II. RESPONDENTS, AFFILIATES AND COOPERATING BUSINESS ENTITIES
A. Respondents
Telseven is a Florida limited liability corporation, with its principal place of business located at 200 Executive Way, Ponte Verde Beach, Florida, 32082. It is a telecommunications company providing DA service, which Respondents characterize as Enhanced Number Assistance and Directory Assistance (ENADA),7 to customers throughout the United States, except in Nevada, and Alaska.8 As the term ENADA does not appear to be broadly utilized in the industry, or adopted by the FCC, and as Respondents' bills refer to DIR ASST, we will refer here to "DA" services. Telseven sometimes does business under the fictitious name of 101515800. Patrick Hines has consistently been identified as the direct or indirect owner of Telseven.9
As set forth below, staff discovered that Telseven was offering a telecommunications service in California without having registered or obtained a CPCN from the Commission. When staff directed Telseven to apply for operating authority from the Commission, Respondents first claimed their service was interstate, and then applied for that authority under the name California Calling 10, LLC.10
Calling 10 is a Delaware limited liability corporation with its headquarters also located at 200 Executive Way, Ponte Vedra Beach, Florida, 32082.11 It is a telecommunications company providing DA services to customers throughout the United States, except in Alaska, Connecticut, Iowa and Nevada.12 Calling 10 employs the same business model and has the same beneficial owner (Patrick Hines) as Telseven.13 Calling 10 does business under the fictitious business names of California Calling 10 LLC, Calling 10, Calling 101515800, Calling 1015158000, Service Bureau Networks, and Calling 1010275.14 Patrick Hines has consistently been identified as the direct or indirect owner of Calling 10.15
When confronted with allegations of unlicensed telecommunications service in California, Respondents filed a registration application under the "full legal name" of California Calling 10, LLC. There is no corporation in California with that as its "full legal name"; as noted above, the full legal name of the Telseven affiliate in question is Calling 10, LLC, and the California Calling 10, LLC name is a fictitious business name.16
As illustrated in the Staff Report, Telseven and Calling 10 have and appear to share common ownership, control, and management; by all appearances, Patrick Hines effectively owns, manages and directs both companies.17
B. Affiliates
Staff reports that Respondents' business operations are enabled by affiliated18 and non-affiliated "cooperating business entities."19 In addition to these companies, Mr. Hines also effectively owns and controls a number of affiliated companies, among which he apparently distributes the various functions involved in marketing and delivering the DA service, including but not limited to: (1) Signal One, a fictitious business name for several different corporations, operates as a "Responsible Organization" or RespOrg, giving Respondents control over a approximately one million toll-free numbers, as described below;20 (2) Levendo LLC, which contracts with various other entities that actually supply the DA service, telecommunications, and (in some cases) provide billing and collection services (Respondents appear to contract with third parties for all of the core operational aspects of the DA service); (3) Red Resources Ltd. and (4)Tarajara Properties Ltd., which apparently function as a holding companies for Respondents Telseven and Calling 10.21
C. Unaffiliated Cooperating Business Entities
Through contracts, sometimes between Respondents (or their affiliates) and third parties, and sometimes between Levendo (or other Hines affiliates) and third parties, Telseven and Calling 10 obtain the services necessary to run their businesses. These apparently unaffiliated business entities are essential to the operation of Respondents' business. These include: (1) Respondents' billing agents or "aggregators," ILD Telecommunications, Inc. (ILD) and ACI Billing Services, Inc., a subsidiary of BSG Clearing Solutions (BSG), which allow Respondents to place their charges on local phone companies' telephone bills;22 and (2) the company to which Respondents apparently outsource both the transportation of the dial-around calls to the DA platform and the DA service itself, Wholesale Carrier Services (WCS). WCS has its principal place of business at 5471 N. University Drive, Coral Springs Florida.23 WCS has filed a lawsuit in Florida seeking to block access to documents related to Telseven and Calling 10.24
Finally, the billing telephone companies, typically the large ILECs AT&T and Verizon, provide the actual billing and collection services which are essential to Respondents' business model.25 AT&T, at least, was aware of the high number of consumer complaints associated with Respondents' service.26
D. Leave to Amend
Because of the multiplicity and possible confusion of corporate names and services, as well as the difficulty in obtaining definitive information as to the relationships between Respondents and third parties, we grant staff leave to propose the addition of other parties as Respondents herein, as well as the addition of other factual allegations and legal theories to this OII.
