The contractor that ran the gift certificate program for the Defense Commissary Agency has shut its doors, leaving an unknown number of customers holding commissary gift certificates they can't use.
CertifiChecks, Inc., abruptly announced that effective Feb. 26 they will no longer administer gift certificate programs. The company's commercial phone number in Dayton, Ohio has been disconnected. A toll-free number provided on the Web site is a recording that does not allow a caller to leave a message. The Web site states that the company is in the process of filing for Chapter 7 bankruptcy.
Commissary officials advise customers holding CertifiCheck certificates who wish to submit their certificates for "potential reimbursement" to send them to:
Attn: Redemption Dept.
P.O. Box 13603
Dayton, OH 45413
It was uncertain at this time whether customers should send copies of the gift certificates and retain the originals in order to protect their money. The company warns merchants not to deposit gift certificates in the bank, because they will be returned.
Information was not available from the Defense Commissary Agency about the estimated value of outstanding commissary gift certificates. The agency is located at Fort Lee, Va., which was closed Monday because of snow.
But in a press release issued earlier, officials said more than $17.5 million in gift certificates have been purchased for authorized customers since the program was established in September 2002. In fiscal 2008, more than $3.9 million worth of certificates were purchased, redeemable in commissaries in denominations ranging from $5 to $100.
Philip Sakowitz Jr., the commissary agency's director, said in the press release that as an appropriated fund agency, DeCA no longer can accept the certificates. He said DeCA is looking for an alternative solution to fulfill customers' requests for commissary gift certificates.
Anyone could buy the certificates, but only authorized customers could use them. A number were bought as donations for military families in need through installation chaplains, the Air Force Aid Society, the USO, Operation Homefront, Operation Interdependence, and the Fisher House Foundation.
Those who bought the certificates paid a fee of $4.95 that went to CertifiChecks, for the cost of printing, mailing and handling of up to 20 certificates per order. The commissary agency received no revenue from its agreement with CertifiChecks, DeCA officials said.
CertifiChecks, Inc., which was established in 1999, processed gift certificates for about 450 merchants and associations across the country, DeCA said.
One of those merchants has been the Army and Air Force Exchange Service, which used CertifiChecks, Inc., to administer its Gifts From the Homefront program. As of Monday, AAFES stores were still accepting the gift certificates, pending a final decision on a policy for handling the defunct certificates, said spokesman Judd Anstey.
About one-third of the gift certificates bought through the Gifts From the Homefront program have not yet been redeemed. Between March 2003 and Dec. 31, 2008, the latest month for which data is available, 112,307 gift certificates valued at $2.4 million were purchased. As of March 2, some 37,602 gift certificates valued at $731,395 had not been redeemed.
Donors in the general public also could buy those gift certificates. But in October 2008, AAFES officials began scaling back the CertifiChecks program and promoting their own gift cards, which do not have a fee.
Gifts From the Homefront certificates also could be used in Navy exchanges, but Navy Exchange Service Command officials could not immediately be reached for information about whether the certificates will continue to be accepted.
Exchange gift certificates sold through the exchange catalog were not affiliated with CertifiChecks, and are not affected.
The Defense Commissary Agency will accept outstanding CertifiCheck gift certificates from authorized customers thanks to a plan approved today by the Department of Defense. The approved plan allows DeCA commissaries to honor CertifiCheck gift checks now through July 31, 2009.
"I am happy to report that DeCA and DoD have found a way that we can honor our customers' unredeemed certifichecks," said DeCA Director and CEO Philip E. Sakowitz Jr. "We have been deeply concerned about how this situation has impacted our customers worldwide, and we're happy that we've been able to find a solution."
CertifiChecks Inc., the Dayton, Ohio, company that has issued the commissary gift checks since 2002, announced Feb. 26 on its Web site that it had ceased operations and was filing Chapter 7 bankruptcy.
Since then, DeCA had been working non-stop with DoD officials to settle on a legal recourse it could offer its customers left holding the unredeemable certifichecks.
DeCA will be allowed to absorb the losses incurred from honoring the certificates from its Defense Working Capital Fund, Resale Stocks Account, Defense officials said. The DWCF was established to allow the federal government purchase and repair activities to account for costs and revenue as if they were commercial businesses.
Since 2002, more than $20 million in gift certificates have been purchased for authorized customers, including more than $3.9 million in fiscal 2008.
Consumers might recoup only "pennies on the dollar" for gift certificates sold by a defunct Ohio company, the state's attorney general said this week.
That could mean the loss of hundreds of thousands of dollars for military retailers who are still redeeming the certificates.
Ohio Attorney General Richard Cordray filed a lawsuit Monday against CertifiChecks Inc., saying the company broke the state's sales laws by failing to honor the certificates and misrepresenting reimbursements offered to customers after it closed.
CertifiChecks left tens of thousands of shoppers in the global military community and across the United States with worthless gift certificates when it suddenly went out of business Feb. 26. It posted a notice on its Web site saying it planned to file for bankruptcy in Ohio and asking customers to mail unused gift certificates for "potential" reimbursement.
CertifiChecks defaulted on $713,290 worth of gift certificates sold to military exchange shoppers. The Navy Exchange and the Army and Air Force Exchange Service said last week they will cover the loss and are continuing to accept the certificates.
AAFES said recently it is keeping its legal options open. Agency officials in the United States were not immediately available for comment Tuesday.
Commissary shoppers bought $3.9 million worth of the certificates in 2008. The Defense Commissary Agency, which runs the stores, said it didn't know the total amount of gift certificates still in circulation but it would redeem them at a loss.
Any reimbursement claims for that lost money will be handled by a bankruptcy court - if CertifiChecks follows through on its stated plan to file an action, Cordray said in a release Monday.
"The bankruptcy court will determine the amount of reimbursement each consumer is entitled to receive," he said. "Depending on the resources available, this may be only pennies on the dollar for individual consumers."
Cordray asked the court to order CertifiChecks responsible for reimbursing consumers and to rule that the company violated the law. The attorney general also asked that the company be fined at least $25,000, according to the release.