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C. 20554 DA 95-1834 In the Matter of) ) File No. ENF 95-14 INTERSTATE SAVINGS, INC. d/b/a ) ISI TELECOMMUNICATIONS ) NAL/Acct. No. 516EF0004 ) Apparent Liability for Forfeiture) NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: August 18, 1995; Released: August 18, 1995 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Interstate Savings, Inc. d/b/a ISI Telecommunications ("ISI"). For the reasons discussed below, we find that ISI willfully violated Commission rules and orders by changing the primary interexchange carrier ("PIC") designated by Knicely & Cotorceanu, P.C. ("K&C") of Williamsburg, Virginia, without K&C's authorization. Based upon our review of the facts and circumstances surrounding the violations, we find that ISI is apparently liable for a forfeiture in the amount of forty thousand dollars ($40,000). II. BACKGROUND 2. In its Allocation Order and subsequent Reconsideration Order and Waiver Order, the Commission set forth rules and procedures for implementing equal access and customer presubscription to an interexchange carrier ("IXC"). The Commission's original allocation plan required IXCs to have on file a letter of agency ("LOA") signed by the customer before submitting PIC change orders to the local exchange carrier ("LEC") on behalf of the customer. After considering claims by certain IXCs that this requirement would stifle competition because consumers would not be inclined to execute the LOAs even though they agreed to change their PIC, the Commission later modified the requirement to allow IXCs to initiate PIC changes if they had "instituted steps to obtain signed LOAs." In 1992, the Commission again revised its rules because it continued to receive complaints about unauthorized PIC changes. Specifically, while the Commission recognized the benefits of permitting a telephone-based industry to rely on telemarketing to solicit new business, it required IXCs to institute one of the following four confirmation procedures before submitting PIC change orders generated by telemarketing: (1) obtain the consumer's written authorization; (2) obtain the consumer's electronic authorization by use of an 800 number; (3) have the consumer's oral authorization verified by an independent third party; or (4) send an information package, including a prepaid, returnable postcard, within three days of the consumer's request for a PIC change, and wait 14 days before submitting the consumer's order to the LEC, so that the consumer has sufficient time to return the postcard denying, cancelling or confirming the change order. Hence, the Commission's rules and orders require that IXCs either obtain a signed LOA or, in the case of telemarketing solicitations, complete one of the four telemarketing verification procedures before submitting PIC change requests to LECs on behalf of consumers. 3. Because of its continued concern over unauthorized PIC changes, the Commission recently prescribed the general form and content of the LOA used to authorize a change in a customer's primary long distance carrier. The Commission's recent rules prohibit the potentially deceptive or confusing practice of combining the LOA with promotional materials in the same document. The rules also prescribe the minimum information required to be included in the LOA and require that the LOA be written in clear and unambiguous language. The rules prohibit all "negative option" LOAs and require that LOAs and accompanying promotional materials contain complete translations if they employ more than one language. 4. On March 15, 1995, the Commission received a written complaint from James J. Knicely of K&C alleging that ISI had converted K&C's prescribed long distance service provider from AT&T Corporation ("AT&T") to ISI without K&C's authorization. The complaint contains a sworn affidavit from Marney S. Haven, office manager of K&C, in which Haven states, among other things, that the "ISI Savings Authorization" ("authorization form") forwarded to her by ISI as verification of K&C's order to switch carriers bears a forged signature. 5. Haven states that she was first contacted by Lee J. Gladney, a sales or marketing agent of ISI, on November 3, 1994. On or about November 28, 1994, at Gladney's request, Haven sent Gladney one of K&C's billing statements to enable Gladney to generate a proposal to provide long distance service. Gladney forwarded the proposal to Haven under a transmittal letter dated November 28, 1994. Haven informed Gladney that she would pass the long distance service proposal on to the partners of K&C for their consideration. 