IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION rime oo;oo COMPLAINT

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1 l 'l I IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) PEOPLE OF THE STATE OF ) ILLINOIS, ex ref. LISA MADIGAN, ) Attorney General of the State of Illinois, ) ) Plaintiff, ) ) V. ) ) ) ) SPERIAN ENERGY CORP, a Nevada ) Corporation, ) ) Defendant. ) ) ) 2017 rime oo;oo CGiiS.i~t;;it:l!: F r.atiij Judge..., F"f1., COMPLAINT Plaintiff, THE PEOPLE OF THE STATE OF ILLINOIS, by and through LISA MADIGAN, Attorney General of the State of Illinois, brings this action against Defendant, SPERIAN ENERGY CORP (hereinafter "Sperian"), for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et. seq., and the Illinois Telephone Solicitations Act, 815 ILCS et. seq. INTRODUCTION I. The Attorney General brings this action to remedy the unlawful conduct by Sperian and its sales representatives in its marketing of retail electricity supply to Illinois consumers. 2. Sperian has engaged in a pattern of deceptive conduct whereby Sperian and its agents defrauded consumers by enrolling them without their express consent in a costly contract for

2 electricity supply, without disclosing the price, length of contract, or identity of the company from whom the deceived consumer will now be purchasing their electricity. Many Sperian customers have been enrolled with Sperian after being given the false impression that they were signing up for a discount on electricity from their public utility or that they were going to save money through an energy choice program. Sperian customers routinely paid higher prices for electricity supply with Sperian than they would have paid if they had remained a customer of their public utility for supply service. PARTIES 3. Plaintiff, the People of the State of Illinois, by Lisa Madigan, the Attorney General of the State of Illinois, is authorized to enforce the Consumer Fraud Act and the Telephone Solicitations Act. 4. Defendant, Sperian, a Nevada corporation with its principal place of business at 3010 Briarpark Drive, Suite 200, Houston, TX 77042, is an alternative retail electric supplier ("ARES") certified by the Illinois Commerce Commission ("ICC") to engage in the sale of electricity to residential retail customers in the geographic service area of the public electric utility Commonwealth Edison Company ("CornEd"). Sperian is a wholly owned subsidiary of Sackett National Holdings, Inc., a Delaware corporation. 5. At all times relevant to this complaint, Defendant was engaged in trade and commerce in the State of Illinois under the Consumer Fraud Act by marketing, selling, and promoting electricity supply to Illinois residents. See 815 ILCS 505/1 (t). 6. For purposes of this Complaint for Injunctive and Other Relief, any references to the acts and practices of Sperian shall mean that such acts and practices are by and through the acts of 2

3 Sperian's officers, o\vners, members, directors, employees, salesperson, representatives and/or other agents. 7. The Illinois Attorney General believes this action to be in the public interest of the citizens of the State of Illinois and brings this lawsuit pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/7(a), and the Illinois Telephone Solicitations Act, 815 ILCS 413/25( e). JURISDICTION AND VENUE 8. This Court has jurisdiction over this action pursuant to the Court's general jurisdiction and pursuant to 815 ILCS 505/1 et. seq., 815 ILCS 413/10 et. seq., and 735 ILCS 5/2-209(a) as the cause of action arises from actions taken by Defendant in Illinois. 9. This Court has personal jurisdiction over Defendant because it transacts business in Illinois, including in Cook County, Illinois. 10. Venue for this action is proper in Cook County, Illinois, pursuant to Section and Section 2-101(a) ofthe Illinois Code of Civil Procedure, 735 ILCS 5/2-101, l01(a), because Defendant is doing business in Cook County, Illinois, and some of the transactions out of which this action arose occurred in Cook County, Illinois. ALLEGATIONS 11. In January 2012, Sperian received a Certificate of Service Authority to operate as an ARES from the ICC. Under the certificate, Sperian may sell electricity to eligible residential and nonresidential retail customers in the geographic service area of the public electric utility CornEd. 12. Since April 2012, Sperian has engaged in the marketing and sale of electricity to Illinois residential customers in CornEd's service territory. 3

