ALJ/MD2/avs Date of Issuance 1/14/2011

Decision 11-01-017 January 13, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation on the Commission's own motion into the operations, practices, and conduct of Contractors Strategies Group, Inc., Intella II, Inc., A&M Communications, TNT Financial Services, Limo Services, Inc., Calnev Communications, Inc., 1^st Capital Source Funding & Financial Services, Inc., and their owners to determine whether Respondents violated the laws, rules, and regulations of this State regarding the connection of Automatic Dialing-Announcing Devices to Customer-Owned Pay Telephones.

Investigation 10-02-004
(Filed February 4, 2010)

DECISION APPROVING SETTLEMENT AGREEMENTS,

GRANTING MOTION FOR SUMMARY ADJUDICATION REGARDING LIABILITY, AND RESOLVING ALL OTHER ISSUES

TABLE OF CONTENTS

Title Page

DECISION APPROVING SETTLEMENT AGREEMENTS, 2 2

GRANTING MOTION FOR SUMMARY ADJUDICATION REGARDING LIABILITY, AND RESOLVING ALL OTHER ISSUES 2 2

Summary 2 2

1. Background and the OII 3 3

2. Procedural History 10 10

3. The Settlements 14 14

3.1. Standard of Review 14 14

3.2. Settlement with TNT Financial Services
and Intella II, Inc. (Joint Motion #1) 14 14

3.3. Settlement with Jose and Barbara
Quezada/ Limo Services, Inc. (Joint Motion #2) 16 16

3.4. Discussion 17 17

4. CPSD Motions for Summary Adjudication
of Facts and to Forego Hearings 18 18

4.1. Standard of Review 19 19

4.2. The Parties' Positions 21 21

4.3. Conclusion 24 24

5. Penalties, Refunds, and Other Remedies for Violations 31 31

5.1. The Parties' Positions 32 32

5.2. The Commission's Options 33 33

5.2.1. Fines 33 33

5.2.2 Refunds and Other Remedies 38 38

6. Comments on Proposed Decision 42 42

7. Assignment of Proceeding 45 45

Findings of Fact 45 45

Conclusions of Law 49 49

ORDER 51 51

ATTACHMENT A - Exhibit List

DECISION APPROVING SETTLEMENT AGREEMENTS,

GRANTING MOTION FOR SUMMARY ADJUDICATION REGARDING LIABILITY, AND RESOLVING ALL OTHER ISSUES

Summary

On February 4, 2010, the Commission opened this Order Instituting Investigation (OII) into the operations, practices, and conduct of Contractors Strategies Group, Inc., Intella II, Inc., A&M Communications, TNT Financial Services, Limo Services, Inc., Calnev Communications, Inc., 1st Capital Source Funding & Financial Services, Inc., and their owners (collectively, Respondents) to determine whether Respondents violated the laws, rules, and regulations of this State regarding the connection of Automatic Dialing-Announcing Devices (ADADs) to Customer-Owned Pay Telephones (COPTs) and, if so, what remedies should be applied.

The Consumer Protection and Safety Division (CPSD) reached a settlement with three Respondents: Intella II, Inc., TNT Financial Services, and Limo Services, Inc. These parties have jointly submitted motions to approve adoption of their respective settlement agreements and the Decision approves these uncontested settlements. Each settling Respondent admitted to violation of Cal. Pub. Util. Code § 2871 et seq., including the attachment and illegal operation of ADADs with their COPTs. Intella II, Inc. will pay a fine of $1,000.00, TNT Financial Services will pay a fine of $500.00, and the individual owners of Limo Services, Inc. Barbara & Jose Quezada, will replace Limo Services as the named Respondent in this proceeding and will jointly pay a fine of $2,000.00. Limo Services, Inc. is dismissed as a Respondent.

This decision also grants CPSD's Motion for Summary Adjudication as to the Facts Regarding Liability and a Motion to Forego Hearings and Proceed to Briefing the Remaining Legal Issues. Following approval of the settlement agreements, this motion is considered applicable to the other, non-settling Respondents. They each conceded that they had repeatedly violated Pub. Util. Code § 2871 et seq., by unlawfully connecting and operating ADADs to COPTs, resulting in generation of a federally-mandated fee per call, known as "Dial-Around Compensation (DAC). Because violations of the laws are undisputed by Respondents, no evidentiary hearings were held and the parties briefed the legal issues related to what remedies the Commission might apply to the non-settling Respondents, who argued for leniency primarily based on ignorance of the law.

This decision imposes a fine of $13,451.33 on Alterber Terlusky Freeman and his companies, and $1,462.45 on Massimo Cavallaro and his company. Furthermore, the decision directs all Respondents to release their claims to $103,193.64 in DAC funds generated by their illegal use of ADADs that are currently held in escrow by G-Five LLC, Respondents' billing aggregator. Due to the administrative inefficiencies of refunding small amounts to dozens of carriers for further refund of less than $0.50 to hundreds of thousands of owners of toll-free numbers (if they could be located), 50% of the escrow funds will be distributed to the State's General Fund and 50% to the Telecommunications Consumer Education Fund, pursuant to the Commission's equitable authority.