III. CPSD'S CURRENT INVESTIGATION
A. The Scope
The CAB database contained 706 consumer complaints filed against Legacy for the period 2005 to 2008. Staff successfully located 345 paper files. Of the 345 paper files, 162 files contained sufficient background information (consumer letters and bills) to allow staff to evaluate the veracity of the complainant's case. Staff attempted to reach the 162 complainants and was successful in interviewing 91 complainants. The balance of 71 (162-91) complainants could not be reached or declined to be interviewed. The 91 complaints constitute the sample staff used to form its conclusions presented in its report.
Staff obtained authorization from the complainants to obtain their automated messaging account (AMA) or "switch records" and/or telephone bills in relation to their complaints against Legacy. Staff reviewed and analyzed the details of the complaints raised by the 91 consumers. Staff determined whether these complaints are supported by switch records obtained from their respective carriers and from Legacy. Staff also reviewed the billing records associated with these complaints to understand the nature, duration, and point of origin of the subject calls. Staff summarized its findings and conclusions in this report. Of the 91 complainants, 54 signed Declarations attesting to their respective complaints. Several complainants also agreed to testify before the Commission about their complaints, if called upon.12
B. The Conclusions
1. Legacy Placed Unauthorized Charges on Consumers' Telephone Bills
Staff talked with 91 complainants and reviewed their billing records and switch records. After completing this review, Staff identified 106 incidents of unauthorized charges (also known as "cramming") and 49 incidents of unreasonable charges and lack of rate disclosure. Based on the evidence gathered in the investigation, Staff reached the following conclusions.
A large proportion (57%) of the sampled cramming incidents filed with CAB against Legacy concerned charges for collect calls that did not occur or for which records did not exist. Staff's examination of the available switch records of the subject calls and additional information from the carriers and complainants provided suggest that these 60 collect calls were not placed, connected, or authorized, supporting the consumers' complaints of unauthorized charges.
A subscriber's Local Exchange Carrier (LEC) provides the service necessary for a call to connect to and from the subscriber's telephone. A call must travel over the LEC's switch in order for it to connect to the consumer's telephone. If the LEC's switch records show that no call traveled over the LEC's switch to the billed consumer's telephone at the time and date of the purported call, then the call did not occur. Staff requested the switch records of the calls in question from Legacy and from the consumers' LECs (AT&T and Verizon). Staff compared Legacy's switch records to those provided by AT&T and Verizon.
In 25 of the 60 incidents in this complaint category, the carriers' switch records showed that the calls Legacy billed to the consumers never travelled over AT&T's or Verizon's switches, supporting the conclusion that these calls did not occur. In fact, in 12 out of the 25 instances, Staff uncovered a pattern of Legacy charging consumers for fictitious collect calls. Specifically, Legacy charged these consumers for a collect call, and one month later billed them for another collect call that allegedly happened exactly 1 hour and 11 minutes after the first call.
In 22 of the 60 incidents in this complaint category, the carriers or Legacy were able to produce call records that suggest phone connection of some duration. The average duration of the connection time for 71% of the 22 calls is 21 seconds. When viewed in the context of the consumers' assertions that they did not take these collect calls, the relatively short call duration suggests that it is unlikely that conversations occurred. These 22 complainants are convinced these calls did not occur and they provide supporting facts in their complaints, such as: not knowing anyone from the originating number; collect calls supposedly accepted after business hours when no one is at the premises; collect calls allegedly accepted by someone at a residence when no one is at home; etc. (See Appendix 13 for a complete list of complaint descriptions.) Staff believes that these collect calls did not occur.
In the remaining 13 of the 60 incidents, the carrier and/or Legacy were unable to provide any switch records at all.
Unlike a collect call, wherein the receiving party authorizes the charge for the collect call, a third-party call is any call for which the charges are billed to a third number, other than the call originating number or the call destination number. In order to bill for a third-party call, a telephone provider must first obtain the authorization of the party to be billed. Nineteen percent of the cramming complaints that Staff sampled relate to unauthorized third-party billings.
