NOTICE ***************************************************************** ******** NOTICE ***************************************************************** ******** This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D. C. 20554 In the Matter of ) ) File No. ENF-95-18 Heartline Communications, Inc. ) ) NAL/Acct. No. 516EF0007 Apparent Liability for Forfeiture ) NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: June 20, 1996; Released: June 20, 1996 By the Commission: I. INTRODUCTION 1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Heartline Communications, Inc. (Heartline). For the reasons discussed below, we find that Heartline apparently willfully or repeatedly violated Commission rules and orders by changing the primary interexchange carriers ("PICs") designated by the complainants identified below without their authorization. Based upon our review of the facts and circumstances surrounding the violations, we find that Heartline is apparently liable for a forfeiture in the amount of two hundred thousand dollars ($200,000). 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 currently 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 contents of 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 be completely translated if they employ more than one language. III. THE COMPLAINTS 4. This forfeiture action is based on the staff's investigation of five consumer complaints involving allegations of slamming by Heartline that were filed with the Commission between August 10 and September 21, 1995. Each of the complainants allege that Heartline converted their long distance service provider without their authorization through the apparent use of falsified or forged LOAs. In each case, the LOAs were apparently submitted to Heartline by one of its several sales and marketing agents. We describe each of the complaints and Heartline's responses to them below. A. John C. Best 5. In July 1995, Millennium Telecom, an independent agent of Heartline, apparently sent Heartline an order to switch the PIC of John C. Best, of San Diego, California, from AT&T, his presubscribed long distance service provider, to Heartline. Heartline states that the PIC change was submitted to Pacific Bell on July 11, 1995, apparently on the basis of Millennium Telecom's representation that it had obtained the necessary authorization. Upon learning of the switch, Best contacted Heartline by telephone on August 7, 1995 and denied authorizing any change to his PIC. In response, Heartline sent to Best a copy of the LOA upon which it had relied to request the PIC change. Best examined the signature on the LOA, which was dated May 7, 1995, and determined that it was a forgery. He then sent a copy of his driver's license to Heartline as evidence that the signatures on the LOA and the driver's license did not match. On August 28, 1995, Best filed his complaint with the Commission, and included a copy of the allegedly forged LOA and a copy of his driver's license showing his signature as evidence to support his allegations. Best also noted in his complaint that his street address is misspelled on the LOA. The Common Carrier Bureau's Consumer Protection Branch served the complaint on Heartline and directed it to satisfy Best's complaint or explain why it was unable to do so. B. Mohammad Farooq 6. In July 1995, Millennium Telefonica, also an independent agent of Heartline, apparently sent Heartline an order to switch the PIC of Mohammad Farooq, of Glendale, California, from AT&T, his presubscribed long distance service provider, to Heartline. Heartline states that it submitted the PIC change to Pacific Bell, apparently on the basis of Millennium Telefonica's representation that it had obtained the necessary authorization, and Farooq was switched from his preferred carrier to Heartline on July 17, 1995. Upon learning of the switch, Farooq contacted Heartline on August 18, 1995 and denied authorizing any change to his PIC. In response, Heartline sent to Farooq a copy of the LOA upon which Heartline had relied to request the PIC change. Farooq compared the signature on the LOA, which was dated May 7, 1995, with his signature on his California driver's license, and determined that the signature on the purported LOA was a forgery. On August 28, 1995, Farooq filed his complaint with the Commission, and included a copy of the allegedly forged LOA, a copy of his driver's license, and copies of his long distance phone bills from both AT&T and Heartline as evidence to support his allegations. The Consumer Protection Branch served the complaint on Heartline and directed it to satisfy Farooq's complaint or explain why it was unable to do so. C. Joyce H. Park 7. In or around July 1995, Tropic Tel, another independent agent of Heartline, apparently sent Heartline an order to switch the PIC of Joyce H. Park, of Northridge, California, from AT&T, her presubscribed long distance service provider, to Heartline. Heartline states that it submitted the PIC-change order on the basis of a representation