PORTLAND, Ore. (PORTLAND TRIBUNE) — Behind Mall 205, past Old Chicago Pizza & Taproom, you can find the money-making idea of Scott Campbell called Hannah the Pet Society.
Seven years ago, Campbell founded the pet-care company based on an innovative model, crafted to bypass costly insurance regulations: You turn over ownership of your pet, then pay a monthly fee to cover veterinary care and food.
Now, with two locations featuring comfortable waiting areas and an array of examination rooms, the firm is poised to go national, says CEO Fred Wich, a former ATM company executive hired in 2015 to get the company ready for outside investors.
The for-profit firm has more than 6,000 paying members. But it also has one big problem: an Oregon Department of Justice investigation into substantial evidence that the firm misled customers, provided substandard veterinary care, and set up a fraudulent nonprofit to conceal a long-standing practice of buying dogs from commercial breeders, not shelters as the company had long claimed.
Wich notes that the state is looking at unfair trade practices, not a criminal statute.
“It’s not like they’re investigating whether we’ve committed a crime,” he said. “It’s more like did you mislead in your advertising.”
The problems are now corrected, he said: “I think we’ve done everything right since I’ve been involved.”
Still, in March 2016 the firm sued the state to block investigators’ demands for documents. Last month, Multnomah County Circuit Judge Leslie Bottomly rejected the company’s arguments and ordered the documents produced by April 14.
Last week, Wich provided a tour of Hannah’s Mall 205 location. At one point, in a room where dogs waited for veterinary care, he leaned over to touch the nose of a friendly white pug waiting in a cage. “You’re a cutie,” he said.
Headquartered in Vancouver, Washington, the company’s marketing says it was named for Campbell’s mother, who was known as Hannah. She “was a dedicated nurse who cared for every stray, hurt or sick, wild or domestic animal that crossed her path,” according to the firm’s entry on Yelp.
Adapting HMO model to pets
The company’s innovative approach, Wich says, was designed to make pet ownership affordable. The firm does so by taking ownership of pets under a model similar to a medical HMO, where the company decides what medical care the animal will receive and provides it.
Hannah the Pet Society received unwelcome publicity in early 2016, when the news broke that the company had euthanized three dogs. Critics said the dogs were not aggressive, contrary to the company’s claims.
In February 2016, the consumer protection unit of the state Department of Justice demanded documents from the company, citing complaints accusing the company of poor care and of not fulfilling promises made when it signed up customers.
Wich portrayed some complaints as unfounded. “Some of the complaints … are based on legitimate disagreements, and sometimes we’ve screwed up … but a lot of times they’re just basically trying to get out of a contractually obligated payment.”
Among the complaints cited were several claiming inadequate care because the company didn’t have enough veterinarians. One complainant reported that her cat’s urinary tract infection — a potentially life-threatening condition — was diagnosed as a behavioral problem.
Nonprofit gives investigators pause
The most significant evidence disclosed by the Department of Justice concerned the company’s role in setting up a nonprofit that allowed it to make marketing claims that state investigators deem false.
Until last year, its business model was based on connecting would-be “pet parents” with ostensibly rescued pets. Through at least late 2015, Hannah’s website stressed its connection to local shelters. It no longer supplies dogs and cats, however.
Photos showing people with cute pets were labeled on the website, “Shelter dogs and cats meet their new forever families.”
But the DOJ’s investigation found that the company’s image was based on false pretenses, and the appealing purebreds offered weren’t shelter pets at all, according to court documents.
Specifically, they found that a nonprofit called the Pet Animal Welfare Society, or PAWS, was set up by Hannah and used to purchase pets from commercial breeders. The nonprofit company was run by a Hannah executive using administrative and accounting services provided by Hannah, and had no assets, charitable programs, staff or public presence, according to the state investigation.
“Hannah was the sole source of PAWS funds, which PAWS used to purchase pets primarily from commercial breeders,” the state said. “PAWS then provided the pets to Hannah, and Hannah leased the pets to its customers, typically representing that these pets came from shelters or other animal welfare organizations.”
Indeed, the Hannah website claimed to have donated funds to local shelters and welfare organizations. But the funds instead were straight payments to PAWS in exchange for pets, according to the state.
According to a sworn declaration filed by DOJ financial investigator Lieselotte Zorn, PAWS sold approximately 1,000 pets to Hannah in 2013 alone.
Zorn wrote that her research “confirmed” that “Hannah organized PAWS under false pretenses” and “Hannah’s claim that it has donated more than $1.2 million to animal rescue organizations was false, because these payments were fees paid to purchase pets, not charitable donations.”
The firm has sought to blame the nonprofit as the work of a “rogue” former employee. But DOJ reports tracing its founding to the firm’s top leadership.
Wich, for his part, says the investigation is a long way from reaching any conclusion, and says Hannah’s membership is staying loyal despite the bad publicity.
“Through that bad publicity, virtually nobody left our program because they know,” he said. “They experience our service. They know we provide great health care. They know we have great doctors and facilities, and they know we truly love pets and are really trying to do the right thing.”
The Portland Tribune is a KOIN media partner.