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Long-distance company's license in jeopardy

A company founded by a convicted felon illegally switched customers' long-distance service without their permission, used high-pressure, misleading sales tactics and failed to respond to complaints, says the Florida Public Service Commission.

So outrageous are Cherry Communications' tactics, says the PSC staff, that the company's certificate to do business should be revoked. Cherry's lawyers say the company has addressed the problems and promise that complaints will drop.

The PSC heard a day of testimony about Cherry's tactics Friday.

"They're unconscionable," said George Hanna, the PSC's director of consumer affairs.

The Chicago company has sold long-distance service for itself, Matrix Telecom, U.S. Sprint and WilTel. For the first four months of 1993, Cherry accounted for 40 percent of complaints received by the PSC of unauthorized switching of long-distance service, a practice known as slamming.

The PSC says:

Cherry sales representatives solicited Hurricane Andrew victims who were standing in line to use a pay phone after the hurricane struck, offering them free long-distance phone service for a month. The residents thought the company was offering the service as a humanitarian gesture. They were slammed.

Salespeople forged consumers' signatures on letters authorizing long-distance service switches.

Telemarketing salespeople called consumers to "verify" that they wanted to change their long-distance company when no initial call had been made. They also falsely told customers they were affiliated with Southern Bell, AT&T, GTE or Centel. Consumers described the telemarketers as rude, argumentative and misleading.

Cherry Communications failed to state on its application for a PSC certificate that then-chief executive officer James R. Elliott was convicted of wire fraud in Chicago nine years ago. PSC investigators say the company was dissolved in Illinois when it incorporated in Florida.

Cherry Communications president David Giangreco testified he is "appalled" at the tactics his employees used. He said abuses have been eliminated.

"This Hurricane Andrew situation absolutely sickens me," he said. "We are an ethical, honest company. We never had anything like this ever ever happen to us before."

Yes, they have, according to PSC records.

Utility regulators have investigated "a multitude of slamming and marketing problems" against Cherry in five other states: Louisiana, Alabama, Arkansas, Tennessee and Illinois.

Florida's PSC staff recommended revoking Cherry's certificate to sell and provide long-distance service.

"To do otherwise . . . would send the wrong signal to the industry," the staff report said.

"It would also send the wrong signal to Florida's consumers who have described the company's actions as outright fraud and characterized its telemarketers as "misleading,' "abusive' and "deceptive.' Customers are asking us why a company like Cherry is allowed to do business in Florida. We believe it is a fair question and one that should be answered."

The commission did not answer Friday. The case was being heard by commissioners Terry Deason, Susan Clark and Julia Johnson. A ruling is due Sept. 7.

Clark suggested the PSC could allow Cherry to stay in business on the condition that complaints drop.

Cherry, which has 30,000 long-distance customers in Florida, had a stable of lawyers on its side, led by former Florida Attorney General Robert Shevin and three Chicago attorneys.

In a settlement offer, Cherry offered to clean up its sales practices, suspend telemarketing for four months and pay a $60,000 fine. Shevin said the company would pay a $10,000 fine later if complaints continue.

The PSC staff recommended rejecting the offer.

PSC Attorney Charles Murphy said the company's misleading sales tactics, slamming and other marketing problems continued even after the PSC notified the company in February of the pending charges.

Cherry officials say they made changes in April to prevent slamming. But PSC senior complaints analyst Nancy Pruitt said the PSC received 72 slamming complaints against Cherry from early May to June 17, after receiving 88 slamming complaints against the company the previous five months.

The company placed an ad in the Miami Herald on April 11 soliciting a salesman: "I need a killer. An absolute assault weapon. I have an entire 120-man telemarketing floor to generate lay-down leads (potential easy sales) for you. . . . Call me for HUGE MONEY."

"The content of this ad," Pruitt testified, "certainly calls into question the company's commitment to clean up its marketing techniques."

There has been no improvement in sales behavior or slamming, Pruitt said. "Indeed, the company's sales force appears to be out of control."

Cherry failed to investigate complaints it received from the PSC as required by law, the staff report said. Instead, the company's law firm sent a form letter and a $12 refund.

One of the company's high-pressure sales calls came to the home of PSC employee Rick Moses. He said after he twice told the sales representative he did not want to switch his long-distance carrier, he still was told he would receive a notice in the mail in 30 to 60 days that his new carrier would be Cherry Communications.

Shevin sought to show that while the company's sales personnel may have been overly aggressive, the PSC report did not prove a "willful and intentional" violation of the law that should result in revocation of the company's certification.