Terms of the Proposed Settlement
As noted above, the proposed settlement consists of three parts. The first calls for a series of payments by the respondents to Gilardi totaling about $340,000; Gilardi in turn will disburse them to eligible customers. The second is an agreement by the Gershenson Group companies to surrender their CPCNs, and not to offer any type of telephone service within California for a period of five years. The third part is an undertaking by Ned Gershenson and Doris Fisher as individuals not to apply for any type of operating authority from this Commission during the same five years, and if they do apply for such authority after this period, to disclose the existence of this proceeding and any legal complaints that may have been filed against them subsequently. We will discuss each of these parts in turn.4
As to payments, the settlement agreement designates Gilardi as a fiduciary to receive funds from the various respondents. Most of these funds are to be deposited into either a "restitution" account or a "switching fee payment" account. All of the respondents are required to make their respective payments within five days after this Commission issues a decision approving the settlement agreement. Tel-Save is obliged to pay Gilardi $105,000, of which $88,000 is for the restitution account and $17,000 is for payment of Gilardi's services as claims administrator. The Gershenson Group is required to pay Gilardi $100,811.74, from which $64,000 is to be deposited into the restitution account, $22,361.74 into the switching fee payment account, and $14,450 is payment for Gilaridi's services. (¶ 2.1.) As noted above, the Gershenson Group is also required to pay a penalty of $136,000, but that money is to be paid to the Commission for deposit into the State of California's General Fund. (Id.) Pursuant to a fee arrangement included in the settlement agreement, Gilardi agrees to invoice Tel-Save and the Gershenson Group for its actual costs, and to return to them the difference (if any) between these actual costs and the $31,450 designated as payment for Gilardi's services as claims administrator. (Id., ¶ 2.2.)
The date that the Commission approves the settlement agreement is also the starting date for other obligations of the respondents and Gilardi. For example, within ten days after the decision, the respondents are obliged to provide computer files to CSD (which will forward them to Gilardi) setting forth the names and billing telephone numbers (including mailing addresses) of all "eligible consumers," i.e., those present and former customers who complained of slamming by one of the Gershenson Group companies between January 1996 and December 1999, and who are therefore entitled to a restitution payment. (Id., ¶ 3.1.) Gilardi, in turn, is obliged to send a restitution check to each of the eligible consumers within 21 days after issuance of the Commission's decision, along with a written explanation from CSD that is attached as Exhibit A to the settlement agreement. (Id., ¶ 3.4.) The amount of each check is computed by dividing the funds designated for restitution ($152,000) by the number of eligible consumers, which is approximately 6,020, 5 resulting in a payment per consumer of $25.24. (Id., ¶ 3.5.)6
Gilardi also has extensive responsibilities in administering the switching fee payment account. Under paragraph 4.1 of the agreement, the respondents are obliged within ten days after the Commission's decision approving the settlement to provide CSD with computer files setting forth the names and billing telephone numbers of all "existing customers," i.e., those California consumers who have been billed by a billing agent on behalf of one of the respondents during the six-month period preceding issuance of this decision.7 CSD will then forward these data to the appropriate local exchange carriers (LECs) and request that the LECs provide within 10 days the current billing addresses of these customers; CSD will then forward the addresses to Gilardi. Within 21 days thereafter, Gilardi will send each existing customer a notice explaining the need to select a new long distance or toll service provider, along with a switching fee payment check in an amount corresponding to what the customer's LEC charges under its tariffs for changing a long distance or toll service provider. According to paragraph 4.5, this amounts to $5.26 for Pacific Bell Telephone Company and $4.46 for GTE California Incorporated (now Verizon California). Existing customers served by other LECs are also entitled to a switching fee payment of $4.46.8
The Gershenson Group companies also have obligations in connection with the switching of long distance or toll service providers. Under paragraph 4.9, they agree to notify their underlying facilities-based providers to stop provisioning existing customers by the end of a 60-day "Transition Period" (which begins the day after the Commission's decision approving the settlement), and they also agree not to bill or collect for any services (inadvertently) provided after this 60-day period. Under paragraph 4.10, the members of the Gershenson Group agree to cease providing service to any existing customer (or other California consumer) at the end of the Transition Period, and specifically agree to cease using in California any of the technical codes that are essential for providing long-distance or toll service, i.e., Access Customer Name Abbreviations, Carrier Identification Codes (CICs) or sub-CICs.