4 13. Since April2012, Sperian acquired approximately 62,000 customers in Illinois. 14. As of April 2017, Sperian had approximately 9,000 existing customers in Illinois. Retail Electricity Supply 15. Each public electric utility in Illinois has a defined service territory and serves all retail (i.e. residential and small business) customers in that territory. Public electric utilities in Illinois have traditionally provided both the distribution service that delivered the electricity to customers and the electricity supply itself. 16. The prices that public electric utilities charge eligible residential customers for electricity supply ("utility default price") are regulated by the ICC. Under Illinois law, public electric utilities do not earn a profit from the sale of electricity supply. Therefore, the utility default price reflects the price that the utility paid for the electricity without any mark-up for profit. 17. Under the Illinois Electric Service Customer Choice and Rate Relief Law of 1997, 220 ILCS 5/ et. seq., consumers may choose to purchase their electricity supply from an ARES rather than their public electric utility. If a consumer decides to switch to an ARES, the consumer continues to pay the public electric utility for delivery service but pays the ARES to acquire the electricity itself. Regardless of whether the consumer selects an ARES or the utility as their supplier, the utility continues to deliver electricity to the consumer's home. 18. Although ARESs must be licensed by the ICC in order to sell electricity supply in the State of Illinois, ARESs' rates, unlike public utilities' rates, are not regulated by the ICC, and ARESs are permitted to profit from the sale of supply in the competitive market. 19. The ICC has reported that between June 2016 and May 2017, ARES customers in the CornEd service area paid $152.1 million more for electricity supply in the aggregate than they would have paid had they purchased their electricity supply from CornEd. 4

5 Defendant's Sales Practices 20. Sperian charges its customers based on the how much electricity (measured in kilowatt hours) they use each month. Sperian sells several different types of plans with different rates (price per kilowatt hour) and contract lengths. 21. Sperian sells plans with two different rate types: fixed term rate plans and month-tomonth variable rate plans. 22. Under Sperian's fixed rate plans, consumers pay a fixed introductory rate for a set period oftime, often 3-months, 6-months, or 12-months. 23. The rates charged by Sperian to Illinois customers while they were on a fixed term rate were higher than the public utility default rate 52% of the time from April 2012 and April Sperian fails to inform consumers at the time they enroll in a fixed rate plan, however, that the "fixed" rate only lasts for a certain period of time, and when that time has lapsed, the customer will be switched to a month-to-month variable rate plan. Furthermore, notices provided to consumers before the end of the fixed rate period fail to clearly and conspicuously disclose that the consumer will be switched to a month-to-month rate if they do not respond. 25. Under Sperian's month-to-month variable rate plans, customers are charged a different rate each month. The only time this rate is regularly disclosed to customers is at the end of the month when they receive their monthly bill, after they have already used their electricity supply and are being billed at the variable rate. 26. The rates charged by Sperian to Illinois customers while they were on a month-to-month variable rate plan were higher than the public utility default rate 80% of the time from April 2012 through April

6 27. In addition to the monthly per kilowatt hour charges, Sperian also charged customers a $4.93 monthly "Energy Service Fee." Sperian customers do not receive any additional services, beyond supply of electricity, as a result of paying the Energy Service Fee. 28. CornEd does not charge a fixed monthly fee for electricity supply. 29. Sperian' s dominant form of marketing in Illinois between April 2012 and August 2015 was telephone solicitation (also referred to herein as "telemarketing"), as defined in the Telephone Solicitations Act as "any communication through the use of a telephone by live operators for soliciting the sale of goods or services." 815 ILCS 413/5. Sperian also engaged in door-to-door marketing and direct mail marketing during that time. 30. Since 2012, Sperian employed both Sperian employees and external third-party vendors to market the sale of electricity supply to Illinois consumers via telemarketing (collectively referred to as "sales representatives"). 31. Third-party telemarketing vendors are paid commissions based on the number of customers that they enroll. 32. Third-party vendors have used different scripts, approved and edited by Sperian, to instruct Sperian's sales representatives on how to market Sperian's service. 33. When enrolling a new customer via telemarketing, Sperian's sales representatives use a two-step process: first the sales representative gives the consumer a sales pitch, and then the sales representative transfers the consumer to a third-party verification system, as required by the Illinois Consumer Fraud Act. 815 ILCS 505/2EE(b ). 34. To verify an enrollment, Sperian's sales representatives initiate a 3-way conference call with an automated third-party verification system while the consumer remains on the line. The consumer answers previously-recorded questions from an automated system, which is recorded 6

