IX. Assignment of Proceeding
On October 10, 2001, this matter was assigned to ALJ Jeffrey P. O'Donnell. On March 22, 2002, this matter was assigned to Commissioner Michael Peevey. In his scoping memo of May 30, 2002, Commissioner Peevey designated ALJ O'Donnell as the principal hearing officer for this proceeding.
1. Clear World is owned by Michael Mancuso (90%), James Mancuso (5%), and Joseph Mancuso (5%).
2. Worldwide was incorporated by Christopher Mancuso, and owned by Joseph Mancuso. James Mancuso was its general counsel.
3. Worldwide entered into an agreement with WTS, a certified interexchange reseller, to use WTS's tariffs and operating authority for which WTS would receive a fee. All operations were to be performed by Worldwide. At that time, WTS had no operations.
4. Worldwide's services were marketed by WorldTech whose officers were Christopher Mancuso and Jerry Ballah.
5. Worldwide's long distance minutes, and back office functions such as billing service provisioning and data entry, were provided by Clear World.
6. CSD's director wrote a letter, dated February 4, 1999, to Worldwide saying that Worldwide was providing service without a CPCN, and that its arrangement with WTS was not permitted. Worldwide subsequently revised its agreement with WTS, and filed A.99-04-042 for registration as an interexchange service reseller.
7. On April 25, 2002, Worldwide filed a motion to withdraw its application, and said that it was no longer operating in California.
8. By D.02-06-045, Worldwide's application was dismissed. In addition, it was ordered to appoint a custodian of records, and preserve its existing corporate documents for possible use in this proceeding.
9. Joseph Mancuso is the custodian of records for Worldwide.
10. By D.98-08-056, Clear World was authorized to resell interexchange services.
11. In October 1998, Clear World acquired all of the assets of AEC/DLD, including customers and customer lists. The Clear World acquisition of AEC/DLD had been in the works for 18 months prior to that date.
12. Christopher Mancuso started Commonwealth.
13. One of Commonwealth's customers was Culture Farms, a company for which Christopher Mancuso ultimately served as vice president.
14. Culture Farms was a Ponzi scheme.
15. Christopher Mancuso pled guilty to mail fraud in connection with his Culture Farm activities, and was incarcerated.
16. During the time Christopher Mancuso was in prison, he received over $300,000 from Slatkin.
17. NTC had several accounts with WorldCom including Amerivision/DLD subaccount 182806 that is the same as the Clear World/DLD subacount 182806 under which Clear World operates.
18. Christopher Mancuso, through CCI, provided carrier negotiation, product development, and strategic marketing analysis to AEC/DLD as early as 1993, and then began providing those services to Clear World when it acquired the assets of AEC/DLD in 1998.
19. D.98-02-029 prohibited Christopher Mancuso, as a prior officer or director, from ever again having an officer or director role at NTC.
20. In 1997, Ballah and Christopher Mancuso decided to buy NTC, and resort to a ruse to deceive the Commission.
21. Christopher Mancuso and Ballah started Worldwide, and created WorldTech to sell long-distance services for Worldwide.
22. Christopher Mancuso negotiated an agreement between WTS and Worldwide pursuant to which Worldwide used WTS's tariffs and operating authority.
23. Worldwide's sales were made through the marketing services of WorldTech.
24. In February 2000, Christopher Mancuso arranged for a Swiss telephone number for Slatkin that could be used to deceive Slatkin's investors into thinking that they were reaching a Swiss institution when the telephone actually rang in Slatkin's Santa Barbara garage.
25. Slatkin is incarcerated.
26. Christopher Mancuso's company, ITC, provides carrier negotiations, and bill auditing to Clear World.
27. James Mancuso is the secretary and general counsel for Clear World, and general counsel for Worldwide.
28. James Mancuso received over $300,000 from Slatkin for the benefit of Christopher Mancuso in 1986 and 1987. The checks were written to Trojan Financial, a company controlled by James Mancuso.
29. James Mancuso formed Mancuso LLC, and assisted it in a substantial legal settlement involving Slatkin.
30. Michael Mancuso is the president, chief executive officer and treasurer of Clear World. He also worked at NTC, Incomnet, Amerivision, and managed DLD on a daily basis.
31. Joseph Mancuso owned AEC/DLD and Worldwide, and owns five percent of Clear World.
32. Worldwide entered into an agreement with WTS, in July 1998, whereby it used WTS's tariffs and operating authority for a fee. The agreement provided that Worldwide was responsible for virtually all operations, and the customers and customer information were Worldwide's property. Worldwide was described as an authorized agent for its customers. WTS was allowed to inspect Worldwide's books quarterly, and approve tariff changes. WTS had no obligation to collect any charge, or respond to any customer complaint.
