VI. NEWLY DISCOVERED EVIDENCE OF PAST CONDUCT.
A. Mancusos' Operation of DLD as a Telephone Company Without Certificate of Public Convenience and Necessity.
After analyzing the evidence before it in A.01-09-040, the Commission concluded that "we cannot determine whether AEC/DLD provided telecommunications services without a CPCN." D.03-02-066 Mimeo at 23. The Mancusos' denied that they had done so. Id. The Staff Reports present substantial new evidence that the Mancusos indeed operated AEC/DLD as a telephone company prior to forming Clear World, and did so for as long as six years without registering with this Commission. It also appears that DLD may have underpaid required regulatory user fees and public interest surcharges. SR III, §§ III, IV, Atts. N, O, FF.
1. DLD's Participation as a "Separate Entity" in the "Consortium Buying Arrangement."
Staff Report I presents a newly discovered 1998 letter from Christopher Mancuso to WorldCom in which he characterizes DLD's relationship with WorldCom as part of a "consortium buying arrangement with three separate companies NTC, Amerivision, and Discount Long Distance." SR I at § VI, Att. 1.
Staff reports that DLD functioned as an independent reseller of long distance services, and that third parties regularly treated DLD as such. Id. at §§ VI, VII, VIII. In a newly discovered 1995 letter, a senior WorldCom executive expressed concern about WorldCom's "exposure" under the NTC contract to "three separate entities": NTC; Amerivision; and DLD. Id. at Att. 28. Staff also attaches a May 31, 1998 Memorandum to Amerivision CEO Steve Halliday, reportedly written at a time when Amerivision was trying to separate itself from DLD:
DLD presents considerable problems for Amerivision and is further complicated by continuing liabilities after we are divorced from them. As Amerivision has been rating and billing DLD's calls falsely for some time, and has been filing tax reports and traffic reports including DLD's portion (essentially hiding them as a company from regulatory agencies and government scrutiny), should there be a complaint or investigation in the future Amerivision may face fines and/or the revocation of its certification to conduct business in a particular state.
Id. at Att. 32 (emphasis added).
Staff reports that Christopher Mancuso himself admitted that "DLD has operated under the Amerivision banner since its inception," and that the Mancusos' account representative at WorldCom confirmed that the Mancusos were essentially providing the same long distance service under DLD in 1997-98 as they do today under Clear World, and that "DLD ... has operated under [accounts 182806, 186317 and 178522] since the earth cooled." Id. at Att. 24.41
2. Contractual Agreements between DLD and Amerivision; and Clear World and WorldCom.
Staff presents newly discovered contractual documents that appear to define DLD's role as a reseller of long-distance service. Decision 03-02-066 found that there was no record of Staff having requested "a copy of the agreement" that supported Clear World's contention that AEC/DLD only "operated as an agent of another carrier," i.e., Amerivision. Mimeo at 24. Staff reports that it has unsuccessfully requested the DLD-Amerivision contracts and records from Clear World. SR I at § XVII(A)(2)(b). Staff ultimately obtained the following agreements from Amerivision: a Billing Services Agreement; a Supplemental Advance Purchase Agreement; and a Security Agreement. SR I at Atts. 29-31. These agreements were apparently executed by Joseph Mancuso for DLD and Carl Thompson on behalf of Amerivision on or about June 26, 1997. The first two Agreements refer to DLD as a "reseller of long distance telecommunications services." In these Agreements, Amerivision contracts to provide billing and "collection services" and other support services "to such reseller." Id.
Staff reports on the details of this arrangement, wherein Amerivision apparently was to receive DLD call detail records (CDRs) from WorldCom, rate them, and pass them on to the LECs through Amerivision's billing aggregators.42 Wholesale invoices were sent to Christopher Mancuso, who, in turn, approved payments to WorldCom, and directed that the balance be remitted back to his company, Communications Consulting Inc. (CCI). Id. at § XII(A). Staff also presents evidence that the accounts and customers formerly served by DLD were later transferred to Clear World under the same account numbers. SR I at § IX, SR III at
§ VI. Staff references a 1999 contract between Clear World and WorldCom, signed by James Mancuso, which provides:
Customer assumes responsibility for all services provided by MCI Worldcom to Customer (or Discount Long Distance, its predecessor-in-interest) under account numbers 112904, 182806, 186317, and 178522, and agrees to be liable for all charges relating to services provided under such accounts.
SR I at Att. 5 (emphasis added).
Clear World's principals and the Director of Sales for WorldCom have claimed that DLD was only an agent for Amerivision, similar to the Mancusos' claim that Worldwide was only an agent of WorldTel. SR I at §§ VIII, XII(A); D.03-02-066, Mimeo at 11-12; compare Mimeo at 25-26. Staff was unable to find any documentary evidence supporting DLD's claim in this regard, and instead presents a number of documents indicating that all involved considered DLD to be a principal, not an agent of Amerivision. SR at § VIII. If DLD was a principal, it was illegally selling long distance service without Commission authority to do so.
3. Mancusos' Unlicensed Sale of Long Distance Service through another Company, Worldwide Telecommunications Corporation.
Staff alleges that another unlicensed Mancuso affiliate, Worldwide, used the tariffs and certifications of a licensed carrier, WorldTel Services Inc. ("WorldTel") to provide telephone service to California customers. The Mancusos have claimed that Worldwide's "sole activities" were as an agent of WorldTel (D.03-02-066, Mimeo at 11-12) but Staff reports that the alleged principal, WorldTel, no longer existed for at least part of the time Worldwide was purporting to be its agent. SR I at § XI.
