BEFORE THE PUBLIC
UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA

COMPLAINT AND REQUEST FOR CEASE AND DESIST ORDER AND DAMAGES AGAINST TELEPACIFIC COMMUNICATIONS FOR IMPOSING UNAUTHORIZED CHARGES ON SUBSCRIBERS' PHONE BILLS AND FAILING TO PROVIDE CUSTOMER SERVICE

Pursuant to Section 1702 of the California Public Utilities Code (the "Code"), this complaint is brought and hereby filed by the Utility Consumers' Action Network ("UCAN") against TelePacific Communications aka TelePacific Holdings Corp. fka Mpower Communications and related entities collectively "TelePacific" for imposing unauthorized charges to customers and failing to adequately notify customers of additional services required to protect phone services from unauthorized use.  As set forth below, TelePacific's action violate the Public Utilities Code and Public Utilities Commission Rules.

SUMMARY OF THE COMPLAINT

This complaint addresses the practice of TelePacific (hereinafter TelePacific) imposing unauthorized direct dialing charges on customers who have not dialed the numbers appearing on their bills, providing no notice that international calls could be placed on the account, billing at unpublished rates significantly higher than the highest published rates, as well as misbilling customers at incorrect rates.  These practices are unjust and unreasonable and prohibited under Public Utilities Code § 451, cramming as prohibited under Code § 2890, and a failure to provide customer service as required by Code § 2896. UCAN asserts that these customers never dialed nor authorized anyone to dial these telephone numbers that they were billed for and that TelePacific improperly tried to collect the disputed charges and sent the customer to collections while the dispute was still pending. The customer brought an informal complaint with the California Public Utilities Commission's Consumer Affairs Branch ("CAB") but CAB failed to investigate the dispute beyond asking the company to respond to the complaint. Though CAB took no action beyond forwarding TelePacific's response to the customer, there are too many inconsistencies with the facts and the situation to accept unchallenged TelePacific's position that the billed unauthorized charges are the customer's responsibility.

I. THE PARTIES

1.Complainant UCAN is a consumer advocacy organization at 3100 Fifth Ave., Suite B, San Diego, CA 92103, (619) 696-6966.
2.Defendant TelePacific is a corporation currently doing business in the State of California as a telecommunications service provider. TelePacific's principle California offices are located at 515 South Flower Street, 47th Floor, Los Angeles, CA 90071.
3.Attorneys and representatives for UCAN are Art Neill, Michael Shames, and Michael Scott.
4.The addresses for TelePacific is: 515 South Flower Street, 47th Floor, Los Angeles, CA 90071. TelePacific's representative is currently unknown to UCAN.

II. BASIC FACTS

5.TelePacific is registered with the California Public Utilities Commission as a telecommunications provider.
6.Though TelePacific has multiple utility numbers the entity in question is MPower Communications dba TelePacific Communications utility number U-5859-C.
7.TelePacific markets and sells telecommunications services in the State of California.

