GOLDEN, Colo. - More than 11,000 small businesses including Credit Union of the Rockies are embroiled in a telecom nightmare with a bankrupt phone and Internet services provider that they say failed to deliver services. At issue is Newark, N.J-based NorVergence, a reseller of phone and Internet service that declared bankruptcy in July, 2004. Last spring, hundreds of small businesses signed five-year leases with NorVergence, but weeks before the firm declared bankruptcy and without connecting service, it sold the leases as investment contracts to more than 20 banking firms, according to investigators. Businesses were charged monthly payments ranging from $200 to $2,300 that would total $10,000 to $150,000 over the life of five-year agreements. After signing up customers, NorVergence sold its lease agreements to dozens of financial companies across the nation, which are currently trying to collect those lease payments and even have filed litigation against some of NorVergence's former clients. At least a dozen states, including Colorado, Florida, Illinois and New Jersey have launched consumer fraud investigations. Texas recently threatened to take legal actions against the leasing companies if they don't back off from the small businesses during the state's investigation. Bryan Resche, president of $38 million CU of the Rockies, did not want to reveal the terms of the lease but did say "the amount has not had a material effect on the credit union." Like others, the credit union is "fighting to get out of the agreement," Resche said. "It seems like it's going to be a long process going forward," Resche said. "What we've learned here is to do business with companies based on referrals from other credit unions and not through cold calls. The matter is now in the hands of our attorney." Meanwhile, Colorado's attorney general office is dismissing claims from previously published reports that it does not plan to pursue the matter, said Garth Lucero, Colorado deputy attorney general. The office is currently working with other states and federal agencies to come up with solutions to help small businesses that have been affected. "It's a difficult situation because of the issue involved with commercial leases and signed leases and the tremendous number of companies involved nationally," Lucero told the Credit Union Times. Colorado has received more than 21 complaints from small businesses, but CU of the Rockies is the only credit union that has contacted the attorney general's office, Lucero said. Small insurance companies, printing companies and dental offices are among those who have filed complaints here. Meanwhile in New Jersey, more than 1,000 small businesses have filed complaints with the state's attorney general's office, said Peter Aseltine, a spokesman. It appears that no credit unions are on the list. New Jersey prosecutors have issued subpoenas to 26 banks and leasing companies, including Wells Fargo and U.S. Bank, asking for documents detailing their business deals with NorVergence. At the same time, the financial services companies were ordered to cease and desist litigation against NorVergence customers who stopped making payments after the phone company went out of business. NorVergence ran out of cash and shut down in July, 2004, leaving thousands of small businesses without service while creditors were left with tabs totaling $30 million or more. Investigators say that when a customer signed a NorVergence lease, the company was quick to sell the leases at a discount to such major financial service companies. Even though many customers say that service never began, the finance companies have been demanding payment. [email protected]