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updated 5/27/2004 2:49:21 PM ET 2004-05-27T18:49:21

A Minneapolis-based telephone company has settled claims by 10 states, including Montana, that alleged the company's telemarketers misled consumers.

Under the settlement, New Access Communications LLC, will make more than $2 million in payments to consumers and the states.

This will include $750,000 in penalties and payments to the states, and at least $250,000 paid to a trust fund to pay consumers hurt by the company.

In a written statement, the company called the settlement "amicable."

"New Access is pleased to put this matter behind it, so that it can focus on its core business of serving its customers in Minnesota and elsewhere," the statement said.

It was not immediately clear how much money each of the states would receive.

Consumers who have complained or who file a complaint within 90 days can request either a $50 payment or have a retired judge appointed to the case determine the amount of their claim.

The company also must give billing credits to former customers, which has been valued at over $1 million.

At one time Gov. Tim Pawlenty was one of three directors and an investor in New Access' parent company, NewTel Holdings. Pawlenty has said he had no oversight over New Access and didn't know about complaints against the company.

Reports of Pawlenty's ties to New Access last year ignited political battles at the Capitol, especially after Pawlenty disclosed he was paid about $60,000 in attorney's fees while a legislator by his longtime friend and political confidant Elam Baer, the chairman of NewTel.

Regulators in other states also heard from consumers and Minnesota Attorney General Mike Hatch, a Democrat, led the multistate investigation into the company.

The nine other states involved in the investigation were: Colorado, Iowa, Michigan, Montana, Nebraska, North Dakota, Ohio, Texas and Wisconsin.

The states initiated the investigation after receiving complaints of so-called "slamming," in which the company had failed to disclose that "package prices" didn't include in-state long distance calls or other features and that New Access pretended to be calling from another phone company.

The settlement also includes a provision that New Access must tape record its telemarketing calls.

New Access said the settlement "should not be construed or used as admission of any fault, wrongdoing or liability for any purpose, and New Access specifically denies all allegations made by the state attorneys general.

"All parties entered into the settlement agreement to avoid the delay, uncertainty, inconvenience and expense of protracted litigation," the statement said.

New Access noted that it had already adopted many of the marketing controls called for by the settlement.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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