Sanctions
In D.98-12-075, the Commission developed principles that it would consider in setting the appropriate fine to impose in the enforcement of affiliate transaction rules. The principles developed in D.98-12-075 distill numerous Commission decisions concerning fines in a wide range of cases. Thus, we look to these principles in determining the level of fine.
Reparations should be distinguished from fines. Reparations are not fines and conceptually should not be included in setting the amount of a fine. Reparations are refunds of excessive or discriminatory amounts collected by a public utility. (Section 734.) The purpose of reparations is to return unlawfully collected funds to the victim. Accordingly, the statute requires that all reparation amounts be paid to the victims.
Reparations
The record developed in this proceeding indicates that consumers that may have been slammed or crammed by Accutel have received credits and been made whole.
Fines
The purpose of a fine is to go beyond reparation to the victim and to effectively deter further violations by this perpetrator or others. For this reason, fines are paid to the State of California, rather than to victims.
Effective deterrence creates an incentive for public utilities to avoid violations. Deterrence is particularly important against violations which could result in public harm, and particularly against those where severe consequences could result. The two general factors used by the Commission in setting fines are (1) severity of the offense and (2) conduct of the utility. Fines should be set in proportion to the violation.
The severity of the offense includes several considerations. Economic harm reflects the expense that was imposed upon the victims as well as any unlawful benefits gained by the public utility. Generally, the greater of these two amounts will be used in establishing the fine. Compliance with Commission directives is required of all California public utilities:
"Every public utility shall obey and comply with every order, decision, direction, or rule made or prescribed by the commission in the matters specified in this part, or any other matter in any way relating to or affecting its business as a public utility, and shall do everything necessary or proper to secure compliance therewith by all of its officers, agents, and employees." (Section 702.)
Such compliance is absolutely necessary to the proper functioning of the regulatory process. For this reason, disregarding a statutory or Commission directive, regardless of the effects on the public, is considered a severe offense.
D.98-12-075 also stated that the number of the violations is a factor in determining the severity. A series of temporally distinct violations can suggest an on-going compliance deficiency that the public utility should have addressed after the first instance. Similarly, a widespread violation that affects a large number of consumers is a more severe offense than one that is limited in scope. For a "continuing offense," § 2108 counts each day as a separate offense.
D.98-12-075 also recognized the important role of the public utility's conduct in (1) preventing the violation, (2) detecting the violation, and (3) disclosing and rectifying the violation. The public utility is responsible for the acts of all its officers, agents, and employees:
"In construing and enforcing the provisions of this part relating to penalties, the act, omission, or failure of any officer, agent, or employee of any public utility, acting within the scope of his [or her] official duties or employment, shall in every case be the act, omission, or failure of such public utility." (Section 2109.)
D.98-12-075 also weighs the utility's actions to prevent a violation. Prudent practice requires that all public utilities take reasonable steps to ensure compliance with Commission directives. This includes becoming familiar with applicable laws and regulations, and most critically, reviewing its own operations regularly to ensure full compliance. In evaluating the utility's advance efforts to ensure compliance, the Commission will consider the utility's past record of compliance with Commission directives.
The utility's actions to detect a violation are also a factor. The Commission expects public utilities to monitor diligently their activities. Where utilities have for whatever reason failed to meet this standard, the Commission will continue to hold the utility responsible for its actions. Deliberate, as opposed to inadvertent, wrongdoing will be considered an aggravating factor. The Commission will also look at management's conduct during the period in which the violation occurred to ascertain the level and extent of involvement in or tolerance of the offense by management personnel.
Prompt reporting of violations furthers the public interest by allowing for expeditious correction. For this reason, steps taken by a public utility to promptly and cooperatively report and correct violations may be considered in assessing any fine.
The financial resources of the utility are another factor. Effective deterrence also requires that the Commission recognize the financial resources of the public utility in setting a fine that balances the need for deterrence with the constitutional limitations on excessive fines. Some California utilities are among the largest corporations in the United States and others are extremely modest, one-person operations. The Commission intends to adjust fine levels to achieve the objective of deterrence, without becoming excessive, based on each utility's financial resources.
