AT&T Is Paying $7.75 Million in Refunds and Fines Over Sham Calls (fortune.com)

AT&T will pay $7.75 million after a federal investigation found it allowed unauthorized third-party charges on its customers' telephone bills, the U.S. Federal Communications Commission said Monday, reports Reuters (via Fortune). From the report: The company allowed "scammers to charge customers approximately $9 per month for a sham directory assistance service," the FCC said Monday. The fraud was uncovered by the U.S. Drug Enforcement Administration while investigating two Ohio companies for drug-related crimes and money laundering, the FCC said. The settlement includes $6.8 million in refunds and a $950,000 federal fine, the FCC said. AT&T signed a consent decree with the FCC and agreed to cease billing for nearly all third-party products and services on landline bills and adopt procedures to obtain express consent from customers prior to allowing third-party charges. The company also agreed to revise its billing practices to ensure third-party charges are conspicuously identified on bills.

Comments

Cequint: Another sham

[Anonymous Coward]

Another sham both AT&T and Verizon seem to do is to charge you for Cequint's caller ID software even if you cancel the free trial.

Stealing pays

[Anonymous Coward]

"The settlement includes $6.8 million in refunds and a $950,000 federal fine"

So stealing is worth it as long as you get away with it 0.950 / (6.8 + 0.950) = 12% of the time

Re:Stealing pays

[Anonymous Coward]

I don't get it, how does that formula prove that?

Re:Stealing pays

[jimbolauski]

The $0.95 million fine was the penalty for stealing 6.8 million. If AT&T did this 100 times how many times would they need to get away with it to make a profit.
GetAway*$6.8 - (100-GetAway)*0.95=0
GetAway*6.8= .95*100 - GetAway*.95
GetAway*7.75=95
GetAway=12.25806 times

Re:Stealing pays

[nitehawk214]

So the more they cheat, the more likely they will make money on this....

Your Sig is on-topic here, as well.

Re:Stealing pays

[nitehawk214]

Actually if the interest they made on having 6.8 million for x number of years outweighs the fine, they might of made a profit even after the fine.

Only took em 30 years to get caught...

[Anonymous Coward]

...committing blatant & obvious fraud on a nationwide level.

The law never sleeps!

WooHoo! I win another quarter for the slot machine

[fustakrakich]

This refund... another sham, amirite? Just some chump change to these guys.

Tricks of the Mouth

[Tablizer]

We've had the experience whereby we order a new service or discount program. The AT&T "operator" starts talking fast and rattling off obscure names and words. When we ask for clarification, the operator just changes the subject, or says, "one second, let me check on something". Then a month and a half later, strange fees start showing up on our bill. After giving us the transfer run-around, we finally ask to have the fees removed. The "operator" says, "Sorry, they must have gotten there by accident".

I suspect these "operators" get a cut of any add-on service they sell, and thus have an incentive to stick you with a service using well-honed tricks of the mouth. In case the conversation is recorded, they have their "sloppy talk" as an excuse. In the end, it's "just a misunderstanding".

Why are all their "misunderstandings" in THEIR favor and not ours?

If there truly is a hell, these "operators" will roast crispy and crunchy (along with the managers who know about it and do nothing).

Re:Tricks of the Mouth

[TroII]

When we ask for clarification, the operator just changes the subject, or says, "one second, let me check on something". Then a month and a half later, strange fees start showing up on our bill.

One scam I've encountered before, and I'm not saying AT&T does this but other companies do, is they'll record your entire phone call. When they say "one second, let me check on something" and you reply with something like "that's fine," now they have a recording of you saying "that's fine." If you challenge the charges later on, they dig up the recorded phone call and someone spends a couple minutes stitching it together so it sounds like you said "that's fine" after they asked "Would you like to order $EXPENSIVE_SERVICE?"

I'm very leery of saying any affirmative phrases ("OK", "yes," "sure") over the phone unless I initiated the call or I know the other party.

