Meet the Shady Corporation That Allied With Romney While Scamming Customers

APX grew quickly. The home-security trade press hailed it as an innovator in the alarm and home-automation industries, thanks to products that allowed people to manage security, appliances, locks, and energy consumption from a smartphone. In recent years, the rechristened company began selling solar-panel arrays for homes. Today, Vivint has more than 500,000 customers and 5,000 employees, according to its website. The private-equity firm Blackstone acquired it last month for $2 billion, and Utah Business magazine described it as one of the five fastest-growing companies in the state.

But its tactics caused it problems almost from the beginning. Storefront businesses have a certain level of visibility, accountability, and stability, but door-to-door sales work differently. The practice pressures the customer in a place where he or she is captive. (One can always leave a store.) And a salesman can simply misrepresent the company he works for, because it’s difficult to track down an out-of-state firm when something goes wrong with the product. Traveling salespeople often work on a commission basis with little oversight.

National and state lawmakers have long seen door-to-door sales as easily perverted by abusive and fraudulent practices. Numerous attempts across the country to ban these sales have led to Supreme Court protections of the practice, but states and municipalities regulate it tightly. The Federal Trade Commission also requires a 72-hour period in which any purchase people make in their homes can be refunded. (Vivint has been accused by watchdog groups of evading that rule in multiple states.) “We don’t condone any aggressive-style sales, but there is no such thing as a sales process that doesn’t have some aggressiveness to it,” Pedersen told Bloomberg News last year. “[Otherwise,] you’re not going to sell anything.”

Lucas Fernandes, 22, says he worked for Vivint for four months last year in Arizona and Texas, where he learned just how abusive door-to-door sales could be. At first, Fernandes couldn’t understand how his team members sold five systems a day, making as much as $3,000 in commissions, depending on how many bells and whistles they pitched to their clients. Then they explained to him that, as he puts it, “you have a different pitch for if you’re knocking ’hood or knocking rich.”

“Knocking rich” entails selling in wealthy neighborhoods and touting the product’s high-tech features, such as surveillance cameras and a smartphone app. “Knocking ’hood,” however, was far more lucrative. Salesmen would go to poor neighborhoods with more vulnerable customers and tell them, “Everything’s free.” Company technicians told Fernandes that they routinely got summoned to install systems before clients had even signed their contracts.

Sometimes, Fernandes says, his teammates told homeowners about nonexistent crime waves. Other times they said they’d come to install an upgrade for whatever home-security system the customer already had—the same thing that happened to Raynor. Fernandes recalls them telling confused marks, “We used to be Brinks,” a rival firm. In August 2006, Brinks sued APX, accusing it of fraudulently poaching customers in several states. According to the lawsuit, APX salesmen pretended to work for Brinks and told homeowners, “In a couple of years, federal law will require everyone to have a wireless security system.” In August 2008, General Security sued the company on similar grounds. (Vivint, in turn, has sued other companies for stealing its clients.)

Not long after learning how things really worked, Fernandes says, he quit. “Once I realized that you get to the paperwork and you’re really bullshitting people,” he says, “I couldn’t look them in the face.”

Romney attends a ribbon cutting ceremony at APX in 2009. (The Daily Herald)

ROMNEY AND VIVINT

There’s no evidence that Romney knew about any of this. But he would have been disinclined to find out, because Vivint has multiple ongoing ties to the presidential nominee. Dunn, its chief operating officer, was Romney’s deputy political director during his 2002 Massachusetts gubernatorial campaign. When Romney assumed office, Dunn became his deputy chief of staff. Then he jumped back to Romney’s campaign organization, leading the governor’s effort to increase GOP representation in the state Legislature. Dunn attended Harvard Business School with Tagg Romney, the candidate’s eldest son, and has been described as “a close family friend” by the Boston Herald. He lived near the family in Belmont, Mass., for a time, and moved to Utah in 2005. Dunn did not respond to multiple NJ requests for comment.

Pedersen and Dunn are part of a fundraising network in Utah that has been important to Romney’s success, especially in his campaign’s early stages. Utah has provided a Western complement to Romney’s Boston network, which is built primarily on business ties. His top fundraiser, Spencer Zwick, who first met Romney while working for the Salt Lake Olympics, is another BYU graduate (like Dunn, Pedersen, and Mitt Romney). He was reportedly present for Romney’s appearance at Vivint’s headquarters.