The Commission will also apply a totality of the circumstances test in furtherance of the public interest. Setting a fine at a level that effectively deters further unlawful conduct by the subject utility and others requires that the Commission specifically tailor the package of sanctions, including any fine, to the unique facts of the case. The Commission will review facts that tend to mitigate the degree of wrongdoing as well as any facts that exacerbate the wrongdoing. In all cases, the harm will be evaluated from the perspective of the public interest.
We now apply these principles to the case at bar. Accutel has violated § 451 by imposing on consumers' phone bills a monthly charge for a calling card not authorized by consumers. The record shows that Accutel took steps to rectify the root cause of the improper charges. Further, Accutel took steps to reimburse consumers for erroneous charges. However, although the record does not support a finding that Accutel intended to defraud consumers, Accutel actions do reflect some level of negligence. For example, Accutel could have taken more precautions to verify the validity of consumer lists and could have better supervised work contracted out to third-party vendors.
Applying a totality of the circumstances test in furtherance of the public interest, we shall set a fine at a level that takes into account Accutel's actions and responses. In this case, Accutel has made explicit admissions that it caused some consumers to be crammed or slammed. Accutel also took remedial steps to resolved incidents of slamming and cramming. Taking into account the unique facts of the case, we impose, pursuant to § 2107, a fine of $20,000. We will direct the Commission's General Counsel to take all reasonable steps to collect this fine. All fines collected will be deposited in the State's General Fund. In the event Accutel fails to pay the imposed fine within 60 days of the effective date of this decision, we shall direct the Executive Director to issue an order suspending Accutel's Certificate of Public Convenience and Necessity and take all necessary steps to ensure that Accutel ceases doing business in California, including but not limited to, directing all California Local Exchange Carriers and Billing Agents to cease doing business with Accutel.
We also require Accutel to make a compliance filing, within 60 days of the effective date of this decision, with Telecommunications Division showing authority from the Secretary of State to do business in the State of California.
Finally, today's decision is narrowly tailored to resolve the issues set forth in the OII and is based on the specific facts developed at evidentiary hearing. Today's decision does not purport to resolve any issues concerning Accutel in other proceedings.
1. Accutel billed an uncertain number of California consumers for products or services not ordered or authorized by consumers.
2. Accutel switched without authorization the presubscribed long distance carrier of an uncertain number California consumers' pre-subscribed long-distance carrier.
3. Accutel has been negligent in its provision of telecommunication services.
4. Accutel's negligence warrants the imposition of a fine.
1. Accutel violated Pub. Util. Code § 451.
2. Accutel violated Pub. Util. Code § 2890.
3. Accutel violated Pub. Util. Code § 2889.5.
4. For reasons set forth in the foregoing opinion, Accutel should pay a penalty of $20,000.
IT IS ORDERED that:
1. The September 7, 1999 motion of Consumer Services Division is denied.
2. Accutel Communications, Inc., d.b.a. Florida Accutel Communications, Inc. (U-5865) (Accutel) shall pay a fine of $20,000.
3. Within 60 days of the effective date of this decision, Accutel shall make a compliance filing with Telecommunications Division showing authority from the Secretary of State to do business in the State of California.
4. The Commission's General Counsel shall take all reasonable steps to collect the fine imposed by this order. All fines collected will be deposited in the State's General Fund.
5. In the event Accutel fails to pay the fine imposed by Ordering Paragraph 1 within 60 days of the effective date of this decision, the Executive Director is directed to issue an order suspending Accutel's Certificate of Public Convenience and Necessity and take all necessary steps to ensure that Accutel ceases doing business in California, including but not limited to, directing all California local exchange carriers and billing agents to cease doing business with Accutel.
6. Accutel shall obey and comply with all laws and all orders and rules of the Commission.
7. This investigation is closed.
This order is effective today.
Dated , at San Francisco, California.
