Newspaper scam operators shuttered, fined $3.5M

• Operators of a nationwide newspaper subscription scam have agreed to stop doing business and pay %243.5 million
• This settles an Oregon consumer-fraud lawsuit%2C but suits in five states and a federal probe remain
• Authorities said operators targeted senior citizens and charged them up to 200 percent for bogus subscriptions

Operators of a nationwide newspaper subscription scam have agreed to stop doing business and to pay $3.5 million to settle a consumer-fraud lawsuit in Oregon.

Ten people behind a network of at least nineteen companies that sent fake invoices to customers of dozens of publications, including The Arizona Republic, will pay a $3 million fine and provide $500,000 in restitution to victims.

The operators did not admit any wrongdoing as part of the settlement agreement. But they still face similar lawsuits in five other states and a federal investigation by the U.S. Postal Service.

PREVIOUSLY:44 companies tied to nationwide newspaper subscription scam

"This was a sophisticated operation," Oregon Attorney General Ellen Rosenblum said in a statement this week. "(It) generated millions of dollars each year from consumers across the country who thought they were doing business with a reputable magazine or newspaper publisher, but were instead working with a company that made its money by scamming them."

The Oregon lawsuit, along with suits filed in Minnesota, Missouri, New York, Texas and Wisconsin, paint a complex picture of the subscription scheme.

Authorities said operators targeted primarily senior citizens and charged them up to 200 percent for subscriptions that didn't need to be renewed. In other cases, consumers were billed for subscriptions they didn't have.

Operators sent bills from dozens of companies that were controlled primarily through Liberty Publishers Services and Orbital Publishing Group. More than 70 subsidiaries have been identified, according to the suits.

Operators were accused of using the companies to launder money, then transferring proceeds from their "unlawful activity" into their personal accounts and buying property and investing in real estate.

MORE:Five states file suits in newspaper subscription scam

An investigation by The Arizona Republic last year tracked 44 subscription companies to a post office box in Medford, Ore. The companies, with names that included "publishers," "readers," "magazine," "billing," "services," "payment" and "circulation," were owned by 37-year-old Laura Lovrien of Eagle Point, Ore.

Lovrien is president of Liberty Publishers Service, which owns the domain name for the processing center used to collect payments from newspaper and magazine customers who are led to believe they are renewing legitimate subscriptions.

Computer searches and business records indicate Lovrien managed a construction company in the 1990s. She appears to have taken over the subscription-renewal companies beginning in 2010, when she became president, treasurer, secretary and director of Orbital.

Orbital was incorporated in New York in 2009 and then transferred to Nevada. Records are unclear as to whether Lovrien was involved in Orbital before then.

Oregon authorities said Orbital actually was owned by a New York company called Henry Cricket Group LLC, which describes itself as a consulting firm.

The owner of Henry Cricket is Jeffrey Hoyal, a Medford businessman. Oregon authorities said Hoyal used Henry Cricket and another company, Maximillian Inc., to direct operations of the subscription scam and to obtain the bulk of the proceeds.

Oregon authorities described Henry Cricket as "a fiction."

Hoyal, who resides at a $2 million, 140-acre estate, has gained prominence for his efforts to develop an Oregon winery, according to reports in the Medford Mail Tribune.

Both Lovrien and Hoyal signed the settlement agreement, along with Oregon residents Linda Babb, Shannon Bacon, Colleen Kaylor, Noel Parducci, Lydia Pugsley and Rachel Worcester.

California residents Dennis Simpson and William Strickler also signed the settlement.

The settlement prohibits them from again engaging in the newspaper or magazine subscription business, operating a newspaper subscription clearinghouse or using customer lists from third-parties.

The subscription scheme has been around for at least two decades, but until recently almost exclusively focused on magazines.

The companies involved have aggressively defended their right to solicit subscriptions, and lawyers for the companies have denied in lawsuits that solicitations were deceptive. They claimed the companies were independent renewal agents that had every right to sell subscriptions, regardless of whether publishers were aware of it.

Newspapers don't use independent renewal agents. Newspapers across the country began getting complaints from customers about renewal notices in October 2014. Newspaper officials reacted by sending scam advisories to customers, publishing alerts and, in some cases, paying bills for customers who responded to the bogus invoices.

The Republic logged at least 70 complaints in just days. Two companies, Readers Payment Services and Publishers Education Services, sent invoices to Republic customers asking $469.95 for an annual renewal, about 20 percent more than the actual cost.

State consumer-fraud lawsuits were filed after the Newspaper Association of America sent a cease-and-desist letter to the subscription companies in November on behalf of 363 newspapers.

Officials with the U.S. Postal Inspection Service confirmed in October they were investigating the subscription-renewal offers.

Oregon Attorney General Rosenblum said in her statement that it was critical to put the companies out of business.

"It's a particular embarrassment to the legitimate Oregon business community when national companies based here don't play by the rules," she said. "The only option was to shut them down — and we have."