II. SUMMARY OF ALLEGATIONS
Staff has prepared a report documenting its investigation to date, including declarations obtained from victims and documentary evidence obtained from Americatel and other sources. The report is released today and shall be placed in the Commission's public formal file for this proceeding. The following is a summary of Staff's allegations.
Americatel is a Delaware corporation with headquarters in Rockville, Maryland. Americatel provides long-distance dial around services in the United States with connections to Latin America and the Caribbean, with a focus on Hispanic customers. Americatel is primarily held and controlled by Platinum Equity, a holding corporation incorporated in Delaware with headquarters in Beverly Hills, California1.
The Commission granted Americatel authority as a switchless reseller of inter-Local Access and Transport Area (Inter LATA) services in December 1997 (Decision (D.) 97-12-128). Americatel mainly offers two types of service: dial-around service and contracted dial-around. With contracted dial-around service, customers agree to pay a monthly contract fee in exchange for a lower-per minute rate. Americatel's charges appear as a line item on the customers' local telephone bill2.
Americatel generally utilizes telemarketers and direct marketers (face-to-face), including Bravo Marketing, Inc. (Bravo), a Florida Corporation. Bravo's contract provided for promotion and marketing of Americatel's calling plans, through face-to-face contacts in public areas such as shopping malls3.
In 2008, the Commission's Consumer Affairs Branch (CAB) noted a significant increase in the number of cramming4 complaints against Americatel and notified CPSD, although CPSD Staff had previously noted a high incidence of complaints about Americatel as early as 2006. CPSD Staff learned from Americatel that the cause of the rise in complaints in 2008 was due to a "breakdown in the systems and procedures of one of Americatel's third party marketing vendors."5
Staff has learned that early in 2008 Americatel began to receive thousands of Letters of Authorization that its marketing agent Bravo purportedly obtained from new customers signed up by its agents. It took several months for Americatel to ascertain that the customers were the victims of fraud by Bravo, after receiving large numbers of complaints. Americatel ultimately terminated its relationship with Bravo and began issuing refunds to affected consumers. Americatel reported to CPSD Staff that sales to 61,096 California consumers were associated with Bravo, primarily for Americatel's dial-around plans for a typical monthly fee of $16.99. Americatel informs Staff that it has issued refunds to all affected California consumers6.
In addition, Staff noted a large discrepancy in the amounts of refunds issued in 2008 - approximately $2 million out of $3.5 million in refunds - which were not attributable to Bravo's fraud. Staff discovered that this discrepancy was caused by Americatel's billing errors in 2008 that resulted in the application of an incorrect Universal Service Fund (USF) surcharge rate of 100% instead of 11.4% and incorrect per-minute rates for certain calls under Americatel's Uniendo America plan.7.
1 Staff Report, at p.6.
2 Id., at p.7.
3 Id., at p.8.
4 "Cramming" is the inclusion of unauthorized charges on a telephone bill, which is prohibited by Public Utilities Code Section 2890.
5 Staff Report, at p.9.
6 Id., at pp.130-14.
7 Id., at pp.19-20.
