BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE …



BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

|ORDER INSTITUTING INVESTIGATION AND ORDERING NETFORTRIS ACQUISITION | |

|CO., INC. TO APPEAR AND SHOW CAUSE WHY IT SHOULD NOT BE SANCTIONED |FILED |

|FOR VIOLATIONS OF THE LAWS, RULES, AND REGULATIONS OF THIS STATE BY |PUBLIC UTILITIES COMMISSION |

|MONITORING AND RECORDING EMPLOYEE TELEPHONE CONVERSATIONS WITHOUT |SEPTEMBER 14, 2017 |

|PRIOR CONSENT. |SAN FRANCISCO |

| |I.17-09-004 |

| | |

ORDER INSTITUTING INVESTIGATION AND

ORDER TO SHOW CAUSE

SUMMARY

We open this investigation into NetFortris Acquisition Co., Inc.’s (NetFortris) practices of monitoring and recording employee telephone conversations without prior consent, in violation of General Order (GO) 107-B and Public Utilities Code (Pub. Util. Code) Sections 702.[1] This investigation will also assess NetFortris’ practice of using recorded employee telephone conversations for its own advantage, in violation of Pub. Util. Code Section 7903. In addition, based on NetFortris’ call recording conduct in relation to its customers, this investigation will determine whether NetFortris violated its obligation to provide just and reasonable service pursuant to Pub. Util. Code Section 451. Finally, this investigation will also review and determine whether Nefortris’ responses to Staff’s investigation constitute a violation of Rule 1.1 of the Commission’s Rule of Practice and Procedure (Rules).

This Order provides notice that the Commission will determine: (1) whether NetFortris violated the Commission’s General Orders and Rules and California statutes, and (2) whether the Commission should impose fines or order other remedies for NetFortris’ apparent violations of applicable laws described below. This Order also directs NetFortris to appear and show cause why the Commission should not find violations in this matter, and why the Commission should not impose penalties and any other forms of relief, if any violations are found.

RESPONDENT

Decision (D.) 02-04-036 granted CF Communications, LLC the authority to provide limited facilities-based and resold local exchange service.[2] CF Communications renamed itself Telekenex, Inc.[3] On June 3, 2010, Telekenex, Inc. filed Advice Letter No. 71 transferring its public utility operations to IXC Holdings, Inc. (IXC), which continued to do business utilizing the name Telekenex. D.14-01-026, issued on January 23, 2014, granted the application of IXC and Telekenex Acquisition Corporation (Telekenex) for approval of the transfer of assets and control over the public utility operations of IXC to Telekenex under Pub. Util. Code Sections 851 and 854.[4]

On June 10, 2014, Telekenex notified the Commission that the Utility ID numbers U-6647-C relating to Telekenex Acquisition Corporation and U-1116-C relating to IXC were being consolidated into U-6647, and renamed NetFortris.[5]

STAFF INVESTIGATION

The Commission’s Utility Enforcement Branch (UEB)[6] of the Consumer Protection and Enforcement Division (CPED) became aware of improper monitoring and recording allegations after reviewing the Verified Complaint 15-04-017 (Verified Complaint) filed at the Commission by Anthony Zabit and Roberto Alvarez on April 9, 2015 and the Verified Answer of NetFortris filed on June 17, 2015.[7] Staff completed an initial investigation into NetFortris’ use of monitoring and recording telephone equipment. After conducting its investigation, CPED staff developed a report: Investigation of Anthony Zabit and NetFortris Acquisition Co., for Potential Violations of G.O. 107-B (Staff Report).

The Staff Report revealed extensive documentation of GO 107-B violations in which NetFortris admitted to recording employee telephone calls without audible warnings. Mr. Zabit, when he controlled Telekenex, and later as a Chief Operating Officer at NetFortris,[8] authorized the setting of employees’ telephones to “automatic record” without notifying all parties with the required audible warning that such calls may be recorded, as required by GO 107-B.[9] NetFortris, after taking over the assets of Telekenex on January 23, 2014, continued recording all incoming and outgoing telephone calls to and from employees’ extensions until on or about January 22, 2015 without the requisite notifications.[10]

The Staff Report presents the Commission with a strong showing that NetFortris violated applicable law. NetFortris did not utilize an audible warning during its recording of telephone calls made to employees’ extensions. As detailed below, the Commission has substantial evidence and good cause to commence a formal investigation to ascertain whether such violations occurred and, if so, to consider the proper penalties and remedies for such violations.

