III. FACTUAL BACKGROUND
The immediate impetus for this Investigation was our determination in D.03-02-066 that CPSD should review all facts bearing on the fitness of Clear World and its management. The fitness of the Mancusos and their predecessor corporations has been of concern to the Commission for a number of years. Our Investigation 97-09-001 of slamming allegations against National Telephone and Communications (NTC) resulted in a stipulated order effectively banning Christopher Mancuso from further participation in NTC.2 In February 1999, the Commission's Consumer Services Division (CSD) wrote to the Mancusos informing them that another of their companies, Worldwide, was illegally operating without a CPCN.3 D.03-02-066 described facts indicating additional unlicensed telecommunications sales and other illegal acts by the Mancusos, and cast doubt on their fitness to operate Clear World as a telecommunications utility.
Staff presents newly discovered evidence in three Staff Reports addressing general fitness issues (hereinafter SR I), slamming issues (SR II), and surcharge, financial, and corporate documentation (SR III). Those Staff Reports address two underlying and interrelated problems: (1) an alleged scheme of deceit and artifice to hide the de facto operation of at least two unlicensed interexchange carriers by the Mancusos; and (2) slamming and marketing abuse perpetrated by Clear World and other Mancuso entities.
A. Clear World
As described in the Staff Reports, Clear World Communications Corporation (U-6039) is a reseller of long-distance telephone service in California and nationally. Staff informs us that the largest segment of Clear World's customers is Latino
surnamed, and many appear not to speak English as a first language, a population we have previously found to be vulnerable to aggressive sales practices.4 SR II at § I(B). Staff also reports that Clear World has a smaller number of Vietnamese customers, along with some "direct billed" business accounts. SR I at § IV(A). Clear World's President Michael Mancuso was unable to accurately state the number of Clear World customers, but it appears to have been between 500,000 and 800,000 at the time of the 2002 hearings. HT5 at 415-19. Residential sales have been made from telemarketing centers located in Fresno, Santa Ana, Los Angeles, Riverside, and Downey. SR I at §IV(A). Staff asserts that Clear World's "Income from Operations" has grown from approximately $1.5 million/month at the time it acquired DLD (e.g., mid-1998) to $3.7 million/month in more recent years. Staff Report III at Table 5.
A. The Mancusos
Clear World is "nominally"6 owned by Michael, James and Joseph Mancuso, and operated by Michael and James. In addition, from 1999-2002 Clear World made at least $5 million in payments to a third brother, Christopher Mancuso, as a "consultant," although Clear World was unable to present a contract or invoices to document these payments. D.03-02-066, Findings of Fact 103-106. As used herein, "Mancusos" will refer to the three brothers and their father.
As the Commission wrote in D.03-02-066, "examination of the fitness of Clear World to provide telecommunications services in California necessitates a look at the actions of these men [the Mancusos] in connection with this application, and before." Mimeo at 6. Staff contends that the Mancusos have acted collectively, that Michael, James and Joseph have functioned as de facto agents for Christopher Mancuso and for each other, and that each aided and abetted a common enterprise of operating one or more unlicensed telecommunications utilities, of hiding Christopher Mancuso's participation in those utilities, and of using misleading if not fraudulent sales practices in acquiring new customers, in violation of the legal requirements applicable to such utilities. SR I at § III; SR II; SR III at § VII and Appendix A.
1. James Mancuso
James Mancuso is director, secretary, general counsel, and 5% owner of Clear World. He has also been agent, counsel, and/or incorporator for other entities apparently operated or controlled by Christopher Mancuso, including DLD, American Electronics Corporation, Worldwide Telecommunications Corporation (Worldwide), Communications Consulting Incorporated (CCI), International Telecommunications Consulting LLC (ITC), World Technology Marketing, Inc. (World Tech), and Mancuso LLC. See SR III at § VII, App. A, Atts. R-BB. Staff reports new evidence that James was involved in DLD's unlicensed sale of telecommunications services. SR I at §§ III(B), VII, Att. 140.
2. Michael Mancuso
Michael Mancuso is president, chief executive officer, treasurer, and 90% owner of Clear World. During the 1990s, he was involved with entities associated with Christopher Mancuso, and worked for National Telephone Communications (NTC), Amerivision, and DLD (which he managed on a daily basis). D.03-02-066, Finding 30. Staff presents new evidence of Michael's involvement in the unlicensed sale of long distance service by DLD and Worldwide. SR I at § IV(B).
3. Joseph Mancuso
Joseph Mancuso is the father of Christopher, James and Michael Mancuso. He is also a 5% owner of Clear World, as well as the nominal 100% owner of both Worldwide and Clear World's predecessor entity, American Electronics Corporation dba DLD (AEC/DLD), (see further discussion below). Our Decision 03-02-066 noted that, although Joseph was custodian of records for Worldwide, he was allegedly "so ill that he could not understand or answer questions and could not be deposed in these proceedings." Finding of Fact 44.
