I know that Shu Wong of San Jose hasn’t received the $3.50 mail-in rebate for a Vastech computer networking USB hub purchased at a Fry’s Electronics in May. Richard Louie of Austin, Olivia Sattaypiwat of Saratoga and Buu Duong of San Jose haven’t received their rebates, either.

I know this because they told me so, and because I am staring at more than 1,300 rebate requests sent to Vastech on Bonaventura Drive in San Jose. The envelopes were tossed – unopened – into a garbage dumpster near Vastech. I have two boxes of envelopes that were thrown out without being processed. In all of my years of reporting, I have never encountered such outrageous behavior against consumers.

An employee of nearby Dominion Enterprises found the letters, along with hundreds of others addressed to Vastech, at his company’s dumpster. He turned them over to his boss, Joel Schwartz, who gave them to me. All of the letters were addressed to UR-04 Rebate or some variation of the product name at the Vastech address.

Vastech is a small computer accessories company owned by Weizhen Tan, who goes by William. I didn’t get a response when I sent e-mails as directed by Vastech’s Web site. And the company’s voice mail was always full. But he was there at the small office at 63 Bonaventura Drive in San Jose when I came calling, letters in hand.

`Bad employee’

In his cramped office, Tan acknowledged that his 4-year-old company was behind on processing rebates that it had offered to consumers from February to May. He said he wanted to apologize to his customers.

When I asked why rebate letters were tossed out, he initially said it was due to a “bad employee.” Later, he said that it was probably done by a friend of the family who was not a formal employee but was supposed to be helping out. That person, he said, probably threw the letters out because of “laziness.” He said the person no longer does any work for the company.

Tan acknowledged receiving a lot of complaints, some filtered through Fry’s Electronics, which he said was the only chain that offered the Vastech products with rebates. He promised to respond quickly to complaints lodged at the company’s voice mail at (408) 786-7699, or its e-mail address at support@vastechinc.com.

“If we do rebates in the future, we will put in place a better system for tracking them,” he said, promising that his company would be caught up on rebate processing this month. “It’s unfortunate this happened. We will take responsibility for them and handle it better.”

At best, you can chalk this up to a small company getting stretched too thin when it offered a good rebate deal that consumers couldn’t pass up. But there is a bigger problem: The whole rebate system.

“They don’t make it easy for you,” said Vastech customer Richard Louie. “It’s a lot of work. When it’s a small amount of money, I don’t keep track of it. For the bigger ones, I do keep track and sometimes I have to call them to complain.”

This is why current rebate practices should end. Fry’s Electronics, which has 34 superstores in nine states, and other reputable chains like Best Buy and Circuit City, should have nothing to do with them.

From the start, the deck is stacked against consumers to discourage them from ever redeeming the rebates. Depending on the rebate’s value, anywhere from 5 percent to 80 percent of customers apply for them. Rebates are often used to get consumers into stores by touting a low price like “$39 after rebate.” Manufacturers use them to cut prices after a product is in the market and to get a better idea of who their customers are.

Manuel Valerio, a spokesman for Fry’s in San Jose, confirmed that Fry’s had received complaints about Vastech’s rebates and that Fry’s had assisted some customers in getting paid. He said the store didn’t know rebate letters had been dumped, adding that Fry’s would likely not sell products from companies that engaged in such practices.

But Fry’s has no plans to ban rebates.

“We certainly know there are many people who are no fans of rebates, and we are not the greatest fans of rebates as well, but the reality is they are out there,” he said. “So long as manufacturers and other retailers offer them, Fry’s will continue to do so because we don’t want to be at a disadvantage vis-a-vis other competitors in the retail industry.”

False advertising

The Federal Trade Commission has taken action for false advertising against a number of companies that have abused the rebate system, said Matthew Gold, a staff attorney for the FTC in San Francisco. The companies must pay the consumers. Retailers can be held liable if the manufacturers don’t pay as promised. In some cases, states have brought criminal fraud actions against companies.

The Better Business Bureau of Silicon Valley reports that it has processed 51 complaints about Vastech since February 2006. Of those, 49 went unanswered by the company in the past year. The BBB considers that an unsatisfactory record.

“We tried contacting Vastech a few times with no success,” said BBB spokesman Zach Vander Meeden.

This is a ridiculous system that invites abuse. All the discarded letters I looked at were postmarked around May and were found in the garbage just days after being sent. It makes you wonder how often this happens.

I certainly don’t trust Vastech at this point, even though Tan offered to sign rebate checks in front of me and requested the unprocessed rebate forms, which I plan to return to him. And I think Fry’s Electronics should take care of their customers if Vastech doesn’t. Imagine the surprise that Shu Wong got when I called and said he wasn’t likely to get his rebate check. “It’s only $3.50,” he said. “But that’s wrong.”