1 Mr. Zabit’s Verified Complaint 15-04-017 Allegations Amount to Apparent G.O. 107-B Violations by NetFortris

As noted above, on April 9, 2015, complainants Mr. Zabit and Mr. Alvarez filed a Verified Complaint against Respondent NetFortris claiming that NetFortris “surreptitiously recorded telephone conversations,” “compiled call records that reveal the calling patterns and identity of Mr. Zabit and other NetFortris customers,” and that “NetFortris did not warn the called or calling parties that their calls were being recorded nor did it obtain the required written consent from these telecommunications users to record their conversations.”[11] Mr. Zabit’s and Mr. Alvarez’s Verified Complaint alleges that NetFortris recorded Mr. Zabit’s “conversations made by him on his business land line, his company cell phone and personal cellular phone.”[12] The Verified Complaint supports this allegation by stating that “the equipment used by NetFortris to record conversations does not include an audible warning for calls made to or between direct dialed numbers not associated with the main call center number.”[13] Accordingly, no audible warning was present when calls were made to or from an employee’s extension.[14]

2 NetFortris’ Verified Answer Admits to the Use of Recording Equipment without Prior Consent

According to NetFortris’ Verified Answer to Mr. Zabit’s and Mr. Alvarez’s Verified Complaint, NetFortris continued using prior disclosures regarding call recording of employees’ telephone calls.[15] In addition, NetFortris also disclosed that the automatic recording functions installed by Telekenex remained in use at NetFortris.[16] Moreover, NetFortris admitted that no audible warning was deployed for direct calls to company telephone extensions.[17] NetFortris continued this practice from January of 2014 until January of 2015, when the call recording equipment was removed, except for at its call center.[18]

3 The Declaration and Deposition of Thomas Swayze Admit to NetFortris’ Violations of G.O. 107-B

The extensive use of the call recording equipment is detailed throughout the declaration and deposition of Thomas Swayze, NetFortris’ Chief Technology Officer (CTO) and former employee of Telekenex. Both these documents are part of the factual record of the Anthony Zabit vs. NetFortris Acquisition Co. complaint filed in the Superior Court of the State of California County of San Francisco (Superior Court). The Superior Court complaint, and the cross complaint filed by NetFortris as well as additional documents relating to the complaint, were obtained through a data request issued by UEB staff to both Mr. Zabit and NetFortris.[19]

Mr. Swayze stated in his sworn deposition testimony and declaration that all incoming and outgoing calls made to or from employees’ extensions, and some employees’ cell phones, were automatically recorded with no audible warning.[20]

Mr. Swayze’s declaration outlines Telekenex’s installation and capabilities of the recording equipment and the practice of using it.[21] Mr. Swayze stated that Telekenex installed the call recording equipment in 2008 and was set to the “Record On” setting for all employee extensions.[22] Mr. Swayze’s declaration states that no audible warning was deployed for employee telephone extensions and calls using direct dialed extensions were recorded automatically with no audible warning.[23]

In addition, Mr. Swayze’s deposition testimony further elaborates that approximately 150 direct extensions were used by employees, none of which had an audible warning that a call was being recorded.[24] Importantly, Mr. Swayze’s deposition testimony states that NetFortris continued this practice of automatically recording all telephone calls made from and received on an employee’s extension without an audible warning.[25]

DISCUSSION

1 Jurisdiction over NetFortris

The Commission has jurisdiction over NetFortris because NetFortris is a Certificate of Public Convenience and Necessity holder licensed by the Commission to provide limited facilities-based and resold local exchange and interexchange telecommunications services.[26]

2 Privacy Protections Established by General Order 107-B

GO 107-B prohibits the recording of telephone calls unless all parties to the call give their express prior consent or are notified that the recording is taking place.

GO 107-B states in pertinent part that:

(4) No portion of the public utility telephone network in California to which the public, or any portion of the public, has access shall be used for the purpose of transmitting any telephone conversation which is being monitored or recorded except when:

(a) All the parties to the conversation give their express prior consent to the monitoring or recording, or

(b) When notice that such monitoring or recording is taking place is given to the parties to the conversation by one of the methods required in this order.