4. Christopher Mancuso
In Decision 03-02-066, the Commission found that "Christopher Mancuso has demonstrated that he is not fit to be involved in any way with any regulated utility," and barred him from further participation in Clear World. Mimeo at 28.7 His long history as founder of NTC, consultant to Amerivision, "principal" of DLD, and incorporator of Worldwide - all resellers of WorldCom service - is alluded to in D.03-02-066, and described in the accompanying Staff Report I, which portrays Christopher as the architect of the complex relationships among these entities. Id. at 6-10; SR I at §VI.
Staff alleges that Christopher Mancuso remains material because of his role in the unlicensed utilities DLD8 and Worldwide, inter alia, enterprises in which Clear World principals James and Michael Mancuso were also involved and about which they have allegedly testified falsely under oath. In addition, he was the recipient of at least $5 million in undocumented "consulting fees" from Clear World.
Staff Report I demonstrates that Christopher Mancuso first became involved in the telecommunications industry in the late 1980's, and since that time has used extraordinary efforts to conceal his involvement in various telecommunications utilities. As Christopher himself has said in regard to NTC: "[T]he investors ... didn't want me to be an officer or director because we'd have to disclose the fact that I had a felony conviction." CMT9 103:1-3. Decision 03-02-066 recites how Christopher admitted resorting to "creative" means, ten years later, to hide his participation in another (planned) utility from the Commission10 at approximately the same time as Commission Decision 98-02-029 effectively banned him from further participation in NTC.
Christopher Mancuso failed to appear as a witness in A.01-09-040 despite the Assigned Administrative Law Judge's request that he do so, after he had "avoided a subpoena [served] by CPSD." D.03-02-066, Finding of Fact 116. Clear World - despite family and financial ties (including paying Christopher at least $5 million in a little over two years) - could not or would not procure his testimony.11
C. The Mancusos' Four Applications to this
Commission.
Over the last fifteen years, Mancuso family members or their agents have filed three Applications to this Commission for authority to provide telephone utility service, and are alleged to have caused a fourth Application to be filed on their behalf. Chronologically, those applications are: (1) A.88-12-007, filed by NTC seeking authority to operate as a reseller of interLATA service in California; (2) A.98-07-012, filed by Clear World seeking authority to operate as a reseller of inter- and intra-LATA service in California; (3) A.99-04-042, filed by Worldwide seeking authority to operate as a reseller of inter- and intra-LATA service in California; and (4) A.01-09-040 filed by Clear World seeking authority to operate as a competitive local exchange carrier in California.
Application 01-09-040 triggered an investigation by CPSD into Clear World's high slamming numbers, the Mancusos' other telephone activities in California, and Clear World's relationship with the Mancusos' brother Christopher - a felon - and resulted in Commission Decision 03-02-066, denying Application 01-09-040. The facts uncovered in D.03-02-066 lead us now to consider revoking Clear World's CPCN to offer inter- and intra-LATA service, granted in Commission Decision 98-08-056.
2 See D.98-02-029, OP 1; see also D.03-02-066, Finding of Fact 19. 3 D.03-02-066, Finding of Fact 6. 4 D.97-05-089, Investigation of ... Communications TeleSystems International (CTS), 72 CPUC 2d 621, 633 (citing non-English speakers' "lack of familiarity with the aggressively competitive long distance telephone market"). 5 "HT" refers to the Commission's August 2002 hearing transcript in Application 01-09-040. 6 D.03-02-066 found that the ownership shares are 90% for Michael, and 5% for his brother and father, based on the Mancusos' filings with this Commission. Cf. Finding of Fact 1. Staff uses the word "nominal" in light of what it sees as a pattern of Christopher Mancuso placing ownership of companies he effectively controls in the hands of his father or other family members. SR I at § III(D). 7 The Decision goes on to state that "he should not be an officer, owner, director or employee of any regulated utility, or of any provider of services to a regulated utility, including as a consultant." Ordering paragraph 2 of D.03-02-066, however, does not fully implement this resolve, barring Christopher Mancuso only from direct or indirect participation in Clear World. In order to effectuate D.03-02-066's intent, and assure that he not have such functions in the future with any regulated utility, we make Christopher Mancuso a respondent hereto and order him to show cause why that should not occur. See Ordering Paragraph 7 below.8 Staff alleges that Christopher appears to have run much of the DLD business, and received the proceeds of same, through his company Communication Consulting Inc. (CCI). See, e.g. SR I at § XII(A), Atts. 141-42. As discussed below, Staff presents evidence that the Mancusos' business model and operations remained consistent between DLD and Clear World.
9 "CMT" refers to the Christopher Mancuso Transcript, a 1998 deposition transcript entered into evidence in A.01-09-040 as Exhibit CPSD 19. References in this OII to "Exhibits" refer to record evidence in A.01-09-040. 10 Mimeo at 7, Finding of Fact 20. 11 Findings of Fact 116-17. Lacking Christopher Mancuso's live testimony, the Commission turned to statements taken from a November 10, 1998 video-taped deposition of Christopher Mancuso in connection with Case No. 797154 before the Orange County Superior Court, a lawsuit filed by NTC against Ballah, Mancuso, WorldTech, et al. Id.; see also Exhibit CPSD 19 (CMT).
