V. SCOPE OF THE COMMISSION'S INVESTIGATION
A. The OII
We agree with CPSD that the request for an OII should be granted and the CPSD allegations identified above and in the attached CPSD Report should be fully investigated.
B. Penalty/Refund Analysis
We will also investigate whether, and to what extent, penalties and refunds are warranted, pursuant to P.U. Code Section 2107.
With respect to penalties, in Re Standards of Conduct Governing Relationships Between Energy Utilities and their Affiliates, [Decision 98-12-075; R.98-04-009], 84 CPUC 2d 155, 182-184, 190 PUR4th 6 (1998), we explained that the "purpose of a fine is to go beyond restitution to the victim and to effectively deter further violations by this perpetrator or others[,]" and we consider two general factors: [1] severity of the offense; and [2] conduct of the utility. These factors are broken down in greater detail as follows.
This includes several considerations, such as the economic harm to the victim and any unlawful benefits gained by the public utility. In instances where there is no harm to the consumer, we look to whether there has been harm done to the integrity of the regulatory process. The number of violations is also a factor in determining the severity of the offense.
This factor recognizes the important role of the public utility's conduct in (1) preventing the violation, (2) detecting the violation, and (3) disclosing and rectifying the violation. (Id.)
Effective deterrence also requires that the Commission recognize the financial resources of the public utility in setting a fine which balances the need for deterrence with the constitutional limitations on excessive fines. (Id.)
Setting a fine at a level which effectively deters further unlawful conduct by the subject utility and others requires that the Commission specifically tailor the package of sanctions, including any fine, to the unique facts of the case. (Id.)
The Commission adjudicates a wide range of cases which involve sanctions, many of which are cases of first impression. As such, the outcomes of cases are not usually directly comparable. (Id.)
We have considered the application of the five criteria in the telecommunications field when there are claims that California subscribers are being improperly charged for services. (See Investigation on the Commission's own motion into the operations, practices, and conduct of Coral Communications, Inc. (Coral) and Michael Tinari, President of Coral...to determine whether they have charged California subscribers for telecommunications services the subscribers never authorized, [Decision 01-04-035; I.98-08-004], at pages 53-55 (April 23, 2001).)
Finally, in terms of the level of proof, violations of the PUC or other Commission requirements may be proved by the preponderance of the evidence. (Investigation on the Commission's own motion into the operations, practices, and conduct of Qwest Communications Corporation (Qwest), [Decision 03-01-087; I.00-11-052], at * 12, fn. 5 (January 30, 2003), citing Communications Telesystems International (CTS), D.97-10-063, Finding of Fact 11.)
In contrast, reparations "are refunds of excessive or discriminatory amounts collected by a public utility. (Section 734.) The purpose of reparations is to return unlawfully collected funds to the victim." (Investigation into Accutel Communications, Inc., [Decision 02-07-034; I.99-04-023], at * 18 (July 17, 2002).)
Therefore IT IS ORDERED that:
1. An investigation on the Commission's own motion is hereby instituted into the operations of Legacy (Respondent) to determine whether Respondent violated:
1. P.U. Code Section 2890(a) by placing unauthorized charges on consumers' telephone bills in many different ways. Specifically, Respondent charged California consumers for non-existent, fraudulent and unauthorized calls such as:
· Calls that did not occur according to carriers' switch records;
· Collect calls consumers assert they did not accept nor make;
· Unauthorized third-party charges;
· Collect calls that did not connect well, were inaudible, static, were disconnected or connected to wrong numbers;
· Collect calls which consumers specifically refused to accept; and
· Collect calls Respondent connected to consumers' answering machines.
2. P.U. Code Sections 2896(a) and 451, and Section 226 of the 1996 Federal Telecommunications Act by failing to disclose rate information to its customers for them to make informed choices on whether to accept certain collect calls or not;
3. P.U. Code Section 489(a) by failing to file its complete tariff timely, and charging consumers under rates not filed with the Commission;
4. P.U. Code Section 532 by charging consumers in excess of rates posted in rate sheets; and,
5. The Commission's Rules of Practice and Procedure Rule 1.1 by failing to disclose the numerous regulatory sanctions Respondent sustained in 16 other states.