7 and maintained by Sperian. Sperian's sales representatives are required by law to "drop off the call once the 3-way connection has been established." 815 ILCS 505/2EE(b). 35. Sperian's sales representatives, however, routinely remain on the line during the thirdparty verification process and direct the consumer on how to answer certain questions or restart the process when a consumer answers incorrectly. 36. Once a sale is completed, a sales representative sends Sperian the audio recording of the third-party verification system as evidence of the sale. Misrepresentations by Defendant's Sales Representatives 37. Sperian's sales representatives routinely make misrepresentations with the intent that consumers rely on those statements. These misrepresentations are contained in recorded phone solicitations and sales scripts provided to Sperian sales representatives. Savings Representations 38. Sperian directs its sales representatives through telemarketing scripts and training materials to tell consumers that they will save money on their electric bill if they enroll with Sperian. For example, scripts provided to Sperian's sales representatives direct them to tell consumers that they can help them "choose a cheaper electric supplier" or that they are calling to "apply" "savings" or a "rate reduction" to their CornEd accounts. 39. Sperian's sales scripts also direct sales representatives to tell consumers they are "entitled" to "savings" or "low rates." 40. Sperian's sales representatives use aggressive sales techniques to convince consumers that they can save money with Sperian. For example, in one recorded call on October 30, 2014, a Sperian sales representative told consumer S.P., a customer of another alternative supplier, that she was currently paying too much before determining what rate the customer was being 7

8 charged: ''your rates have not been adjusted"; "so do you want to keep the high rate you're being charged?"; "your rates haven't went into effect Ma'am;" "Do you want the price protection or do you want to just keep the high rate?"; "Are you on a fixed income? Then this would definitely benefit you." Even though the fixed rate quoted to the customer was lower than the rate charged by the customer's current alternative supplier, with the monthly $4.93 Energy Service Fee, the customer was likely paying more than they would under the public utility default rate. Furthermore, the Sperian sales representative enrolled the customer in a 3-month fixed rate plan that would switch to a month-to-month variable rate at the end of 3 months, leaving the customer vulnerable to future price increases. 41. Sperian's sales representatives also portray Sperian's rates as a discount on CornEd's price rather than a new price being charged by a new company. For example, its sales representatives would assert "Sperian is lowering CornEd customer's rates." 42. For example, in one recorded call on June 4, 2015, a Sperian sales representative told a consumer, "This is completely free for you and you will continue to keep that extra money in your pocket." 43. Sperian intends that consumers will rely on its claims that Sperian's prices will save them money to induce them to sign up for their product, yet Sperian's rates are routinely higher than the rate that the customer would be charged if they stayed with their public utility, CornEd. 44. In internal training documents, Sperian acknowledged that its fixed rate plans are "often more expensive" and "If electric prices drop below the fixed rate, the customer will not get the lower rate until the contract expires." 45. Since 2012, Sperian customers who were charged rates that were higher than CornEd's rates in the same month were charged nearly $9.6 million more for electricity supply than they 8

9 would have been charged had they continued to purchase supply under the public utility default rate charged by CornEd. 46. In addition, during that same period, Sperian charged its customers an additional $3.1 million in monthly Energy Service Fees that they would not have paid if they had been a supply customer of their public utility, CornEd. 47. In sum, since 2012, Sperian customers were charged at least $12.7 million more than they would have paid had they continued to purchase supply under the public utility default rate. Association with Consumer's Public Utility 48. Sperian directs its sales representatives through training materials and sales scripts to ask to speak with the person who handles the CornEd bill or say they are calling regarding the customer's CornEd bill or account. This language leads consumers to believe that Sperian's sales representatives are calling on behalf of the consumer's public utility- CornEd- rather than a third-party supplier. 49. Sperian's sales representatives routinely respond to questions from consumers with vague answers that do not clearly identify that they are not associated with the consumer's utility. For example, in one recorded call on May 7, 2015, consumer J.G. interrupted the automated third-party verification to ask whether she would remain a customer of CornEd if she were to enroll with Sperian. An agent from "the verification" responded, "Yes Ma'am. Everything remains with CornEd. The only thing that you are receiving is a lower fixed rate underneath the supply portion of your bill. Sperian energy is just one ofthe suppliers that CornEd can get your energy from." 50. Sperian 's sales representatives routinely fail to disclose that they are calling on behalf of Sperian or identify themselves as calling on behalf of other entities. For example, several sales 9

10 representatives claimed on recorded calls that they were calling on behalf of"consumer Utility Partners." This identificalion would mislead consumers to believe that the sales representative is calling from a consumer-friendly organization rather than a telemarketer. 51. Sperian intended that consumers would rely on the misrepresentations about its relationship with the consumer's public electric utility to induce them to enroll in Sperian's plans. Savings Guaranteed through State or Federal Program 52. Sperian also directs its sales representatives through telemarketing scripts and training materials to tell consumers that they are entitled to choose a supplier that will give them a lower rate because of federal or state law or "deregulation." 53. For example, in one recorded call on February 9, 2015, a Sperian sales representative told consumer T.T. that they were entitled to receive a reduction due to the deregulation law and "At this time you could be receiving a rate reduction on the supply portion of your bill, and this is something you're entitled to due to the deregulation law... What happens now is that you get that decreased rate and your account will be protected through that federal law." 54. No federal law regulates the prices charged by ARES for electricity supply. 55. Sperian's sales scripts direct sales representatives to tell consumers "you could be receiving a rate reduction on the supply portion of your bill. This is something you're entitled to due to deregulation." 56. Sperian's sales representatives routinely tell consumers that they are entitled to savings "due to the deregulation law." 10

