Respondents Violated Rule 1 in Answering Question 7

Question 7 of the CPCN application asks the applicant to state that no officer, director, general partner, or owner of applicant had acted in that capacity with an interexchange carrier that 1) filed for bankruptcy; 2) had a judgment or verdict involving a violation of Bus. & Prof. Code § 17000 et seq. or consumer misrepresentation; or 3) is under investigation for similar violations. Respondents answered "true" in response to Question 7. We find that Respondents misled the Commission in so answering, because at the time of the application ACI was under investigation for consumer misrepresentation.

ACI Was Under Investigation for Consumer Misrepresentation Within the Meaning of Question 7

Question 7 inquires whether a court has found an interexchange carrier with which the applicant held a similar position criminally or civilly liable for consumer violations or whether the interexchange carrier currently is under investigation for similar violations. Question 7 does not concern an applicant's compliance with regulatory authorities. (73 CPUC2d supra at 292.) CPSD and Respondents disagree whether there was any investigation into consumer misrepresentation by ACI, but the record reflects that ACI was under investigation for consumer misrepresentation by other than regulatory authorities at the time the application was filed.

CPSD alleges that the Arizona Attorney General had a pending action alleging consumer fraud, but Respondents state the Arizona Attorney General had dismissed their complaint against ACI at that time. The Arizona Attorney General's 1998 complaint against ACI alleging consumer fraud is discussed in Bucci's Motion for Summary Judgment in the related 2000 complaint filed after the 1998 complaint was dismissed. The motion states that a Judgment of Dismissal was filed in the 1998 action on February 4, 2000, and that the 2000 complaint is identical to the 1998 complaint brought under the Arizona Consumer Fraud Act and alleges that ACI and Bucci engaged in deception, deceptive acts and practices, fraud, false pretenses, false promises and concealment, suppression and omission of material facts with the intent that others rely upon such concealment, suppression, or omissions.

The record does not support Respondents' claim that the complaint had been dismissed in 1998. Instead, the record points to dismissal occurring in 2000 after the Attorney General failed to actively pursue the investigation. Even that dismissal does not show that the investigation had concluded, since the Attorney General immediately filed an identical complaint.

The Arizona Attorney General's pending complaint alleging consumer fraud is the type of information Question 7 attempts to elicit. In this instance, we find that Respondents misled the Commission in responding "true" to Question 7 at a time when ACI was under investigation in Arizona for consumer fraud.

On July 22, 1998, prior to the filing of the CPCN application, the New Jersey Division of Consumer Affairs-Office of Consumer Protection served a subpoena on ACI to appear by August 6, 1998, and produce documents related to ACI's customer solicitation process, customer complaints, evidence of agreement to switch to ACI for specific customers, etc., under the authority granted by the New Jersey Consumer Fraud Act. On June 15, 1999, the New Jersey Attorney General's office sent ACI a letter noting that ACI had failed to produce the documents and demanding that ACI comply by July 6, 1999. In this instance, we find that Respondents misled the Commission in responding "true" to Question 7 while New Jersey was investigating ACI for consumer fraud.

On March 30, 1999, the Idaho Attorney General notified Bucci that it had commenced an investigation to determine whether ACI had violated Idaho's Consumer Protection Act, Consumer Protections Rules, Telephone Solicitations Act, and Telephone Solicitation Rules. Idaho's Consumer Protection rules prohibit sellers from

Making any claim or representation concerning goods or services which directly, or by implication, has the capacity, tendency, or effect of deceiving or misleading a consumer acting reasonably under the circumstances. An omission of a material or relevant fact shall be treated with the same effect as a false, misleading, or deceptive claim or representation, when such omission, on the basis of what has been stated or implied, would have the capacity, tendency, or effect of deceiving or misleading a consumer acting reasonably under the circumstances. (Rule 30 of the Idaho Rules of Consumer Protection, IDAPA 04.02.0100.)

However, the Idaho Attorney General's office doubted that this notification ever caught up with Bucci due to Bucci's numerous changes of address. In this instance, we find that Respondents did not mislead the Commission by responding "true" to Question 7, because Bucci did not have notice that ACI was under investigation in Idaho for consumer fraud. Absent actual or constructive notice that Idaho was investigating ACI, Bucci could not have answered "not true."

ACI Had Not Filed for Bankruptcy Within the Meaning of Question 7

We determine that in this instance, Respondents did not mislead the Commission in responding "true" to Question 7, because in fact ACI had not filed for bankruptcy at the time Titan's CPCN application was filed. Although a receiver had been appointed for ACI, a receivership is not the same as a bankruptcy. Bankruptcy is defined as the administration of an insolvent debtor's property by the court for the benefit of the debtor's creditors. A receivership is the state of being in the hands of a receiver, one appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. (Merriam-Webster's Dictionary of Law, http://www.findlaw.com.) Although both processes concern insolvent entities, those processes are distinct.