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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) CCN, INC., ) CHURCH DISCOUNT GROUP, INC., ) DISCOUNT CALLING CARD, INC., ) DONATION LONG DISTANCE, INC., ) LONG DISTANCE SERVICES, INC., ) CC Docket No. 97-144 MONTHLY DISCOUNTS, INC., ) MONTHLY PHONE SERVICES, INC., and ) NAL/Acct. No. 816EF0003 PHONE CALLS, INC., ) ) ) Order to Show Cause and ) Notice of Opportunity for Hearing ) ORDER Adopted: April 21, 1998; Released: April 21, 1998 By the Commission: I. INTRODUCTION 1. In this Order, we revoke the operating authority of the above-captioned nondominant telephone companies (collectively, the "Fletcher Companies"), because they have repeatedly "slammed" long distance telephone subscribers and committed numerous other violations of the Communications Act of 1934, as amended ("the Act") and our rules. Commission staff has determined that each of the companies, all apparently owned and operated by Daniel Fletcher, ceased providing common carrier services in 1997 while the Commission staff was engaged in a massive investigation into their slamming practices. We take this revocation action today to ensure that none of the companies can resume common carrier operations and once again engage in slamming or other conduct that is harmful to consumers. As an additional measure, because the principals of these companies have ignored or evaded numerous requests by the Commission that they appear before the Commission and provide some explanation for their actions, we enjoin Daniel Fletcher and all other principals associated with the Fletcher Companies from providing any telephone services in the future without the prior consent and authorization of the Commission. In this order, we also assess forfeitures against the Fletcher Companies and their principals that total $5,681,500. We also deny the petition to intervene and motion to enlarge the issues of Atlas Communications, Ltd. and Billing Concepts, Inc. II. BACKGROUND 2. The Fletcher Companies are interexchange carriers ("IXCs") that currently provide, or have provided, resale interstate long distance telecommunications services to consumers in various states throughout the country as well as limited international service. On June 13, 1997, the Commission released its Order to Show Cause and Notice of Opportunity for Hearing, FCC 97-210 ("Show Cause Order") in this proceeding. The Show Cause Order ordered the Fletcher Companies to show cause why the operating authority of the Fletcher Companies should not be revoked and whether the principal or principals of the Fletcher Companies and the Fletcher Companies should not be ordered to cease and desist from any future provision of interstate common carrier services without the prior consent of the Commission. The facts and circumstances leading to the issuance of the Show Cause Order are recited therein and need not be reiterated at length. The Commission adopted the Show Cause Order in response to over 1400 complaints, beginning in 1993, with the majority of the complaints from mid-1996 through 1997, alleging, inter alia, that certain of the Fletcher Companies had changed consumers' primary interexchange carriers ("PICs") from their presubscribed carriers to one of the Fletcher Companies without the consumers' knowledge and authorization. The Commission has long prohibited slamming and has promulgated rules and issued orders to protect consumers from this practice. The Commission's PIC- change rules and orders require, among other things, that IXCs obtain signed letters of agency ("LOAs") or, in the case of telemarketing solicitations, complete one of four telemarketing verification procedures before submitting PIC-change requests to LECs on behalf of consumers. 3. Most of the complaints detail the Fletcher Companies' use of misleading, and in some cases fraudulent, marketing practices to effect the unauthorized PIC changes, including submitting, directly or through marketing agents, forged or falsified letters of agency ("LOAs") to the local exchange carriers responsible for effecting the PIC changes. Some complaints further alleged that some of the Fletcher Companies billed them for long distance calls that they did not place, or assessed monthly fees for services without their knowledge or authorization. 4. Under the Commission's rules for resolving consumer complaints, the Common Carrier Bureau's Enforcement Division ("Enforcement Division") forwarded each consumer complaint filed against the Fletcher Companies to the appropriate company with the requisite Official Notice of Informal Complaint ("Official Notice"). The Fletcher Companies failed to respond to the vast majority of the Official Notices issued by the staff. In the few instances when the Fletcher Companies filed responses to the Commission's Official Notices, the responses were poorly prepared, failed either to satisfy the complaints within the meaning of Section 208 of the Act and Section 1.717 of our rules or to explain the Fletcher Companies' refusal or inability to do so, and otherwise fell far short of the information required by the staff to further investigate the complaints and make determinations about the carriers' compliance with the Act and our rules and orders. The responses merely contained what amount to vague denials of the complainants' allegations and conveyed virtually no specific information about the carriers' practices or any facts and circumstances pertaining to the complainants allegations. 