NTC Settles Suit Alleging Illegal Phone-Switching

National Telephone & Communications Inc. agreed Thursday to pay $1.25 million to settle accusations that it switched the long-distance service of at least 10,000 consumers without their permission, a practice known as slamming.

The settlement, the second major slamming settlement in the state this year, ends a civil fraud suit brought by the Orange County district attorney’s office, which had been investigating the Irvine-based company since April. Both the suit and the settlement were filed simultaneously. NTC admitted no wrongdoing.

Slamming has been the bane of the long-distance industry for several years. The Federal Communications Commission said it receives more complaints about slamming than any other telephone-related issue.

“It’s safe to say that for every one case reported, there is as least one other case we don’t know about,” said Wendy Brough, Orange County deputy district attorney in the office’s consumer protection unit.

The money from the settlement will go to the county, but a $50,000 chunk will go to the California Public Utilities Commission, which has launched a separate investigation. The state investigation could result in reimbursements to consumers.

According to PUC sources, NTC’s alleged victims included an Orange County district attorney’s investigator and a dentist whose patients included state Sen. Steve Peace (D-San Diego). Peace chairs a legislative committee overseeing utilities.

Thursday’s agreement marks the second time NTC has settled a slamming case. In July, the company paid nearly $56,000 to settle a case involving 41 consumers in Connecticut.

“If we take the approach of full disclosure, we can clean up the past and try to make a fresh start,” said James Quandt, NTC’s president. “Yes, we’ve had a problem with our sales agents. That’s why we’ve fired hundreds of them in the past few months.”

NTC operates through a commissioned sales force of more than 48,000 nonemployee agents nationwide.

As part of the settlement, NTC agreed to institute a 24-hour delay in completing service-change orders and a system to verify the changes. An independent third-party verification is required by law for residential customers.

Several cases have grabbed media attention locally. In May, state regulators slapped Communications Telesystems International, known as WorldxChange in San Diego, with a $3.9-million penalty.

NTC officials said that from January 1996 to July 1997, it switched about 200,000 Pacific Bell customers to its own long-distance service. Pacific Bell later received more than 10,000 complaints from customers who said the switch was not authorized, according to the PUC.

The agency learned about the allegations last spring and began investigating complaints that NTC forged customers’ signatures, including names of dead Californians.

Dentist Anthony Tran was going over his father’s business records and realized his family was paying for two long-distance carriers, NTC and MCI Communications Corp.

“When I called PacBell, they said NTC had an order form with my father’s signature and it was dated January 1997,” said Tran, whose father had died a month earlier. “They slammed the wrong man.”

Tran contacted one of his patients, Sen. Steve Peace. The lawmaker contacted the PUC and helped launch a state investigation. At about the same time, complaints were made to the Orange County district attorney’s office.

NTC’s Quandt said that because of a corporate shake-up and a newly installed management team, the company didn’t realize the seriousness of its slamming problem.

“I was reading the stories about slamming and realized that we could be having that problem here,” said Quandt, who joined NTC’s staff in January. “In May, we sent a letter to the PUC and offered to meet with them. If we had problems, it was safer in the long run to be open and invite everyone in.”

According to PUC documents, state investigators also found that NTC sales agents, armed with offers of free phone cards and cheap pagers, asked teenagers to sign authorization forms to switch their parents’ service.

Other complaints accused NTC salespeople of asking non-English-speaking immigrants to sign authorization forms written in English.