B. Terms of the Proposed Settlement

Like the original settlement agreement submitted in December 2003, the revised agreement of January 19, 2005 contains three principal provisions relating to this investigation. First, respondents ² agree to make payments to the Commission totaling $2,950,000 over a 24-month period. Second, from this total amount, respondents agree that $50,000 will be set aside to handle restitution, with about $35,000 being paid to eligible customers, and $7,825 going as a fee to the settlement claims administrator, Rosenthal & Company LLC (Rosenthal). Third, respondents promise that for a two-year period following the Commission's approval of the settlement, they will abide by the "Call Unit Marketing and Sales Compliance Program" that was included in the settlement and consent decree the respondents entered into with the Federal Communications Commission (FCC) in December 2002.³ The settlement agreement recites that as consideration for these three promises, "the Commission agrees to end its investigation and close the docket in I.02-05-001," and that respondents will not be deemed to have admitted any "fact, law, or violation" by virtue of having entered into the settlement.

As to the details of how the $2,950,000 payment will be structured, the agreement provides that within 45 days after the Commission's decision approving the settlement, respondents will furnish two checks: one for $500,000 payable to the Commission for deposit into the General Fund, and a second check for $50,000 payable to Rosenthal. (¶1.2.) Within each three-month period following these initial payments, the respondents agree to deliver another check payable to the Commission in the amount of $300,000, "until the Respondents' installment payments to the Commission accumulate to $2.95 million." (¶1.3.)⁴ The agreement also states that respondents waive any "potential, residual, or current" claim or interest to any of the settlement funds, "except if this Settlement is rescinded or its approval by the Commission [is] vacated." (¶1.4.) Finally, upon payment of the full $2.95 million, the respondents will be released from liability for "all costs, direct or indirect, presently known or unknown, accruing to or incurred by the Commission" in connection with this investigation. (¶5.2.)

Sections 2, 3 and 4 of the settlement agreement concern the settlement claims process and the duties of Rosenthal. First, respondents agree to execute the fee agreement with Rosenthal within the same 45-day period in which they must deliver their first two checks to the Commission.⁵ (¶2.1.) Rosenthal agrees to establish an escrow account into which the $50,000 check will be deposited, to segregate the amount representing its fee, and to inform CPSD that the account is open and that the restitution process can proceed. (¶2.2.) Within 10 days after such notification, CPSD agrees to furnish Rosenthal with the name, address, telephone billing number and other appropriate data for each of the approximately 1400 customers who are considered "Eligible Consumers" entitled to a restitution payment.⁶ (¶2.3.) Within 30 days after receipt of this data from CPSD, Rosenthal is obliged to distribute the restitution checks (each in the amount of $25) to the Eligible Consumers, along with an explanatory statement from CPSD. (¶¶2.4, 3.2.)

There is a time limit on the restitution checks. They expire 90 days after the date printed on the check, and if a check is undeliverable or the Eligible Consumer fails to deposit or cash the check within the 90-day period, Rosenthal "will cancel the Restitution Check and attempt no redelivery." (¶3.3.) The settlement agreement also provides that within 130 days after the last restitution check is mailed, Rosenthal will pay the amount representing uncashed checks to the Commission. (¶4.1.)

As a corollary of this obligation, Rosenthal is obliged to furnish the Commission with a final report covering its work from the date the escrow account is established until the time the restitution process is complete. Rosenthal's report is to set forth the balance in the escrow account for each month from the time it is opened, and to report by month on the number of restitution checks that (1) have been mailed, deposited or cashed, (2) have expired, or (3) have been returned as undeliverable. (¶4.2.)

As noted above, the third major part of the revised settlement is an agreement that for two years following its approval by this Commission, the respondents will abide by the "Call Unit Marketing and Sales Compliance Program" included in the FCC TCU Consent Decree. (¶6.1.) Under this program,⁷ the respondents agreed with the FCC to undertake a variety of measures designed to ensure that the abuses associated with the marketing and billing of the TCU program would not recur.

The FCC compliance program requires, among other things, that (1) the compliance program must be reviewed and implemented by legal counsel knowledgeable in both consumer protection and telecommunications law, (2) such counsel must also review, edit, and approve all materials used for marketing, advertising, or training in connection with the TCU methodology, and (3) all officers and directors, and all managers and employees involved with marketing and customer service, must be informed of the FCC consent decree and furnished with written instructions regarding their responsibilities for implementing it. In addition to these requirements, all marketing management personnel must receive annual training on the TCU compliance program and a related code of conduct (which all marketing employees must sign), and the respondents are obliged to take appropriate disciplinary action against any employee or agent found to have engaged in intentionally deceptive conduct in marketing or selling any TCU program.

Other provisions in the revised settlement agreement concern such things as cooperation with law enforcement agencies and the effect of any changes the Commission might order in the agreement. For example, while CPSD has agreed that it will "initiate no enforcement action [and] seek no administrative or other penalties against the Respondents based on the evidence in this case," CPSD reserves the right to provide information to, or to cooperate with, law enforcement agencies, courts of law or other federal or state administrative agencies in any investigation relating to the issues here. (¶¶5.5, 5.6.) If the Commission wishes to modify any provision in the settlement agreement, all parties have 15 days within which to file a written objection to the proposed modification, and if that objection is not withdrawn within 10 days thereafter, the settlement will be deemed rescinded, and respondents will be entitled to the return of any settlement funds they have already paid. (¶¶7.3, 1.4.)⁸

Finally, enforcement and breach are the subjects of several provisions in the agreement. ¶5.1 provides that "each material breach of this Settlement will constitute a separate violation and will entitle the Commission to take any necessary action to enforce its orders." Similarly, although CPSD has agreed not to initiate enforcement actions or seek penalties against the respondents based on the facts of this case, this limitation "will not apply if the Respondents jointly or severally materially breach this Settlement or violate the Commission order approving it." (¶5.5.)