III. CUSTOMER-SPECIFIC FACTS ASSERTED

Edelweiss Flower Salon / Natalja Stepanova

8.Natalja Stepanova was the owner of Edelweiss Flower Salon ("Edelweiss"). Ms. Stepanova contracted for telecommunication services with Mpower Communications nka TelePacific for her business Edelweiss. The account number was 400042, with five lines. One line is a dedicated dsl line, a second line is a 800 number, and the three remaining lines are traditional phone lines. Edelweiss dedicated one phone line to a fax machine.
9.On September 1, 2006, Edelweiss received a billing statement from TelePacific (Exhibit A), which included unauthorized charges made from the fax dedicated line, telephone number 858-751-0376, totaling $1,043.13 ($1148.20 after taxes, fees and surcharges) for 17 calls listed as "NBR Called" "881-9900060115" and "Place" "Iridium Sate" from August 16 through August 23, 2006.
10.On September 20, 2006, Ms. Stepanova called customer service and spoke to customer representative "Carolyn" who stated she would place a block on the number. A written complaint (Exhibit B) was submitted the same day.
11.On October 1, 2006, Edelweiss received a billing statement (Exhibit C) for $2180.01 ($2336 after taxes, fees, and surcharges) for 11 calls listed as "NBR Called" 881-9900060115 and "Place" Iridium Sate from August 25 through August 31, 2006.
12.On October 9, 2006, when the unauthorized charges were not removed from Edelweiss' statement, a second written complaint (Exhibit D) was submitted to TelePacific, which also disputed the new unauthorized charges billed on October 1, 2006.
13.On October 17, 2006, Edelweiss' attorney, Lawrence T. Dougherty, spoke with Elaine Calloway of the fraud analysis department at TelePacific.
14.On October 17, 2006, after speaking with Elaine Calloway, attorney Dougherty sent a letter to TelePacific summarizing the dispute (Exhibit E).  Based on the suggestion of a customer service representative, a check for $437.56 was sent to cover charges for the undisputed amounts, with the understanding that by payment of these undisputed charges, TelePacific would not disconnect the phone service for Edelweiss pending investigation of the fraudulent and unauthorized use of Edelweiss Flower Salon.
15.On or around November 28, 2006, Cindy Toms of TelePacific called Ms. Stepanova demanding payment.  Toms further stated that if Ms. Stepanova could not make the payment, she should borrow money from a friend to pay, or that service would be disconnected in an hour.
16.On or around November 28, 2006, Edelweiss' main line, second line, fax line, internet and toll free line were all disconnected.
17.On November 30, 2006 a request was made to terminate the phone and DSL contract for account number 400042 because Ms. Stepanova did not want to continue paying for phone service that had been suspended for nonpayment though she was disputing the amount owed.
18.Had Ms. Stepanova not been charged for unauthorized calls and then had her service disconnected while disputing the charges, which resulted in great inconvenience and financial losses to her business, she would not have felt it necessary to terminate her service.
19.As a result of terminating her phone service Ms. Stepanova incurred a number of inconveniences to her business which resulted in losses.
20.On December 1, 2006 Ms. Stepanova filed a police report regarding the unauthorized charges (Exhibit F). The police report indicated "identity theft for services."
21.On December 20, 2006, TelePacific billed Edelweiss for $1349.58 in early termination fees as a result of cancellation of the contract (Exhibit G).
22.On January 30, 2007, Ms. Stepanova filed an informal complaint with the CAB.
23.On February 27, 2007, the Law Office of Scott & Associates, attorney or at least debt collector for TelePacific, demanded payment from Edelweiss in the amount of $5132.88 (Exhibit H).
24.On March 1, 2007, CAB acknowledged receiving Ms. Stepanova's informal complaint (Exhibit I).
25.In a letter dated March 6, 2007 (Exhibit J), TelePacific responded to CAB regarding Ms. Stepanova's informal complaint by stating the "long distance calls were made from the consumer's place of business."  TelePacific further cited Section 5 of the Master Service Agreement, which states that it is the "Customer's responsibility to adequately secure its computer network, circuits, and customer premise equipment from unauthorized access by 3rd parties."
