Feds move to close LV firm

Grace Leong

Tuesday, April 8, 2003 | 11:09 a.m.

The Federal Communications Commission, which had levied a $1 million fine in 2001 against NOS Communications Inc. of Las Vegas over its alleged fraudulent billing practices, is now seeking to revoke the operating license of NOS and two affiliates and to impose additional fines of up to $1.2 million.

If its license is revoked, NOS will no longer be able to provide local or long distance telephone services or operate as an interstate carrier outside Nevada -- where 99 percent of its business is derived, said John McGlammery, deputy attorney general, on behalf of the state Bureau of Consumer Protection.

"If NOS's license was revoked, it would probably put them out of business since less than 1 percent of its business is done in Nevada. To date, the company has a total of about 300 employees," he said. The company has closed two of its three Las Vegas offices and still operates an office at 4380 Boulder Highway. NOS has two other offices in Los Angeles and Tulsa, Okla.

A hearing on the FCC matter is to be scheduled before an administrative law judge in Washington D.C.

Chief deputy attorney general and Nevada Consumer Advocate Tim Hay said the FCC action would not have been required if the state had been granted an injunction it sought in August 2002 to stop NOS from continuing to engage in deceptive trade practices.

McGlammery said the state continued to receive numerous complaints from consumers regarding NOS and its affiliates' business practices even after they were fined $2.5 million by Florida in March 2002 and were hit with a $1 million fine proposed by the FCC in 2001 over their fraudulent billing practices.

The FCC, which had received 900 complaints since 1997 against NOS and its affiliates, said the NOS companies, in a January 2003 consent decree, agreed to pay the $1 million to the U.S. treasury and make clear disclosures about their rates and rate structures in their marketing efforts in return for the FCC ending its investigation into the companies' alleged deceptive trade practices.

Other enforcement actions include the Wisconsin Public Utilities Commission revoking NOS's certification to operate and an investigation of the company's practices by the California Public Utilities Commission.

NOS charges for long distance telephone services by using a complex "call-unit" method that is used by no other long distance provider.

NOS customers, many of which are small businesses, have complained to regulators they were misled into thinking "call units" equaled minutes as is the standard billing practice in the long-distance industry. The customers discover the call-unit billing method results in higher charges than if they had been billed by the minute.

But the state's enforcement efforts against NOS were stalled after its request for the injunction was denied by a Carson City District Judge in September 2002. The state then appealed the ruling in October 2002, which is now pending before the Nevada Supreme Court.

"We filed an injunction asking that NOS disclose the length of time in minutes and seconds on the customers' bill. Had the injunction been granted, it would have forced them to change their business practices," said McGlammery. "But the denial of our injunction request allowed NOS to violate their previous compliance agreements with Florida and with the FCC and increase their deceptive trade practices."

The FCC took action after investigating information from Robert Faulkner, a former NOS executive director of accounts receivables and collections, about a misleading telemarketing campaign allegedly operated by NOS and its affiliates starting December 2001.

The FCC said its investigation uncovered evidence NOS and its affiliates violated the January 2003 consent decree by operating a marketing campaign aimed at "tricking and threatening" former customers into authorizing switches to the companies' services.

The NOS companies would allegedly call former customers, misrepresent that their lines had not been completely switched to their new preferred carriers and threaten service disruption if the customers didn't sign so-called temporary letters of authorization to keep their services running.

"This practice depicts a callous disregard for the requirements of the (Federal) Communications Act," the FCC said in Friday's complaint. "Based upon our review of the evidence, we find that NOS's apparent telemarketing campaign evidences apparently willful or repeated violations ... of the Act."

NOS officials could not be reached for comment on the FCC's latest allegations.