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Long-Distance Phone Customers Being 'Slammed'

September 01, 1996|MICHAEL G. WAGNER | TIMES STAFF WRITER

The first federal judge assigned to a case filed in U. S. District Court in Los Angeles by Deputy Atty. Gen. Margaret Reiter was shown one of the checks submitted as evidence, and complained: "I can't read what it says on the back of this thing."

Some 100,000 Californians cashed the checks, causing enormous confusion, especially in Latino communities, where some checks were cashed by tenants using telephones belonging to their landlords, Reiter said.

Sonic also charged rates two to three times those of AT&T and MCI, said PUC investigator Mark Clairmont. The company was barred from doing business in California last year. Some $700,000 is supposed to be refunded this month to customers Sonic slammed, in $5 and $10 credits on their phone bills.

As much as any case, Sonic brought home to regulators that "deregulation had made the telephone industry an area ripe for fraud," Reiter said. "Within a couple of months you can make an awful lot of money. You can slam as fast as you can print checks and send them out."

The sudden onslaught on slamming complaints in the early 1990s caught California regulators by surprise and unprepared.

Before 1995, when victims called the PUC to complain, their complaints often went nowhere. They simply piled up in the consumer affairs bureau, an understaffed outpost that would send copies of the letters to offending companies and pass replies to consumers if they were received.

But by 1995, slamming complaints had overwhelmed the small bureau. Despite requests for more staff and guidance on how to handle the growing volume, little was done. "The best answer I can give you is: We were never allocated the staff [to investigate the complaints]," said Robert Weissman, who oversees long-distance carriers. When complaints came in, he added, "there really wasn't any follow up."

But utility commissioners soon became convinced that full-time investigators were needed to address the problem, so they turned slamming over to the PUC's Safety & Enforcement branch.

"The whole slamming thing hit the commission at a time when we simply weren't prepared to deal with it," said Wesley Franklin, the agency's executive director. "It was a new thing and we didn't have the mechanism set up."

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Today, local phone companies report monthly how many customers have complained to them, and investigators regularly review the complaints. Several investigations are in progress; other cases are pending before the commission.

One of the largest pending cases is against the company that slammed John Warnock, the San Diego man who discovered he had been slammed when he tried to reach a long-distance information operator. As it turned out, Warnock was slammed by one of the industry's favorite methods. Regulators call it highly deceptive but spectacularly effective.

In February, Warnock's teenage son dropped by the Boll Weevil Restaurant for a hamburger with friends. Next to the cash register was a brightly colored box announcing the chance to win a free Camaro. His son filled out what appeared to be a raffle coupon about the size of an index card, Warnock said, never noticing the tiny print with the letters LOA, for "letter of authorization."

"It's real slick. Nowhere on the form does it say what LOA stands for," Warnock said.

After he figured out what had happened, Warnock said he went to the restaurant. "There must have been 40 coupons in there," he said. "It's all a scam. If you roll enough people, it doesn't matter if you take $10 or $100. They're just stealing business."

Federal regulators fined the Texas slammer $200,000 last month. A settlement is pending in the California PUC action calling for the company to suspend service to residential customers for 40 months, and refund $20 to each of some 32,000 slamming victims. "You can't fake people out," said the FCC's Muleta, "telling them they're going to win a car and then switching their phone service."

Yet dozens of companies have done exactly that, said W. Donald Booth, president of the Texas company, who insists he never set out to roll anybody.

Like other companies looking to get big fast, Booth said he signed on with a marketing agent he met at an industry trade show. The plan was to have the agent develop a large base of customers whose calls would be carried over Booth's long-distance network.

Booth said he even advanced $400,000 to the Los Angeles marketing company, Su Telefonica, which was founded by a businessman from Mexico City. In order to sign up customers in California, where his company had not yet obtained an operating certificate, Booth's company essentially rented the license of a company in Denton, Texas, for $250 a month.

But according to testimony before the PUC, Su Telefonica's marketers misrepresented themselves when they canvassed for customers. Christian Saavedra, for example, was in his Los Angeles home one day last summer when a man wearing an AT&T identification badge came to his door and offered to sign Saavedra up for a new savings plan. Instead, Saavedra was unwittingly switched to Total World Telecom.

"We're not excusing what they've done," Booth said, but marketing agents going to extremes is a by-product of competition.

Now, Booth is trying to get his company as far away from retail customers as he can. His company is rapidly expanding as a wholesaler of time to other long-distance companies.

Like others, Booth said he was drawn into the business by deregulation.

"I was just trying to operate a little back-room phone company" he said.

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