Complaint Summary
With the current trend of related accounting misdeeds, such as those of MCI or Global Crossing, the country is now keenly aware that large corporations often have substantial accounting issues that hurt shareholders and the economy as a whole. It is clear that the government has ignored these problems in the past, however media attention and public outcry have demanded that these issues be dealt with.
Teletruth has attempted to bring attention to this issue in the past, however much to our dismay, the state commission has chosen to ignore our original filing, forcing us to file a secondary complaint. Like any government agency that represents the interests of the people, the Commission has a responsibility to properly investigate claims brought to them, or that have been given to them by another government agency. As a result, when our grievances are ultimately verified and investigated, it will be known on record how the Commission responded (or did not respond) when the complaints were brought forth.
This complaint makes the following claims:
1) In the year 1999, the FCC released the results of audits of the Bells' continuing property records that found that the Bell's accounting records contained $5 billion dollars in missing equipment and an additional $13.6 billion in "unverifiable" equipment. -- a total of $18.6 billion dollars.
2) This finding was only the first of four audit areas that needed to be examined. This audit area, Central Office Equipment, was the easiest to examine when compared to the other audit areas, such as "Plug-ins" (equipment that is movable.)
3) Because of political pressure from Congressmen Tauzin, Dingell, and other interested parties, the FCC did not endorse its own auditors and turned the audits over to the state commissions. To date, the Commissions have not fully investigated these audits. To read a letter sent by these Congressmen to the FCC see:
http://www.house.gov/commerce_democrats/press/106ltr5.htm
As of March 2002, the FCC closed the Accounting Safeguards Division that was responsbile for audits and examining other accounting areas.
4) To their credit, the New York Public Service Commission is the only commission known to have independently investigated the initial portion of the audits. They issued a report August 8th, 2001 that independently corroborates some the evidence found by the FCC auditors. See: http://newnetworks.com/NYplantdoc10309.pdf
The Report found that $633 million of "non-specific" investment expenses are on the FCC's books but are now missing.
5) This Report found that there were both FCC as well as SEC violations based on incomplete and inaccurate accounting. The Commission did not investigate the rest of the audit areas, nor did they give customers refunds.
6) TeleTruth estimates that there could be over $2.5 billion dollars of missing or unverifiable equipment In New York. This information could be corroborated if the rest of these audits are completed.
7) Nationwide, TeleTruth estimates that some $10-20 billion dollars of equipment is missing from the other three unaudited areas, and the amount of total equipment missing or unverifiable could be as high as $20-$80 billion nationwide.
8) The price of all services from the "FCC Subscriber Line Charge" or other charges on local service to the prices to all competitors (including prices known as "TELRIC") need to be recalculated and the costs to customers and competitors reduced. On the state level, this could equate to hundreds of dollars of savings for customers.
It is also ironic that as of this writing, both the FCC and the New York Commission have increased the phone rates customers pay in New York. The FCC raised its "FCC Subscriber Line Charge", from $3.50 to $6 dollars over the last two years. A 70%+ increase, while the state commission raised rates 11%.
10) The role of the company's hired auditors Price Waterhouse Coopers should also be investigated separately for their failure to bring to light all of the missing equipment issues as well as SEC and FCC violations, including the exclusion of certain categories of equipment from the audit and verification process.
In Conclusion:
Based on the aforementioned revelations, the state commission is obligated to investigate the continuing property records of the Bell companies because of known and documented accounting problems.
The State should continue all parts of the audit and refund money to customers and competitors as well as lower current phone rates.
We would also like to remind the New York State Attorney General's Office of their own previous comments about the FCC's Audits and how the findings effects phone rates.
"The New York State Attorney General is an advocate on behalf of New York
State's residential and small business utility ratepayers, before both the FCC
and the New York State `Public Service Commission ("NYPSC"). The interest of
New York consumers in the FCC's audit of NYNEX/Bell Atlantic North's
continuing property records is manifest. Approximately half of NYNEX/Bell
Atlantic North's reported costs represent capital investment recorded in the
continuing property records. The FCC and the NYSPSC use these cost figures
to set NYNEX/Bell Atlantic North's rates. The audit shows that NYNEX/Bell
Atlantic North's costs are inflated. New York State telephone customers, both
commercial and residential, are adversely affected if the various charges which
comprise their rates are inflated because of overstated capital investment
figures….Thus, the auditors' findings, if adopted by the FCC, could lead to
significant adjustments in the intrastate and interstate rates paid by New York
businesses and residents."
To read the original New Networks Institute Complaint see: