to provide some relief for consumers who lost deposits as a result of these deceptive sales practices.”

The settlement will be divided as follows:

• Four million dollars in restitution will be paid to 1,440 consumers involved in approximately 1,800 transactions with General Steel dating back to 2000.
• Four hundred thousand dollars will be divided equally between the Colorado Attorney General’s Office and the Sacramento District Attorney’s Office, which also settled its claims as part of this settlement.
• Of the remaining funds, General Steel will pay a $50,000 civil penalty and another $50,000 to administer the consumer restitution distribution.

General Steel, located in Lakewood, Colorado, sells large metal buildings to customers nationwide. In its lawsuit, the Attorney General’s Office alleged that General Steel carried out a deceptive sales and marketing plan. The suit asserted that the company falsely implied that it manufactured an inventory of buildings available at factory-direct or clearance prices, when, in fact, no such buildings existed. General Steel advertised these clearance buildings on national television and radio programs, including the Paul Harvey and Rush Limbaugh shows. The complaint alleged that this sales scheme was merely a ruse designed to lock consumers into a contract to purchase the shell of a building.

The Jefferson County District Court held an eight day trial on these allegations in late 2004. On December 7 of that year, Chief Judge R. Brooke Jackson found that these sales practices were deceptive and violated the Colorado Consumer Protection Act. The Court then made permanent an injunction that General Steel had agreed to earlier in the case.

In the twenty-seven months since the Court entered its December 2004 order, the Court entered a series of additional orders requiring the parties to identify individual consumers entitled to restitution. The case was settled as the parties were proceeding through this identification process. Ultimately, consumers identified through this process and through complaints received by the Sacramento District Attorney’s Office will be eligible for restitution. These consumers are located across the country and account for nearly 1,800 transactions.

The settlement was reached during several days of negotiation in late 2006. Judge Murray Richtel of the Judicial Arbiter Group mediated the settlement. He concluded that the settlement reasonably compensated affected consumers, given the risks and costs of litigation. This conclusion was reached with account to the small sampling of complaints heard at the trial court level, as well as Judge Jackson’s determination that General Steel has a good product.

General Steel has thirty days to pay the $4.5 million. After payment is received, the Attorney General expects to issue notice to the consumers eligible for restitution. The notice will set a deadline by which the consumers must respond to the Attorney General if they wish to receive a check. If everything proceeds as planned, the Attorney General expects to have checks issued to consumers during the fall of 2007.