6. According to Haven, she had no further contact with Gladney until January 31, 1995, when Haven received a call from Gladney stating that his supervisor had authorized him to offer K&C a rate of $.12 per minute on long distance calls. Haven told Gladney she would relay the information to the partners of the firm. On February 15, 1995 Haven wrote a letter to each long distance company that had submitted a service proposal advising that no decision on their proposals had been made. 7. On February 22, 1995, Haven telephoned an AT&T operator to inquire about AT&T's international telephone service rates. Haven was informed by the operator that AT&T was no longer the prescribed long distance carrier for K&C. Haven then contacted Bell Atlantic-Virginia ("Bell Atlantic") and was advised that K&C's long distance carrier had been changed to WilTel, Inc. ("WilTel"). When Haven telephoned WilTel, she learned that ISI, a reseller of WilTel's long distance service, had submitted the PIC change request to Bell Atlantic that had led to ISI's designation as K&C's long distance carrier. Haven then called Kerry Holland of ISI about the service change. Holland transmitted to Haven by facsimile a copy of an LOA allegedly signed by Haven as verification of a K&C order authorizing the carrier change. The LOA purportedly bearing Haven's signature is attached to Haven's affidavit as Attachment D. 8. Haven maintains that she had never seen the authorization form before Holland sent it to her on February 22, 1995, and that the signature in the customer signature box is not hers. Haven further states that she never spoke to Gladney on January 26, 1995, the date the document was allegedly signed and that the rate information contained in the LOA did not reflect ISI's January 31, 1995 proposal. III. DISCUSSION 9. We have carefully evaluated the information submitted in connection with K&C's informal complaint and conclude that ISI is apparently liable for forfeiture for willful violation of the Commission's rules and PIC change requirements. We find ISI's apparent actions particularly egregious. It appears that on or about February 6, 1995, ISI submitted a PIC change request to Bell Atlantic, based on an apparently forged LOA, which resulted in the conversion of K&C's telephone service from AT&T to ISI. The statements and information provided by K&C leave virtually no doubt that the LOA was forged and that ISI lacked the requisite authorization to request a PIC change to K&C's long distance service. There is no similarity between the signature on Haven's sworn affidavit and her purported signature on the LOA form that ISI used as the basis for the PIC change submitted to Bell Atlantic. Under these circumstances, we conclude that ISI's apparent actions were in willful violation of the Commission's PIC change rules and orders and that a substantial forfeiture penalty is appropriate. 10. Section 503(b)(2)(B) of the Communications Act authorizes the Commission to assess a forfeiture of up to one hundred thousand dollars ($100,000) for each violation or each day of a continuing violation up to a statutory maximum of one million dollars ($1,000,000) for a single act or failure to act. In exercising such authority, the Commission is required to take into account "the nature, circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." For purposes of determining an appropriate forfeiture penalty in this case, we regard the conversion of K&C's telephone line as a single violation. After weighing the circumstances surrounding the violation, we find that ISI is apparently liable for a forfeiture of forty thousand dollars ($40,000) for the unauthorized conversion of the K&C line. ISI will have the opportunity to submit evidence and arguments in response to this NAL to show that no forfeiture should be imposed or that some lesser amount should be assessed. In this regard, we note that the Commission has previously held that a licensee's gross revenues are the best indicator of its ability to pay a forfeiture and that use of gross revenues to determine a party's ability to pay is reasonable, appropriate, and a useful yardstick in helping to analyze a company's financial condition for forfeiture purposes. We will give full consideration to any financial information provided by ISI before assessing a final forfeiture amount. IV. CONCLUSIONS AND ORDERING CLAUSES 11. We have carefully reviewed the information submitted in connection with Knicely & Cotorceanu, P.C.'s informal complaint and conclude that on or about February 6, 1995, ISI apparently converted or caused a local exchange carrier to convert K&C's telephone line without K&C's authorization through the use of an apparently forged LOA. We further conclude that ISI thereby willfully violated Commission rules governing primary interexchange carrier conversions, and that its conduct warrants a forfeiture in the amount of forty thousand dollars ($40,000). 12. Accordingly, IT IS ORDERED, pursuant to Section 503(b) of Communications Act of 1934, as amended, 47 U.S.C.  503(b), and Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, that Interstate Savings, Inc. d/b/a ISI Telecommunications IS HEREBY NOTIFIED of an Apparent Liability for Forfeiture in the amount of forty thousand dollars ($40,000) for its willful violation of the Commission's PIC change rules and orders, 47 C.F.R.  64.1100; PIC Change Order, 7 FCC Rcd 1038 (1992); Allocation Order, 101 FCC 2d 911 (1985); Waiver Order, 101 FCC 2d 935 (1985). 13. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, that within thirty days of the release of this Notice, Interstate Savings, Inc. d/b/a ISI Telecommunications SHALL PAY the full amount of the proposed forfeiture OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or should be reduced. 14. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture SHALL BE SENT by certified mail to Matthew Freedman, President of Interstate Savings, Inc. d/b/a ISI Telecommunications 1015 18th Street, N.W. - Suite 505, Washington, D.C. 20036. FEDERAL COMMUNICATIONS COMMISSION Kathleen M.H. Wallman Chief, Common Carrier Bureau