(5) Notice of recording shall be given either:

(a) By an automatic tone warning device which shall automatically produce the distinct tone warning signal know as a “beep tone” which is audible to all parties to a communication and which is repeated at regular intervals during the course of the communication whenever the communication is being recorded; or

(b) By clearly, prominently and permanently marking each telephone instrument for company use from which communications may be recorded to indicate that a communication of the user of the instrument may be recorded without notice; provided that this method of giving notice of recording may be used only if the automatic tone warning signal is audible to all parties to the communication using telephone instruments not so marked.

As illustrated in the Staff Report, discovery responses, evidence from Mr. Zabit’s Verified Complaint, the declaration and deposition of Thomas Swayze, and the Verified Answer filed by NetFortris all show that NetFortris recorded all telephone calls to and from their employees’ extensions without obtaining prior consent or providing notifications that recording was taking place, over a period of 12 months. This is compelling evidence demonstrating NetFortris’ violation of GO 107-B.

3 Required Compliance with the Commission’s Orders and Rules Pursuant to Pub. Util. Code Section 702

CPED presents a strong showing that NetFortris acted in violation of Pub. Util. Code Section 702. According to Pub. Util. Code Section 702:

Every public utility shall obey and comply with every order, decision, direction, or rule made or prescribed by the commission in the matters specified in this part, or any other matter in any way relating to or affecting its business as a public utility, and shall do everything necessary or proper to secure compliance therewith by all of its officers, agents, and employees.

NetFortris did not ensure that its internal practices were compliant with rules and laws governing public utility activities. Pursuant to and as authorized by Pub. Util. Code Section 701,[27] the Commission establishes orders and rules to regulate the activities and practices of public utilities, including GO 107-B. Staff’s investigation reveals a strong showing that NetFortris violated GO 107-B because NetFortris’ equipment automatically recorded calls to and from employee extensions without an audible warning. By failing to investigate employee practices or equipment settings and functions, NetFortris also failed to “do everything necessary or proper to secure compliance therewith by all of its officers, agents, and employees.”[28] Thus, it may be reasonable for the Commission to conclude that NetFortris violated Pub. Util. Code Section 702.

4 Pub. Util. Code Section 7903 Prohibits the Use or Appropriation of Information from Private Messages

As identified in discovery responses and admitted in the sworn deposition of

Mr. Swayze, NetFortris downloaded and listened to non-consensual recorded telephone conversations to gain additional information and obtain an advantage over Mr. Zabit. The use or appropriation of information derived from private messages for the advantage of a third-party is a violation of Pub. Util. Code Section 7903. Section 7903 states in pertinent part that:

Every agent, operator, or employee of any telegraph or telephone office, who in any way uses or appropriates any information derived by him from any private message passing through his hands, and addressed to any other person, . . . attempts to turn, the information so obtained to his own account, profit, or advantage, is punishable by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or by imprisonment in a county jail not exceeding one year, or by fine not exceeding ten thousand dollars ($10,000), or by both that fine and imprisonment.

Mr. Swayze downloaded, listened to, and forwarded call recordings and used the information contained within the recordings for NetFortris’ advantage – to confirm whether Mr. Zabit was soliciting a then-current NetFortris employee for work or for NetFortris’ proprietary information [29] in violation of Mr. Zabit’s non-competition agreement.[30] These activities constitute the use or appropriation of information derived from private messages for the advantage of a third-party. Therefore, NetFortris may be in violation of Pub. Util. Code Section 7903.

5 Just and Reasonable Service Obligations pursuant to Pub. Util. Code Section 451

Pub. Util. Code Section 451 states in part,

[e]very public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities, including telephone facilities, as defined in Section 54.1 of the Civil Code, as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees and the public. All rules made by a public utility affecting or pertaining to its chargers or service to the public shall be just and reasonable.

Section 451, therefore, demands public utilities to provide a particular level of service. The Commission has broad authority to determine whether service or equipment of any public utility poses any danger to health or safety of public, and if so, to prescribe corrective measures and order them into effect.[31] The blatant disregard for customer privacy may necessarily amount to unreasonable service. By recording customers’ conversations with employees without consent or an audible warning, NetFortris may have violated its obligation to provide reasonable service.

Consumer privacy is well within the Commission’s discretionary bounds of determining what constitutes “reasonable service.” The right to privacy is codified in the California Constitution[32] and has been recognized by this Commission.[33] In particular, GO 168 establishes a “Consumer Bill of Rights and Freedom of Choice,” that recognizes customers’ right to privacy from the unauthorized use of their personal information.[34] Therefore, the Commission may find that NetFortris did not provide reasonable service to its customers when it recorded and monitored employee telephone conversations with customers, in violation of Pub. Util. Code Section 451.