Ten percent of the sampled cramming complaints relate to charges for calls that did not connect well, were inaudible, disconnected after 3 seconds, or connected to wrong numbers. For example, a consumer complained that the phone rang; she picked it up but heard no voice, and then heard a disconnecting sound. She hung up the phone. She was billed for the call.13
The switch records for the complaints in this category show an average call connection duration of 14 seconds. The short average duration appears to support the complainants' assertions that the collect calls did not connect well. In each of the instances, the complainant provides specific descriptions of the poor connection. (See Appendix 13 for a complete list of complaint descriptions.)
Yet 8% of the sampled cramming complaints relate to Legacy charging consumers for collect calls they rejected.
Six percent of the sampled cramming incidents concerned charges for collect calls that were left on the consumers' answering machines. When collect calls are left on answering machines, the recipient of the call does not have the opportunity to accept or reject the call. Thus, Legacy's billing for collect calls left on answering machines is a case of cramming. In its response to CPSD's data request 4-3, Legacy stated that "Legacy does not bill for collect or third party calls that are answered by answering machines or voice mail,"14 and that "collect calls can only be considered accepted by the automated call processor when a DTMF signal of `1' is received by the Dialogic card."15 Legacy further claims that, "[n]o collect calls are released to answering machines or computer modems."16 But consumer complaints that Staff reviewed contradict Legacy's assertions. (See Appendix 21, 22, and 23.)
2. Legacy Failed to Disclose Rate Information to its Customers
In addition to the complaints of unauthorized charges, 49 complaints concerned allegedly unreasonably high collect call rates and lack of rate disclosure. Complainant #6038032 stated in her Declaration that her husband asked a Legacy representative how the recipient of an automated call could know what the rates are and the Legacy representative told him, "[t]here is no way to know. The person who is making the collect call can ask for rates, but the person who gets the call can not ask what the rates are, and has no opportunity to ask what the rates are."17
Legacy President Curtis Brown acknowledged this limitation of Legacy's automated call platform system. In his deposition, Mr. Brown stated that in California, the recipient of a collect call placed via Legacy's automated call platform cannot get the rate or price of the collect call. The recipient can only accept or refuse the call.18
CPSD Staff sought to learn the industry standard on disclosure of automated-operator placed collect call rates in California prior to connection, and learned that it is AT&T's policy and practice to: (1) announce the caller and if the caller is an inmate, to announce the facility, and (2) to either quote the rate or offer a rate option.19
In CPSD's Protest of Legacy's Application A 06-11-003, Staff asserted, and Legacy admitted,20 that Legacy failed to file timely its complete tariff with the Commission. In November 2006, Communications Division Director John M. Leutza sent a letter to all regulated telecommunications companies, asking that each company file with the Communications Division its complete and current tariff on a compact disc by January 2, 2007. Legacy did not comply with this request until ordered to do so by ALJ Patrick on June 20, 2007 at a prehearing conference relating to Legacy's request for expanded CPCN21. In his testimony, Legacy President Brown also admitted that Legacy billed consumers under rate sheets it had not filed.22
4. Legacy Charged Consumer Rates in Excess of Its Filed Tariffs
Of the total of 49 sampled complaints regarding unreasonably high collect call rates and the lack of disclosure, Staff claims it verified and Legacy admitted23 that it charged 10 customers rates in excess of its filed tariffs, in violation of P.U. Code Section 532. For example, a complainant informed Staff that he talked to a Legacy representative who told him that "it made no difference how long each call lasted, the company bills for 5 minutes at a minimum."24 Legacy's filed tariffs and rate sheets do not include a $29.05 five-minute-minimum flat rate.
