ALJ/MAB/MOD-POD/hkr _ Mailed 4/23/2001
Decision 01-04-035 April 19, 2001
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Investigation on the Commission's own motion into the operations, practices, and conduct of Coral Communications, Inc. (Coral) and Michael Tinari, President of Coral; William Gallo, Senior Vice President of Coral; Devon Porcella, Vice President of Sales and Operations of Coral; Neal Deleo, Vice President Finance and MIS of Coral to determine whether the corporation or its principals have operated within California without having a certificate to operate from the Commission and whether they have charged California subscribers for telecommunications services the subscribers never authorized. |
Investigation 98-08-004 (Filed August 6, 1998) |
O P I N I O N
Dennis L. Kennelly, Attorney at Law, for Coral Communications, Inc., Florida Coral Communications, Thomas J. MacBride, Jr. and Jeffrey P. Gray, Attorneys at Law, Goodin, MacBride, Squeri, Ritchie & Day, for Easy Access International, Inc., Edward Tinari, and Celestine Spoden; Patrick Christoff, Attorney at Law, Law Office of John Benedict, for Telephone Billing Service, Inc.; Martin A. Mattes, Attorney at Law, Nossaman Guthner Knox & Elliott, LLP, for OAN Services, Inc.; Steven Rosenthal, Attorney at Law, for OAN Service, Inc., Denise Tso; David Crocker and Lawrence M. Brenton, Attorneys at Law, Early Lennon Peters & Crocker P.C., for Accutel; respondents.
Monica L. McCrary, Attorney at Law, for Consumer Services Division.
TABLE OF CONTENTS
Title Page
OPINION 2
I. Summary 2
II. Procedural Background 2
III. Factual Background 5
A. How Unauthorized Charges Are Placed on Customers' Bills 5
B. LEC Billing for Long Distance Carriers 6
C. The Advent of Billing Agents 7
D. Commission Authority Over Billing Agents 8
E. Use of Multiple Billing Agents and Factors 9
IV. Description of Coral's Activities 10
A. Coral's Business Practices 10
B. Coral's Billing Agents and Factors 14
C. Coral's Relationship with Easy Access 20
V. Discussion 22
A. The Validity of Coral's "Authorizations" 23
B. Obtaining Reparations from Coral 27
C. Authority Over Accutel, TBS, and OAN 28
D. Authority to Order Billing Agents to Turn Over Funds 29
E. Regaining Funds in the Possession of Billing Agents 33
1. Contractual Provisions 35
2. Funds Retained in Payment of Fees 36
a) Which Billing Agents are Assignees and Which are Agents? 36
b) Funds in the Possession of Assignees 39
c) Funds in the Possession of Agents 48
d) Amounts to be Returned 51
e) OAN's Legal and Equitable Arguments 51
F. Reparations Plans 54
G. Penalties 54
H. Disclosure Requirements 56
I. Jurisdiction Over Easy Access and the Individual Respondents 57
1. Did Easy Access Acquire Control of Coral? 57
2. Did Easy Access Act as Coral's Alter Ego? 60
3. Did the Individual Respondents Act as Coral's Alter Ego? 63
J. Further Efforts to Return Funds to Customers 64
K. Need for Further Proceedings 65
Findings of Fact 68
Conclusions of Law 74
ORDER 80
Attachment 1
I. Summary
In this decision we find that Coral Communications, Inc. (Coral) has engaged in an illegal practice known as "cramming." Specifically, Coral placed nearly $6 million of unauthorized charges on the local telephone bills of over 250,000 Californians. Coral based these charges on sweepstakes entry forms that contained purported authorizations in the fine print. To get the billings on the local telephone bills, Coral used multiple levels of billing intermediaries between itself and the local exchange carrier (LEC) that actually billed the customer. Coral also converted the billings to cash by selling its accounts receivable to financing firms called "factors." The LECs, billing intermediaries, and factors all retained portions of the improperly-billed amounts for their fees and charges, as well as reserves for customer refunds. By this decision, we order full refunds of all charges assessed by Coral. Unfortunately, Coral is allegedly defunct and insolvent. In order to make as complete a refund as possible to customers, we order the billing intermediaries and factors to disgorge all funds retained from Coral billings. We also order the Commission's General Counsel to take all reasonable steps to secure Coral assets for reparations to Coral's California victims.
