Reparations Policy

As discussed above, the Commission adopted a set of guidelines for consideration in setting penalties in D.98-12-075. Those guidelines also briefly addressed reparations. The guidelines noted that reparations are refunds of excessive or discriminatory amounts, and that the purpose of reparations is to return wrongfully collected funds to the victim. To clarify our policy on reparations, we will discuss the role that reparations play in Commission enforcement actions.

As a general matter, the Commission's priorities in enforcement proceedings, where violations of law or regulations have been established, as here, are to: (1) bring to an end any ongoing violations, (2) provide restitution to victims of the wrongdoing, and (3) deter future violations through the use of fines. Here, Pacific Bell and GTEC have ceased to provide billing and collection services to USP&C, so violations have ceased.

Our second objective, providing restitution to victims, has not been addressed in this proceeding to date. The record in this proceeding shows that from January 1998 to June 1999 USP&C served as the billing agent for $51.5 million worth of billings to California customers. As noted above, USP&C presented billings for service providers that conducted business under several different unregistered aliases, and that also used up to four different names for identical services, in violation of the Public Utilities Code. Of the total amount billed by USP&C during this period, $27 million (52%) was refunded at the customers' request. The remaining $24.5 million, however, was collected by USPC, and after USP&C extracted its fees, was forwarded to the service providers. This remaining amount, $24.5 million, represents the amount that has been unlawfully collected from California customers. We consider it of paramount importance to discharging our duty to protect the public that every opportunity at our disposal be used to attempt to recover these funds.

In its comments on the POD, CSD stated that if the Commission adopts CSD's recommended fine of $4 million, "disgorgement of consumer funds kept in reserve by USP&C is unnecessary." We disagree. A fine of $4 million (as recommended by CSD) paid to the General Fund of the State of California cannot render "unnecessary" refunds to the customers that paid $24.5 million in unauthorized charges. Moreover, a fine of $4 million against one participant in a group of perpetrators who absconded with $24.5 million substantially undermines our policy of deterring further such violations.

In sum, because USP&C's unlawful acts are no longer ongoing, we consider obtaining reparations for customers that paid unlawful charges to be our primary goal.¹² To that end, it is essential that USP&C disgorge any and all amounts obtained from California customers and held for any purpose. These amounts, and any additional sums that we might obtain from the service providers, must be returned to customers. We have considered above the need for a fine pursuant to our guidelines, and quite apart from the amounts needed for restitution.