33. The Commission has not previously addressed comprehensively what constitutes a legitimate agency agreement with an authorized carrier.
34. The amended agreement of April 1999, described Worldwide as an agent for sale of WTS's services. Worldwide remained responsible for all aspects of operations. In addition, the amended agreement described Worldwide as an agent for end users. Although the amended agreement described "end users" as "end users of WTS," all customer information belonged to Worldwide. Any access WTS may have had to customers or customer information was strictly for performance of the agreement. WTS was allowed to inspect Worldwide's books quarterly, and approve tariff changes.
35. The amended agreement does not give WTS sufficient control over Worldwide to ensure compliance with statutory and Commission requirements. It describes Worldwide as an agent for both WTS and customers, which appears to create a conflict of interest. In addition, since WTS did not own the customer information, the customers effectively belonged to Worldwide.
36. On February 26, 1999, counsel for Worldwide wrote to the Commission's General Counsel concerning a subpoena duces tecum that had been served on the Commission in connection with litigation between NTC, Worldwide, Christopher Mancuso and other parties. Worldwide's counsel stated that the purpose of the letter was to notify the General Counsel that his office represented two of the parties to the litigation, Worldwide and WTS, and that both of these parties had been dismissed from the litigation.
37. An amended complaint in the litigation was filed on February 26, 1999.
38. James Mancuso was deposed in that litigation almost two months after the February 26, 1999 letter.
39. Worldwide was granted a demurrer with leave to amend.
40. In its Statement of Domestic Stock Corporation filed with the California Secretary of State, Worldwide listed its street address as 2781 MacArther Boulevard, Suite B-603, Santa Ana, California 92704. This address is for a Mail Boxes Etc. box, even though the form for the statement specifically says not to use a post office box.
41. In an application for registration as an interexchange service reseller, an applicant is required to provide its street address.
42. In A.99-04-042, Worldwide listed its street address as the above Mail Boxes Etc. box.
43. D.02-06-045 allowed Worldwide to withdraw A.99-04-042, but ordered Worldwide to preserve all corporate documents and appoint a custodian of records.
44. Joseph Mancuso was so ill that he could not understand or answer questions, and could not be deposed in this proceeding.
45. James Mancuso, the only employee of Worldwide other than Joseph Mancuso, did not know where Worldwide's records were.
46. Worldwide produced only 13 pages in response to CPSD's request.
47. The record does not demonstrate that James Mancuso, as Worldwide's general counsel, attempted to have someone else made the custodian of records, or otherwise make the records available.
48. Slamming is the unauthorized switching of a subscriber's long distance service provider in violation of Pub. Util. Code § 2889.5.
49. A PIC dispute occurs when a subscriber alleges to the local exchange carrier that his or her long distance service was switched to another carrier without authorization.
50. CPSD mailed letters to 1,804 customers who had PIC disputes. One hundred fifteen responded. CPSD also contacted eight customers who complained to the Commission's Consumer Affairs Branch. In all, 76 customers were interviewed by CPSD. Of these, 54 said that they were slammed, 19 said they authorized the switch but didn't receive the promised rates, 60 said they did not receive a written notice of the switch, and three said that they did not complain about Clear World.
51. Sobenes's long distance service was switched to Clear World without her permission. The switch was authorized by her adult son, without her permission.
52. Sobenes complained to the Commission in July 2001.
53. Clear World stopped its service, and provided Sobenas with a refund.
54. Sobenes never received written notice of the switch.
55. Xu's long distance service was switched to Clear World without his permission on October 10, 2001.
56. On October 10, 2001, Xu's wife received a call from Clear World. The sales representative spoke to her in Mandarin because she does not speak English. He offered her 200 free minutes even if she did not want to switch carriers. She accepted the free minutes only. The representative told her that a third party representative would verify her acceptance of the gift, and requested that she respond to the verifier by saying yes. The verifier asked questions in English.
57. On October 19, 2001, Xu had Pacific transfer his service back to his authorized carrier.
58. After July 2001, sales representatives were prohibited from being on the line during the verification process.
59. On October 27, 2001, Clear World again switched Xu's service without his authorization.
60. On December 13, 2001, Xu complained to the Commission.
61. Xu never received written notice from Clear World of the switch.
62. Xu eventually received a refund from Clear World.
63. On October 2001, Duran found that his long distance service had been switched without his permission. He called Clear World and said he did not authorize the switch. He was informed that he had received service from them for six months. The representative promised a refund of the difference between Clear World's rates and those of his previous carrier.
