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Reilly turns to private enforcement of item pricing

State Attorney General Thomas F. Reilly has found a novel and profitable way of enforcing one of his consumer protection regulations -- turn the job over to the private sector.

The latest example of this privatization effort is a proposed settlement with Walgreens in which the drugstore chain has agreed, without admitting guilt, to pay nearly $1.6 million to settle charges it violated the state's item-pricing regulation. Court documents indicate Walgreens also has agreed to comply with the regulation in the future and appoint item-pricing coordinators at each of its Massachusetts stores.

What's unusual about the agreement -- the third of its kind -- is that it was negotiated by private class-action attorneys, who essentially enforced the state's item-pricing regulation for Reilly.

The arrangement, which Reilly and the attorneys say was not planned but evolved over time, has worked out well for both sides.The regulation gets enforced, the attorneys pocket hefty fees, and Reilly's office receives a portion of the settlement money.

So far, the class-action attorneys have received a total of $2.65 million for working on previous cases against Home Depot and Wal-Mart, and stand to receive another $550,000 if the proposed settlement with Walgreens is given final approval in September. Other item-pricing cases against other retailers are pending.

Because it would be impossible to identify consumers hurt by item-pricing failures, the three settlement agreements have called for the retailers to give a total of $3.9 million to an eclectic group of charitable, consumer, and nonprofit groups, with approximately $425,000 going to Reilly's office.

A letter written by the lead attorney on the item-pricing cases indicates Reilly also called him last year to solicit money for his campaign. Robert J. Bonsignore, a Medford attorney, then solicited the other attorneys working on the cases on Reilly's behalf.

In an Oct. 9, 2003, letter to Ed Konieczny, an Atlanta attorney who worked on the Home Depot case, Bonsignore pressed for the maximum $500 contribution for Reilly. Bonsignore boasted -- mistakenly, as it turns out -- that every lawyer involved in the item-pricing litigation was giving $500 to Reilly.

"You coordinate litigation and understand how important it is to have all members of a team on the same page," Bonsignore wrote. "It is important that members of this team support Tom Reilly."

Konieczny, in a telephone interview, said no one at his firm donated to Reilly. Reilly's campaign records indicate six attorneys at other firms, including Bonsignore, gave $500 apiece to the attorney general's campaign fund.

Bonsignore and a spokeswoman for Reilly say there was never any coordination between the attorney general and the class-action attorneys about how to handle the item-pricing litigation or apportion the settlement money.

Bonsignore said he has never had a "lengthy discussion" with Reilly about the cases, and Reilly never asked for any of the settlement money. He said Reilly's reluctance to enforce the item-pricing regulation is understandable.

"An attorney general has to pick his priorities," Bonsignore said. "For his own reasons, he chose not to enforce this regulation. Fortunately, the law allows people to enforce the regulation on their own."

As for the fund-raising call from Reilly, Bonsignore said it was logical the attorney general would call him because the two worked together at the Middlesex County district attorney's office and he is a Reilly supporter.

The item-pricing class-action suits evolved from efforts by Colman M. Herman of Dorchester to enforce the regulation. When Reilly refused to enforce it in 1999, Herman began suing retailers himself in small claims court and later in state court. Those suits eventually morphed into the class-action lawsuits led by Bonsignore, which prompted retailers to clamor for Reilly to do away with the regulation.

Initially, Reilly stood by item pricing, which requires nonfood retailers to stamp prices on most items in their stores. But when Home Depot was forced in late 2002 to cough up $3.8 million to settle the first class-action lawsuit, pressure from retailers intensified. Reilly met them halfway last year, changing the regulation to allow retailers to avoid individually pricing items if they installed scanners in their stores that could spit out price stickers for items.

Herman who has parted ways with Bonsignore, said he has two major gripes about the class-action settlements. One is that too much of the settlement money is going to nonconsumer groups and the other is that the class-action attorneys don't do enough to ensure compliance with the regulation after a settlement is signed.

"Once the lawyers have their fees, they don't care anymore," he said.

Bonsignore said that's not true, noting he is preparing to take court action against Home Depot for its noncompliance.

The proposed Walgreens settlement includes $150,000 for the Massachusetts Bar Association, $120,000 each for the American Heart Association, the American Cancer Society, and the Juvenile Diabetes Research Foundation; $100,000 each for the National Consumer Law Center, the Roscoe Pound Institute of Washington, the New England Patients' Rights Group, and the attorney general's office; $50,000 for Public Citizen, and $40,000 for the Greater Boston Jewish Coalition for Literacy.

Bonsignore said all the grants, which were negotiated with the retailers, will benefit Massachusetts residents and most, including the bar association grant, will be used to spur greater awareness of consumer rights.

Herman said all the money should be going to consumer causes. "What does the American Cancer Society have to do with consumer rights?" he asked.

Cheese overcharges Colman M. Herman, the item-pricing watchdog, bought a $3.19 package of Kraft cheese at the Shaw's Supermarket in Dorchester in April and was charged $3.59 at checkout.

He reported the 40-cent overcharge to customer service and received a full refund and the item for free. He said the customer service representative filled out a form to have the price corrected.

Out of curiosity, Herman went back the next day, bought more cheese, and discovered the pricing error had not been corrected. He went back the next three days and each time was overcharged. Only when a manager overheard Herman talking to a customer service person on the fifth day was the mistake corrected.

In May, the same overcharges occurred two days in a row. Herman said he ended up with a lot of free cheese, but asks: "What about all the other people who bought the cheese and who were oblivious to being overcharged?"

Herman has sent a demand letter to Shaw's under the state's Consumer Protection Act, asking that the Dorchester store be brought into compliance with the item-pricing law covering food stores. He also wants $175 in damages.

Terry Donilon, a Shaw's spokesman, issued an apology and said the chain takes pricing accuracy seriously. He said human error sometimes occurs.

Bruce Mohl can be reached at mohl@globe.com.

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