5. The Remedy, and Other Matters

We have concluded that respondents were in violation of Pub. Util. Code § 1001 or § 1013(a) and § 854 for the unlawful operation of DLD and Worldwide and the unlawful acquisition of DLD by Clear World. Section 1013(h) of the Code authorizes a fine of up to $20,000, which may be multiplied by the number of days in which the violation continued. Similarly, § 2107 authorizes a fine of no less than $500 nor more than $20,000 per day for violation of Commission orders.

Recent penalties assessed by the Commission for providing telecommunications services without a CPCN have ranged from $500 to $24,000. (See, Telecom Consultants, Inc. (2004) D.04-01-039 ($500 fine); FirstWorld SoCal (2001) D.02-05-045 ($24,000 fine); Evercom Systems, Inc. (2001) D.03-06-069 ($11,000 fine).) The penalty for transferring assets without Commission authorization has ranged from $5,000 to $51,500, as reflected in NetMoves Corporation (2000) D.00-12-053 ($5,000 penalty) and Wild Goose Storage, Inc. (2003) D.03-06-069 ($51,500 fine).

As established at hearing, DLD made telephone sales under AmeriVision tariffs between June 1997 and October 1998, and Worldwide made telephone sales under the WorldTel tariffs between August 1998 and February 1999, for a total of approximately 695 days. Under the standard of § 1013(h) and § 2107, the minimum penalty would be approximately $350,000, while the maximum penalty would be approximately $14 million. We elect to mitigate the fine to $100,000 (equating roughly to $5 per current California customer). We do so under the guidelines of the Affilate Enforcement Rulemaking, D.98-12-075, taking into account the relatively small size (20,000 California customers) and current operating losses of Clear World. To the extent the Statute of Limitations applies to this fine, we deem it tolled by the Commission's order in D.03-02-066 requiring continued investigation of DLD and Worldwide.

A fine of $100,000 conforms to the penalties set in our earlier cases since the case before us involves three separate violations - the operation of two telecommunications companies without CPCNs and the transfer of assets of one of those companies without authorization.

We note also three other factors that mitigate the penalty that we impose: (1) non-monetary sanctions against Clear World for essentially the same offenses were previously imposed by the Commission in D.03-02-066; (2) Worldwide in 1999 immediately ceased sales and sought certification after it was notified that its purported agency agreement with WorldTel was unlawful, and (3) a preponderance of the evidence does not establish a pattern of wrongdoing by Clear World since operation of the two predecessor reseller companies.

D.03-02-066 concluded that DLD and Worldwide had not operated as legitimate agents of other telecommunications companies. While the decision did not impose a fine (because the proceeding was an application for expanded authority rather than an investigatory case), the decision denied Clear World's efforts to expand into the local exchange market, ordered a further investigation that has imposed substantial burden and expense on the company for two years, required restrictions in the company's operating procedures, and effectively barred Christopher Mancuso from further participation in Clear World. Our record suggests that Christopher's role as a negotiator and billing consultant had contributed significantly to the company's financial success in the past. (At hearing, James Mancuso testified that comparing Christopher's contribution to that of his successor following D.03-02-066 "is like Barry Bonds being compared to a girl's coed softball league.")

The penalty that we impose today shall be paid by Clear World to the California General Fund, as detailed in the ordering paragraphs. We decline to impose personal liability on the Mancusos because there is no evidence to show that Clear World is a sham corporation, and CPSD has failed to prove alter ego connections such as commingling of funds or the holding out by an individual that he is personally liable for the debts of the corporation. (See, generally, Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-840.)

As a final matter, we take note that a pattern of regulatory inconsistencies on Clear World's part pervades the evidence before us. It is troublesome that Clear World could not promptly produce records showing its recent compliance with state and federal surcharge payments. It is disturbing that handwritten notes departing from the "official" script were available to some telemarketers, and that a former floor supervisor accused of shady practices apparently evaded subpoena. In D.03-02-066, we found that Clear World's recordkeeping was flawed, and in this proceeding the company has been slow and often reticent in producing records for Commission investigators. Christopher Mancuso's failure to appear and his continued avoidance of service of a subpoena suggest (but do not prove) that there was more to his service to DLD, Worldwide and Clear World than the record now reflects.

Because of this, there is need for additional monitoring of Clear World's operations. Clear World promises to continue to apply a "gold standard" to its operation as a reseller of long distance service. In order to assure us, as well as itself, that this commitment remains in place, our order today requires Clear World to deliver to us an annual compliance report for the next three years confirming that commitment.

Clear World is directed to file an annual compliance report on or before December 31 in the years 2005, 2006 and 2007. The compliance report, to be served on the Director of the Telecommunications Division, shall be certified by two officers of Clear World and shall state in detail (1) the names of all shareholders, officers and consultants of the company during the year; (2) the company's dealings, if any, with Christopher Mancuso or any entity controlled by or associated with Christopher Mancuso during the year; (3) the number of PIC disputes filed against the company during the year as compared to the number of PIC disputes filed against the company the preceding year; (4) the number of complaints alleging slamming filed during the year with this Commission and with the Federal Communications Commission, and the disposition of each such complaint; (5) the number of new California customers added by Clear World, and the number of California customers lost by Clear World, during the year; (6) the amount of surcharges paid by Clear World during the year, and (7) a description of Clear World's program during the year to ensure compliance with Pub. Util. Code § 2889.5. The compliance report should be accompanied by documents that will permit the Commission to verify the data supplied in the report.

If the Telecommunications Division detects deficiencies in operations or customer service in Clear World's annual compliance report, it is directed to report to us with recommendations for corrective action.