from Tropic Tel that it had obtained the necessary authorization to switch Park, and she was switched from her preferred carrier on August 1, 1995. Upon learning of the switch, Park contacted Heartline on August 8, 1995 and denied authorizing any change to her PIC. In response, Heartline sent to Park a copy of the LOA upon which it had relied to request the PIC change. Park examined the signature on the LOA, which was dated July 13, 1995, and determined that the signature on the purported LOA was a forgery. Park filed her complaint, dated August 8, 1995, with the Commission, and included a copy of the allegedly forged LOA, a copy of her California driver's license, and copies of her long distance phone bills as evidence to support her allegations. The Consumer Protection Branch served the complaint on Heartline and directed it to satisfy Park's complaint or explain why it was unable to do so. D. Natalie L. Finley 8. In or around June 1995, Tropic Tel apparently sent Heartline an order to switch the PIC of Natalie L. Finley, of La Mesa, California, from Sprint, Finley's presubscribed long distance service provider, to Heartline. Heartline submitted the PIC change to Pacific Bell, which switched Finley to Heartline on July 6, 1995. Finley contacted Heartline on August 17, 1995 and denied authorizing any change in her PIC. In response, Heartline sent to Finley a copy of the LOA upon which Heartline relied to make the switch. The copy of the LOA provided by Heartline was dated May 8, no year, and bore the name and purported signature of Torlorf Finley, whom Heartline believes to be Finley's husband. Upon comparing the signature on the LOA with Torlorf Finley's Alabama driver's license and Armed Forces ID card, Finley determined that the signature on the LOA was an apparent forgery. On September 18, 1995, Finley mailed her complaint to the Commission, and included a copy of the allegedly forged LOA and copies of Torlorf Finley's driver's license and military ID card as evidence to support her allegations. The Consumer Protection Branch served the complaint on Heartline and directed it to satisfy Finley's complaint or explain why it was unable to do so. E. Colleen Carranza 9. In or around June 1995, Tropic Tel apparently sent Heartline another PIC-change order, this time to switch the PIC of Colleen Carranza, of San Diego, California, from her presubscribed long distance service provider to Heartline. Heartline submitted the PIC change to Pacific Bell, which switched Carranza to Heartline on June 27, 1995. Carranza contacted Heartline on June 29, 1995 and denied authorizing any change in her PIC. In response, Heartline sent to Carranza a copy of the LOA, dated May 15, 1995, upon which Heartline relied to make the switch. Carranza states in her complaint to the Commission, dated August 2, 1995, that the signature on the LOA is not hers. The Consumer Protection Branch served the complaint on Heartline and directed it to satisfy Carranza's complaint or explain why it is unable to do so. IV. HEARTLINE'S RESPONSES 10. In each case, Heartline responded to the Commission's Notice of Informal Complaint (NOIC) with what appears to be a form letter that had case-specific information inserted at various points. In each of these letters, Heartline states that it used a marketing agent to obtain the LOAs that it relied upon to switch the complainants' long distance service. Heartline explains in each case that the marketing agents solicited new customers by using an LOA that was combined with a sweepstakes entry form that asked for the entrant's name, address, telephone number, and signature. Further, Heartline uniformly states that it has refunded usage charges billed to the complainants in excess of the rates charged by each complainant's preferred long distance carrier, that the LEC has refunded charges for switching long distance carrirers, and that the complainants, except Farooq, have been switched back to their carriers of choice. Heartline, however, neither denies that the signatures do not match those provided by the complainants nor disputes the complainants' allegations that the signatures on the LOAs are forgeries. V. DISCUSSION 11. We have evaluated the information obtained as a result of the staff's investigation and based on the foregoing, we conclude that Heartline has apparently willfully or repeatedly violated the Commission's rules and orders regarding PIC-change requirements. We find Heartline's actions particularly egregious. It appears that Heartline submitted PIC-change requests to various LECs based on apparently forged or falsified LOAs from a variety of its sales agents that resulted in the unauthorized conversion of these five complainants' long distance telephone service from the complainants' preferred long distance carrier to Heartline. The statements and information provided by the complainants leave virtually no doubt that the LOAs were not executed by the complainants and that Heartline lacked the requisite authorization to request a PIC