5. Legacy Failed to Disclose Numerous Regulatory Sanctions Received in 16 Other States
In his signed Verification Statement in its application for expanded CPCN (in A.06-11-003), Legacy President Curtis Brown attested that "neither applicant, any affiliate, officer, director, partner nor owner of more than 10% of applicant, or any person acting in such capacity....has been sanctioned by the Federal Communications Commission or any state regulatory agency for failure to comply with any regulatory statute, rule or order."25
In Legacy's response to CPSD's Data Request 1.17, it responded "No" to the question "Have Companies, their affiliates, or their principals been investigated by any State or Federal agency in the last ten years for any matter related in any way to the provision of telecommunications services?"26
In Legacy President Curtis Brown's deposition, when asked whether Legacy had been sanctioned in any of the 49 states in which Legacy does business, Mr. Brown stated, "[n]o."27
Yet Staff discovered that Legacy had been sanctioned, investigated, penalized, had its tariff cancelled, and had its public utility registration or corporate charter revoked, in 16 other states. As such, Legacy violated Rule 1.1 repeatedly by misrepresenting to the Commission and Staff that it has never been sanctioned or investigated by any state regulatory agency. Table 6 in the CPSD Report shows the various actions against Legacy in 16 other states. Legacy President Curtis Brown, when confronted with the facts, admitted to and took responsibility for the errors and misstatements.28
12 In Investigation on the Commission's Own Motion Into the Operations and Practices of Telmatch Telecommunications, Inc., (U 5715), to Determine Whether It Has Violated the Laws, Rules and Regulations Governing the Manner in which California Consumers are Billed for Telecommunication Services, [Decision 02-06-077; I. 99-09-001] at *24, 2002 Cal. PUC LEXIS 380 (June 27, 2002), we made it clear in prior investigations that it is not incumbent upon the Commission to establish evidence of each affected consumer in a cramming investigation: "In order to protect the public from unscrupulous carriers that engage in cramming, we conclude the Commission is not required to make a factual inquiry of each affected consumer. Instead, an investigation into the practices of the respondent utility, which may include interviews with affected consumers, is sufficient to determine if Telmatch's actions constitute an unjust or unreasonable practice, here cramming." (See also Investigation on the Commission's Own Motion Into the Operations, Practices, and Conduct of Qwest Communications Corporation (Qwest), U-5335-C... [Decision 02-10-059; I. 00-11-052] at * 5-6 (October 24, 2002) [evidence of cramming and slamming based on interviews, 61 declarations, and information obtained through data from local exchange carriers]; Investigation on the Commission's Own Motion into the Operations, Practices, and Conduct of Vista Group International, Inc. [U-5650-C]... [I.99-04-020], at * 18, 1999 Cal. PUC LEXIS 149 (April 22, 1999) ["Staff's declarations also indicate that Vista may be engaged in cramming. According to Pacific Bell reports, complaints of cramming by Vista are on the rise. In addition, Staff has seen at least two cramming complaints that involve alleged unauthorized charges appearing on consumers' telephone bills in 1999."]; and Investigation on the Commission's Own Motion into the Operations and Practices of MCI, WorldCom, or MCI WorldCom, (U-5011, U-5378, U-5253, U-5278)..., [I. 05-04-018 2005], at*1, fn. 2, Cal. PUC LEXIS 163 (April 21, 2005) [Staff reviewed approximately 200 minimum usage fee complaints, interviewed 115 consumers, and obtained 77 declarations].)
13 Appendix 18, Declaration of Consumer #6008334.
14 Appendix 21, Legacy Response to Data Request 4-3.
15 Ibid.
16 Appendix 22, Legacy Response to Data Request 1-9, Billing/Collections Department Customer Service Guidelines, Collect Call Disputes, Number 3, "No collect calls are released to answering machines or computer modems." (filed under seal).
17 Appendix 26, Declaration of Complainant #6038032.
18 Appendix 12, Deposition of Curtis Brown, p. 189, lines 5-13.
19 Appendix 27, email from AT&T Regulatory Affairs Officer Greta Banks, (filed under seal).
20 Appendix 8, Testimony of Curtis Brown, President, Legacy Long Distance International, Inc., A.06-11-003, filed on November 7, 2007, p. 1, lines 1-18.
21 As mentioned in the Background section, Legacy has withdrawn its Application for the expanded CPCN.
22 Appendix 8, Testimony of Legacy President Curtis Brown, p.1, lines 11-18.
23 Appendix 30, Legacy Supplemental Responses to Data Request 3-2.
24 Appendix 29, Declaration of Complainant #7001839.
25 Appendix 31, Verification Statement of Curtis A. Brown.
26 Appendix 32, Legacy Response to CPSD Data Request 1-17.
27 Appendix 33, Deposition of Curtis Brown, pp. 162-163, lines 25-1.
28 Appendix 8, Testimony of Curtis Brown, p. 1, lines 11-18.