6 Rule 1.1 Compliance and Candor Requirements

In the responses provided to UEB Data Request Set Number 01 NetFortris stated that NetFortris was not aware of its automatic call recording equipment usage and failure to use an audible warning. However, evidence and documents cited throughout the Staff Report illustrate that NetFortris was aware of the call recording equipment previously installed and used by Telekenex, and that NetFortris kept the call recording equipment in place, recording all calls made to or from employees extensions without an audible warning from the time of the acquisition in 2014 until January 2015.

If true, NetFortris’ actions contravene the directives of Rule 1.1 of the Commission’s Rules of Practice and Procedure Rule 1.1 states that:

Any person who . . . transacts business with the Commission, by such act . . . agrees to comply with the laws of this State; to maintain the respect due to the Commission, members of the Commission and its Administrative Law Judges; and never to mislead the Commission or its staff by an artifice or false statement of fact or law.

On November 4, 2015, UEB propounded Data Request Set Number 01 to NetFortris and asked in Request for Admission 3 “ADMIT or DENY that NetFortris knew about the capabilities of the call tracking, logging, and recording features of the ‘Telekenex Telephone Equipment’ at the time it acquired ‘Seller Parties’” assets.[35] Additionally, UEB, in Request for Admission 5, asked “ADMIT or DENY that NetFortris, at any time, owned assets, the use of which violated the California Public Utilities Commission’s General Order (GO) 107-B.”[36] NetFortris’ CTO, Mr. Swayze prepared the response to Request for Admission 3 and 5 and stated that:

DENY. NetFortris has never installed equipment on telephone lines in violation of General Order 107-B. At the time of the acquisition, NetFortris was not aware that the Telekenex Telephone Equipment was being used to record calls other than call center calls preceded by an audible warning. NetFortris relied upon the Compliance with Laws representations of the Asset Purchase Agreement. As soon as NetFortris’s new executive management team learned that its call recording equipment installed by

Mr. Zabit and inherited post-closing might not be in compliance with law as warranted, NetFortris promptly took steps to disable all features of the equipment that would record calls other than calls preceded by an audible warning.[37]

However, this response can reasonably be construed as a misrepresentation. The response directly contradicts later discovery responses and Mr. Swayze’s responses to UEB discovery requests, sworn deposition testimony, and declaration. As Mr. Swayze states, NetFortris: (1) did in fact own assets, the use of which violated the California Public Utilities Commission’s GO 107-B since it did not uninstall or change the settings of the recording equipment that was in use by Telekenex until approximately January 22, 2015, one year after NetFortris acquired Telekenex[38] and (2) retained personnel directly responsible for the installation of call recording equipment and who set the recording equipment to “always on,” including Mr. Swayze himself who was NetFortris’ CTO directly following acquisition.[39] Therefore, the Commission may conclude that NetFortris was aware of the use of recording equipment and continued to record its employees’ conversations without an audible warning within mere minutes of acquisition and did not correct course until over a year later.

ORDER TO SHOW CAUSE

As a result of the admissions by NetFortris for improperly monitoring and recording employees’ telephone conversations and for misrepresenting its actions to the Commission, the Commission finds that good cause exists to order NetFortris to appear in this proceeding and show cause why it should not be fined or have any other sanctions imposed as a result of the alleged violations. CPED staff satisfied its initial burden to show, by a preponderance of the evidence,[40] that NetFortris violated GO 107-B, Pub. Util. Code Sections 702, 7903, 451, and Rule 1.1. NetFortris will maintain the burden in this proceeding to demonstrate that it has not committed the violations described above, and why it should not be fined as a result.

PRELIMINARY SCOPING MEMO

The preliminary scope of issues and schedule are set forth below, and may be changed by the assigned Commissioner’s scoping memo. (See Rule 7.1(c)).

