California Public Utilities Commission CONSUMER PROTECTION & SAFETY DIVISION INVESTIGATIVE REPORT ON OSP COMMUNICATIONS, LLC (public version) By: Nora Y. Gatchalian San Francisco May 26, 2011

TABLE OF CONTENTS

I. SUMMARY 1

II. COMPANY BACKGROUND 3

A. OSP 4

1. OSP Provides Collect Call and Prepaid Phonecard Services 4

2. OSP's Marketing Strategy is Inherently Fraudulent 5

3. OSP Is Purportedly No Longer In Operation 6

B. ENTITIES ASSOCIATED WITH OSP 6

1. Billing Aggregators: The Billing Resource, LLC (TBR) and The Billing Resource dba Integretel (Integretel) 6

2. Underlying Carrier Purportedly Providing Dial Tone: EKC Telecom, Inc. (EKC) 8

C. OSP'S SOLE OFFICER JOHN G. VOGEL IS ASSOCIATED WITH NUMEROUS TELECOMMUNICATIONS COMPANIES, ONE OF WHICH WAS THE SUBJECT OF NUMEROUS CRAMMING COMPLAINTS FOR UNAUTHORIZED COLLECT CALLS 9

III. CRAMMING COMPLAINTS AGAINST OSP 11

A. CAB AND TBR RECORDS SHOW SUBSTANTIAL NUMBERS OF COMPLAINTS FROM CALIFORNIA CONSUMERS AGAINST OSP 11

B. FEDERAL TRADE COMMISSION RECORDS CONTAIN CONSUMER COMPLAINTS AGAINST OSP FOR UNAUTHORIZED COLLECT CALL CHARGES 15

C. WEBSITES SHOW CONSUMER COMPLAINTS OF UNAUTHORIZED COLLECT CALL CHARGES FROM OSP 15

D. DECLARATIONS FROM COMPLAINANTS SHOW OSP CRAMMED THEM 16

IV. STAFF'S ANALYSIS AND FINDINGS 16

A. THE LACK OF SUPPORTING CALL RECORDS FROM TELEPHONE COMPANIES CALLS INTO QUESTION THE EXISTENCE OF OSP'S COLLECT CALLS 17

1. AT&T call records do not support OSP's collect call charges. 19

2. Verizon call records do not support OSP's collect call charges 21

3. Approximately all of OSP's billing transactions for collect calls are invalid. 22

B. COMPLAINANTS CLAIM THEY NEITHER RECEIVED NOR AUTHORIZED OSP'S COLLECT CALLS 22

C. OSP EXPERIENCED EXCESSIVELY HIGH REFUND RATES 23

D. OSP BEGAN OPERATING A SIMILAR COLLECT CALL SCHEME SHORTLY AFTER LINK SYSTEMS CEASED OPERATIONS BECAUSE OF CPSD'S INVESTIGATION. 25

E. OSP FAILED TO PROVIDE A LEGIBLE CONTRACT THAT DETAILS THE PRECISE SERVICES PERFORMED BY EKC, ITS SUPPOSED UNDERLYING CARRIER. 25

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 26

VI. OSP VIOLATED P.U. CODE SECTION §2890 (A) BY PLACING UNAUTHORIZED CHARGES ON CONSUMERS' TELEPHONE BILLS 29

VII. OSP VIOLATED P.U. CODE §451 29

VIII. OSP DOES NOT HAVE OPERATING AUTHORITY IN CALIFORNIA BUT MAY BE PROVIDING A SERVICE THAT REQUIRES REGISTRATION WITH THE COMMISSION 30

IX. OSP SHOULD REMIT REGULATORY FEES 30

X. RECOMMENDATIONS 30

I. SUMMARY

The Utility Enforcement Branch (UEB or "Staff") of the California Public Utilities Commission's (Commission) Consumer Protection and Safety Division (CPSD) initiated in October 2009 an investigation into the operations and practices of OSP Communications, LLC (OSP) in response to the significant number of cramming complaints reported by OSP's billing aggregator.¹ Cramming is referred to as the placement of unauthorized charges on a consumer's telephone bill. Results of Staff's investigation support the following conclusions:

1. OSP crammed more than 250,000² California consumers and billed them over $8 million³ for collect calls they neither received nor authorized in violation of Public Utilities (P.U.) Code§2890(a).