11 57. For example, in one recorded call on May 5, 2017, a Sperian sales representative told consumer J.G, that she was going to get a lower rate because "all CornEd customers are entitled to it due to the deregulation law that's passed in your state." 58. Although an Illinois deregulation law does exist, the Illinois Electric Service Customer Choice and Rate Relief Law of 1997, 220 ILCS , it does not guarantee savings to consumers. In fact, the deregulation law precludes the ICC from regulating the prices charged by ARES like Sperian. 59. Sperian intended that consumers would rely on these misrepresentations about guaranteed savings under state and federal laws to induce them to enroll in Sperian's plans. Savings Guaranteed by Energy Choice Programs 60. Sperian's sales representatives routinely reference fictitious programs that the representatives suggest will guarantee savings, such as the "Illinois Customer Choice Program" or the "energy choice program." However, no such program exists in Illinois for which consumers are eligible or that would guarantee consumers can save money. 61. Sperian's sales scripts direct sales representatives to say, "The reason for my call is awhile back you should have seen information about Illinois's Energy Choice Program. Do you recall seeing that?" 62. Illinois's Energy Choice Program does not exist. Any communications previously sent to Illinois consumers from their public utility or by the Illinois Commerce Commission may have provided information about customer's ability to obtain service from an ARES, however, on information and belief, no materials were ever distributed referencing such a program. 11

12 63. Sperian also directs its sales representatives to tell consumers that they may have recently received information in the mail about various energy choice programs, even though no such information was sent to consumers discussing Sperian or choice programs. 64. For example, the third-party verifications used by Sperian to enroll consumers identify Sperian as "a licensed electricity supplier through the Illinois Energy Choice Program." 65. Sperian intended that consumers would rely on these misrepresentations about guaranteed savings through energy choice programs to induce them to enroll in Sperian's plans. Obtaining Customers' Public Utility Account Number Under False Pretenses 66. Sperian directs its sales representatives to ask for consumers' public utility account number and to tell the consumer that it needs the number to "verify the account information" and "apply savings." In fact, Sperian will actually use the consumer's account number to switch them to a new electricity supply contract with Sperian. 67. Sperian' s sales scripts instruct its sales representatives to say "grab a copy of your bill so I can quickly switch you over to the lower rate." 68. Another script instructed representatives to say "To receive your rate reduction I just need to verify your account number, if you grab your CornEd bill you can verify your account number so I can apply your savings." 69. Sales representatives portray the enrollment process as a clerical step towards obtaining a discount, rather than obtaining adequate consent from the consumer to bind them to a new electricity supply contract. 70. To complete the deceptive switching of consumers to Sperian, after a Sperian sales representative has acquired the customer's public utility account number, they transfer the customer to the third-party verification system which will "confirm" their enrollment with 12

13 Sperian. However, because Sperian representatives routinely stop and restart the automated third-party verification process in order to direct the customer's responses to the automated questions, customers are frequently enrolled even if the third-party verification recording demonstrates that the consumer had questions about the product and did not understand that they were actually switching electricity supply service, often at a higher price than their public utility default rate. 71. Sperian intended that consumers would rely on these misrepresentations about the reason that the sales representative was requesting the consumer's public utility account number to induce them to enroll in Sperian's plans. Failure to Disclose Monthly Fees 72. Sperian's sales representatives routinely fail to disclose to consumers that they will be charged a monthly Energy Service Fee of$4.93 by signing up for Sperian's service. 73. Although the third-party verification system discloses the fee, this occurs after a consumer has already provided their public utility account number to the sales representative to execute a change in service. 74. Furthermore, Sperian's sales representatives routinely direct customers to respond "yes" to all questions during the third-party verification. 75. For example, in one recorded call on October 30, 2014, a Sperian sales representative told consumer S.P. before transferring her to the third-party verification, "All they're going to do is verify your name, your address, your account number. They're going to ask to make sure that you're above the age of they're going to also ask you if I reminded you of that cancellation fee... and they'll give you a confirmation number... And I'm going to punch in all the buttons, they're going to ask me to press I for English and things of that nature, I'm going to punch in 13