A. Issues Presented

The Commission bears a responsibility to protect consumers, to enforce laws utilities may have violated, and to investigate the practices of public utilities. Therefore, the proceeding shall determine:

1. Whether NetFortris violated GO 107-B by recording and monitoring employee telephone conversations without prior consent;

2. Whether NetFortris violated Pub. Util. Code Section 702 through its non-compliance and its failure to do everything necessary or proper to secure compliance with GO 107-B;

3. Whether NetFortris violated Pub. Util. Code Section 7903 by using the content of recorded employee telephone conversations for its own advantage;

4. Whether NetFortris provided unjust and unreasonable service by recording employee telephone conversations with customers, in violation of Pub. Util. Code Section 451;

5. Whether NetFortris violated Rule 1.1 of the Commission’s Rules of Practice and Procedure by making misrepresentations to the Commission in response to the Commission’s Utility Enforcement Branch discovery requests;

6. Whether NetFortris violated any other Commission rule or order or California statute in which the Commission has jurisdiction to enforce; and,

7. Whether penalties pursuant to Pub. Util. Code Sections 2107, 2108, and 7903 are warranted and, if so, the amount appropriate to the facts and the law; and,

8. Whether any other remedies available to the Commission are warranted.

The issue of sanctions and penalties to be imposed encompasses consideration of Pub. Util. Code Section 2107, which sets a $500 minimum and a $50,000 maximum fine for each offense, and Section 2108, which provides that every day is a separate offense, and Pub. Util. Code Section 7903, which provides for either or both a fine not exceeding $10,000 or imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or by imprisonment in a county jail not exceeding one year. Further, every corporation or person, other than a public utility “which or who aids or abets any violation of the California Constitution or Commission order, decision, rule, direction, or demand, or requirement of the [C]ommission” is subject to a penalty of $500 to $50,000 for each offense.[41] Also, the issue of sanctions may encompass the consideration of any or all other remedies available to the Commission, including remedies pursuant to Pub. Util. Code Section 701.

B. Preliminary Schedule

Pursuant to Rule 7.6(a), appeals of the categorization of this investigation, if any, are to be filed and served within 10 days of the date this order is issued.

Respondent NetFortris may file responses on the preliminary determination of need for evidentiary hearings, issues, and schedule within ten days of the date this order is issued. Other persons who intend to move for party status may also file responses on these matters within ten days of the date this order is issued, provided that such response is accompanied by written motion for party status (See Rule 1.4(a)(4) and (b)) and such motion is granted. Replies to responses may be filed and served within 5 days of the due date for responses.

A prehearing conference shall be set pursuant to Rule 7.2 as soon as practicable after a Commissioner and Administrative Law Judge are assigned to this proceeding. During the prehearing conference, the Administrative Law Judge will calendar a date, time and location for a hearing on the Order to Show Cause in a subsequent ruling or order.

The schedule for taking testimony and briefing shall be determined by the assigned Commissioner, and may be modified by the assigned ALJ as required to promote the efficient and fair resolution of the investigation. It is expected that the investigation will be resolved no later than 12 months from the date this investigation is instituted, pursuant to Pub. Util. Code Section 1701.2(e).

CATEGORY

The category of this proceeding is adjudicatory. Accordingly, ex parte communications are prohibited pursuant to Rule 8.3(b).

PRELIMINARY DETERMINATION OF NEED FOR HEARING

It is preliminarily determined that evidentiary hearings will be needed in this proceeding.

SERVICE OF OII

This OII shall be served on the Official Service List for C.15-04-017. Service of the OII does not confer party status or place a person who has received such service on the Official Service List for this proceeding. An initial service list for this proceeding shall be created by the Commission's Process Office and posted on the Commission's Website (cpuc.) as soon as it is practicable after the first prehearing conference. Any interested party may also obtain the service list by contacting the Process Office at process_office@cpuc..

Addition to the official service list is governed by Rule 1.9(f) of the Commission’s Rules. Any person will be added to the “Information Only” category of the official service list upon request, for electronic service of all documents in the proceeding, and should do so promptly in order to ensure timely service of comments and other documents and correspondence in the proceeding. (See Rule 1.9(f).) The request must be sent to the Process Office by e-mail (process_office@cpuc.) or letter (Process Office, California Public Utilities Commission, 505 Van Ness Avenue, San Francisco, California 94102). Please include the Docket Number of this rulemaking in the request.

Persons who move for party status (See Rule 1.4) will be added to the “Parties” category of the official service list upon granting of such motion. In order to ensure service of comments and other documents and correspondence in advance of obtaining party status, persons should promptly request addition to the “Information Only” category as described above; they will be removed from that category upon obtaining party status.