64. On February 19, 2002, Duran called Clear World asking the status of his refund. He received the refund in March 2002.
65. When CPSD played the tape recording of the third party verification for him, Duran did not recognize the voice or the name of the person on the tape.
66. Duran never received a written notification of the switch.
67. On August 23, 2001, Flores received a call from a sales representative for Clear World offering a new long distance discount plan by Pacific. Believing the offer to be by Pacific, she accepted.
68. On September 7, 2001, Flores received a third party verification call. The verifier said the service was to be provided by Clear World rather than Pacific. Flores then told the verifier that she was not interested. The verifier told her that Clear World's service would be stopped and Clear World would have to pay the fee for the carrier change. Clear World subsequently billed Flores for a monthly charge. Flores never received a written notification of the switch.
69. Flores received a bill from HBS Billing Services, dated October 28, 2002, that indicates a monthly service fee from Clear World on October 1, 2001. That bill appears to indicate that Clear World billed Flores for services before the October 10, 2001 date on which Clear World alleged the transfer was authorized.
70. Xu, Duran, and Flores had no reason to misrepresent what happened regarding the alleged slamming.
71. The PIC dispute numbers provided to CPSD by WorldCom for Pacific's territory are much larger than those reported by Pacific, and showed Clear World PIC disputes prior to when Clear World was created or began offering service.
72. Clear World's sales representatives receive two days of training, and receive other on the job training.
73. Clear World's sales calls are electronically monitored by supervisors.
74. The exact number of PIC disputes is uncertain.
75. Having an average number of PIC disputes does not demonstrate that slamming did not occur.
76. Verification of a customer's choice to switch to Clear World is done by an independent entity chosen by Clear World using an automated system where an electronic voice asks a series of questions.
77. To determine whether the person agreeing to the switch is authorized to make decisions regarding telephone service, the following question is asked:
"Clear World is a long distance company that bills you through your local phone Company, but is not associated with them in any way. To confirm that you are over the age of 18, and you are the person authorized to make decisions regarding your telephone service, please state your birthday."
78. The question could easily be misunderstood to be asking only for the person's birthday.
79. Clear World is responsible for ensuring proper verification.
80. By allowing this wording to be used, it is reasonable to conclude that it switched some customers without valid authorization. Such occurrences likely contributed to the number of PIC disputes.
81. Sobenes' adult son represented to Clear World that he was authorized to make the change, and did so.
82. Sobenes may technically have been slammed.
83. There is no reason to believe that Clear World knew that Sobenes' son was not authorized to make the change.
84. Clear World provided no records that demonstrate that Sobenas, Xu, Duran or Flores actually received notices.
85. The version of the November 30, 2001 letter from WorldCom to Clear World produced by WorldCom was to a "Mr. Michael Mancuso - President" and "Mr. Christopher Mancuso - Founder" of Clear World Communications Corporation. The version produced by Clear World was the same letter but with the reference to Christopher Mancuso as founder missing.
86. Clear World sent WorldCom a fax with the reference to Christopher Mancuso deleted, and put it in its files.
87. When Clear World produced the letter for CPSD, it copied the one in its files.
88. There is no apparent reason why the altered version of the November 30, 2001 letter from WorldCom to Clear World should be in Clear World's files for internal use. The only logical reason to include the altered version in Clear World's files rather than the original is so that the reference to Christopher Mancuso would not be seen by someone outside the company. The only entity outside Clear World who would likely care about the reference is the Commission.
89. The November 30, 2001 letter was apparently altered in the past, rather than specifically for this proceeding.
90. The letter was altered to conceal the reference to Christopher Mancuso as founder.
91. Clear World sold wholesale minutes to Worldwide.
92. After receipt of CSD's letter, Worldwide attempted to satisfy the Commission's requirements by revising its agreement with WTS, and filing for registration as an interexchange carrier.
93. If Clear World had stopped providing services to Worldwide, Worldwide's customers would have had their service disrupted.
94. The Commission did not take any action against Worldwide.
95. Use of its agreement with WTS allowed Worldwide to escape scrutiny by the Commission, including Christopher Mancuso's involvement.
96. The WorldCom PIC dispute reports show that 226 PIC disputes were lodged against "Clear World/DLD" Account No. 182806 in January 1998, and there were similar numbers of PIC disputes for subsequent months.
