Yet More Telecom Scams, Slammers and Losers

Just when you thought that it was safe to pick-up a telephone again... along comes another round of rip-offs from across the telecom industry. Leading the charge (again) this month is a perennial (favorite) AT&T. What would we do without them?!!? We also have a couple of other companies that you have probably never heard of, making their debut in this column. A quick reminder... Slamming is the unauthorized switching of someone's long distance carrier. Well, let's get digging...


The bad boys of telecom are at it again! This time they are being accused of failing to pass on savings to their customers and charging users excesive monthly leases and service fees on phones left-over from the breakup of the "Bell System". Both Ameritech and the United Homeowners Association (a consumer watchdog group) have accused AT&T of failing to pass on savings to their customers which came about due to decreased interconnection fees from local phone companies. Ameritech issued a press release recently accusing AT&T of "hoarding windfall profits" and stated that "AT&T's greed apparently has no limits." The United Homeowners Association has asked the FCC to force the long distance carrier (as well as MCI and Sprint) to pass on its savings directly to the consumer, and called AT&T's rates "unjust and unreasonable." A spokesman for the group added that "fees for local access -- what a long distance company like AT&T pays a local exchange carrier to connect a call -- keep going down, but long distance rates are increasing." We will let you know the outcome of any action that the FCC decides to take, if any.

The Association has also called for an investigation by the Federal Trade Commission into charges that AT&T has been leasing telephone equipment to former "Bell System" customers for years, charging fees over time that have possibly far surpassed the actual cost of some outdated phone equipment. Millions of customers have been leasing the same phones from AT&T since divestiture, over 11 years, and continue to keep paying leases and repair guarantee fees month after month. The association claims that AT&T has not adequately informed customers about alternatives to leasing. "Our review of this program leads us to believe that it is inherently a fraudulent practice, preying particularly on older homeowners, who presumably became used to leasing their telephones and have continued to do so over the nearly 11 years since the AT&T break-up," stated a spokesman for the group. The Association has asked the FTC to limit the amount of the lease to three times the market value of the actual equipment, and to require AT&T to better inform it's customers about options to leasing.


MCI has it's own problems lately! Besides being criticized by the United Homeowners Association for failing to pass-on discounts to their customers (see above article on AT&T), they have also recently agreed to refund millions of dollars to consumers for overcharges stemming from their 1-800-COL-LECT program. MCI admitted that a "computer software problem" had led to overcharges totaling an estimated $44 million on calls placed by consumers from as far back as 1993. The problem was only corrected after a television reporter discovered the timing discreptancy while investigating a story, and asked the Virginia State Corporation Commission to look into the matter. MCI agreed to fix the program immediately. The company recenently announced that it will provide coupons that may be redeemed for $2.50 in MCI long-distance service to repay customers who were overcharged for collect calls. The company claims that the average consumer was only overcharged about $.18 on calls that were affected by the error, and that they were actually, "erring on the side of overcompensating." Sounds like it's time to send-out the "phone patrol"!


When we first reported news of Sprint's "Fridays Free" program to you over a month ago, we were openly critical of just how "stupid" this program was, and how vunderable the offer would be to abuse. It didn't take a rocket scientist to figure this one out. Perhaps Sprint could use a few rocket scientists to run their promotions from now on though. Word of Sprint's poor treatment of some customers who had signed up for this program has attracted national press attention, including the Wall Street Journal and USA Today. It seems that Sprint promised residential customers who called-up the company that they could add their residential lines, and still get up to $1,000 worth of calls for free on Fridays. They lied. The company sent letters to thousands of customers who they felt did not qualify for this business program (according to what standards, we are not totally sure of) telling them that they would be automatically switched off of the program and on to another (higher-priced) service unless they responded to Sprint with documentation of their company's incorporation within less than 24 hours. The company claimed that it had "tried to reach the customer without success" before sending the letter out, but we have yet to hear from a single person who Sprint actually tried to contact before the letter was mailed. Instead of being switched on to the higher-priced service, most customers picked-up their phones to find that they had no long distance service at all! Thousands of customers jammed Sprint's customer service lines to complain. To add insult to injury, the company announced later that it would revoke "Fridays Free Calls" to certain international countries, including Bolivia, Burma, China, Ecuador, India, Iran, Israel, Pakistan & Thailand to customers who remained on the service. Some have jumped on the restrictions to some of these countries as to possibly be discriminatory towards certain ethnic and religious groups, however we believe that they are eliminating these countries just to save money.

