III. CRAMMING COMPLAINTS AGAINST AMERICATEL
A. High Levels of Cramming Complaints
On July 23, 2008, the Commission's Consumer Affairs Branch (CAB) notified Staff of a significant increase in the number of cramming complaints against Americatel (see Table 4 below for details). Cramming is referred to as the placement of unauthorized charges on a consumer's telephone bill. After review of the complaints raised by consumers, Staff sent a data request on July 29, 2008,19 asking Americatel for information and data relating to alleged unauthorized services and charges, continuous billing post service cancellation, and inadequate service. Americatel sent a letter dated July 31, 2008, 20 addressed to the Director of CPSD from its General Counsel, Robert Felgar, notifying the Commission about the unusual volume of complaints from consumers in a recent period. The consumers complained that they had been enrolled in one of Americatel's monthly service plans without their authorization. Atty. Felgar stated in the letter "there has been some breakdown in the systems and procedures of one of Americatel's third party marketing vendor."
According to Atty. Felgar, Americatel would be responding to each complaint as directed by CAB. Americatel's intention was to make everyone of these consumers whole, and actively investigate the underlying problem. Americatel would inform the Commission accordingly once Americatel determined the cause of the problem. Specifically, Atty. Felgar indicated that, in every instance, Americatel would have -by the end of the week- reversed the monthly fees in question.
B. Complaints Resulted From Fraudulent Behavior of Americatel's Marketing Vendor
In August 2008, Staff phoned Ms. Lucy Mends, Americatel's Manager of Regulatory Compliance/Legal Department, and inquired about the suspected breakdown in their systems and procedures mentioned in the letter to the CPSD Director. Ms. Mends mentioned that Americatel's marketing vendor might have committed fraud. On September 5, 2008, Staff sent Data Request No. 321 to ask for further clarifications to Americatel's responses dated August 15, 200822 and August 22, 2008,23 including the status of Americatel's investigation into the alleged breakdown in the marketing vendor's systems and procedures. In its reply dated September 22, 2008,24 Americatel stated:
"...Americatel received thousands of Letters of Authorizations (LOAs) from Bravo. Thus, Americatel was under the impression that the service was properly authorized. The procedures, however, did not contemplate fraud in the form of forgery of the LOAs. It took Americatel a few months to ascertain that Americatel and its customers were the victims of a fraud....
As a result of the nature and large number of complaints we received regarding the Bravo sales, we believe that Bravo or its sub-contractors forged signatures on the LOAs...."
On January 8, 2009, Staff sought more information regarding the alleged forgery of the LOAs and sent another data request, (CPSD Utility Enforcement Branch Data Request No. 005-Americatel (NYG)). 25 In its responses dated February 2, 2009, Americatel submitted Attachments F and I. Attachment F included an e-mail dated June 27, 200826 from Hector Krauss of Americatel addressed to the Bravo team. Mr. Krauss stated in the e-mail:
"I am sending you a table with the 3,200 ANIs that have caused calls and credits at customer care. One customer actually called Thomas' office and one of the caller said the LOAs had the name of his uncle who died 3 years ago. See on the table that a few reps have OVER 50 complaints to customer care, there are many over 30 and many-many in the high single digits. The fact that reps were able to generate over 30 calls, each, with complaints and credits is unbelievable. Obviously there is no control on your sales, what so ever. My gut feeling is that reps are filling up LOAs using the phone book as a place to get names. Roughly this past week over $9,000 in credits were generated and the volume (3,200 in a week) is about what the call center generates in 2 months. The call center does not have enough back office staff to handle these tickets...."
Attachment I included an e-mail dated July 11, 200827 from Mr. David Yepes of Bravo addressed to kosta@bravohispanicmarketing.net and greg@bravohispanicmarketing.net. Mr. Yepes stated in the e-mail:
"... Among the production I receive yesterday, it was obvious by looking at his bundle that he took the LOAs home and filled them up from some kind of database, (Phone Book etc)....I took it upon myself to start making calls to his production and none please pay attention NOBODY acknowledge to subscribe to anything, a big % were numbers already disconnected or the person does not live there no more. By looking at the signatures on the LOAs you can tell belong to the same person."