97. The asset purchase agreement by which Clear World acquired all of the assets of AEC/DLD included customers and customer lists.
98. Prior to the acquisition, AEC/DLD had purchased long-distance services from Amerivision that were then resold to AEC/DLD's customers.
99. Christopher Mancuso provided carrier negotiations, product development, strategic marketing analysis to AEC/DLD beginning in 1993.
100. AEC/DLD never obtained a CPCN from the Commission.
101. DLD operated under an agreement with another carrier, which is not in the record. The record does not show that CPSD made a request for the agreement, or that such a request was denied.
102. D.98-08-056 required Clear World to keep its books and records in accordance with the USOA.
103. Clear World made payments to ITC, totaling over $5.275 million from August 3, 1999 through April 19, 2002, without a written contract or invoices for the payments.
104. The Commission's requirement that Clear World keep its books and records in accordance with the USOA presupposes that adequate records are actually kept. Clear World cannot avoid the requirement by not keeping records of such transactions.
105. Clear World did not keep adequate records of its transactions with ITC and therefore, it did not keep its books and records in accordance with the USOA.
106. Since the transactions involve Christopher Mancuso, the lack of such records tends to conceal details of the services provided to Clear World by Christopher Mancuso.
107. CPSD filed three separate motions to compel to obtain documents from Clear World that should have been readily provided.
108. Clear World produced no documents in response to CPSD's repeated requests for evidence of whether Worldwide or WTS paid Clear World for the services sold by Worldwide.
109. At the May 23, 2002 prehearing conference, the ALJ made it clear that he would place no restrictions on CPSD's discovery rights.
110. Clear World has sought to deny discovery on the basis of privacy, and because CPSD had not demonstrated that it had good cause for requesting the information.
111. There is no privacy exception applicable to a regulated utility's books and records.
112. CPSD is not required to prove to Clear World that it has good cause before such books and records are produced.
113. Christopher Mancuso was convicted of mail fraud.
114. In February 2000, Christopher Mancuso set up Slatkin's Swiss telephone number, which would ring in Slatkin's Santa Barbara garage rather than Switzerland.
115. Slatkin subsequently pled guilty to multiple counts of felony federal securities fraud, and is now incarcerated.
116. At the beginning of the hearings in this proceeding, the ALJ noted the allegations made by CPSD regarding Christopher Mancuso, and said that Clear World should address them, preferably by providing Christopher Mancuso as a witness. Clear World did not produce Christopher Mancuso during the hearings. In addition, he avoided a subpoena by CPSD.
117. Christopher Mancuso's statements in his 1998 deposition, as used in this opinion, were made before either this application or Worldwide's application were filed, and were against his or his family's interests in this proceeding.
118. Christopher Mancuso appeared at the Commission's offices in San Francisco for an ex parte meeting with the Assigned Commissioner's advisor, on May 8, 2002, regarding this application. The ex parte notice was not filed until August 19, 2002.
119. Rule 7.1 of the Commission's Rules of Practice and Procedure require that notices of ex parte contacts be filed within three working days of the meeting.
120. Since the ex parte notice of the May 8, 2002 meeting was not filed until after the hearings held in this proceeding on August 5-7, 2002, CPSD did not know that the meeting had occurred, and therefore could not cross-examine James or Michael Mancuso on what happened at the meeting.
121. A notice of the filing of the application appeared in the Daily Calendar on October 5, 2001.
1. A valid agency agreement with a certificated telecommunications carrier should be structured to at least ensure that the carrier has sufficient control over the agent to ensure the agent's compliance with statutory and Commission requirements. In addition, the agreement should provide that customers belong to the certificated carrier.
2. The granting of a demurrer with leave to amend is not the same as a dismissal, and the further step of a judgment dismissing the action or the party is always necessary.
3. Worldwide's assertion, in its February 26, 1999 letter to the Commission's General Counsel, that it had been dismissed from litigation was false.
4. Worldwide misled both the Secretary of State and the Commission as to its true street address.
5. Since Joseph Mancuso was so ill that he could not understand or answer questions and could not be deposed in these proceedings, someone else should have been made custodian of records.
6. Worldwide's records are effectively unavailable to the Commission, in violation of D.02-06-045.
7. Because Clear World had a lot of PIC disputes, slamming is likely to have occurred.
8. The testimonies of Xu, Duran, and Flores are credible and persuasive.
9. Xu was slammed by a sales representative who misrepresented what was offered, and took advantage of Mrs. Xu's inability to speak English.
