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A company set up to encourage California consumers to take advantage of a class action settlement with Microsoft Corp. has hit a road bump. San Francisco Superior Court Judge Paul Alvarado said at a hearing Thursday that he is concerned about the way the Settlement Recovery Center is soliciting consumers to participate in the settlement. “These are not claimants that started the process on their own,” Alvarado said. “They are being solicited in malls or other locations. Who knows what they are being told?” Microsoft settled the California consumer class action in January 2003, agreeing to give $1.1 billion worth of vouchers to 14 million Californians who indirectly purchased Microsoft software — that is, bought computers from a company that had purchased Microsoft software — between 1995 to 2001. The vouchers are to be used to buy any computing products. Alvarado approved the settlement agreement earlier this year. Howard Yellen, an entrepreneur and lawyer, established SRC in October 2003 as a way to make money by helping companies, nonprofits and individuals collect their share of the Microsoft payout. Yellen’s company takes a commission, which for nonprofits is about 20 percent of the face value of their vouchers and for companies about 30 percent, SRC spokesman Craig Wolfson said. SRC has asked Alvarado to issue an order stating that the claims SRC filed meet the terms of the settlement agreement. At the end of a two-hour hearing, Alvarado said he would rule at an unspecified date. Microsoft attorney Robert Rosenfeld, a partner at Heller Ehrman White & McAuliffe, said one of his partners had been stopped in a shopping mall and asked to sign a petition to get Microsoft to give money to charity. Rosenfeld said there is no way to know what SRC’s canvassers are telling people. Townsend and Townsend and Crew partner Richard Grossman, who represents the plaintiffs in the class action, spoke in favor of SRC’s role in getting more consumers involved in the settlement. He argued that the ability to donate to charities gave them a choice. SRC said in a court filing that it has contracts with dozens of corporations, including General Electric Co., Charles Schwab & Co. and Delta Airlines to process their claims. It also has received authorization from 40,000 individuals to process their claims and donate their vouchers to one of 250 charities. However, SRC has only filed 950 claims thus far. Microsoft contends all of those claims are invalid and some are fraudulent. SRC concedes that in one instance its employees encouraged college students to file claims for software they hadn’t purchased. Microsoft also argues that 793 of the 950 claim forms contain irregularities that may indicate fraud — including forms that are identical except for the names and addresses on them. SRC attorney Mitchell Green said Microsoft has exaggerated the problem. “Putting these [fraud] cases in perspective, they involve under 100 signatures out of over 50,000 claims,” Green wrote in a brief to the court. He said some fraud is unavoidable since the settlement does not require individuals to support their claims with documentation. SRC contends that Microsoft is trying to limit the number of claims in order to hold on to some of the $1.1 billion in voucher funds. Under the settlement, two-thirds of the unclaimed funds will go to public schools in the form of vouchers and the remaining one-third will revert to Microsoft. According to SRC, only about 700,000 of more than 14 million possible claims had been filed as of Nov. 22. The filing period ends Jan. 8.

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