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Illinois Department of Financial and Professional Regulation

Illinois fines Pinnacle $1m for alleged deceptive sales practices

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Wednesday, October 31, 2012

I just learned today that summer-sales-model company Pinnacle Security has agreed to pay a $1 million fine in a long-term settlement to the state of Illinois for such alleged violations as “slamming” customers and even hiring felons as sales reps.

In reaching the agreement, Pinnacle neither admitted nor denied the allegations. And the company sent me the following statement:

Pinnacle Security is pleased that it has come to a settlement with the Department of Financial and Professional Regulation of the State of Illinois to the parties' mutual satisfaction. Pinnacle Security has worked closely to address the generally historical issues related to licensing requirements of our sales representatives that allegedly took place as early as 2006.

Since 2010, Pinnacle has implemented industry-leading compliance initiatives to help ensure that Pinnacle's sales representatives meet all city, county and state licensing requirements.  We are confident that through this agreement, Pinnacle will continue to provide its thousands of customers in the state of Illinois superior support and customer service.

Here’s what the state said in its Oct. 31 news release:

State regulators announced today they have reached a long-term settlement agreement with Pinnacle Security, LLC, headquartered in Orem, Utah and licensed to sell home and business security systems in Illinois.  The Department of Financial and Professional Regulation (IDFPR) alleged in its order that Pinnacle had sold its services using unfair and deceptive trade practices, knowingly hired unlicensed sales personnel, and allowed employees with criminal histories to sell their products door-to-door to Illinois consumers.  The company also ‘slammed’ consumers by changing their alarm service using fraudulent and deceptive means.

“When homeowners purchase security systems to protect their families from crimes, they should at least be assured that the company with which they do business is following Illinois laws,” said Jay Stewart, Director, Division of Professional Regulation, IDFPR.  “With this settlement agreement, families doing business with Pinnacle Security, LLC will know that Illinois’ consumer protection agency is making sure they meet their obligations.”

The investigation conducted by IDPFR included issuing subpoenas for all employees working in Illinois and found that 700 of the 1,100 were not licensed by the state.  Further, several of the employees listed on the employee roster had been charged with or convicted of felonies, including larceny, robbery, theft, conspiracy to commit burglary, aggravated criminal sexual abuse, assault, domestic battery, and possession of controlled substances, any of which would have been cause to deny a license, had an application been filed.

The case was referred to IDFPR by Illinois Attorney General Lisa Madigan, after her office settled a lawsuit to protect prospective customers.   Today’s settlement includes payment of a one million dollar fine, of which $250,000 has already been paid, a two-year ban on new sales to Illinois consumers, supervision of Pinnacle’s ongoing business of overseeing already installed security systems and five years of supervised probation by the Illinois.

Pinnacle has settled similar complaints made by other states, although the amount of this fine stands out.

Pinnacle has told Security Systems News that the company had some issues in past years with “rogue” door-knocking sales staff.  However, in 2010, Pinnacle made a company cultural shift to emphasize a code of ethics for employees and the implementation of new ways to monitor their behavior and enforce the code.