10. Duran was slammed because he didn't authorize the switch.
11. Flores was misled, and then slammed.
12. Clear World should be ordered to change its verification language so that the customer is asked to state his or her date of birth, and separately asked whether he or she is authorized by the subscriber to switch telephone service to another carrier.
13. Clear World submitted an altered document to the Commission.
14. After receipt of CSD's letter, Worldwide attempted to satisfy the Commission's requirements by revising its agreement with WTC, and filing for registration as an interexchange carrier, which was a reasonable first step in resolving the situation.
15. Since Clear World did not keep adequate records of its transactions with ITC, it did not keep its books and records in accordance with the USOA in violation of D.98-08-056.
16. The fact that CPSD participated in this proceeding in no way diminishes its ability as Commission staff to inspect a utility's books and records.
17. Clear World has not fully cooperated with CPSD in its investigation.
18. Christopher Mancuso is not fit to be involved in any way with any regulated utility.
19. Both Clear World and Christopher Mancuso had ample opportunity to address allegations regarding him, and any statements attributed to him including those given in his 1998 deposition.
20. We have no reason to believe that Christopher Mancuso's statements in his 1998 deposition, as used in this opinion, were untruthful.
21. Since the notice of Clear World's May 8, 2002 ex parte meeting was not filed until August 19, 2002, it violated Rule 7.1 of the Commission's Rules of Practice and Procedure.
22. Since the ex parte notice of the May 8, 2002 meeting was not filed until after the hearings held in this proceeding on August 5-7, 2002, CPSD's ability to participate in the hearings in this proceeding was inhibited.
23. Clear World should be ordered to remove Christopher Mancuso from any involvement with the company.
24. Clear World is not fit to provide local exchange services.
25. Since we find that Clear World is not fit to provide local exchange services, its financial, technical and managerial qualifications are moot, and it is not in the public interest to grant the application.
26. The application should be denied.
27. This order should be effective immediately to remove Christopher Mancuso from involvement with Clear World, and to correct its verification language as soon as possible.
IT IS ORDERED that:
1. The application of Clear World Communications Corporation (Clear World) to resell local exchange services is denied with prejudice.
2. Clear World shall remove Christopher Mancuso (as well as any firm, company, limited liability company, partnership, corporation, or other entity of any nature that is associated with him, owned by him, or with which he has a consulting or employment agreement), from any and all involvement whatever with Clear World, its affiliates, subsidiaries, and successors.
3. Clear World shall conduct a complete, comprehensive audit of any and all business and consulting relationships, whether reduced to writing or otherwise, between Clear World, its officers and directors, and entities and persons associated with Clear World and with Christopher Mancuso (as well as any firm, company, limited liability company, partnership, corporation, or other entity of any nature that is, or was, associated with him, owned by him, or with which he has, or has had, a consulting or employment agreement), including loans of money or informal business relationships and shall list and describe in detail all such relationships, of any nature whatever. Said audit shall be completed and returned to the Consumer Safety and Protection Division and the Assigned Commissioner and Administrative Law Judge in this proceeding no later than 45 days after the effective date of this order.
4. Clear World shall change its verification language so that the customer shall state, in response to two separate questions, that he or she is over 18 and is authorized to switch telephone service from one carrier to another. As a third separate and distinct question, the customer shall be asked whether he or she desires to change service. Standard script language in accordance with this provision shall be submitted to the Public Advisor's Office of the Commission for its approval no later than 30 days after the effective date of this order. Upon approval by the Public Advisor's Office, Clear World, its agents, affiliates, associates, subsidiaries, successors and all comparable entities shall use such language.
5. Clear World shall file and serve a written report that indicates its compliance with Ordering Paragraph 2 and 4 above, including the complete text of the verification language, within 30 days of the effective date of this decision. A copy of the report shall be sent to the Commission's Telecommunications Division, and Public Adviser's Office.
6. The Consumer Protection and Safety Division and Legal Division shall review the record in this proceeding and any related matters bearing upon the fitness of Clear World, its officers, directors, owners and affiliates to operate under a Certificate of Public Convenience and Necessity and shall recommend whether an Order Instituting an Investigation (OII), pursuant to Rule 14 and Public Utilities Code §1701 should be issued by the Commission. Such recommendation, and proposed order (as appropriate), shall be presented to the Commission no later than May 8, 2003, unless good cause for continuance is shown.
This order is effective today.
Dated ____________________, at San Francisco, California.