5. Furthermore, beginning in June 1996, a number of Official Notices issued by the staff to the Fletcher Companies concerning consumer complaints were returned to the Commission by the U.S. Postal Service marked "unclaimed," "moved," or "refused." Thereafter, the staff attempted repeatedly and unsuccessfully to contact representatives of the Fletcher Companies by telephone and by mail. Based on staff investigations, the staff subsequently obtained a new address for service of Official Notices filed against Phone Calls, Inc. and Monthly Phone Services, Inc. The staff mailed Official Notices relating to approximately 500 informal complaints to this address. The majority of these Official Notices were returned to the Commission marked either "moved, left no address" or "return to sender -- not at this address." 6. Based on the information described above, and set forth in greater specificity in the Show Cause Order, the Commission found that the Fletcher Companies apparently were either unwilling or unable to conduct lawful common carrier operations -- even within the broad parameters established by the Act and rules and orders governing nondominant carriers. As the Commission pointed out in the Show Cause Order, many of the consumer complaints involved allegations that one or more of the Fletcher Companies changed consumers' PICs without their authorization, in violation of the Commission's slamming rules and orders. We have previously found the practice of slamming through the use of forged or falsified LOAs to be a particularly egregious violation of our rules because such practices undermine the competitive nature of the interexchange marketplace and deprive consumers of their right to select the services of particular interexchange carriers to satisfy their long distance service needs. 7. In the Show Cause Order, we expressed concern that the Fletcher Companies compounded the egregious nature of their slamming practices by failing to respond to or accept Official Notices issued by the staff in response to consumer complaints, and by failing to designate agents for the receipt of notices, orders, or other correspondence issued by the Commission, as required by Section 413 of the Act. Moreover, we stated that Daniel Fletcher and the Fletcher Companies apparently deliberately acted to frustrate the staff's efforts to investigate consumer complaints and to inquire into the Companies' practices by failing to provide legitimate business addresses or telephone numbers. III. HEAR ING AND DISCUSSION 8. Based on the actions of the Fletcher Companies described above and further set forth in the Show Cause Order, the Commission convened an evidentiary hearing to determine whether the operating authority of the Fletcher Companies should be revoked and whether the Fletcher Companies and/or their principals should be ordered to cease and desist from any future provision of interstate common carrier services without the prior consent of the Commission. Specifically, the Commission convened a hearing to provide the Fletcher Companies and their principals an opportunity to demonstrate facts and circumstances that might refute the Commission's findings that the Fletcher Companies and their principals had committed numerous violations of the Act and the Commission's rules and that would persuade the Commission that the operating authority of the Fletcher Companies should not be revoked. For example, the Commission sought to develop record evidence concerning the PIC changes made or requested to be made by the Fletcher Companies. The Commission also sought to develop record evidence regarding Long Distance Services, Inc.'s, Phone Calls, Inc.'s., and Discount Calling Card, Inc.'s failure to accept and/or respond to Official Notices, and the companies' inadequate responses to certain Official Notices, as well as their failure to file with the Secretary of the Commission the name of a designated agent for service of all notices and process, orders, and requirements of the Commission. Furthermore, the Commission sought to develop record evidence pertaining to Long Distance Services, Inc.'s failure to file tariffs covering its interstate telecommunications service offerings during the period from May 1, 1996 to present. 9. The Commission also sought to develop record evidence concerning the Fletcher Companies' violations of one or more of the following provisions of the Communications Act of 1934, as amended, and the Commission's rules: 47 U.S.C.  203(a), 208(a), 413, and 416(c) and 47 C.F.R.  1.717, 64.1100, and 64.1150. The Commission further sought to determine whether the continued operation of the Fletcher Companies as common carriers would serve the public convenience and necessity, and whether the issuance of an order restraining the Fletcher Companies and their principals from future provision of interstate common carrier services would be in the public interest. 