IX. ROLE OF WORLDCOM, NTC, AMERIVISION, AND CERTAIN BILLING AGGREGATORS IN FACILITATING MANCUSOS' CONDUCT.

The Staff Report paints a disturbing picture of a telecommunications oversight system subverted by the apparent actions - intentional or unintentional -- of the utilities and other companies working with the Mancusos: NTC/Incomnet (U-5173, now operated as Ironwood Telecom LLC); Amerivision Communications (U-5244); MCI WorldCom (U-5011, U-5378, U-5253, U-5278), and several billing aggregators or agents. All of these entities appear to have participated in a scheme whereby the Mancusos could effectively operate a telephone company, DLD, without obtaining a license to do so from this Commission.

As suggested by D.03-02-066, and discussed above, it appears that the Mancusos were well aware that any entity run or owned by Christopher Mancuso would incur significant Commission scrutiny because of Christopher's previous conviction for mail fraud. It also appears that Amerivision shared this awareness, and that WorldCom was as well positioned to be aware of these facts as Amerivision. Id. at § XII(A). WorldCom's wholesale sales director admitted knowing since 1993 or 1995 that Christopher was a convicted felon. Id.

In order to develop a full factual record, the third party utilities and billing agents listed below will be made Respondents to this Investigation.

A. MCI WorldCom and the Mancusos.

WorldCom played a key role in facilitating the Mancusos' operations, although it was not alone. WorldCom and its affiliates did business with the Mancusos since at least 1992, when WilTel (with whom Robert Brejcha was then employed) entered into a contract with NTC. See Timeline at Appendix D to SR I. Staff reports that WorldCom's highest-ranking witness to date, wholesale sales director Robert Brejcha, claimed under oath first to have been unaware of DLD, and then to know only that DLD was an agent of Amerivision. SR I at § XII(A). He denied knowing that DLD was selling long-distance service on its own behalf to end users (Id. at § XVI(A)), but evidence attached to Staff's Reports suggests that WorldCom and Brejcha were well aware of DLD's sale of long distance service.⁵⁷

B. NTC

As described in Staff Report I, the NTC-Amerivision-DLD "consortium buying arrangement" continued at least until Clear World's inception on October 1, 1998.⁵⁸ NTC clearly played a key role in this arrangement, although NTC as such no longer exists. In 1999, NTC (re-named Incomnet after purchase by a holding company) filed for bankruptcy, and shortly thereafter as Incomnet applied to this Commission for permission to transfer its assets to a Colorado-based holding company that had invested in Incomnet, Ironwood Telecom LLC. (Application No. 00-04-047.) Ironwood/Incomnet's Application to transfer Incomnet's customer base to Ironwood was approved by Commission Decision No. 00-09-065. In that Decision, we memorialized Ironwood's representation to us that Incomnet would continue to operate as a telephone utility. Id. Staff, however, has been unable to find either: (a) Ironwood/Incomnet's officers, directors or any signs of its operation; or (b) any evidence that Ironwood or Incomnet had applied to this Commission to go out of business. SR I at § XVI(B). As Ironwood/Incomnet may still exist and be in possession of evidence related to the matters here at issue, we direct service of this OII on Ironwood as Respondent in this Investigation.

C. Amerivision

Although 1998 Amerivision documents indicate the company was involved in "hiding" DLD "from regulatory scrutiny" (SR I, Att. 32), Staff reports that Amerivision sought to sever its links with the Mancusos at that time, even though James Mancuso threatened to sue Amerivision for this. SR I at § XVI(C). Amerivision has cooperated in Staff's review and pre-investigation, and remains important for full development of the facts in this case. Id.

D. Billing Agents or Aggregators

Staff alleges that billing agents or aggregators play a key role in allowing the Mancusos to operate as an unlicensed telephone utility. Staff reports that the aggregators that historically serviced the Mancusos' telecommunications companies AEC/DLD, Worldwide, and Clear World - Hold Billing Services (HBS), ACI Billing Services Inc. (ACI), and Billing Concepts Inc. (BCI) (and BCI's former affiliates Zero Plus Dialing Inc. and USBI) -- have apparently all been consolidated into one holding company, BCI Acquisition LLC. SR I at § XVI(D).

The role of billing agents or aggregators, as described in this Commission's 2001 Coral Communications decision, is multifaceted: they are an interface between the smaller carrier and the LEC, arranging for the small carrier's rated calls to be formatted in a way acceptable to the LEC; they are a conduit for accounts receivable and for cash, passing ownership of the former from the carrier to the LECs, and forwarding the proceeds back to the carrier; sometimes they even act as "factors," purchasing the accounts receivable from the small carrier and providing instant discounted cash to the carrier. Investigation into ... Coral Communications, Inc., D.01-04-035, 2001 Cal. PUC LEXIS 289, at *10-11.⁵⁹ It is this latter role that provides a serious potential for abuse, allowing unscrupulous carrier/resellers to falsely obtain customer authorizations and thereby "generate accounts receivable to sell to factors before the end-use customers are even billed." Id. Once these customers are billed, "many of them unwittingly (or out of fear of losing their telephone service) pay the unauthorized charges." Id.

Staff reports that the Mancusos employed billing agents and aggregators throughout their telecommunications careers, beginning at the latest in 1994, both as an interface with the LECs and as factors to purchase DLD and Clear World's accounts receivables. SR I at § XVI(D); Appendix D (timeline). BCI Acquisition LLC and its subsidiaries BCI, ACI, and HBS are made parties Respondent in this Investigation in order to facilitate the fullest fact finding herein.