SUBSCRIPTION SERVICE

Persons may monitor the proceeding by subscribing to receive electronic copies of documents in this proceeding that are published on the Commission’s website. There is no need to be on the official service list in order to use the subscription service. Instructions for enrolling in the subscription service are available on the Commission’s website at .

PUBLIC ADVISOR

Any person or entity interested in participating in this rulemaking who is unfamiliar with the Commission’s procedures should contact the Commission’s Public Advisor in San Francisco at (415) 703-2074 or (866) 849 8390 or e-mail public.advisor@cpuc.. The TTY number is (866) 836 7825.

IT IS ORDERED that:

1. In accordance with Rule 5.1 of the Rules of Practice and Procedure, the Commission institutes this order instituting investigation and orders NetFortris Acquisition Co., Inc. to appear and show cause why it should not be sanctioned for violations of General Order 107-B; California Public Utilities Code Sections 702, 7903, and 451; and, Rule 1.1 of the Commission’s Rules of Practice and Procedure.

2. NetFortris is hereby given notice that the Commission may impose fines in this matter pursuant to Public Utilities Code Sections 2107, 2108, and 7903 inter alia, and may order the implementation of operational and policy measures designed to prevent any subsequent misuse of telephone recording capabilities.

3. Pursuant to Rule 7.1(c) of the Commission’s Rules of Practice and Procedure, this proceeding is categorized as adjudicatory. Ex Parte communications are prohibited. The categorization of this Order is appealable under Rule 7.6.

4. Pursuant to Rule 7.3, this Order constitutes a preliminary scoping memo. The issues of this proceeding are framed in the above order, which may be amended by subsequent order or ruling of the Assigned Commissioner or Administrative Law Judge. These issues will be heard in this proceeding without prejudice to any related proceedings. Comment on the preliminary determination of need for evidentiary hearings, issues, and schedule are due within ten days of the date this order is issued.

5. A prehearing conference shall be convened before an Administrative Law Judge for the purpose of establishing a schedule in this matter including the exchange of prepared testimony, and the date, time, and location of a hearing on the Order to Show Cause and an evidentiary hearing. For good cause shown the Administrative Law Judge and/or Assigned Commissioner may extend the deadlines specified herein, for any particular responses required.

6. To facilitate the completion of this investigation, and consistent with the provisions of Public Utilities Code Sections 311, 314, 581-82, and 584, staff shall continue discovery and investigation of the operations of Respondents. NetFortris shall cooperate fully with staff’s inquiries and preserve all records related to the matters described above until the completion of this Investigation. Any data requests to staff shall be limited to matters discussed in this Order Instituting Investigation, the Staff Report, and any further prepared testimony offered by staff in this proceeding.

7. Respondents are ordered to preserve until further order by the Commission all information and documents, regardless of age, which might relate to this action, including but not limited to correspondence with consumers and third parties, inter-office memoranda, inter-office email, disk drives, company websites including archived sites, bank account and other financial records, and complaints (i.e., all expressions of dissatisfaction) from California consumers. Respondents are ordered to cooperate with Staff in its investigation, and provide information, documents and witnesses as requested.

8. A copy of the Consumer Protection and Enforcement Division’s Staff Report will be placed in the record of this proceeding.

9. We expect staff to bring any newly discovered information or alleged violations by Respondents to our attention. Staff may present additional allegations to the Administrative Law Judge in the form of a motion to amend the scope of this proceeding, which shall be supported by a further staff report or declaration supporting the proposed amendments.

10. The Executive Director shall cause this order instituting investigation to be served on the official service lists for C.15-04-017.

11. The Executive Director shall cause a copy of this Order Instituting Investigation and Order to Show Cause to be served by certified mail on the Respondent, NetFortris and each individual listed below at:

Kevin Dickens, Chief Operating Officer

NetFortris Acquisition Company, Inc.

455 Market Street, Suite 620

San Francisco, CA 94105

Gene Carr, Co-Chief Executive Officer

NetFortris Acquisition Company, Inc.

455 Market Street, Suite 620

San Francisco, CA 94105

Nick Zanjani, Director

Consumer Protection and Enforcement Division

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

nick.zanjani@cpuc.

Jeanette Lo, Program Manager

Consumer Protection and Enforcement Division

Utility Enforcement Branch

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

jeanette.lo@cpuc.