10. Notwithstanding the Fletcher Companies' failure to designate an agent for the receipt of notices, orders, or other correspondence issued by the Commission, and to file such designation with the Commission, in violation of Section 413 of the Act, the Commission made significant efforts to locate the Fletcher Companies and their principals, including, but not limited to enlisting the assistance of Dun & Bradstreet and repeatedly attempting to contact representatives of the Fletcher Companies by telephone and by mail. The Commission also mailed a copy of the Show Cause Order to the Fletcher Companies' last known address. Despite these efforts, neither Daniel Fletcher nor any other representative of any of the Fletcher Companies filed a written appearance stating that the Fletcher Companies' principals or other legal representative would appear at the hearing and present evidence on the matters specified in the Show Cause Order. Moreover, neither Fletcher nor any of his representatives appeared at the prehearing held on July 15, 1997. Accordingly, by Order released July 17, 1997, Administrative Law Judge Joseph Chachkin terminated the proceeding and certified the case to the Commission, for the Commission to determine whether, on the basis of all available information, a revocation order and/or a cease and desist order should issue. 11. Because neither Daniel Fletcher nor any other representative of the Fletcher Companies filed a notice of appearance or appeared at the hearing, we deem each allegation set forth in the Show Cause Order to be admitted. Therefore, we find that the Fletcher Companies committed numerous violations of both our rules and the Act, including, but not limited to submitting unauthorized PIC changes; charging consumers for calls that they did not make; failing to file and maintain with the Commission tariffs containing schedules of the charges, terms, and conditions of their common carrier offerings in the manner prescribed by Section 203(a) of the Act and the Commission's rules and orders; failing to file with the Secretary of the Commission the name of a designated agent for service of all notices and process, orders, and requirements of the Commission pursuant to Section 413 of the Act; and failing to observe and comply with all Commission orders as required by Section 416(c) of the Act. Further, because the Fletcher companies have failed to follow corporate formalities, we find it appropriate to assess liability for the violations committed by the Fletcher companies against the company principals. 12. Because the Fletcher Companies are classified as non-dominant interexchange carriers, their authority to provide domestic, interstate services was obtained automatically pursuant to Section 63.07 of our rules. As such, the Fletcher Companies are considered to have "blanket" authority to operate domestic common carrier facilities within the meaning of Section 214 of the Act. Accordingly, the Fletcher Companies could "construct, acquire, or operate" any transmission line for domestic telecommunications service without obtaining prior written authorization from the Commission. In addition, Phone Calls, Inc., one of the Fletcher Companies, maintained an international Section 214 authorization. Pursuant to our authority under Section 4(i) of the Act, we hereby revoke the operating authority of the Fletcher Companies because of the egregious actions and blatant violation of our rules and the Act committed by the Fletcher Companies and the principal and/or their principals. 13. We hereby delegate to the Chief, Common Carrier Bureau, authority to issue orders revoking a common carrier's operating authority pursuant to Section 214 of the Act, and to issue orders to cease and desist such operations, in cases where the Chief Administrative Law Judge, or the Presiding Officer designated, has issued a certification order to the Commission pursuant to Section 1.92(c) of our rules that the carrier has waived its opportunity for hearing under that section. 14. We also order the Fletcher Companies and each principal of the Fletcher Companies to cease and desist from any future provision of interstate common carrier service without the prior consent of the Commission. In addition, we find that the egregious actions of the Fletcher Companies and their principals, who have committed numerous violations of our rules and the Act, warrant the imposition of forfeitures against them. In the Show Cause Order, we included a Notice of Apparent Liability for willful or repeated violations of the Commission rules, under the authority of Section 503(b) of the Act. Under the proposals set forth in the Show Cause Order, the amount of forfeiture would be calculated as follows: a) $15,000 for each unauthorized conversion of complainants' long distance service in violation of 47 C.F.R.  64.1100 and/or 64.1150; b) $5,000 for each failure to respond to an Official Notice of Informal Complaint or inadequate response to an Official Notice of Informal Complaint in violation of 47 U.S.C.  208(a) and 416(c) and 47 C.F.R.  1.717; c) $1,000 for violation of 47 U.S.C.  413; and d) $6,000 for each failure to comply with the requirements of 47 U.S.C.  203(a), plus $300 for each and every day of the continuance of each such violation. 