26.In a second letter to CAB dated March 19, 2007 (Exhibit K), TelePacific reaffirmed its response but made key changes in the second letter. First they misrepresented the total amount in dispute, by claiming that only $1,043.13 was in dispute while the customer had disputed $3,223.14 in unauthorized charges explicitly and was also disputing all taxes, surcharges, and late fees associated with the disputed charges (Exhibit E).
27.TelePacific also misrepresented the contract termination date as June 23, 2008, while the actual termination date for the two year contract was June 23, 2007 as stated in TelePacific's March 6, 2007 letter.
28.CAB did not challenge TelePacific's position on the issue though neither TelePacific or CAB addressed how the calls could have been placed when the customer denied placing the calls and to the best of the customer's knowledge and belief Edelweiss was not broken into and the phone equipment was not in anyway used by an unauthorized person. 
29.Additionally, TelePacific and CAB did not address a number of other issues that while not raised by the customer, would have to be answered and resolved before a final determination as to whom should be responsible for the charges could be made.   
30.First, neither CAB or TelePacific addressed the fact that though TelePacific billed the customer at a rate of $14.67 per minute, the company's established and advertised rate for calls to an Iridium Satellite phone is $2.95 per minute (Exhibit L). Therefore, even if the customer was held responsible for the calls, TelePacific improperly billed the customer at a rate far in excess of the published rate.
31.Second, neither CAB or TelePacific addressed the fact that the listed NBR Called could not have been to an Iridium Satellite phone. The Country Code 881 is assigned to Global Mobile Satellite System, a fourth number designates the Satellite Phone Company. Iridium was assigned the Country Codes 881-6 and 881-7. The NBR Called listed is 881-900060115. That number would be associated with Globalstar Satellite phones.
32.TelePacific does not list or give any notice of a calling rate for Globalstar. Presumably an individual calling from a TelePacific phone line would not be able to reach a Globalstar phone because presumably if TelePacific allowed calls to be placed to Globalstar phones it would have a calling rate.
33.TelePacific lists the highest rates for "MPower," the service for which Ms. Stepanova contracted, as  "$9.55" for "Inmarsat Pacific O," and "$10.50" for the country Tokelau.  No rate of $14.67 is listed (Exhibit L).
34.Third, nothing in the customer's agreement, none of the representations from the company, and nothing on the customer's billing statement suggested or otherwise gave notice to the customer that International Calling was a part of the customer's contracted for service and that action could or needed to be taken to protect those lines from unauthorized international calling. After incurring charges for International Long Distance, the customer requested that International Long Distance be blocked on the customers' phone lines.
35.TelePacific placed an international calling block on two of the customer's phone lines, but it failed to place the international calling block on the line that was billed for international calls despite the customer's explicit request.
36.TelePacific has not explained why it failed to place the international calling block on the one phone line that had incurred international charges per the customer's request.     
37.Fourth, TelePacific not the customer is in the best position to know about the risks of hacking into phone lines, which is the company's stated position on how the charges occurred. TelePacific failed to inform the customer of these risks and provide information on how to secure the phone lines.
38.The customer is not in a position to know without being provided information from TelePacific or a consumer notice from CAB that hacking is a risk to phone lines and that the responsibility to protect the lines from hacking is part of the customer's responsibility.
39.Paragraph 5 in the Master Services Agreement (Exhibit M) states that "Customer acknowledges that it is the Customer's responsibility to adequately secure its computer network, circuits, and customer premise equipment from unauthorized access by 3rd parties" is not sufficient to inform a customer that they need to take action to protect a person from an undisclosed locations from going through a phone line to take control of the line and somehow use it to place international calls.