change to their long distance service. In addition to the apparent forged signatures, we note that three of the LOAs contain other discrepancies. Best's street address is misspelled and Carranza's address is completely incorrect. Moreover, Farooq's name is misspelled and the signature on the LOA is his full name, while his signature on his letter and his California drivers license is a stylized version of his last name only. 12. Heartline has provided no evidence or information to counter the complainants' claims that the LOAs were forged or their claims that they did not otherwise authorize the PIC changes. There is little similarity between the signatures provided by the complainants and their purported signatures on the LOAs. In any event, Heartline has not contested any of the claims that the signatures on the LOAs do not match those provided by the complainants. Under these circumstances, we conclude that Heartline's apparent actions were in willful or repeated violation of the Commission's PIC-change rules and orders and that a substantial forfeiture penalty is appropriate. 13. We also note that with regard to PIC changes, the actions of Heartline's marketing agents do not relieve Heartline of its independent obligation to ensure compliance with our rules, nor do they otherwise mitigate Heartline's role in the apparent violations. The Communications Act deems the acts or omissions of an agent or other person acting for a common carrier to be the acts or omissions of the carrier itself. Hence, the Act expressly prohibits a carrier from evading the requirements of the Act or the Commission's rules or orders by hiring someone else to engage in conduct that contravenes these requirements. 14. As a general matter, the unauthorized conversion of a customer's presubscribed long distance carrier continues to be a wide-spread problem in the industry. We are particularly troubled by what appears to be a common practice by some IXCs of relying on unverified LOAs, which turn out to be falsified or forged, to effect changes in consumers' long distance service. The pervasiveness of the problem suggests that our current administration of the law has not produced sufficient deterrence to noncompliance and the carriers have little incentive to curtail practices that lead to consumer complaints. Furthermore, as a practical matter, the carriers' responses to alleged unauthorized conversion complaints rarely provide a detailed explanation or justifications of the carriers' actions. Therefore, to draw the industry's attention to the seriousness of the problem and to provide incentives to comply with the Commission's rules and orders, we intend to scrutinize consumer complaints and to take prompt enforcement action, including the imposition of substantial monetary fines, when the facts indicate that a carrier has failed to take the necessary steps to ensure that LOAs are valid and duly authorized. If carriers intend to rely on a LOA to request a PIC change, they will be responsible for ensuring its validity. 15. 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 each of the five complainants' telephone line as a single, separate violation. After weighing the circumstances surrounding each violation, we find that Heartline is apparently liable for a forfeiture of forty thousand dollars ($40,000) for the unauthorized conversion of each of the five complainants' long distance service, resulting in a total forfeiture of two hundred thousand dollars ($200,000). Heartline will have an 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 analyze a company's financial condition financial condition for forfeiture purposes. We will give full consideration to any financial information provided by Heartline before assessing a final forfeiture amount. VI. CONCLUSIONS AND ORDERING CLAUSES 16. We have carefully reviewed the information obtained through our investigation and conclude that during the period of June, July, and August, 1995, Heartline apparently converted or caused a local exchange carrier to convert the five complainants' telephone lines without their authorization. We further conclude that Heartline thereby apparently willfully or repeatedly violated Commission rules governing primary interexchange carrier conversions, and that its conduct warrants a forfeiture in the amount of two hundred thousand dollars ($200,000). 17. 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 Heartline Communications, Inc., IS HEREBY NOTIFIED of an Apparent Liability for Forfeiture in the amount of two hundred thousand dollars ($200,000) for its willful or repeated 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). 18. 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 NAL, Heartline 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. 19. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability SHALL BE SENT by certified mail to Joseph R. Harrott, Heartline Communications, Inc., P.O. Box 53029, Houston, Texas 77052-3029. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary