3 A Brief History of the Mancusos' California Entities

The Mancusos since the early 1990s have formed and operated a number of telecommunications companies. The history of these operations is recounted in D.03-02-006, but a brief review here will assist the reader in assessing the evidence presented at hearing.

Christopher Mancuso (hereinafter sometimes referred to simply as Christopher, in the interests of brevity and clarity, not informality), the most experienced of the Mancuso family in telephone marketing, organized most of the telephone companies operated by the Mancusos. In 1989, working with a partner from outside the family, he had formed National Telephone and Communications, Inc. (NTC), a certificated reseller of long distance service. Christopher in 1992 sold a controlling interest in the company but continued to serve NTC as a consultant. The Commission investigated NTC in 1997 and, in D.98-02-029, fined the company $1.2 million for slamming violations and required $335,000 in restitution to customers. The decision also effectively banned Christopher from further service to NTC.

Christopher in 1995 organized a telecommunications company called American Electronics Corporation, better known by its dba as Discount Long Distance (DLD), with his father Joseph Mancuso as president and his brother Michael Mancuso as general manager. DLD in 1997 purported to become the agent of AmeriVision Communications, Inc. (AmeriVision) for the sale of long distance service to the public under AmeriVision's tariffs and operating authority.

Christopher incorporated Worldwide Telecommunications Corporation (Worldwide) on July 23, 1998, with his father Joseph Mancuso as Chief Executive Officer and brother James Mancuso as agent for service of process. Christopher negotiated a contract with WorldTel Services, Inc. (WorldTel), a certificated interexchange reseller, by which Worldwide resold long distance service under WorldTel's tariffs. On February 4, 1999, the Commission's chief enforcement officer notified Worldwide that its method of providing its own long distance service under the name of WorldTel was unlawful in California, and he directed that such sales cease immediately. Worldwide ceased sale of telephone services, amended its agreement with WorldTel, and filed an application for registration as a reseller of long distance service. The application was never granted and was withdrawn in April 2002.

Clear World, the principal respondent in this case, was incorporated in California on May 11, 1998 and filed an application on July 13, 1998 for authority to resell long distance and local toll service in California. The application was granted under the Commission's short-form registration process in D.98-08-056 on August 17, 1998. Once again, Christopher Mancuso did much of the organization work in his role as a "consultant" for the new company, but his brother Michael was named chief executive officer and James Mancuso, a lawyer, became general counsel. In October 1998, Clear World acquired all of the assets of DLD, including its customer lists and sales force.

At the height of its business in 2003, Clear World had 750 employees generating 30,000 new orders a month in 32 states, with telemarketer operations in Santa Ana (the headquarters), Los Angeles, Fresno, Downey and Riverside. At the time of hearing, Clear World had closed all of its telemarketing offices except Santa Ana, had reduced headcount to 130 employees, and was showing a net loss in operating income. Clear World claimed that it had approximately 100,000 customers nationwide, with about 20,000 of them in California.

Earlier, in 1992, Christopher had formed a number of consulting companies, including Communication Consulting Incorporated (CCI) and International Telecommunications Consulting, L.L.C. (ITC), to provide carrier negotiations and bill auditing services for telecommunications carriers, including Clear World and the other Mancuso-owned companies. In 1996, Christopher negotiated with MCI Worldcom (MCI) what came to be known as the "billion-dollar agreement." In it, MCI provided attractive pricing on underlying long distance service to the various telephone companies owned by or associated with the Mancusos by combining the sales of those companies to achieve the maximum volume reduction in the wholesale price of long distance lines.

Christopher Mancuso did not appear in this case, and CPSD's attempts to subpoena his appearance were unsuccessful. While Christopher was active in the formation of most of the Mancuso-owned companies, his role was described as that of a consultant rather than an officer or shareholder. The reason for this, as he recounted in a 1998 deposition in a Superior Court case, was that Christopher had been convicted of felony mail fraud in 1986 and in 1987 had served six months in prison for his role in a Ponzi scheme involving the sale of milk cultures purportedly used for cosmetics. (A Ponzi scheme is one that defrauds investors by paying them returns with funds raised from later investors.) While a felony conviction does not necessarily bar Christopher Mancuso from service as an officer or shareholder of a regulated utility in California, it is a substantial impediment when the felony involves fraud. This was the reason that Christopher sought to avoid an official role in DLD, Worldwide or Clear World, but continued to serve them through his consulting companies, CCI and ITC.