Cross Posted at Legal Schnauzer
Perhaps it's time for members of the ultra-rich Rollins family to decide that it's a bad idea to screw around with people in Alabama.
Ted Rollins, CEO of Campus Crest Communities, has drawn a wave of unflattering news coverage here, thanks to the bogus divorce lawsuit he brought in Alabama that caused his ex wife and two daughters to wind up on food stamps.
Ted should have learned a lesson from the experience of his cousins, Randall and Gary Rollins, who almost saw their business empire take a massive hit about 12 years ago in Alabama. Randall and Gary Rollins head Atlanta-based Rollins Inc., which is the parent company for Orkin Pest Control.
A Macon County jury found in 2000 that Orkin had breached a long-term termite contract and committed fraud against a customer named Artie Mae Jeter. A poor, elderly black woman who lived near Tuskegee, Jeter bought an Orkin contract in 1977 that was supposed to provide "lifetime" protection against termite damage. Over the next 20 years or so, termites had a feast on Ms. Jeter's house, but Orkin kept telling her everything was fine. In fact, Orkin engaged in blatant fraud by propping her house up on cinder blocks and jacks to conceal the damage, according to court documents.
An Alabama jury was so repulsed by the actions of Orkin and Rollins Inc. that it awarded $80.8 million in damages to Ms. Jeter's children, who took over the lawsuit after she died in 1999. The Alabama Supreme Court in 2001 reduced the total verdict to $2.3 million. But the case still is seen as a landmark against the best-known name in the highly profitable pest-control business.
Here is how John F. Sugg summed up the Jeter case in an investigative report at Creative Loafing:
One of those customers' names has become the "remember the Alamo" in Orkin litigation. In 1977, a poor, largely uneducated Alabama woman named Artie Mae Jeter purchased a "lifetime" contract that provided for up to $100,000 in termite repairs for damage that occurred after the agreement was signed. Orkin repeatedly inspected Jeter's modest home and just as repeatedly told her there was no damage.
As Alabama Supreme Court documents state: "Orkin had in place a policy pursuant to which an inspector could not inform a homeowner of any termite damage to the home." Which, of course, meant the company could avoid paying repairs.
The termites, meanwhile, were having a feast. One Orkin inspector determined repairs would cost between $16,800 and $28,826. The company told Jeter the damage was caused by moisture, but being a good sport offered her $400.
Rollins Inc. stated in an SEC filing that it fulfilled its contractual obligations to Ms. Jeter and did not try to conceal damage. Even the companies own employees did not believe that one. From the Creative Loafing article:
An Orkin manager's memo that became the linchpin in the case states: "Ms. Jeter is 78 years old, black, in poor health, no money. ... Her house was improperly treated, we sold her twice with no documentation of existing conditions, home is badly eaten up by termites to the point of breaking apart. ... [W]e can spend $5,000 now and have her put in small claims over the years until she dies and her children sell the house, or if any attorney get[s] involved, we will probably buy her a new house, thousands in punitive damages and attorneys fees."
Rather than, as Gary and R. Randall Rollins told their shareholders, acting with "honesty and integrity as an integral part of the way we do business," Orkin offered Jeter $4,660 -- but still didn't disclose the extent of damage.
Notice that Gary and Randall Rollins had access to a manager's memo that showed the company acted in a flagrantly dishonest fashion, but they still claimed that "honesty and integrity" were part of Orkin's business model.
As for Ted Rollins, we've shown that honesty and integrity have nothing to do with the way he conducts either his personal or business affairs. When it comes to cheating the citizens of Alabama, he is continuing a "proud family tradition."
(To be continued)