As noted above, the second major part of the settlement agreement calls for the Gershenson Group companies to surrender their CPCNs and not to offer any type of telephone service within California for a period of five years. To carry this out, the Gershenson Group consents to the cancellation of the CPCNs for the four companies named in footnote 1 of this decision, effective the last day of the Transition Period. (¶6.1.)9 Second, the Gershenson Group agrees that by the last day of the Transition Period, it will either terminate, cause to have terminated, or amend four agreements relating to the alleged "purchase" of the Gershenson Group companies by Tel-Save referenced in the OII. The parties agree that the effect of these terminations or amendments shall be to "preclude the [Gershenson Group] from providing telecommunications services within California." (¶6.2.) Third, the Gershenson Group agrees that for the five years beginning on the last day of the Transition Period, its members "will not do business as a Telephone Corporation within California on a wholesale or retail basis with California consumers." (¶6.3.)10
The members of the Gershenson Group (who include Ned Gershenson and Doris Fisher individually) also agree that during the five years that begin on the last day of the Transition Period, neither they nor any Telephone Corporation that they "own, control, operate, manage, or hold a TEN (10) percent or greater shareholder interest in" will apply for a CPCN from the Commission. (¶6.4.) They also agree that if, after the end of the five-year period, any of them reapply for a CPCN, the applicant(s) will furnish both the Director of CSD and the appropriate Assistant General Counsel of the Commission with copies of the application, and that the application will (a) refer to this proceeding, (b) offer proof of the applicant's fitness to operate within California, (c) include a plan for using unique CICs or PICs11 that "will enable Commission Staff to monitor any of the [applicant's] California operations," and (d) disclose any state or federal investigations or proceedings, whether judicial or administrative, that involve allegations of slamming, consumer fraud or "other alleged unlawful conduct." (Id.)
The remaining provisions of the settlement agreement address such things as how the agreement is to be enforced and the effect of any changes the Commission might order in it. The most noteworthy feature of these provisions is that the Commission is given "primary jurisdiction over any interpretation, enforcement, or remedies" pertaining to the settlement agreement, and that "no party may bring an action pertaining to this Settlement in any local, state, federal court, or administrative agency without first having exhausted its administrative remedies at the Commission." (¶7.2.) In the event any of the respondents breaches the agreement, CSD is authorized to commence proceedings at the Commission to enforce the agreement or obtain other appropriate remedies, and in any such proceeding, "a CSD declaration documenting the breach or violation shall support CSD's action, and CSD shall have the burden of proof." (¶7.1.) CSD has also agreed that while it will not initiate proceedings by any law enforcement agency based on the facts alleged in the OII, "CSD may provide information or otherwise co-operate to the extent requested by a law enforcement agency or a court of law." (¶7.5.)
4 The settlement agreement in Appendix A consists of two pages of recitals, 16 pages of numbered paragraphs and three signature pages. In addition, one appendix and three exhibits are attached to the settlement agreement. The references in this decision are to the numbered paragraphs in the settlement agreement. 5 Paragraph 3.5 also states that the number of eligible consumers "may vary because of miscoding, unavailable mailing addresses, duplication, or other circumstances unforeseen at this time." 6 Paragraph 3.4 provides that the restitution checks shall contain an expiration date of 90 days after mailing. Under Paragraph 3.6, the amount representing uncashed or undeliverable restitution checks is to be paid to the Commission. This payment is to be made 120 days after the mailing of the last restitution check. (¶5.1.) 7 The original settlement agreement set forth in Appendix A defined an "existing customer" as one who had been billed on behalf of respondents for the period from March 1 to August 30, 2000. The modification set forth in Appendix B updated this to specify a customer who had been billed on behalf of respondents within the six months prior to this decision. 8 Like the restitution checks, the switching fee payment checks expire 90 days after mailing. (¶4.4.) Under paragraph 4.7, Gilardi will pay the amount representing uncashed or undeliverable switching fee payment checks to the Gershenson Group companies. Gilardi is required to make this payment 120 days after the mailing of the last switching fee payment check. (¶5.2.) 9 Investigation reveals that the Commission has apparently granted two CPCNs under the name of "Long Distance Charges, Inc.". The first bears the registration number U-4206-C, is a California corporation and is surrendering its CPCN pursuant to the settlement agreement approved herein. The second bears the registration number U-5696-C and is a Florida corporation that was granted a CPCN in D.96-10-053. This latter corporation is unrelated to the Gershenson Group companies, and its status is not affected by today's decision. 10 "Telephone Corporation" is a defined term under paragraph 1 of the settlement agreement. It is defined as "every corporation or person owning, controlling, operating, or managing any telephone line for compensation within California, and includes a reseller of telephone services." 11 Paragraph 1 of the settlement agreement indicates that PIC is an acronym for Primary Interexchange Carrer.