14 everything. All you do is respond after the beep with a clear yes. And if you have any questions hold it until the end so that we don't have to start it over, honey, because I'm going to still be on the line with you to make sure you have anything you need." 76. Sperian intended that consumers would rely on Sperian's failure to disclose the monthly fees to induce them to enroll in Sperian's plans. Failure to Disclose Electricity Price and Length ofagreement 77. Sperian's sales agents routinely fail to disclose to consumers during the sales pitch the price that they will be charged by Sperian and how long that price will be in effect. 78. Although the third-party verification system discloses the price and length of the contract, this occurs after a consumer has given consent to the sales representative to execute a change in servtce. 79. Sperian intended that consumers would rely on Sperian's failure to disclose the price and length of the contract to induce them to enroll in Sperian's plans. Switch to Variable Rate at End of Fixed Rate Term 80. Consumers who enroll in a fixed-rate plan are charged a fixed price for a certain period of time, but are not adequately informed that they will be switched to a month-to-month variable rate at the end of the fixed-rate introductory period. 81. Sperian's sales representatives routinely fail to disclose to consumers during the telemarketing sales pitch that they will be switched to a variable rate after their contract period ends. 82. Forty-five days before a customer's fixed-rate period is ending, Sperian sends a notice to the customer that their contract is ending. In prominent placement, Sperian promotes the fixedrate prices that are currently available in the customer's geographic area. 14

15 83. The notice fails to clearly and conspicuously disclose that the customer must aftinnatively contact Sperian in order to be enrolled in the one of the fixed-rate plans. 84. If the customer does not contact Sperian, the customer will be automatically enrolled in a month-to-month variable rate plan. 85. Sperian intended that consumers would rely on these misrepresentations when switching their electricity supply service. Examples of Illinois Consumer Experiences with Sperian 86. The Illinois Commerce Commission and the Illinois Attorney General's Office regularly receive complaints from consumers about Sperian. 87. Consumer M.C., then age 62, filed a complaint with the ICC on December 7, 2012, after she received a call from a Sperian sales representative who claimed, in sum and substance, that the company was approved by CornEd, that Sperian's rates would always be lower, and that many people in her neighborhood were switching to Sperian. On March 17, 2015, M.C. filed a second complaint with the ICC after she received another call from a Sperian representative who, in a recorded call, told her he was giving her a "courtesy call" regarding her account and claimed he was able to see her current supplier and current rate, when such was not the case. 88. Consumer R.C., a senior citizen, complained to the ICC on December 12, 2012, that a sales representative called and claimed, in sum and substance, that they were from CornEd, said that she was eligible for a 20% discount because she was a senior citizen, and insisted that she would not be changing from CornEd. 89. Consumer J.G. also filed a complaint with the ICC on or about May 27,2015, alleging that a Sperian sales representative gave the impression that Sperian Energy was affiliated with CornEd. 15

16 Defendant's Intent to Defraud Illinois Consumers 90. Sperian 's conduct indicates intent to mislead consumers and avoid full disclosure about their pricing plans. 91. For example, in an from February 2012, Sperian instructed a vendor to include a specific disclosure about the monthly Energy Service Fee in a way to hide it from consumers: "For compliance issues, I need this piece oflanguage embedded in your script somewhere where you can ID!!:,y it." (emphasis in original) (Exhibit I). 92. The vendor replied in agreement: "We will add and do our best to bury it!" (Exhibit 1). 93. In April of2012, ICC staff sent a letter to Sperian outlining numerous concerns identified in Sperian's sales scripts, including many misrepresentations that continued to be in Sperian's sales scripts until it suspended telemarketing activities in In August 2012, ICC staff alerted Sperian that its sales representatives were remaining on the phone call during the third-party verification process, and that such conduct was a violation of Sperian's obligations under Illinois law. 95. In December of2012, staff from the ICC sent a letter to Sperian demanding that Sperian cease such conduct. Based on subsequent assurances from Sperian, the ICC stafftook no further action at that time. 96. However, Sperian's sales representatives continued to remain on the line during thirdparty verifications and continued to use the same misrepresentations outlined in the ICC's letter even after December In December 2014, ICC staff noticed another increase in Sperian complaints and undertook a second review of Sperian's conduct. 16