The Commission concluded in D.03-02-066 that it did "not believe that Worldwide's initial or amended agreements with [WorldTel] were valid agency agreements." Mimeo at 11. Staff believes that the Commission can now make a stronger finding, that there was no agency relationship at all, and that the Mancusos' assertions to the contrary were materially misleading.43
B. New Evidence of Christopher Mancuso's Significant Control44 Over the Mancuso Utilities, Including DLD and Clear World.
While our Decision 03-02-066 addressed the issue of Christopher Mancuso's future role in Clear World, questions about the scope of his past role in, and control over, DLD, Clear World, and Worldwide remain relevant to whether James and Michael Mancuso misrepresented facts to this Commission.
Staff contends that newly discovered evidence shows a pattern of deceit and fraud in Christopher Mancuso's businesses from Culture Farms to Clear World. Culture Farms aka Cleopatra's Secret was a Ponzi scheme for which Christopher Mancuso went to prison. D.03-02-066, Findings of Fact 14-15. Clear World is a utility licensed by this Commission. Staff contends that the intermediate stops on this trajectory were National Telephone Communications, Inc. (NTC), which Mancuso formed in 1988 shortly after getting out of prison, and DLD, which Mancuso appears to have formed after he sold his interest in NTC. SR I at §§ III(A), IV(D), Appendix D (timeline). Staff suggests that DLD remained unlicensed because Christopher anticipated problems licensing a utility that was largely run by a felon. Id.
at §§ XII, XII(A), XIV. Staff reports that when DLD's relationship with Amerivision disintegrated in 1998, Christopher formed both Clear World and Worldwide. Id. at § XII. Staff maintains that the evidence shows Christopher Mancuso exercised significant (if not primary) control over the entities NTC, DLD, Clear World and Worldwide, and that James and Michael Mancuso participated in the operation of DLD and Worldwide, and were aware of Christopher's role in all these entities. Id.
To the extent that the NTC and DLD business model carried over to Clear World, and Christopher was at any time an undisclosed principal in Clear World, it makes Clear World's Applications to this Commission, as well as James and Michael Mancuso's subsequent representations and testimony to the Commission, false and misleading. We therefore direct that further investigation be made to resolve Staff's allegations regarding Christopher's role in DLD and Clear World.
We believe the new evidence in Staff's Reports also compels a second look at Christopher's role in Worldwide, as that appears to have been an integral part of the Mancuso family business and the subject of contradictory statements by brothers James and Michael. Indeed, James Mancuso signed a sworn Declaration in a California Superior Court case that "Worldwide was formed by myself, with the assistance of my brother Chris Mancuso,"45 yet later effectively denied any significant involvement of Christopher in the company. SR I at §§ XIV(A) and (C)(1).
C. New Evidence Showing Failure to Pay Required Surcharges and Usage Fees.
Telecommunications utilities in California are required to pay user fees and surcharges to support various public interest programs. See, e.g., P.U. Code §§ 405, 739.3, 879, 879.5 and 2881; SR III at § III. Staff's investigation into the operations of DLD and Clear World uncovered evidence suggesting these companies may have underpaid such fees and surcharges. Id. Staff concedes that evidence of such underpayments is not conclusive. We therefore order Clear World and its management to show that it, and its related companies, DLD and Worldwide, have, in fact, paid all required surcharges and fees, and to provide such backup materials as Staff may need to complete its analysis.
D. New Evidence of Failure to Retain and Produce Documents, and Cooperate with Staff.
Staff asserts that evidence obtained from third parties demonstrates that Clear World's failure to retain and produce evidence was more extensive than documented in our Decision 03-02-066 (see Findings of Fact 97-112). The newly discovered documents described above (and attached to the Staff Reports) were obtained almost exclusively from companies other than Clear World. Staff asserts that Clear World and its management have been unable or unwilling to provide meaningful documentation on key corporate issues, including: (a) Clear World's relationship to, and purchase of assets from, DLD/AEC;46 (b) Clear World's relationship with, and sale of long distance minutes to, Worldwide; and (c) Clear World's relationship to Christopher Mancuso and other entities affiliated with him. SR I at § XVII. On these issues, Staff claims that it has attempted to "follow the money" and otherwise discover the most reliable evidence of what Clear World's affiliations were, and has been frustrated in that effort. Id.
Staff reports that its attempts to obtain documents from Clear World began on December 7, 2001 and have continued through this year, when Staff unsuccessfully requested that James and Michael Mancuso appear with documents for an examination under oath pursuant to P.U. Code § 314.
41 The relationships between and among utilities WorldCom, NTC, Amerivision and DLD are illustrated on the chart attached to SR I as Appendix A; see also Appendices B (index of entities), C (index of persons), and D (timeline); and SR III at Appendix A, and Attachments
S-BB (corporate documents).
at 15
46 Clear World produced the Asset Purchase Agreement itself, but no documentation of what those assets were, or what contracts Clear World was succeeding to, etc. CPSD also asked Clear World for all DLD contracts with Amerivision. Clear World states it no longer has these. The purchase and sale agreement requires Clear World to provide written notification to AEC/DLD of its intent to destroy any AEC/DLD documents. SR I, Att. 9. CPSD then requested that Clear World provide any such written notifications and none was produced. Id., Att. 80 (Request 30, Nov. 13, 2003).