15. When determining the amount of forfeiture to be imposed, we are required to consider such factors, inter alia, as the "nature, circumstances, extent and gravity of the violation, and with respect to the violator, the degree of culpability, and history of prior offenses, ability to pay, and such other matters as justice may require." Neither the Fletcher Companies nor their principals have identified any facts or circumstances to persuade us that there is any basis for reconsidering our proposed forfeitures set forth in the Show Cause Order nor have they presented any mitigating circumstances that would warrant a reduction in the proposed forfeiture amounts. Therefore, based on the numerous violations of our rules and the Act committed by the Fletcher Companies and their principals, we assess forfeitures against the Fletcher Companies and their principals that total $5,681,500, as described in the following paragraphs. 16. As discussed above, we received over 1400 complaints containing allegations of slamming by the Fletcher Companies, in many cases, through the use of false or misleading practices, in violation of our rules, 47 C.F.R.  64.110 and/or 64.1150. In the Show Cause Order we proposed a forfeiture amount of $15,000 per violation of 47 C.F.R.  64.1100 and/or 64.1150. Calculating upon this basis, we assess a forfeiture of $3,600,000 for slamming violations against Long Distance Services, Inc. (LDSI) and its principals, and a forfeiture of $1,650,000 for slamming violations against Phone Calls, Inc. (PCI) and its principals. We also find that certain of the Fletcher Companies failed to respond to at least 61 Notices of Informal Complaint, in violation of 47 U.S.C.  208(a) and 416(c) and 47 C.F.R.  1.717. Therefore, we assess the proposed forfeiture amount, $5,000, for each such violation. Thus, we assess a forfeiture of $100,000 for failure to respond against Discount Calling Card, Inc. (DCC) and its principals, a forfeiture of $105,000 for failure to respond against LDSI and its principals, and a forfeiture of $100,000 for failure to respond against PCI and its principals. We also find that each of the eight Fletcher Companies and their principals failed to provide a registered agent in violation of Section 413 of the Act; therefore, we assess a forfeiture in the amount of $1,000 for each violation. 17. Lastly, we assess a forfeiture due to the Fletcher Companies' failure to maintain tariffs in violation of Section 203(a) of the Act. In the Show Cause Order, we stated that it appeared that the majority of the Fletcher Companies provided telecommunications services without maintaining tariffs on file with the Commission. Specifically, we found that LDSI provided service in May 1996 without having a tariff on file with the Commission. We also found that PCI, which maintained a tariff on file with the Commission, provided service prior to the effective date of its tariff. Therefore, we find it appropriate to assess a forfeiture in the amount of $6,000 for failure by these two entities to maintain a tariff in violation of Section 203 of the Act. We also assess a forfeiture in the amount of $300 per day for which LDSI provided service without a tariff. As we stated in the Show Cause Order, it appears that LDSI provided service as early as May 15, 1996 and continuing at least through January 1997. Therefore, we assess a forfeiture in the amount of $300 per day from May 15, 1996 through January 1, 1997, for a total of 232 days, due to LDSI's failure to maintain a tariff on file with the Commission, which results in a forfeiture of $69,600. We also assess a forfeiture in the amount of $300 per day from March 31, 1996 through August 1, 1996, for a total of 123 days, due to PCI's failure to maintain a tariff on file with the Commission, which results in a forfeiture of $36,900. Therefore, because neither the Fletcher Companies nor their principals provided any evidence that might mitigate the foregoing proposed forfeiture amounts, we assess forfeitures against the Fletcher Companies and their principals that total aggregate amount of $5,681,500. V. ATLAS COMMUNICATIONS, LTD. AND BILLING CONCEPTS, INC. PETITION TO INTERVENE AND MOTION TO ENLARGE THE ISSUES 18. On July 14, 1997, Atlas Communications, Ltd. ("Atlas") and Billing Concepts, Inc. ("USB") petitioned the Commission for leave to intervene in the above proceeding and enlarge the issues of such proceeding. Specifically, Atlas requests that the Commission enlarge the issues in the proceeding to include whether and how Atlas and USB should be permitted to continue supplying telecommunications and related services to those customers identified to Atlas and USB by Phone Calls, Inc. (PCI) under the certification and tariffs of PCI. In support of its motion, Atlas focuses on the business relationship between Atlas and PCI, and contends that there are currently approximately 50,000 PCI telephone customers on the Atlas network, and that if the Commission revoked PCI's operating authority, Atlas could no longer service these customers. 19. We hereby deny the Atlas Petition to intervene in this proceeding, because the matters raised in the Atlas Petition do not touch upon the specific issues designated for hearing. As discussed above, the Commission convened an evidentiary hearing to determine whether, based on the facts and circumstances before the Commission, the operating authority of the Fletcher Companies should be revoked and whether the Fletcher Companies and their principals should be ordered to cease and desist from any future provision of interstate common carrier services without the prior consent of the Commission. Atlas has cited no authority mandating that we enlarge the issues in this proceeding, and we see no reason to delay the proceeding to address Atlas' obligation to PCI customers, a matter peripheral to the issues in this proceeding. To the extent that Atlas raises issues outside of the scope of the hearing, such as determining Atlas' obligation to PCI's customers, we note that the Common Carrier Bureau will continue to work with Atlas to craft a solution to protect those current PCI customers. V. CONCLUSION AND ORDERING CLAUSES 20. For the reasons discussed above, we hereby revoke the operating authority of the Fletcher Companies. We also order the Fletcher Companies and each principal of the Fletcher Companies to cease and desist from any future provision of interstate and international common carrier services without the prior consent of the Commission. 