17 98. In July 2015, ICC StatTissued a report identifying significant and repeated violations of Illinois laws by Sperian's telemarketing practices. Illinois Commerce Commission, Consumer Services Division and Office of Retail Market Development, "Staff Report to the Commission," July 20,2015 (ICC Docket No ). 99. In its report, ICC Staff noted "troublingly, meta-data imbedded in the scripts suggests that Sperian modified two ofthe scriptsjust before submitting them to Staff in early April2015. The imbedded meta-data suggests that Sperian altered or removed the scripts' original language." ICC Staff concluded, "These modifications appear to have been made to soften more directly deceptive language." Specifically, the Report found: "Meta-data discovered by Staff in the script document indicates that someone at Sperian altered the original script on March 31, 2015, just before it was sent to Staff on April 8, The edits appear as follows in red underline and strikethrough: "The reason for the call today is that there mav have been was information sent out in the mail recently about the program and the savings that may be available to you." "you will receive a new lowef rate that wtlcouldl-provide a savings on your electric supply service." And "the only change will be that you will be paying a lov, er price per kw-h. See [sic] is Sperian [sic] name on the supplv portion of you [sic] bill and our new low rate." (Attachment 6,1.) These modifications appear to have been made to soften more directly deceptive language." Illinois Commerce Commission, Consumer Services Division and Office of Retail Market Development, "Staff Report to the Commission," July 20, 2015 (Docket No ) Based on Staffs recommendations, on July 28, 2015, the ICC initiated a proceeding to determine whether Sperian had violated Illinois law. (Docket No ). That proceeding is ongomg. I 0 I. On information and belief, Sperian suspended its marketing to Illinois consumers on August 14,2015. Illinois consumers who were enrolled with Sperian prior to that date continue 17

18 to be customers of Sperian and continue to pay fixed monthly fees and rates that are higher than those charged by CornEd. I 02. Despite being alerted by ICC staff to the numerous misrepresentations and deceptive conduct committed by its sales representatives as early as 2012, Sperian continued to engage in deceptive conduct until it suspended its telemarketing in August Sperian's Oversight of Telemarketing Vendors I03. Sperian's sales representatives acted as Sperian's agents as demonstrated by Sperian's control over the manner in which its sales representatives solicited and enrolled consumers on its behalf Sperian has contracted with 33 different companies since 20I2 to employ sales representatives to solicit Illinois consumers via telemarketing on Sperian's behalf. I 05. Before a company begins telemarketing in Illinois on Sperian' s behalf, Sperian employees review, edit, and approve the scripts that Sperian's sales representatives will use. Sperian employees routinely edited scripts prior to and after sales representatives began soliciting Illinois customers. I 06. Sperian routinely responded to inquiries from the ICC regarding complaints from consumers who were enrolled by sales representatives employed by a telemarketing company. I 07. Upon request by Sperian, telemarketing companies amended their scripts and took remedial action in response to a complaint from a consumer or inquiry from the ICC. For example, when one sales representative left a recorded message on a consumer's voic stating that he was calling regarding their CornEd bill, Sperian requested that the individual be removed from marketing on behalf of Sperian and the telemarketing company complied. 18

19 108. Sperian used several training materials and guidance documents to instruct telemarketing companies on how to perform telemarketing on Sperian's behalf These training materials contain language and themes that were repeated by Sperian sales representatives. For example, one Sperian training document says that "As a sales rep you are: calling potential customers to inform them of being qualified for the 'Customer Choice' or 'Energy Choice' program in their utility area (name of programs often named differently)." Numerous scripts used by telemarketers contain similar language about energy choice programs and numerous sales representatives used similar language in recorded phone calls Sperian's sales representatives are paid based on the number of individuals they enroll on behalf of Sperian, incentivizing representatives to engage in aggressive and coercive sales tactics. For example, in one recorded call, consumer JG who had previously been enrolled with an alternative supplier and switched back to CornEd, told the sales representative that CornEd said she was not able to switch to another alternative supplier because Illinois law prevents a customer from switching to another alternative supplier for a certain period time after they switch back to their public utility for supply service. Sperian's sales representative told the consumer "I don't know why they would tell you that." Consumer JG replied, "I don't know. I am confused and that contradicts with what CornEd told me when I switched back to them." The sales representative went on to mislead JG by saying "There's been a federal law passed where you can receive a supplier unless you don't want one. CornEd was caught price gauging, [sic] so they can no longer profit offofthe supply portion ofthe bill." Resigned, JG replied "Okay, I'll go by what you're saying." Ill. Several sales representatives in recorded calls pressured consumers to locate their CornEd bill by saying they are paid by the hour and required to hold while the consumer finds their bill. 19