2. None of OSP's billing transactions was authorized or valid.

· Staff randomly selected a sample of 384 "records," from OSP, representing a 95% confidence level, and asked AT&T (293 records) and Verizon (91 records) to validate them. Neither AT&T nor Verizon could locate matching call records to validate OSP's "records."⁴ In short, they could not verify that the calls occurred.

· OSP's billing aggregator, The Billing Resource (TBR) found, through its own testing of a sample of "records" OSP submitted, that OSP submitted fictitious call detail records for billing. Thus, TBR terminated billing for OSP. As a result of TBR's finding and in light of CPSD's ongoing investigation, TBR currently holds approximately $1.2 million in revenues collected on OSP's billings.⁵

· Consumers who filed complaints with the Consumer Affairs Branch (CAB) and Federal Trade Commission (FTC) and who posted complaints on the internet claim that they neither received nor authorized the collect calls OSP billed them.⁶

· OSP's extraordinarily excessive refund rates of 53% in 2009 and approximately 35% during its entire collect call operations suggest widespread fraudulent billing transactions, especially given that its billing agent TBR considers a 4% - 6% refund rate an acceptable range for collect call services. Despite OSP's refunds to California consumers of approximately $2.9 million, OSP still received about $5 million (approximately 65% of billed revenue) of potentially ill-gotten monies that should be returned to California consumers whom OSP apparently crammed.⁷

· After holding key positions at another telecommunications company (Link Systems, Inc.) suspected of similar collect call cramming violations as OSP, OSP's apparent owner, John Vogel, continued the collect call cramming scheme by creating OSP and utilizing different billing aggregators.⁸

· OSP failed to fully comply with Staff data requests to provide a legible contract that details the precise services that its underlying carrier EKC Telecom, Inc. (EKC) purportedly provided OSP.⁹

3. OSP may have operated prepaid calling card services without Commission authority.

4. OSP failed to remit regulatory fees to the Commission for its operations as a prepaid calling card service provider.

CPSD requests that the Commission open an Order Instituting Investigation (OII) into OSP's actions. If the Commission finds that OSP violated any laws, rules or regulations of this State as described in this report, the Commission should impose penalties against OSP and its apparent owner, John Vogel. Staff is extremely concerned by the findings detailed in this report and strongly questions the integrity and fitness of John Vogel, OSP's sole officer and employee. Staff doubts whether Mr. Vogel should be allowed to operate a telecommunications company or place charges on telephone bills in this State. The Commission should also consider whether Mr. Vogel should be held personally liable because he had the power to control and participated directly in the alleged cramming of over 250,000 California consumers. CPSD asks that the Commission consider Mr. Vogel's integrity and fitness and whether the Commission should also impose sanctions upon Mr. Vogel to protect California consumers.

¹ The billing aggregators report cramming allegations by consumers in compliance with P.U. Code Section 2889.9(d).

² See discussion below in Section IV.A., concerning OSP's Exchange Message Interface (EMI) call records.

³ See discussion below in Section IV.C., concerning OSP's revenues.

⁴ See discussion below in Section IV.A.1., and 2 concerning the verification of call records conducted by AT&T and Verizon.

⁵ See discussion below in Section V., concerning Nelson Gross' (TBR's Managing Director) Declaration dated January 24, 2011 filed with the San Diego County Superior Court of the State of California.

⁶ See discussion below in Section IV.B., concerning the issue or concern raised by complainants.

⁷ See discussion below in Section IV.C., concerning OSP's excessively high rate of refunds.

⁸ See discussion below in Section IV.D., concerning John Vogel and Link Systems.

⁹ See discussion below in Section IV.E., concerning OSP and EKC.