7 See, e.g., http://telseven.com
8 Staff Report at section II(A)(1), and Attachment 2C (re states in where Telseven active). As recounted in the following paragraph, Telseven has also reported that it no longer offers service in California.
9 Staff Report at section II(A)(1).
10 See discussion in sections V(B)(2) and VI(G)(1) and (2) below. Staff has not provided, nor have Respondents offered, an explanation of why Respondents did not apply for authority under the existing name of Telseven. Had they so applied, however, they would presumably have had to answer as "not true" question 7 of the [Short] Form of Application for Registration, which asks whether the Applicant is "currently under investigation for similar violations [involving misrepresentations to consumers]." See Staff Report Attachment 66 (Telseven litigation with Florida Attorney General re documents produced to AG and requested by both Commission staff and FCC).
11 Calling 10's CPUC registration shows this address, but other corporate documentation shows a corporate address in Delaware. See Staff Report at section II(A)(2).
12 Id. at section II(A)(2).
13 Id. at sections II(A)(1)-(2), II(C), and II(C)(1). Compare also http://calling10.com with http://telseven.com.
14 Staff Report at section II(A)(2).
15 Id. and Table 1.
16 Asserting that it could not obtain the legal name Calling 10 LLC in California, Calling 10 LLC registered with the secretary of state under the fictitious name of California Calling 10, LLC, and then reported that fictitious name to this Commission as its "full legal name." Staff Report, Attachment 6 (Calling 10's Application A.06-10-008 listing "full legal name of applicant" incorrectly as California Calling 10, LLC, while correctly identifying the legal domicile of the corporation as Delaware); see also Attachment 6.1, Tab 2, California Secretary of State LLC Application for Registration, showing the dba and true legal name; compare Tab 1 (showing true name of the corporation, domiciled in Delaware, is Calling 10 LLC, not what is disclosed on the Application Form itself).
17 Staff Report, at sections II(A) and (B).
18 Staff is not using the word "affiliated" in any technical sense, and is instead referring to the fact that the entities here are believed to be beneficially owned and ultimately controlled by Patrick Hines. See Staff Report Attachment 14C ("Red Resources Ltd. [owner of Calling 10] and a number of other entities, including Levendo, Signal One and Tarajara Properties, are all owned, indirectly and in various ways, by Patrick Hines"). Many of the attachments to the Staff Report were submitted to Staff as confidential information pursuant to P.U. Code §583 and General Order 66-C. By publishing information from those confidential Attachments in this OII, the Commission is authorizing the release of that information to the limited extent reflected here. The Staff Report itself will be published in public and confidential versions.
19 Staff Report at sections II(B)(1) and (B)(2).
20 Id. at II(B)(1) and (C)(1).
21 Id. at section II(B)(1).
22 Id.at section II(B)(2).
23 See id., and Staff Report Attachment 13C (contract between Respondents and WCS).
24 See Staff Report Attachment 66.1.
25 See Section III(B)(3) of Staff Report for further discussion. In addition, one CAB complaint identifies Cox Telephone as the billing telephone company. Although not in privity with Respondents, the billing telephone companies services are the sine que non of Respondents' business model, as pointed out by District Court Judge Alsup in FTC v. Inc21, 688 F. Supp. 2d 927 (N.D. Cal 2010) (quoted infra). Staff notes the typical billing and collection agreement (BCA) between an ILEC and a service provider, or an ILEC and a billing agent/aggregator, calls for the ILEC to receive a portion of the revenues generated by the service provider. See Attachment 11C (Billing Service Agreements and Amendments) LEC Billing and Collection Attachment 1, Schedule 1-A at pg. 3-4, and 1-B at pg.6. Because the billing telephone companies were in possession of funds from the fraudulent enterprise in the Inc21 case, the Court there named them "relief defendants," subject to the preliminary injunction:
It seems that Pacific Bell could have organized the LEC billing process -- from which it presumably profits handsomely -- to have more control over the flow of funds going to potentially fraudulent businesses, but has simply chosen not to do so. This order declines to exempt Pacific Bell and other LECs from the preliminary injunction. LECs have a responsibility to learn the ultimate destination of the funds they are charging their own customers so that if and when fraud occurs, they can protect their customers and immediately put an end to the fraudulent billing.
688 F.Supp.2d at 939, fn. 12.
26 Staff Report at section III(B)(3) and Attachment 26C.