Re:Tricks of the Mouth

[Anonymous Coward]

That's alright :P NSA has a raw archive of all Verizon and AT&T wire-line comms, gonna have to bust out a FOIA just to defend yourself against the corporate strong arms out there.

~$8 million

[ausekilis]

For a company that makes billions each year. Guess rates are gonna go up a little bit to cover the fine and so the CEOs can pad their wallets for a job well done. After all, they took 5 minutes to fix a problem the gov found.

Sham legal justice

[swb]

If you and I did this through some business we owned, we would be charged with a dozen felonies. The prosecutor would have a field day over the fact that we obscured the nature of the charges to make it look like our legitimate business charges and did nothing to guarantee the charges were legitimate. Bottom line, we would go to jail.

AT&T? A fine so small that it is a rounding error on their SEC filings. And certainly not a hint of any criminal prosecution.

This is sham justice. AT&T should have been fined 10x the gross revenue they received from this little scam. The executives in charge of managing this scam should have been jailed for fraud, possibly even as co-conspirators in whatever drug investigation caused the DEA to find this operation.

They could have sent a message that said if you want to skim the cream with your billing operation, great, but make sure the billing is 100% legitimate or you will be held accountable for fraud.

Re:Sham legal justice

[amiga3D]

The only reason this got caught was because of a drug bust. I say it's really a money laundering scheme for drug kingpins. Isn't that life in prison?

Re:Sham legal justice

[gumbi west]

I would actually guess that they took out a phone number for the bust, tried to figure out what this charge was and told the DOJ who tracked it down. Basically, federal bureaucracy at work.

What the hell

[rsilvergun]

I've got karma to burn, so I'll point out that this is the inevitable result of our misguide attacks on gov't and "Bureaucracy" (which work since we all hate the DMV). America never seems to cut down on the pork and waste going to the top but we do a fine job cutting back on enforcement. Then we all sit around /. and complain that AT&T made 20x profit on a piddly fine and that they'll do it again.

Whenever somebody tells you "Gov't's not the solution, it's the problem" check their credentials. They probably hail from a right wing think tank funded by a billionaire.

Re:What the hell

[swb]

The problem is that I don't think shady business practices are an enforcement priority, period. David Horowitz's "Fight Back" consumer TV show went on the air in 1976, and Consumer Reports has been publishing longer than that. 60 Minutes used to be famous for their on-camera ambush of fraudulent business before they became a talk show for the Geritol set.

American commerce is chock full of hucksters, scammers and flim-flam artists that get away with all kinds of shady practices that if pulled off by individuals would result in jail time, but as "business" they seem pretty immune from investigation let alone prosecution.

I could tell the cops my elderly neighbor sells Oxycontin and get more investigatory effort than is put forward towards the entire state's car dealers.

I sometimes wonder if hustling people (in effect, lying to them) is so ingrained in American culture that we really don't *want* strict enforcement of scams and fraud because at the end of the day we worry that our own frauds will be exposed and punished.

Re:What the hell

[Anonymous Coward]

The problem is that both big gov and big biz are both evil and big gov justifies itself by claiming to keep big biz in check but they are both getting fat off offs. Kinda like the old saying that one lawyer goes broke, but two get rich.

--XYZZY--

Re:What the hell

[Transist]

I honestly don't think America has a culture of scamming in the traditional lying-and-swindling sense. I have no evidence to back my claims, but I think in a lot of other countries you have to much more wary that businesses are straight-up lying to you. On the other hand, I think I agree with Scott Adams when he says that a lot of American businesses are "confusopolies". They inundate consumers with options, purchasing plans, agreements, contracts, and all sorts of unnecessary business models designed to overwhelm consumers- none of which is necessarily fraudulent. But the net effect is either frustrating consumers to the point that they will accept a worse deal than they should, or leading the customer to believe they made a wise choice when in reality they didn't have much of a choice at all.

Re:What the hell

[Anonymous Coward]

... Gov't's not the solution, it's the problem ...