20 112. Sperian also anticipated that its sales representatives would deviate from the scripts provided to them, saying in a training document that ' When constructing a sales script, the following must be stated:... Sale of electricity as purpose of the call. Any variation of statement will work as long as purpose of call is clear. Such as 'discounted electricity."' 113. For example, in an exchange in February 2015, two Sperian employees discussed an inquiry from the ICC regarding an increase in complaints around deceptive sales. One employee said: "I don't actually hear any sales recordings say what our script says. Example: I read a few that make it very clear in the script that we are not affiliated with the utility or working with the utility or any other supplier. But no one says that." A second employee responded: "Since this is a script requirement and its not being said on the majority of the calls by this vendor, maybe it's a good idea to have this statement verbatim." 114. Nevertheless, Sperian continued to allow that vendor to make sales solicitations on Sperian's behalf for five more months following the acknowledgement that the vendor was not following the script. That vendor enrolled 14,805 consumers between October 2014 and July Sperian was also responsible for approving lists of consumers that sales representatives were to call and selecting the third-party verification system that sales representatives were to use to confirm enrollment of Illinois consumers. COUNT I- CONSUMER FRAUD AND DECEPTIVE BUSINESS PRACTICES ACT 116. The People re-allege and incorporate by reference the allegations in Paragraphs 1 through While engaged in trade or commerce, Defendant has committed unfair and deceptive acts or practices declared unlawful under Section 2 of the Consumer Fraud Act, 815 ILCS 505/2, by, 20

21 in the course of marketing, selling, and promoting electricity supply to Illinois residents, making the following misrepresentations or omissions, with the intent that consumers rely on these misrepresentations and omissions: A. Misrepresenting, expressly or by implication, that consumers would save money with Sperian when Sperian's supply charges were routinely higher than the default public utility rate for electricity supply; B. Misrepresenting, expressly or by implication, that Sperian is affiliated with the consumer's public electric utility; C. Misrepresenting, expressly or by implication, that consumers were entitled to savings on their electric bill under state or federal law; D. Misrepresenting, expressly or by implication, that consumers were entitled to savings through an energy choice program; E. Misrepresenting, expressly or by implication, that consumers were sent information about Sperian prior to the call from the Sperian sales representative; F. Misrepresenting, expressly or by implication, that Sperian was obtaining the consumer's public utility account information in order to apply a discount to the consumer's existing electricity service with CornEd, when in fact consumers were routinely enrolled in a new, more expensive, supply service; G. Misrepresenting, expressly or by implication, that the sales representative was confirming the customer's public utility account number, rather than seeking authorization to enroll the consumer in a new contract; H. Failing to disclose the material fact that consumers would be charged a monthly ''Energy Service Fee" in addition to the monthly electricity use charges; 21

22 I. Failing to disclose the material fact of the rates that consumers would be charged; and, J. Failing to disclose the material fact of the length of the contract that consumers are entering into While engaged in trade or commerce, Defendant has committed unfair acts or practices declared unlawful under Section 2 of the Consumer Fraud Act, 815 ILCS 505/2, by, in the course of marketing, selling, and promoting electricity supply to Illinois residents, representing that consumers can save money through an introductory rate, and then moving the consumer to a variable rate that: A. Was not clearly and conspicuously disclosed at the time of enrollment or in the contract renewal materials sent at the time their introductory rate was ending; and, B. In fact was higher or significantly higher than the rate the consumer was previously paying under the introductory rate WHEREFORE, the plaintiff prays that this honorable Court enter an Order: A. Finding that Defendant has violated Section 2 of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, by engaging in the unlawful acts and practices alleged herein; B. Revoking Defendant's Certificate of Service Authority to operate as an alternative retail electric supplier in the State of Illinois; C. Preliminarily and permanently enjoining Defendant from engaging in the deceptive and unfair practices alleged herein; 22

23 D. Declaring that all contracts entered into between Defendant and Illinois consumers by the use of methods and practices declared unlawful are rescinded and requiring that full restitution be made to said consumers; E. Preliminarily and permanently enjoining Defendant from operating as an alternative retail electric supplier in the State of Illinois; F. Ordering Defendant to pay up to $50,000 per deceptive act or practice and an additional amount of $50,000 for each act or practice found to have been committed with intent to defraud, as provided in Section 7 ofthe Consumer Fraud Act, 815 ILCS 505/7; G. Assessing an additional civil penalty in the amount $10,000 per violation of the Consumer Fraud Act found by the Court to have been committed by Defendant against a person 65 years of age and older as provided in Section 7(c) ofthe Consumer Fraud Act, 815 ILCS 505/7(c); H. Requiring Defendant to pay all costs for the prosecution and investigation of this action, as provided by Section 10 ofthe Consumer Fraud Act, 815 ILCS 505/10; and I. Providing such other and further equitable relief as justice and equity may require. COUNT II- CONSUMER FRAUD AND DECEPTIVE BUSINESS PRACTICES ACT SECTION 2EE 120. The People re-allege and incorporate by reference the allegations in Paragraphs 1 through While engaged in trade or commerce, Defendant has committed unfair and deceptive acts or practices declared unlawful under Section 2EE of the Consumer Fraud Act, 815 ILCS 505/2EE, by, in the course of marketing, selling, and promoting electricity supply to Illinois 23

