V. OSP'S BILLING AGGREGATOR ATTESTED OSP CALL RECORDS ARE INVALID AND FRAUDULENT AND CONTINUES TO HOLD REVENUES COLLECTED ON OSP BILLINGS IN VIEW OF CPSD'S INVESTIGATION
According to the response provided to Staff, both Integretel and TBR investigated OSP on several occasions due to complaints and suspicions of anomalies in OSP's billing records.89 Integretel, who initially served as OSP's billing aggregator in June 2007, questioned OSP's billings and requested written evidence for each billing transaction for certain months be provided by a third party, which was provided by EKC (OSP's supposedly underlying dial tone provider). However, from the explanation provided by TBR,90 Staff noted Integretel did not ask for the telephone companies' switch records (AMA) to verify whether OSP's collect calls actually occurred.
Similarly, when TBR served as OSP's billing aggregator beginning in October 2009 it requested evidence for each billing transaction for certain months. In addition, TBR asked for information regarding terminating carriers (i.e., the telephone companies who received OSP's collect calls). However, OSP could not provide TBR the terminating carriers' information, and consequently TBR sent OSP a letter terminating their agreement effective June 3, 2009.
In response to Staff's request, TBR provided additional details regarding the legitimacy of the charges made by OSP in the form of a declaration (by Nelson Gross, Managing Director of TBR)91 that TBR submitted to the California Superior Court (in mCapital, LLC and CardinalPointe Capital Group v. The Billing Resources, LLC; OSP Communications, LLC; and John Vogel; Case No. 37-2010-00100830-CU-BC-CTL).92 In this case, on September 22, 2010, two telecommunications financing companies sued all Respondents in the San Diego County Superior Court for, among other things, breach of contract relating to the revenues collected on OSP billings in TBR's possession (currently at approximately $1.2 million total and it appears Integretel also holds approximately $1.1 million in revenues collected on OSP billings).93 According to the complaint, the plaintiffs had previously purchased from OSP all of its telecommunications accounts receivable and therefore alleges that all of OSP's revenue belong to it. On February 25, 2011, the Court stayed the case and ordered the parties into arbitration in San Jose.94 On April 26, 2011, the Commission filed an Amicus Letter with the San Diego Superior court in this case to request the Court hold the case in abeyance and order TBR to place all revenues collected on OSP billings in an interest-bearing escrow account, under court supervision, pending resolution of the matter at the Commission and in the Court.95 On May 10, 2011 the Court accepted the Commission's Amicus Letter and scheduled a status conference hearing on May 27, 2011 and invited the Commission to participate and to determine whether the Commission intends to intervene in this case.96
TBR filed the aforementioned declaration of Nelson Gross in opposition to an Ex Parte Application for Temporary Restraining Order and Order to Show Cause Re Issuance of a Preliminary Injunction.97 In the declaration, Mr. Gross explained that
currently TBR continues to retain the reserve funds in view of the (1) continuing refunds being made on OSP's billings, and (2) regulatory actions that TBR could face if it could not issue refunds to customers.98 Furthermore, Mr. Gross stated:
20. New TBR has significant reasons to believe that the billing transactions processed by OSP where [sic] invalid and likely fraudulent. The plaintiffs are aware of New TBR's concerns related to the validity of OSP's billing transactions, thus it is absurdly counter-intuitive for the plaintiffs to expect New TBR to release any of the reserves prior to the conclusion of the CPUC's investigation.99 (Emphasis added.)
21. Over time, TBR made several requests of OSP to confirm the validity of its billing transactions, specifically, the billing of collect calls. As TBR's questions became more focused, OSP was unable or unwilling to respond appropriately. This prompted TBR to send a sampling of OSP's call records to Verizon for validation. The sample contained call detail records for collect calls that were supposedly dialed by a third party as a collect call to Verizon customers which purportedly resulted in the collect calls, and their associated charges, being accepted by said Verizon customers...Upon review of the call detail records provided by OSP, Verizon found that none of the call detail records were valid-meaning that none of the calls were never placed. [sic] The call detail records provided by OSP were fictitious. In my professional opinion, this is conclusive evidence that the call detail records and their associated billing transactions were fraudulent.100 (Emphasis added.)
22. Suspicions were also raised by the fact that OSP was experiencing extraordinary high adjustment rates. Operator service providers who provide collect call services, such as OSP, should only experience 4% to 6% total adjustments. OSP experiencing well over 20% in adjustments at any given time, and, to date, has an adjustment exceeding 33%. (sic) These numbers are simply off the charts for any type of LEC billing service provider and more than enough cause to suspect fraud...101 (Emphasis added.)
23. As part of our further investigation, I had several calls placed to OSP customer service call center by people posing as the customers who were billed by OSP...Nothing about the customer experience, or their efforts to explain OSP's billing, were right. Eventually, almost every call ended with OSP customer service representative telling the customers that there must have been a billing error and that a credit would be issued.102 (Emphasis added.)
According to Mr. Gross, TBR and LECs continue to receive requests for customer refunds for OSP billings. To date, TBR has refunded approximately $376,000. LEC's made approximately $544,000 in bill adjustments and OSP has issued over $2,030,000 in refunds.103 Thus, OSP's refunds total approximately $2.9 million.
89 Attachment 9C (TBR Response dated May 10, 2010 to CPSD Staff Data Request No. TBR TEL 277-001 dated April 1, 2010).
90 Id.
91 Attachment 30 (Declaration of Nelson Gross).
92 Attachment 31 (Copy of Case No. 37-2010-00100830-CU-BC-CTL filed in the Superior Court of the State of California, County of San Diego, Central Division).
93 Attachment 32 (Declaration of Dana M. Perlman in Case No. 37-2010-00100830-CU-BC-CTL. On pg. 2 of this declaration, Ms. Perlman mentioned that an additional sum of approximately $1.1 million is being held by the Bankruptcy estate (Old TBR).
94 Attachment 34 (Copy of Court Order).
95 Attachment 35 (Copy of the Amicus Letter).
96 Attachment 36 (Copy of Court's Acceptance of the Amicus Letter).
97 Attachment 33 (Copy of Ex Parte Application for Temporary Restraining Order and Order to Show Cause Re Issuance of a Preliminary Injunction; Case No. 37-2010-00100830-CU-BC-CTL).
98 Attachment 30 (Declaration of Nelson Gross, at p. 6).
99 Ibid. at p. 7.
100 Ibid. at pp. 7-8.
101 Ibid. at p. 8.
102 Ibid. at pp. 8-9.
103 Ibid., at p. 9.
