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State phone regulators failed to collect at least $33M

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From The Associated Press

WALNUT CREEK — The California Public Utilities Commission has failed to collect at least $33 million in fines imposed since 1999, and some of those debts may no longer be collectable, the Contra Costa Times reported Sunday.

The fines, which were imposed on phone companies that violated state consumer protection laws, would go to the state’s general fund to supplement tax revenue.

“This is an astounding breach of the commission’s obligations not just to the (utility) ratepayers but to the taxpayers. This is taxpayers’ money,” said Douglas Heller, executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

The outstanding debt includes a $7 million fine to Ohio-based Vista Group for switching customers’ long-distance carriers without permission, and a $5.1 million fine to Florida-based Coral Communications for billing customers more than $6 million in unauthorized surcharges, according to internal documents obtained by the Times.

But those debts may no longer be collectable because both companies have since folded, the newspaper reported.

In January, the Ohio secretary of state decertified Vista Group’s corporate status. Former Vista officials Thomas Coughlin and Philip Buthune could not be reached for comment, and the company no longer has offices.

Coral also is out of business.

“You can’t get blood out of a stone. I had money. I don’t have it any more,” said Neal DeLeo, who was listed as the company’s vice president of finance on the PUC’s investigative order. He said he hasn’t communicated with his former partners in years, adding that the company “all fell apart when everybody got greedy.”

Officials of companies that went out of business while facing fines and walked away with proceeds and committed “outright theft,” said former PUC commissioner Carl Wood. “This is white-collar crime at its crassest.”

The commission began looking into unpaid fines last year after receiving a routine memo from the state Department of Finance reminding it of obligations to aggressively collect debts owed to state government. But a decision has not been made yet on how to proceed, said the commission’s deputy general counsel, Lionel Wilson.

“We are trying to get a handle on this,” Wilson said. “Pursuing collections can be very difficult.”

The commission’s executive director Stephen Larson and president Michael Peevey did not return repeated telephone calls from the Times seeking comment.

A San Francisco lawyer whose firm represented both Coral and Vista Group before the commission said the PUC often fines companies amounts that cannot be paid.

“It’s rare that a fine is ever collected. A lot of these fines are cosmetic so they can issue a press release,” said attorney Thomas MacBride. “The fines are way out of line.”

Information from: Contra Costa Times

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