In response to consumer complaints with CAB in 2008, Americatel sent a form letter to consumers that stated:28
"...I have researched the account and found that the complainant is a consumer who has been impacted by a breakdown in the systems and procedures of one of Americatel's former third party marketing vendors. As discussed in the attached letter, Americatel will make this and other consumers affected by this problem whole...The credit should be reflected on the customer's Local Exchange Carrier's billing statement..." Staff interprets this letter as an admission that cramming occurred. Since Americatel is responsible for the conduct of its third-party marketing vendor, Americatel is responsible for the cramming that occurred.
2. 61,097 California Consumers Were Crammed as a Result of Americatel's Marketing Vendor's Forging the Letters of Authorization
In response to CPSD's Data Request No. 005,29 Americatel submitted data associated with the Bravo sales. Americatel indicated that Bravo conducted almost all face-to-face sales to residential customers. Majority of the plans sold by Bravo included a monthly fee of $16.99.30
On April 3, 2009, Americatel provided data (see Table 1 below) indicating that Bravo-related sales in California total to 61,097 (a sale is equal to 1 customer).31
Table 1. California Sales of Americatel Calling Plans by Bravo (2008-REVISED)32
Month |
Mar-08 |
Apr-08 |
May-08 |
Jun-08 |
Date of Sale unknown |
Total |
Sales |
1,347 |
12,309 |
22,190 |
21,286 |
3,965 |
61,097 |
Source: Americatel Data Response Dated April 3, 2009
3. Americatel Refunded a Total of $1.5 Million to the California Customers Affected by Fraudulent Sales Conducted by Its Marketing Vendor
In response to Staff's request, Americatel submitted on April 3, 2009 the customer credit data associated with the fraudulent Bravo sales (see Table 2 below for details).33 According to Americatel, a total of $1,933,122 in credits was issued to customers nationwide. Seventy-nine percent of this total, or $1,511,300.72, was issued to California customers.
Table 2. California Customer Credits/Refunds Associated with Bravo Sales
(2008 & 2009 REVISED)34
Entity that Issued the Credit |
Customer Credit/Refund Amount |
No. of California Customers that Rec'd Credits/Refunds |
Americatel Customer Service |
$159,666.28 |
5,318 |
Americatel IT Dept/ILD |
$1,083,474.70 |
50,252 |
Local Telephone Co. |
$27,535.74 |
1,562 |
Total per Feb 2, 2009 Response |
$1,270,676.72 |
57,132 |
Americatel Customer Service or Local Telephone Co. |
$107,056.00 |
1,072 |
ILD |
$133,568.00 |
2,893 |
Total per Apr 3, 2009 Response |
$240,624.00 |
3,965 |
Grand Total |
$1,511,300.72 |
61,097 |
19 Attachment B-1
20 Attachment G to February 2, 2009 Americatel Data Response (Attachment E-2). Staff noted that Americatel sent this letter two days after July 29, 2008 CPSD Data Request, which was sent via e-mail and hard copy.
21 Attachment C-1
22 Attachment B-2
23 Attachment B-3
24 Attachment C-2
25 Attachment E-1
26 Attachment F to February 2, 2009 Americatel Data Response (Attachment E-2)
27 Attachment I to February 2, 2009 Americatel Data Response (Attachment E-2)
28 Attachment K
29 January 8, 2009 CPSD Data Request (Attachment E-1)
30 February 2, 2009 Americatel Data Response, page 5, (Attachment E-2)
31 Attachment F-1
32 Ibid. Initially, Americatel provided Bravo sales data on February 2, 2009, attached to this report as Attachment E-2. Staff noted that on page 7 of February 2, 2009 Americatel Data Response indicated a total of 57,132 customer refunds (Mar-08-Jun 08), which Staff reflected on Tables 1 and 2 of the report.
33 Attachment F-1
34 Ibid. Initially, Americatel provided Bravo sales data on February 2, 2009, attached to this report as Attachment E-2. In its Data Response dated April 3, 2009, Americatel provided information regarding the 3,965 customers that Americatel inadvertenly did not cancel on July 28, 2008 as detailed on Tables 1 and 2 of the report.