24 residents, making the following misrepresentations or omissions, with the intent that consumers rely on these misrepresentations and omissions: A. Failing to disclose all materials tenns and conditions of the offer to consumers before obtaining consent to execute a change in their supply service; B. Failing to obtain consumers' express agreement to execute a change in their supply service; and, C. Failing to drop off the call once the 3-way connection has been established WHEREFORE, the plaintiff prays that this honorable Court enter an Order: A. Finding that Defendant has violated Section 2EE of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2EE, by engaging in the unlawful acts and practices alleged herein; B. Revoking Defendant's Certificate of Service Authority to operate as an alternative retail electric supplier in the State of Illinois; C. Preliminarily and pennanently enjoining Defendant from engaging in the deceptive and unfair practices alleged herein; D. Declaring that all contracts entered into between Defendant and Illinois consumers by the use of methods and practices declared unlawful are rescinded and requiring that full restitution be made to said consumers; E. Preliminarily and pennanently enjoining Defendant from operating as an alternative retail electric supplier in the State of Illinois; F. Ordering Defendant to pay up to $50,000 per deceptive act or practice and an additional amount of $50,000 for each act or practice found to have been committed 24

25 with intent to defraud, as provided in Section 7 of the Consumer Fraud Act, 815 ILCS 50517; G. Assessing an additional civil penalty as provided in Section 2FF of the Consumer Fraud Act, 815 ILCS 505/2FF; H. Requiring Defendant to pay all costs for the prosecution and investigation of this action, as provided by Section 10 of the Consumer Fraud Act, 815 ILCS 505/10; and I. Providing such other and further equitable relief as justice and equity may require. COUNT III-TELEPHONE SOLICITATIONS ACT 123. The People re-allege and incorporate by reference the allegations in Paragraphs 1 through While engaged in trade or commerce, Defendant has violated Section 15 of the Telephone Solicitations Act, 815 ILCS 413/15, by, in the course of marketing, selling, and promoting electricity supply to Illinois residents: A. Failing to identify the name of the business or organization being represented during the sales pitch to Illinois consumers; and B. Failing to inquire at the beginning of the call whether the person consents to the solicitation WHEREFORE, the plaintiff prays that this honorable Court enter an Order: A. Finding that Defendant has violated Section 15 of the Telephone Solicitations Act, 815 ILCS 413/15, by engaging in the unlawful acts and practices alleged herein; B. Revoking Defendant's Certificate of Service Authority to operate as an alternative retail electric supplier in the State of Illinois; 25

26 C. Preliminarily and permanently enjoining Defendant from engaging in the deceptive and unfair practices alleged herein; D. Declaring that all contracts entered into between Defendant and Illinois consumers by the use of methods and practices declared unlawful are rescinded and requiring that full restitution be made to said consumers; E. Preliminarily and permanently enjoining Defendant from operating as an alternative retail electric supplier in the State of Illinois; F. Ordering Defendant to pay up to $50,000 per deceptive act or practice and an additional amount of $50,000 for each act or practice found to have been committed with intent to defraud, as provided in Section 7 of the Consumer Fraud Act, 815 ILCS 50517; G. Assessing an additional civil penalty as provided in Section 2FF of the Consumer Fraud Act, 815 ILCS 505/2FF; H. Requiring Defendant to pay all costs for the prosecution and investigation of this action, as provided by Section 10 of the Consumer Fraud Act, 815 ILCS 505/10; and I. Providing such other and further equitable relief as justice and equity may require. Dated: August 24, 2017 Respectfully submitted, THE PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, ATTORNEY GENERAL OF ILLINOIS BY: Anna P. Crane Caitlyn McEllis 26

27 27 Ronald D. Jolly Aaron Chait Assistant Attorneys General 100 West Randolph Street, lith Floor Chicago, Illinois 6060 I Phone: (312) Attorney No acrane@atg.state.il.us cmcellis@atg.state.il.us riolly@atg.state.il.us achait@,atg.state.il.us