That's the flip-side of the 'rich people create jobs' meme which encourages the government to turn a blind eye to the dealings of rich people. Unless the US government has an explicit commission to handle it (eg. FCC, FTC, FDA, NHTSA, DEA, bATFe), criminal deeds are unchecked because the FBI is more worried about terrorism (the purview of the DHS), money-laundering and organized crime. The FBI's record involves teaching idiots to say they're terrorists, more than finding hidden terrorists.

Re:What the hell

[swb]

They inundate consumers with options, purchasing plans, agreements, contracts, and all sorts of unnecessary business models designed to overwhelm consumers- none of which is necessarily fraudulent.

I would argue that any deliberate attempt to confuse or overwhelm customers, especially with low-value and high cost options, is prima facie fraud because it's done to prevent consumers from making rational choices and represents trickery designed to sell products people don't need or don't understand.

I also think that sellers go out of there way to create false choices and use obscure language in a deliberate attempt to eliminate product comparisons and reduce the perception of choice and competition and create information asymmetry.

It all represents a deliberate attempt to deviate from an optimal market where buyer and seller have equal information.

Re:What the hell

[nitehawk214]

Look at American history. Where does the term "snake-oil salesman" come from? We have been a culture of hucksters and scammers for 240 years.

Look at products like our soda giants, Coke and Pepsi. Both were started as "health remedies".

Maybe pharmacists and doctors actually thought these were some miracle health drug, but I am going to guess that took a back seat when they realized people enjoyed drinking these things.

It's not the operator's fault

[rsilvergun]

they're working with what they have. It's easy as hell to blame the little guy, but shit runs down hill. Having worked in a few "real" call centers (the nasty sort) I can tell you that if you don't make your sales quota you get fired. Not for missing your quota (heaven forbid), but for any one of the dozens of minor infractions that exist. Doesn't help that the pay is so low it's either cheat on your sales or skip eating this week.

Re:It's not the operator's fault

[Tablizer]

I can tell you that if you don't make your sales quota you get fired ... Doesn't help that the pay is so low it's either cheat on your sales or skip eating this week.

Although not a call-center, I've been in ugly situations during recessions, so I can relate.

It's why something like a union would be nice: if you have evidence of being pressured into deceiving customers by your manager(s), you could report it without risk of being terminated. If it's likely to turn into word against word, then other employees can testify also. I imagine there's lots of gray areas, though.

A century or so ago, factory employers made work a high-pressure hellhole, and that's why unions grew. These Phone Tanks have reinvented similar ugliness.

The problem is that unions make the cost of labor too high such that the jobs flow to the 3rd world now. Perhaps we can demand that if a country wants to trade with us, they must have sufficient labor protections in place. We don't have to let them into our market: it's our damned country: let's not make it a race to the bottom.

It's all the government's fault.

[Anonymous Coward]

If not for their pesky laws, we could just kill these bastards and solve the problem without paying taxes.

Free Market or Death!

Yep - it is time...

[Anonymous Coward]

To classify them as public utilities, with strict regulation. State level - where the PSCs already exist...
Let the Feds watch the PSCs for corruption.
And set some pretty strict rules for abusing customers.
( corporate death penalty? Life sentance limit to 2% profit?, no new services to be offered...)

Re:Yep - it is time...

[Anonymous Coward]

A good idea for corporate death penalty would be "Shut your doors for a month. You are still obligated to pay your employees their expected daily income and your closure is considered a breach of contract."

When I say "doors shut", I mean "doors shut". Call center? Phones off the hook. Website? Replaced with the details of the shutdown. Executives? Forbidden from discussing anything relating to business. Vending machine outside the building? Empty. Human Resources? Oh ho ho you think you can fire everyone? That's adorable. Only thing they're allowed to do is terminate contracts from angry clients who are a month without service.

A single contract breach taking place can cost a company huge amounts of money. No company on this planet can survive closing their doors for a month and simultaenously breach every single contract (which by law allows you to walk away without penalty) while still being obligated to pay their employees.

If companies would be punished like that, fines would no longer be a cost of doing business. It would be absolutely devastating, and that's the way it should be.

