IV. Discussion

A. Operating Authority

The OII suspended respondents' operating authority for failure to pay the Commission mandated fees and surcharges. The evidence of illegal conduct and slamming of hundreds of customers warrants permanent revocation of respondents' operating authority and we do so here. Although Miko, after we issued the OII, requested its operating authority be canceled and stated it does not intend to resume business in the future, we also address the possibility of future operations in the event Miko changes its plans. If Miko or Margaret Currie make any future applications for a CPCN, they must address the violations found here, indicate whether they have complied with this decision by fully paying the fines and sanctions imposed herein, and otherwise offer evidence of rehabilitation and fitness; such an application must specifically reference this decision.

In response to the ALJ's questions at the hearing, CPSD's witness stated that, to his knowledge, the Commission does not have written guidelines or procedures for notifying interested parties of when an interexchange carrier's operating authority is revoked. In its brief, CPSD recommends that the Telecommunications Division be immediately notified of the final decision in this case and directed to:

(1) not grant a future CPCN to respondents unless they have paid the fines and complied with the sanctions in this case;

(2) notify CPSD staff if and when a future application is filed so that CPSD can review the application and protest if necessary;

(3) immediately inform all LECs and billing agents that the respondents operating authority has been revoked and remind them to regularly check Telecommunications Division's publicly accessible carrier database to ensure that companies with which they do business have valid operating authority.

We find that the above recommendations are reasonable and will assist in protecting California consumers from further illegal operations by respondents or other unlicensed companies. We therefore adopt them.

B. Uncollected Fees and Surcharges

The evidence substantiates the amount of fees and surcharges owed to the Commission. We therefore order the respondents to pay $27,383 for 2002 and $54,019 for 2003.

C. Penalties

The evidence presented by CPSD is clear and convincing and sustains the allegations in the OII that respondents violated:

· Section 405 by failing, refusing, or neglecting to pay surcharges and fees required by D.01-09-038 (Appendix A);

· Section 702 by failing to pay surcharges and fees required by a Commission decision, and by violating a Commission directive by continuing to operate without valid operating authority;

· Section 1013(a) by operating without a certificate of public convenience and necessity;

· Rule 1 by providing false information to the Commission that Miko did not begin operations in California until January of 2003, when in fact Miko began operating in California in May of 2002; and

· Section 2889.5(a) by failing to establish whether the subscriber intends to make any change to the subscriber's telephone service and to explain any charges associated with that change, i.e., (slamming).

There are three statutes that address penalties for the above violations. First, Section 405 provides for a penalty not to exceed 25% of unpaid regulatory fees for failure to submit to the Commission regulatory fees for a period of 30 days or more. For violations that do not carry specific sanctions, Section 2107 provides for a penalty of not less than $500 nor more than $20,000 per violation. Lastly, Section 2108 can be used in conjunction with Section 2107 to allow the Commission to treat each day's continuance of a violation as a separate and distinct offense.

Under the penalty provisions of Sections 405, 2107 and 2108, CPSD recommends the Commission assess a nominal monetary penalty of $10,000 based on the amount of financial harm to consumers and the State of California, the fact that Miko is insolvent, and the fact that in CPSD's investigation it was unable to identify any tangible assets owned by either Miko or Margaret Currie. CPSD states it does not object to a higher penalty amount if the Commission deems it necessary and that respondents should be on notice that in any case where a party fails to abide with a Commission decision, the Commission has the discretion, pursuant to Section 2104, to pursue recovery of fine amounts imposed by the Commission.

We consider first the penalty provision of Section 405. This statute provides its own level of penalties for nonpayment of regulatory fees and surcharges and respondents have flagrantly violated it. Therefore, we assess a penalty of $20,350 under Section 405.

Next, we consider penalties under Section 2107 and 2108. For violations under these statutes, as the Commission has stated before, "The primary purpose of imposing fines is to prevent future violations by the wrongdoer and to deter others from engaging in similar violations. Fines should, therefore, be set at a level within the range permitted by Section 2107 that is sufficient to achieve the objective of deterrence without being excessive in light of the offending utility's financial resources." (See D.01-08-058, mimeo. at 80 and D.04-09-062, mimeo. at 62.)

In determining the amount of a fine , we look to the criteria we established in D.98-12-075, Appendix A. (84 CPUC2d at 188-190.) That decision stated that the purpose of a fine is to effectively deter further violations by the perpetrator or others and sets the following criteria for consideration:

The severity of the economic or physical harm;

The utility's conduct to prevent, detect, disclose, and rectify the violation;

The utility's financial resources;

The public interest involved;

The totality of the circumstances; and

Commission precedents.

In his testimony, CPSD's witness states that he reviewed 41 of the 216 written complaints received by the Commission's Consumer Affairs Branch. All, or at least most, of these complaints included a response from Miko's Regulatory Affairs Department indicating that Miko had what it considered a valid Third-Party Verification record, but despite this Miko would issue a credit to the customer in order to satisfy the customer and resolve the dispute at hand. CPSD testified that while it did not contact any of these customers to verify that Miko had, in fact, issued a credit, it assumed from Miko's response that the customers had received appropriate restitution. Based on this evidence, we cannot make a finding that customers are owed any further restitution.

In looking at Commission precedents, D.98-12-075 directs that we address previous decisions that involve reasonably comparable factual circumstances and explain any substantial differences in outcome. Most penalty cases for telecommunications companies are not comparable as they involve companies much larger than Miko, with substantial resources and an evidentiary record of having engaged in more numerous violations.

A case that is somewhat comparable is D.03-01-079. In this decision, the Commission, after issuing an OII and holding evidentiary hearings, revoked Titan Telecommunications, Inc.'s (Titan) operating authority as an interexchange carrier and fined Titan $35,000. The Commission did so after finding that Titan and Christopher Bucci, its sole shareholder and president, violated Rule 1 by misleading the Commission in Titan's 1999 application for a CPCN. In D.03-01-079, the Commission made a specific finding that it was reasonable to assess a relatively low fine in light of Titan's limited ability to pay a fine.

Under the criteria established in D.98-12-075, we find that the economic harm to customers is at least equal to the regulatory harm that we have fined respondents $20,350 for under Section 405. Recognizing (1) CPSD's testimony that customers had received appropriate restitution, (2) Miko having re-applied and obtained operating authority from the Commission, and (3) Miko's current insolvency and the lack of identifiable assets for either respondent, we should assess a relatively low fine. Therefore, we find that a penalty of $25,000 for violations under Sections 2107 and 2108 is reasonable and we adopt it. The $45,350 in fines we levy against Miko is in a comparable range to the fine established in Titan.

The respondents shall pay penalties of $45,350 to the State of California's General Fund within 45 days after the date this decision is mailed to the service list. Proof of payment shall be filed and served on the service list and shall be provided to the Executive Director within five days of payment.