Discussion
Although the enforcement provisions in the settlement agreement here are not quite as rigorous as those in the CEI settlement that we approved in D.00-12-050, there are enough attractive features to the settlement -- especially in view of the separate OII involving Tel-Save's affiliate, Talk America, Inc. -- that we have decided to approve it.12
First, as noted in the Joint Motion, the total restitution payment of $152,000 amounts to about $25.00 for each eligible customer, a sum that is consistent with other restitution payments we have approved in recent years. See, D.00-12-050, mimeo. at 12-14; Investigation of Heartline Communications, Inc., D.96-12-031, 69 CPUC2d 584, 591 (1996); Investigation of L.D. Services, Inc., D.97-11-079, mimeo. at 2-3; Investigation of Brittan Communications International Corp., D.98-04-024, mimeo. at 5. While it is true that customers with larger restitution claims will not be able to pursue them under this settlement, the Gershenson Group companies appear to be in the same situation as CEI; i.e., they have been the subject of disciplinary proceedings in so many other jurisdictions that the total amount available for restitution to California customers appears limited. Under these circumstances, it is reasonable to approve capping the restitution payment in the manner specified in paragraph 3.5 of the settlement agreement. See, D.00-12-050, mimeo. at 13.
Second, in terms of assuring that the slamming alleged in the OII does not happen again, the settlement agreement requires the Gershenson Group companies to surrender their CPCNs for cancellation and to cease doing business in California for five years. Morever, no telephone company that Ned Gershenson or Doris Fisher as individuals manage, control or operate, or in which they have a 10% or larger shareholder interest, may apply for operating authority from this Commission during the five-year period, and if they choose to reapply for such authority later, their application will have to disclose this proceeding and make a new showing of fitness. As we said of similar provisions applicable to CEI, these requirements should "help to ensure that long distance and toll service are marketed in California in a more informative and even-handed manner." (Id. at 14-15.)
Third, the $136,000 penalty that the Gershenson Group is paying to the Commission is substantial and appropriate under the circumstances of this case. Not only does this penalty represent 40 percent of the total amount that respondents are paying to settle this matter; it is accompanied by the agreement of the Gershenson Group not to conduct any telecommunications business within this State for at least five years. 13
In light of these considerations, and the lack of opposition to the settlement, we conclude that the settlement agreement is reasonable in light of the whole record, consistent with law, and in the public interest. Thus, the agreement satisfies the standards for approval set forth in Rule 51.1(e) of our Rules of Practice and Procedure, and should be approved without modification.
Comments on Draft Decision
The draft decision of the ALJ in this matter was mailed to the parties on May 28, 2002 in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. The only comments received were from the Gershenson Group, which urged that the settlement agreement's definition of an "existing customer" should be changed from someone who had been billed on behalf of a Gershenson Group company between March 1 and August 30, 2000, to someone who had been so billed during "the six month period immediately preceding the date of issuance of the Commission decision" approving the settlement agreement. The Gershenson Group stated that it advocated this change because it had lost a number of customers since the Spring of 2000, and retaining the original settlement language might serve to confuse customers it was no longer serving, as well as result in an unjustified switching fee payment to such former customers.
As noted in the text, the Gershenson Group, Tel-Save, and CSD filed a modification to the settlement agreement on June 25, 2002 that incorporates this suggested change. We agree that it is reasonable, and have made appropriate changes to the text to reflect it.
1. The settlement agreement attached hereto as Appendix A is unopposed.
2. The proposed settlement will achieve customer restitution, because approximately 6,020 eligible consumers will each receive a restitution payment of about $25.00, for a total of $152,000.
3. The restitution payment described in the preceding finding is consistent with those in other settlements that the Commission has approved in recent years for telecommunications customers allegedly victimized by slamming.
4. The $22,361.74 to be paid by the Gershensen Group for deposit into the switching fee payment account appears sufficient to reimburse the existing customers of Gershenson Group companies for the expense of switching their long-distance or toll service to a different provider.