One consumer Imran Anwar has taken it upon himself to launch a one-man crusade against the company, and has called the offer a classic "Bait & Switch Tactic". It will be interesting to see how Sprint tries to defend itself against criticism of this offer. We don't know if they had this whole mess deliberately planned all along, or if they are just plain stupid, or possibly both. Either way, it has been, and will continue to be, probably the stupidest promotion the company has ever offered - from a public relations standpoint.

Heartline Communications, AKA Total National Telecommunications (TNT)

This is the newest company to enter the DLD Digest "Hall of Shame." The company seems to have a very colorful history, including multiple slamming complaints, alleged LOA forgery, targeting minority customers for slamming and operating in at least one state without proper licensing. The company has received a whopping 10,561+ slamming complaints against it since Novemember 1995 in the state of California alone. The California State Public Utilities Commission has launched an extensive investigation into the company's operations, and has scheduled a hearing to determine whether the company should have it's ability to switch a long distance customer's services revoked. The CPUC claims that the company not only operated without the proper licensing required for a reseller in that state, but has refused to respond to the CPUC about various allegations concerning their business practices. In addition, Heartline has been accused of signing-up customers illegally by offering "raffle tickets", then using the information contained on those tickets to switch the person's long distance carrier without their consent.

The San Francisco Chronicle reported earlier this month that the company is also being investigated for possible civil, regulatory and criminal misconduct. The article noted that over half of the customers that Heartline had switched to their service recently indicated Spanish as their primary language to Pacific Bell, leading to allegations that the company is targeting poor, non-English-speaking customers as easy slamming targets. It was also noted that some LOA's used by the company appareantly contained forged signatures. In one case an apparent victim of the company turned out to be a communications administrator at a major electronics firm!

We have seen several press clippings about the company recently, and we know of at least one feature article being written about them in a major mainstream magazine. Stay tuned for more info on these guys...

Cherry Communications

Cherry is already one of the founding members of our "Hall of Shame", but things are worse there than even WE had previously thought. Through researching publicly available documents, we have discovered that both the President and CEO of this company have sordid criminal histories, which include multiple felony convictions and prison terms. James Elliot, CEO and 100% stockholder of the company has a checkered history of multiple-multiple convictions for federal crimes such as mail fraud, wire fraud and providing false statements. He seems to have spent several months in federal prison, and was on probation for several years. Richard Heidecke was convicted in the U.S. District Court of Illinois for an attempted violation of the Hobbs Act, and served 6 months of unsupervised probation. With all of the rest of the trouble they seem to be in (i.e. a ton of slamming complaints), they are probably not the best company to entrust with your telephone service, or commissions.


This company hasn't set-out to deceive anybody (that we know of), they just seem to have a LOT of problems lately. The company's stock price had declined by 30% at one point, and has misreported predicted losses to their own shareholders (due to a mega computer error). A series of financial problems have plauged the company, leading to tens of millions of dollars in losses. This finally led to the "resignation" of the company's president and CEO last week.


Ameritech makes it's debut this month. Normally, we have only nice things to say about Ameritech, but it seems that they have been given a "wrist slapping" by the Public Utilities Commission this month for sending their customers some slightly misleading advertising literature about switching their interlata carrier. Ameritech maintains that they are trying to prevent slamming, other long distance carriers seem to think that they are only tring to prevent competition, most notably AT&T, who has had a running feud with the company in recent months. Let's hope that Ameritech has a higher sense of business ethics than some of those other long distance carriers. 'Nuff said.


You might remember a couple of other companies we mentioned in this column in recent months. Here's an update on what has happened since then.

Wats International - As you may recall, we reported that this reseller had not paid at least one of their agents (specifically, us) their commissions. Shortly after the article appeared, we received a call from an officer at the company who offered to pay us all of our back commissions. We received a commission statement and a check shortly thereafter. The company has decided to pay commissions to some of their agents on a quarterly basis from now on.

Cyberlink - Cyberlink still seems to be paying it's commission checks on time. We haven't heard many complaints about them lately. Let's hope the trend continues.

In conclusion...

It's a real jungle out there lately, and we have been working hard all week trying to keep up with it. It took 20+ hours just to compile the information necessary for this one article. Watch here for further details.

Though it may seem as if we are "picking" on some of these mega-companies at times, we are only doing it in the hopes that they will clean up their act(s). We would much rather have one of these companies "change their ways" than to have them go out-of-business. We will continue this series of articles for as long as it takes, until all long distance carriers and resellers behave in a legal and honest matter. Unfortunately, the way things are going lately, we may be doing this column for quite some time. I would urge each and every one of you to only do business with companies who have the highest ethical and business standards. This will ensure the long-term survival of the industry, and will prevent rewarding companies who behave irresponsibly. In the long run, this benefits all of us. Thank you.