Jeff Kasmar, Supervisor

Consumer Protection and Enforcement Division

Utility Enforcement Branch

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

jeff.kasmar@cpuc.

Nathan Christo

Consumer Protection and Enforcement Division

Utility Enforcement Branch

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

nathan.christo@cpuc.

Rosanne O’Hara, Staff Attorney

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

rosanne.o’hara@cpuc.

This order is effective today.

Dated September 14, 2017, at San Francisco, California.

MICHAEL PICKER

President

CARLA J. PETERMAN

LIANE M. RANDOLPH

MARTHA GUZMAN ACEVES

CLIFFORD RECHTSCHAFFEN

Commissioners

-----------------------

[1] All subsequent statutory references are to the California Public Utilities Code unless otherwise stated.

[2] D.02-04-036, Ordering Paragraph (OP) 1, at 6.

[3] D.14-01-036, at 2.

[4] D.14-01-026, OP 1, at 11.

[5] Staff Report at 2. The Staff Report is attached herein as OII Attachment A.

[6] Prior to June 1, 2016, UEB was in the Commission’s Safety and Enforcement Division.

[7] Staff Report at 3. On November 12, 2015, Mr. Zabit, Mr. Alvarez and NetFortris filed a Joint Motion requesting dismissal of the case with prejudice because the moving parties resolved the dispute through mediation. On March 22, 2016, the Commission issued D.16-03-005 dismissing the complaint. D.16-03-005, at OP 1, p. 6.

[8] NetFortris Complaint filed in the Supreme Court of New York on March 3, 2015, at 7. Attached herein as OII Attachment B.

[9] Staff Report at 1.

[10] Id.

[11] Verified Complaint of Anthony Zabit And Roberto Alvarez Against NetFortris Acquisition Co., Inc.,

at 1. See Attachment B to the Staff Report.

[12] Staff Report at 6-7.

[13] Id., at 7.

[14] Id.

[15] Id.

[16] Id., at 17.

[17] Id., at 7.

[18] Staff Report at 18.

[19] Id., at 8.

[20] Id., at 8-10.

[21] Id., at 8-9.

[22] Id., at 8.

[23] Id., at 8-9.

[24] Staff Report, at 9.

[25] Id., at 9-10.

[26] D.02-04-036, at OP 1, p. 6.

[27] Pub. Util. Code Section 701 states, “[t]he commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.”

[28] Pub. Util. Code Section 702.

[29] Deposition Transcript of Thomas Swayze, at 88:11-90:11; Declaration of Thomas Swayze In Opposition to Plaintiff’s Ex Parte Application to Preclude Defendant’s Use of Recorded Telephone Information, at 6, paragraphs 30-32. Attached herein as OII Attachment C.

[30] Declaration of Grant Evans in Support of Cross-Complainant NetFortris Acquisition Co., Inc.’s

Ex Parte Application for Temporary Restraining Order, for Expedited Discovery, and for OSC RE Preliminary Injunctunction, at 9, paragraphs 49-51. Attached herein as OII Attachment D.

[31] San Diego Gas & Electric Co. v. Superior Court (1996) 55 Cal.Rptr.2d 724, 13 Cal.4th 893, 920 P.2d 669.  

[32] “All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.” California Constitution. Article I, § 1.

[33] See GO 168, “Market Rules to Empower Telecommunications Consumers and to Prevent Fraud,”

Part 1.

[34] “Consumers have a right to personal privacy, to have protection from unauthorized use of their personal information and records, and to reject intrusive communications and technologies.” GO 168, Part 1.

[35] Staff Report at 16.

[36] Id.

[37] See Attachment N to the Staff Report.

[38] Declaration of Thomas Swayze at 1, paragraph 2. Attached herein as OII Attachment E.

[39] Staff Report at 8.

[40] “The Commission has held that the standard of proof that [the Safety and Enforcement Division] must meet is that of a preponderance of evidence. Preponderance of the evidence usually is defined in terms of probability of truth, e.g., such evidence as, when weighed with that opposed to it, has more convincing force and the greater probability of truth.” D.16-08-020, p. 18, citing In the Matter of the Application of San Diego Gas & Electric Company for a Certificate of Public Convenience and Necessity for the Sunrise Powerlink Transmission Project, D.0812-058, citing Witkin, Calif. Evidence, 4th Edition, Vol. 1, 184.

[41] Pub. Util. Code Section 2111.

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