There they go

[Anonymous Coward]

ATampT is at it again.

Not if you set your corporations up right

[rsilvergun]

worst case you close the LLC and open another one. Now, doing that is tricky as all hell get out. Ever wonder why folks like Romney spend so much time in school? It's learning the difference between the letter of the law and the spirit.

Re:Not if you set your corporations up right

[Tablizer]

worst case you close the LLC and open another one.

My dad knew a guy at church* who would open a furniture store, screw the customers, file bankruptcy, reopen a similar store under a relative's name, screw the customer, file bankruptcy, rinse, repeat until after 7 years where the original owner is no longer liable for the bankruptcy, and starts the cycle again.

Ever wonder why folks like Romney spend so much time in school? It's learning the difference between the letter of the law and the spirit.

If you can afford big lawyers, you get away with far more.

* All the scams and mayhem from church members always puzzled me. Lots of shit going on there. If they are true believers, they should realize they are going to hell. Are they so greedy or horny that they'll take pleasure now and rot for eternity because of it? Either the devil is real and tempting them, or deep down they believe the religion to be full of shit. Or maybe greed and sex are a reflex more powerful than the fear of baking 30 years from now. I've known women with seemingly hypnotic powers myself. I'm too geeky to draw their interest though (for good or bad). Humans are odd. Religion odder still.

Re:Not if you set your corporations up right

[Anonymous Coward]

Once you start seeing church as primarily a community, and recognize that a lot of people go just because they always did and they know people there, all of this is unsurprising.

If it were just about religion, you could just as well sit at home reading the bible.

AT&T landline IS a highly regulated utility

[raymorris]

Quoting TFA for you:

were billing thousands of consumers for a monthly directory assistance service on their AT&T landline telephone bills.

> To classify them as public utilities, with strict regulation. State level - where the PSCs already exist...
Let the Feds watch the PSCs for corruption.

That's precisely how they ARE classified and regulated. So you're suggesting we keep treating them as we have been treating them, so they keep doing what they've been doing. As opposed to most any other business, say a burger joint or mexican restaurant. Because restaurants, which do NOT have regulated billing, have a lot more BS on the bill than AT&T does, right?

> limit to 2% profit?

That sounded good when it was first suggested, over 50 years ago. The thing is, that means the only way they can make more money from a customer is to make the service more expensive. Contrast that with wireless, or voip. When a voip provider can find a way to reduce costs by 10%, they can get more customers by dropping the rate 5% (or skipping a rate increase) AND make 5% more per customer. The unregulated voip service provider has incentive to REDUCE costs. The regulated provider with profit set at 5% has incentive to INCREASE costs. Compare the total bill and services provided for Vonage vs AT&T to see which one works better. On the AT&T bill, don't forget the $26 in misc small fees on top the the $22 "monthly rate" (or $54 in extra fees for the same features that Vonage includes in their $25 flat rate).

Proof again

[Anonymous Coward]

... nearly all third-party products and services on landline bills and adopt procedures to obtain express consent ...

Let's call it what it really is; fraud. In the movie 'The firm' (1993), such bill-padding resulted in the business being shut-down. This slap on the wrist proves 2 things: 1) Fortune 500 companies are 'too big to jail'; 2) the government offers very little protection against corporate greed.

Why didn't the FTC's Bureau of consumer protection respond to this fraud, years ago?

Having a lot of religious family...

[Anonymous Coward]

and experience with a couple wacky religious girlfriends (and even more stories from friends with wacky male/female partners who were religious), the amount of sin occurring *IN* church, nevermind by staunch churchgoers seems a *LOT* higher than the average for non-practicing, agnostic, or atheist persons.

But that just might be skew in the group of people I have recieved the chance to interact or observe.

Re:Having a lot of religious family...

[Tablizer]

I suspect they are repressed, and when they "slip", they slip big and heavy because bottled up emotion overwhelms them.

Wow

[nitehawk214]

AT&T is a sham? Wow!