6. The Commission will also investigate whether and how much penalties and refunds are warranted.
2. Respondent is ordered to appear and show cause why it has not committed the following alleged violations. Respondent is ordered to respond completely (including reference to supporting documents [title of document, author, recipients, and date] and witnesses [name, title, association to Legacy] who can support each response) to the following questions, as well as the attached Data Request, within 30 days from the issuance of this OII (See Attachment A):
1. Did Respondent violate P.U. Code Section 2890(a) by placing unauthorized charges on consumers' telephone bills in many different ways. Specifically, did Respondent charge California consumers for non-existent, fraudulent and unauthorized calls such as:
· Calls that did not occur according to carriers' switch records;
· Collect calls consumers assert they did not accept nor make;
· Unauthorized third-party charges;
· Collect calls that did not connect well, were inaudible, static, were disconnected or connected to wrong numbers;
· Collect calls which consumers specifically refused to accept; and
· Collect calls Respondent connected to consumers' answering machines.
2. Did Respondent violate P.U. Code Sections 2896(a) and 451, and Section 226 of the Federal Telecommunications Act, by failing to disclose rate information to consumers, which rate information would allow them to make informed choices on whether to accept certain collect calls or not;
3. Did Respondent violate P.U. Code Section 489(a) by failing to file its complete tariff timely, and charging consumers under rates not filed with the Commission;
4. Did Respondent violate P.U. Code Section 532 by charging consumers in excess of rates posted in rate sheets; and,
5. Did Respondent violate the Commission's Rules of Practice and Procedure Rule 1.1 by failing to disclose the numerous regulatory sanctions Respondent sustained in 16 other states?
3. To facilitate the completion of this investigation, and consistent with the provisions of Section 314 of the PUC, Respondent is ordered to preserve until further order by this Commission all consumer account records, verification tapes, dispute records, and any other evidence of consumer complaints.
4. Staff shall continue discovery and continue to investigate the operations of Respondent. Any additional information that Staff wishes to introduce shall be provided to the Respondent in advance of any hearings in accordance with the schedule directed by the assigned Administrative Law Judge. Staff need only respond to discovery requests directed at Staff's investigation of the Respondent and Staff's prepared testimony offered in this proceeding.
5. Staff shall monitor consumer complaints made against Respondent. We expect Staff to bring additional evidence of any alleged harmful business practices by Respondent to our attention (e.g. new types of violations). Staff may propose to amend the OII to add additional respondents or to raise additional charges. Any such proposal shall be presented to the Commission in the form of a motion to amend the OII and shall be supported by a Staff declaration supporting the proposed amendments or additional named respondents.
6. This ordering paragraph suffices for the "preliminary scoping memo" as required by Rule 7.1( c ) of the Commission's Rules of Practice and Procedure. The issues of this proceeding are framed in the above order.
7. This proceeding is categorized as adjudicatory. Ex parte communications are prohibited. The determination as to the category is appealable under Rule 7.6 of the Commission's Rules of Practice and Procedure.
8. A prehearing conference shall be convened before an Administrative Law Judge for the purpose of considering the establishment of a schedule in this matter, including the dates for the exchange of written testimony, whether or not evidentiary hearings will be based on stipulated testimony and exhibits or live witnesses, the date, time, and location of any evidentiary hearings, depositions, addressing discovery issues, and other scheduling matters.
9. Respondent is put on notice that fines may be imposed in this matter pursuant to P.U. Code Sections 2107 and 2108.
10. The attached CPSD Report, supported by Declaration, is hereby entered into the record for this proceeding.
11. The Executive Director shall cause a copy of this Order to be personally served on Legacy:
Legacy Long Distance International, Inc.
10833 Valley View Street, Suite 150
Cypress, California 90630-5015
This order is effective today.
Dated June 24, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