40.In addition, CAB accepted without evidence from TelePacific that the customer's computer network, circuits, or premise equipment was accessed by 3rd parties. It is the customer's position that she did not place the listed calls. It was TelePacific that concluded without explanation that the customer's circuit or premise equipment had been accessed without authorization.  Regardless, it should be emphasized that Telepacific, in statements to the customer and UCAN attorneys, have repeatedly asserted that the charges were the unauthorized result of "hacking."
41.However, a phone line may be hacked without a 3rd party accessing premise equipment and depending on how circuit is defined, a 3rd party may gain access without permission completely outside the customer's control.
42.For instance, there are phone terminals or switching boxes that may not be on a customer's property and are often the exclusive property of the phone company, such as where a phone technician may use a linesmen handset to test or otherwise check the line. Such locations could be used to place international long distance calls, a hacking practice known as "beige boxing," and would be unnoticed by the customer if such calls are placed outside the hours of traditional use or on a line not frequently used by the customer such as a fax line.
43.This type of hacking would appear outside the customer's ability to secure the computer network, circuits, and customer premise equipment and could not be encompassed within paragraph 5 of the Master Service Agreement, yet this issue was not addressed by TelePacific, though they suggested to the customer that hacking was the likely cause of the charges.     
44.Fifth, paragraph 5 of the Master Services Agreement would appear to be invalidated by Paragraph 24 in TelePacific's Terms and Condition (Exhibit N) which states: "Local Compliance. The parties agree that this Agreement will be carried out in compliance with all local, state, and federal laws, regulations, and decisions."
45.Paragraph 24 therefore incorporates Code § 2890, General Order 168, and the FCC cramming rules into the agreement which at a minimum conflicts with the placement of the burden for all unauthorized charges that result on a customers line.
46.TelePacific did not address this conflict within its own Agreement.
47.Further, it is logical to conclude that Paragraph 24 of the Terms and Conditions and not Paragraph 5 of the Master Service Agreement would appear to govern because what TelePacific failed to inform CAB is that Paragraph 5 is under the heading of "MPower Installation Policy and Procedures" and relates to the initial set up and installation of the phone services.
48.Paragraph 24, in contrast, is part of the Terms and Conditions that govern the contractual relationship between TelePacific and the customer.
49.Sixth, TelePacific has not in any way established other than by asserting that it established the calls were placed from the customer's place of business, that the charges were incurred because the customer failed to adequately secure its computer network, circuits, and customer premise equipment from unauthorized access by 3rd parties.
50.Paragraph 5 only requires the customer to "adequately secure," and TelePacific did not assert, and CAB did not explicitly conclude that the customer had not adequately secured the customer's computer network, circuits, and customer premise equipment from unauthorized access.
51.For something to be adequately secured does not suggest that the security could not have been breached, but rather that the customer failed to take adequate actions that a reasonable customer in the customer's situation would have done to secure the computer network, circuits and customer premise equipment.
52.CAB did not ask TelePacific how the customer failed to adequately secure its line, rather it improperly accepted the unasserted premise that any unauthorized charge that resulted must have occurred because the customer failed to adequately secure the computer network, circuits, and customer premise equipment.
53. These unanswered question and discrepancies are significant and the informal complaint should have been properly handled as a cramming complaint for unauthorized charges.
54.Though there is a presumption that direct dialed calls are authorized, TelePacific by claiming that the charges occurred because of hacking, is admitting that the direct dial calls are unauthorized, as hacking is a term of art which implies unauthorized access.