21. Accordingly, IT IS ORDERED pursuant to Sections 4(i), 214, and 312 of the Act, 47 U.S.C.  154(i), 214, 312, that the operating authority of the Fletcher Companies IS REVOKED. 22. IT IS FURTHER ORDERED that the Fletcher Companies and each principal of the Fletcher Companies CEASE AND DESIST from any future provision of interstate common carrier services without the prior consent of the Commission. 23. IT IS FURTHER ORDERED that Atlas' Petition to Intervene and Motion to Enlarge Issues of Atlas Communications, Ltd. and Billing Concepts, Inc. IS DENIED. 24. IT IS FURTHER ORDERED that pursuant to Sections 4(i) and 503 of the Act, 47  154(i), 503, that Long Distance Services, Inc. (LDSI) and its principals shall FORFEIT to the United States Government $3,600,000, and Phone Calls, Inc. (PCI) and its principals SHALL FORFEIT to the United States Government $1,650,000, for violating the Commission's rules governing primary interexchange carrier conversions. Payment may be made in the manner provided for in Section 1.80 of the Commission's rules within 30 days from the release of this Order. If the forfeiture is not paid within the period specified, the case will be referred to the Department of Justice for collection pursuant to Section 504(a) of the Communications Act. 25. IT IS FURTHER ORDERED that pursuant to Sections 4(i) and 503 of the Act, 47  154(i), 503, that Discount Calling Card, Inc. (DCC) and its principals shall FORFEIT to the United States Government $100,000, Long Distance Services, Inc. (LDSI) and its principals shall FORFEIT to the United States Government $105,000, and Phone Calls, Inc. (PCI) and its principals SHALL FORFEIT to the United States Government $100,000, for failure to respond to Notices of Informal Complaint, in violation of the Commission's rules. Payment may be made in the manner provided for in Section 1.80 of the Commission's rules within 30 days from the release of this Order. If the forfeiture is not paid within the period specified, the case will be referred to the Department of Justice for collection pursuant to Section 504(a) of the Communications Act. 26. IT IS FURTHER ORDERED that pursuant to Sections 4(i) and 503 of the Act, 47  154(i), 503, each of the Fletcher Companies named in the caption of this order and their principals SHALL FORFEIT to the United States Government $1,000 for failing to provide a registered agent in violation of section 413 of the Communications Act. Payment may be made in the manner provided for in Section 1.80 of the Commission's rules within 30 days from the release of this Order. If the forfeiture is not paid within the period specified, the case will be referred to the Department of Justice for collection pursuant to Section 504(a) of the Communications Act. 27. IT IS FURTHER ORDERED that pursuant to Sections 4(i) and 503 of the Act, 47  154(i), 503, that Long Distance Services, Inc. (LDSI) and its principals shall FORFEIT to the United States Government $75,600, and Phone Calls, Inc. (PCI) and its principals shall FORFEIT to the United States Government $42,900, for failing to maintain tariffs with the Commission, in violation of section 203(a). Payment may be made in the manner provided for in Section 1.80 of the Commission's rules within 30 days from the release of this Order. If the forfeiture is not paid within the period specified, the case will be referred to the Department of Justice for collection pursuant to Section 504(a) of the Communications Act. 28. IT IS FURTHER ORDERED that the Chief, Common Carrier Bureau, is hereby delegated the authority to issue orders revoking a common carrier's operating authority pursuant to Section 214 of the Act, and to issue orders to cease and desist such operations, in cases where the Chief Administrative Law Judge, or the Presiding Officer designated, has issued a certification order to the Commission pursuant to Section 1.92(c) of our rules that the carrier has waived its opportunity for hearing under that section. 29. IT IS FURTHER ORDERED pursuant to Section 1.4(b)(2) of the Commission's rules, 47 C.F.R.  1.4(b)(2), that this order is effective upon release. 30. IT IS FURTHER ORDERED that this proceeding IS TERMINATED. 31. IT IS FURTHER ORDERED, that a copy of this order shall be sent by certified mail, return receipt requested to Daniel Fletcher; Robert Motter; Sandra Platt; CCN, Inc.; Church Discount Group, Inc.; Discount Calling Card, Inc.; Donation Long Distance, Inc.; Long Distance Services, Inc.; Monthly Discounts, Inc., Monthly Phone Services, Inc.; and Phone Calls, Inc.; 201 West Broad Street, Suite 181, Falls Church, Virginia 22206. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary