The truism goes back centuries: “Hee that lies with the dogs, riseth with fleas.” But ten years ago, Utility Consumers’ Action Network (UCAN), the watchdog nonprofit attempting to dissolve while it is being investigated by the federal government, had not learned the lesson.
In 2001, a now-bankrupt company whose top two officials later pleaded guilty to fraud, Best Windows and Doors, installed for free $20,000 of double-paned vinyl windows in UCAN’s then-new headquarters. The next year, the consumer group sent out a mailing to 31,000 members and 30,000 consumers extolling the energy- and money-saving virtues of these windows but warning that companies selling them were often crooked.
Documents in my possession — verified by interviews with former and current UCAN employees — show that the cost of the mailing was $32,965.71. Best Windows and Doors paid $27,403.71 of that mailing; the rest was paid by the consumer group. This means that Best Windows and Doors had advanced more than $47,000 in cash and services to UCAN. (The two employees who handled the mailing, Jordana “Jodi” Beebe and Charles Langley, a whistle-blower now suing the consumer group, say they knew all along that Best had provided the windows for free.)
The nonprofit watchdog set up a purportedly blind test. A staffer, disguised as an ordinary consumer, solicited quotes from ten different dealers, who were supposedly unaware that they were participating in a test.
On the basis of the so-called test, UCAN made its recommendation of the best dealer. Lo and behold, the winner was Best Windows and Doors, which had paid most of the costs of the mailer. “Excellent qualifications and windows make this a UCAN ‘best bet,’” enthused the nonprofit watchdog in its mailing. It was a blatant quid pro quo.
Two factors make it even more blatant: (1) The fact that Best Windows and Doors had paid more than 80 percent of the mailing costs was never disclosed to the recipients; (2) Unlike other companies, Best knew full well it was participating in a test, and its bid was artificially low.
Alex Valdez was the Best sales representative who presented the bid in the test. “I knew that I was going out to give a bid for UCAN,” he says. “I was instructed by the owner of the company [Michael Chavez] to have no pricing or sales gimmicks — give them the lowest absolute price. We didn’t sell windows for that low a price.”
The Best Windows and Doors price the nonprofit quoted in the mailer was $7109. Chavez says that a normal quote would have been $9600. Chavez claims that after UCAN got the initial lowball quote, the nonprofit tweaked it to bring it down even more. I get conflicting stories on whether that happened, but Langley does say, “The whole study was skewed.”
Beebe, no longer with the consumer watchdog group, says, “The survey was forthright and accurate.” She initially claimed that she had not dealt with Best Windows and Doors about the mailing’s costs, but after I faxed her two letters showing otherwise, she had to admit she had. She considers Chavez’s gift of the windows as “a donation” that he had made after the test was completed. However, correspondence clearly shows that Chavez put in the windows in 2001, and the test wasn’t done until several months later. “This is ancient history,” she says, explaining her inability to regurgitate some details.
Langley, who was in charge of recruiting members, as well as doing much of the writing and analysis for the nonprofit, says he was following instructions of Michael Shames, cofounder and chief executive officer. Langley had a $30,000 budget for membership recruiting; Shames wanted it combined with the windows mailing. Langley argued that evaluating windows and dealers “had little to do with UCAN’s core mission. At one point we had a discussion. I said it doesn’t smell right. There is a potential conflict of interest. But Michael [Shames] said, ‘If you want to do your job, you have to do this mailing.’”
So Langley put together the mailing lauding double-paned vinyl windows and warning consumers to watch out for wolves in sheep’s clothing. “Here we were sanctimoniously telling people to watch out for wolves in sheep’s clothing, and the people we were promoting were wolves.… It’s one of the most shameful things I have ever done in my life.”
After only part of the mailings had gone out, UCAN got bitter complaints about Best Windows and Doors. The mailing was aborted. The nonprofit printed the consumer complaints on its website. Among many things, Best had been tied up with a Colorado-based rebate program that was charged with fraud in its home state and Wisconsin. (Initially, the head of the company disappeared to Costa Rica rather than face the music in the United States.)
In 2009, Chavez pleaded guilty to fund diversion and grand theft of personal property. He was sentenced to three years of probation and 180 days in custody. The jail sentence was stayed, but Chavez was ordered to make restitution to victims. Best went into Chapter 7 liquidation bankruptcy, and so did Chavez. One of Chavez’s top lieutenants, Joseph Fink, was sentenced to 120 days in custody and given three years of probation.
John Mattes, former San Diego TV investigative reporter, now an attorney, had interviewed Chavez in 2006. Mattes had asked about the rebate program and the mounting consumer complaints. “[Chavez] was wholly incredible; he used every defense in the book…everybody in the world had betrayed him,” recalls Mattes. At the Chavez sentencing, Mattes, no longer on TV, did a piece on Chavez as an embedded reporter for the watchdog group.
Shames finds it “vile and repugnant” that anybody thinks the UCAN/Best relationship was a quid pro quo. He claims that the nonprofit dropped Best when it used the mailing as a marketing tool, just as Consumer Reports denounces companies that use its reports in marketing promotions. However, a memorandum of understanding dated July 16, 2002, states how Best will pay $27,403.71 for “100,000 pieces to homeowners and UCAN members.” It is signed by Michael Shames and Michael Chavez.