IV. VIOLATIONS OF LAW

55.In California, Public Utilities Code Section 2890(a) governs the cramming of unauthorized charges onto subscriber's phone bills.
56.Section 2890(a) states that "A telephone bill may only contain charges for products or services, the purchase of which the subscriber has authorized."
57.The charging for phone calls not unauthorized by a customer amounts to a violation of California Public Utilities Code Section 2890(a).
58.International calls that were applied to Edelweiss' bill, which were not made by the customer and to which the TelePacific has claimed occurred because of hacking, amounts to a violation of California Public Utilities Code Section 2890(a).
59.According to Part 4 (C)(a) of General Order 168 "telephone companies may bill subscribers only for authorized charges."
60.According to Part 4(A), "Cramming occurs when an unauthorized charge is placed on a subscriber's phone bill."
61.A customer should not be charged for phone calls that were not placed without her knowledge, permission, or consent. 
62.In addition to the calls themselves and corresponding charges being unauthorized, Telepacific places unauthorized charges on subscribers' bills by charging rates different than those they publish and advertise.  As an example, by charging an unpublished $14.67 rate to Ms. Stepanova, versus a stated rate of $2.95 for the charge listed, Telepacific has placed unauthorized charges on the subscriber's phone bill.
63.TelePacific also violated General Order 168 Part 4 C(c) and (d). Part 4 (C)(d) states the following: Complaint Resolution: If a telephone company receives a complaint that the user did not authorize the purchase of the product or service associated with a charge, the telephone company, not later than 30 days from the date on which the complaint is received, shall either (i) verify and advise the subscriber of the user's authorization of the disputed charge or (ii) undertake to credit the disputed charge and any associated late charges or penalties to the subscriber's bill.
64.Ms. Stepanova disputed the charges for international calls with TelePacific by phone and through a dispute letter. Ms. Stepanova was informed that the charges likely occurred because of cramming, but that she is responsible for the charges and must pay for them.
65.However, by acknowledging the charges as cramming TelePacific verified the calls were unauthorized, and should have undertook to credit the disputed charges and any associated late charges and penalties.
66.Despite its position that the charges occurred due to unauthorized hacking, TelePacific demanded payment for the unauthorized charges and suspended Ms. Stepanova's account causing harm to her place business for which Edelweiss lost profit and suffered other losses.
67.Part 4 (C)(c) states the following: "(c) Nonpayment of Charges During an Investigation: While a complaint investigation is pending, the subscriber shall not be required to pay the disputed charge or any associated late charges or penalties; the charge may not be sent to collection; and no adverse credit report may be made based on non-payment of that charge."
68.TelePacific continually demanded payment for the unauthorized charges and associated late fees and penalties. Further, after the customer had filed an informal dispute with CAB, the customer was sent to collections and remained in collections during the entire investigation.
69.TelePacific's conduct also violates California Public Utilities Code § 451.
70.§ 451 states: "All charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful."
71.TelePacific is demanding payment for a service not furnished to the customer. The calls were not placed by the customer or with the customer's knowledge or consent. The calls were unauthorized and demanding charges for such calls is unjust and unreasonable.
72.TelePacific's demand for a $14.67 per minute International calling rate when it has no such rate published or made available to the consumer, is unjust and unreasonable.  It is also unjust and unreasonable to impose this charge to customers when they are not made aware that International dialing is part of their calling plan.
73.Telepacific's charging $14.67 when there is a listed rate of $2.95, and general practice of charging customers improper rates is unjust and unreasonable.
74.§ 451 also states that "All rules made by a public utility affecting or pertaining to its charges or service to the public shall be just and reasonable."
75.TelePacific's practice of attempting to collect charges that are in dispute and associated late fees and penalties, as well as its practice of disconnecting phone service and sending disputed debts to collections are both unjust and unreasonable rules pertaining to its charges.
76.TelePacific's failure to inform the customer that international calling was a feature of her phone service and its failure to list an international calling rate of $14.69 amounts to a violation of California Public Utilities Code § 2896.
77.§ 2896(a) states that
The commission shall require telephone corporations to provide customer service to telecommunication customers that includes, but is not limited to, all the following:
(a) Sufficient information upon which to make informed choices among telecommunications services and providers. This includes, but is not limited to, information regarding the provider's identity, service options, pricing, and terms and conditions of service. A provider need only provide information to its customers on the services which it offers.
78.TelePacific's practice of not informing customers that international calling is a part of their calling plans and not informing customers of a location with an international calling rate of $14.67 is not providing sufficient information to the customer upon which to make informed choices. Specifically, the customer is being denied information as to service options and pricing necessary to making an informed decision.
VI. SCOPING INFORMATION
79.UCAN is filing this complaint as an adjudicatory complaint and believes that hearings will be necessary.
80.UCAN proposes the following schedule for resolving the adjudicatory Complaint within 12 months as follows:
Prehearing Conference: 30 to 40 days from the date of filing the Complaint
Hearings: 110-120 days from the date of the filing of the Complaint
UCAN proposes to alter the schedule for the Commission's suggested guidelines as it anticipates the need for a lengthened discovery period. 

VII. RELIEF SOUGHT

WHEREFORE, UCAN respectfully request that the Commission:
1.Order TelePacific to immediately cease and desist from each and every violation alleged in paragraph 8 through 78 effective upon receipt of this complaint through the issuance of an injunction.
2.Order TelePacific to undertake such steps as are necessary so as comply with state law.
3.Order TelePacific to make and pay any and all reimbursements and penalties available under Code Sections 2107, 2108 and 2113 to Ms. Stepanova and her business Edelweiss.
4.Order TelePacific to pay commensurate punitive damages upon finding of intentional or wanton misconduct.
5.Order all other remedies and penalties, fees and costs as the Commission may determine just and equitable.

Respectfully submitted,                                                 Dated: August 12, 2008
___/s/______________________
Art Neill
Michael Shames
Michael Scott
Utility Consumers' Action Network (UCAN)
3100 5th Ave. Suite B
San Diego, CA 92103
(619) 696-6966
Fax: 696-7477
art@ucan.org
ATTORNEYS and REPRESENTATIVES for Complainant

Verification

I, Michael Shames, am an officer of complainant corporation herein, and am authorized to make this verification on its behalf. The statements in the foregoing document are true and of my own knowledge, except as to the matters which are herein stated on information and belief, and as to those matters I believe them to be true. I declare under penalty of perjury that the forgoing is true and correct. Executed on August 12, 2008 at San Diego, California.

________/s/______________
Michael Shames