5. The proposed settlement will help to protect the public from unscrupulous practices by telecommunications carriers, will serve to obtain refunds for customers injured by respondents' actions, and will help to encourage a robust telecommunications market free from unfair competition.
1. In view of the many disciplinary proceedings brought against Gershenson Group companies in other states, the $152,000 cap on restitution payments provided for in the settlement agreement is reasonable.
2. The $136,000 penalty provided for in the settlement agreement is reasonable and appropriate under the circumstances of this case.
3. The proposed settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
4. The proposed settlement should be approved without modification.
5. All local exchange carriers, facilities-based providers and billing agents that have done business with, performed work for, or rendered services on behalf of any one or more of the Gershenson Group companies should be directed to cooperate with CSD to ensure that complete data (including names and addresses) for all Eligible Consumers and Existing Customers, as defined in the settlement agreement, are provided to Gilardi.
IT IS ORDERED that:
1. The settlement agreement attached to this decision as Appendix A, as modified by the modification set forth in Appendix B, is approved without change.
2. The certificates of public convenience and necessity granted to the following companies shall be cancelled at the end of the Transition Period specified in paragraph 1 of Appendix A (i.e., on the sixtieth day following the mailing date of this decision): Long Distance Charges, Inc. (U-5561-C), Least Cost Routing, Inc. (U-4206-C), Internet Telephone Company, Inc. (U-6107-C), and National Telecommunications, Inc. (ESP 1176, now doing business as "Future-Tel Communications").
3. Pacific Bell Telephone Company (Pacific), Verizon California Inc. (Verizon), Worldcom, Inc. (Worldcom), and all other local exchange carriers, facilities-based providers and billing agents that have done business with, performed work for, or rendered services on behalf of any one or more of the companies named in Ordering Paragraph 2 shall cooperate fully with the Consumer Services Division (CSD) to ensure that complete data (including names and addresses) for all Eligible Consumers and Existing Customers, as those terms are defined in Appendix A and Appendix B, are provided on a timely basis to CSD and Gilardi & Co. LLC (Gilardi).
4. At the end of the 60-day Transition Period specified in Paragraph 1 of Appendix A, Pacific, Verizon, Worldcom and all other local exchange carriers and facilities-based providers shall discontinue service to all California customers receiving service from any one or more of the companies named in Ordering Paragraph 2.
5. Within five days after the issuance date of this decision, the respondents shall execute the fee agreement with Gilardi referenced in Paragraph 2.1 of Appendix A, and shall make the payments specified in said paragraph to Gilardi acting in its fiduciary capacity as Settlement Claims Administrator.
6. This proceeding is closed.
This order is effective today.
Dated June 27, 2002, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
CARL W. WOOD
GEOFFREY F. BROWN
MICHAEL R. PEEVEY
Commissioners
APPENDIX A
12 As noted in the text, the settlement agreement here provides that in the event CSD becomes aware of any violations of the settlement's provisions, CSD may bring an enforcement action before the Commission in which CSD will have the burden of proof. In contrast, the CEI settlement provided for a suspended fine of $500,000 applicable to CEI and $300,000 applicable to QAI, Inc. The fine on CEI was deemed vacated only if CSD did not bring an enforcement action against it within five years, and the QAI fine was deemed vacated only if no enforcement action was brought against QAI within three years. (See D.00-12-050, mimeo. at 19-20.) 13 The agreement of the Gershenson Group's members to cease doing business in California makes it appropriate to accept a penalty in this case that is a somewhat smaller percentage of the total settlement package than the penalty in the I.01-08-003 settlement referred to in footnote 3. In that case, the $560,000 penalty that the respondent has agreed to pay represents 56% of the total settlement amount. Here, in contrast, the proposed penalty is 40% of the total settlement package. However, the settlement in I.01-08-003 does not require the respondent in that case to cease doing business in California.
