Accused of defrauding military members, LI-based Harris Jewelry must cancel $21.3M in debt

A Long Island-based national jewelry retailer accused of using deceptive marketing tactics to defraud military members must cancel $21.3 million in customers' debt and pay $1 million to 18 states, the New York State Attorney General’s Office said in a statement announcing a settlement Wednesday.

Ronkonkoma-based Harris Jewelry must also refund tens of thousands of service members for warranties and dissolve all its businesses under an 18-state agreement that recovers $34.2 million from the retailer for more than 46,000 active and former service members, said New York State Attorney General Letitia James’ office, which worked with the Federal Trade Commission in reaching the settlement.

"It’s abhorrent that Harris Jewelry built their business by taking advantage of young service members risking their lives to protect our country. Harris Jewelry claimed to serve and support our troops, but its business practices were entirely self-serving," James said in the statement.

The settlement resolves a lawsuit that New York state brought against Harris Jewelry and its principals in 2018, when Barbara D. Underwood was the state’s attorney general.

Harris Jewelry neither admitted to nor denied the allegations in the settlement.

The settlement resolves the case in the best interests of the company's stakeholders, Harris Jewelry said in a statement Wednesday.

"With a proud 60-plus year history serving active-duty military personnel, retirees, reservists, National Guard, and their families, Harris Jewelry’s stores — all of which closed over a year ago during the COVID-19 pandemic — will not reopen," said the company, which was formerly based in Hauppauge.

Harris Jewelry, which is the trade name of Harris Originals of NY Inc. and several other affiliated corporations, operated about 30 stores near and on military bases, including Fort Drum, the largest military base in New York state.

“The jewelry company used deceptive marketing tactics to lure active-duty service members to their financing program, falsely claiming that investing in this program would improve service members’ credit scores. Instead, service members were tricked into obtaining high-interest loans on overpriced, poor-quality jewelry that saddled them with thousands of dollars of debt and worsened their credit,” James' office said in the statement.

The company enticed service members to shop at its stores with a marketing scheme called “Operation Teddy Bear,” in which it sold toy bears wearing military uniforms, the attorney general’s office said. Some customers were told that all proceeds would go to a charity, Operation Troop Aid Inc., while others were told that only a portion of the proceeds would go to the charity, the office alleged.

But no legal contract was ever signed between Harris Jewelry and Operation Troop Aid, the office said.

(Operation Troop Aid, which was a Tennessee-based military charity, reached a multistate settlement in 2018 that required it to dissolve for allegedly engaging in a deceptive marketing campaign and failing to properly oversee donations made by Harris Jewelry.)

In addition, Harris Jewelry offered military members "predatory lending contracts" that it said would help them build their credit or improve their credit scores, the attorney general's office said.

“The credit advanced to service members through what was called the Harris Program was not based on a consumers’ credit score, potential income, or other legitimate factors that banks consider,” the office said.

Instead, the credit advance was based on the service members’ branches of service, length of time left on enlistments and the categories of merchandise they bought, the office said.

'Not worth the price'

The jewelry sold was significantly overpriced, typically by six or seven times the wholesale cost, and of poor quality, the office alleged.

“The jewelry was not worth the price and consumers often reported stones falling out, chains breaking and the finish fading,” the attorney general’s office said in the statement.

Harris Jewelry also told customers that purchasing warranties, ranging from $39.99 to $349.99, was optional but added them to nearly all transactions without notifying customers, the attorney general’s office alleged.

With the inflated prices, warranties, taxes, and shipping and handling fees, service members were charged more than the price initially given to them, the office said.

For example, Harris Jewelry paid a wholesale price of $77.70 for a Mother’s Medal of Honor that it sold for $799 at retail, the office said. With the warranty, taxes, other fees and a 14.99% interest rate over 10 months, the total cost to the customer ended up being $1,039.26, the office said.

The settlement with Harris Jewelry requires it to stop collecting $21.3 million in outstanding debt held by 13,426 service members and to provide $12.9 million in refunds to 46,204 service members who paid for lifetime warranties, the attorney general’s office said.

In New York state, 443 service members will have $756,644 in debt canceled and 1,692 will be refunded $479,514.

Harris Jewelry also is required to vacate judgments, totaling $115,335.64, against 112 customers and delete any negative credit entries reported to consumer reporting agencies.

Of the $1 million that Harris Jewelry must pay 18 states, New York will receive $150,000. James will direct that money to Jefferson County, where Fort Drum is located, for programs to support active and former service members.

By Tory N. Parrish

tory.parrish@newsday.comToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.