On May 7, a Hale County, Alabama, jury found a fraudulent scheme by Whirlpool Financial National Bank (now Transamerica Bank) to cheat thousands of Alabamians out of millions of dollars so outrageous that it returned a $581 million verdict to punish the company.

The size of the jury award was "designed to call attention" to the company's misconduct in marketing satellite dishes -- which were marked up 550 percent over the standard retail price plus 22 percent interest on that inflated price -- to elderly, illiterate and poor people, according to the plaintiffs' attorney, Tom Methvin of Montgomery. However, the real fraud not only was that the satellite dishes, which were sold for $1,100, could have been purchased for $199 each, but also Whirlpool's deceptive financing terms.

"Ultimately, it [the verdict] will be reduced, but the message will remain," added Methvin, who asked the jury for far less than the amount it awarded in punitive damages. The jury, led by a former school teacher, awarded $975,000 for mental anguish and $580 million in punitive damages.

Empirical studies by objective legal scholars repeatedly have shown that large punitive damage awards are almost always reduced by the trial judge, on appeal, or in post-verdict settlements. Yet, the possibility of punitive damages constitutes a significant and effective deterrent to the most flagrant misconduct.

In its scheme, Whirlpool used credit card financing because, under federal law, a lender using such financing is not required to disclose in writing the number of payments. Such financing essentially uses open-ended or revolving credit. Under traditional financing -- for example, when a lender makes an installment loan for the purchase of a car -- the lender is required to disclose the amount and number of payments, as well as the total amount that will be paid over the term of the loan, under the federal Truth in Lending Act. In this case, Whirlpool salespeople lied to victims regarding the number of payments without ever having to provide a document that would have exposed this deceit.

At trial, a former Whirlpool agent testified that he trained other salespeople to lie about the financing terms, telling customers that payments would be for three years when in fact it took many victims up to eight years to pay off the debt. The former agent, who quit the company, testified that Whirlpool officials knew about this practice of misrepresentation, but did nothing about it.

In using credit card financing, Whirlpool violated federal consumer protection laws that do not permit such financing where there is no repeat transaction. The Wall Street Journal reported that the decision against Whirlpool was not "all that surprising," since seven other major lenders settled satellite-dish-loan cases in Alabama for millions of dollars and ended their loan programs in the state.

Whirlpool, which has been sued by 59 Alabamians over this loan program, made about $8 million off the scheme. In some cases, the salespeople were convicted felons.

"We proved that Whirlpool Financial targeted the elderly and the illiterate," said Methvin, the plaintiffs' attorney. The jurors "were outraged that this was going on in a modern society."