Montana Man Sentenced to Prison in Telephone Billing Scheme
MISSOULA—A federal judge sentenced Steven Vincent Sann, 61, of Stevensville, Montana, to two years in prison and one year of supervised release for orchestrating a nationwide scheme involving extra charges listed on land-line telephone bills. Sann was also ordered to forfeit $500,000, which he obtained from the scheme then transferred to his personal investment accounts. The sentencing follows an April 3, 2015, change of plea in which Sann pleaded guilty to wire fraud and money laundering charges. Chief District Court Judge Dana Christensen presided over the case, and sentenced Sann to 24 months in prison on each count, to run concurrently.
“Sann engaged in a complex manipulation of tens of thousands of consumers across the country,” said Montana U.S. Attorney Michael Cotter. “Through a long-term joint effort with our law enforcement partners, we have held this man accountable for his crimes and sent a shot across the bow warning others who would engage in similar conduct.”
In an Offer of Proof filed by Assistant United States Attorney Timothy J. Racicot, the government stated that if the case had proceeded to trial it would have presented evidence that Sann managed several companies (the “Sann Companies”) that were engaged in the business of marketing a stand-alone voice-mail and fax service, using a practice known as Local Exchange Carrier (“LEC”) billing to collect for the service’s charges. Sann was the president, secretary, treasurer, and director of one of those companies, called Emerica Media Corporation (“Emerica”). The Sann Companies were incorporated in Nevada and most of them designated one person—either a relative or friend of Sann’s—to serve as president, secretary, treasurer, and director.
Utilizing LEC billing to collect for services has come under intense scrutiny over the past several years based on allegations that charges are placed on customers’ monthly bills without their knowledge or consent. The practice is known as cramming and involves the placement of unauthorized charges on residential land-line telephone bills. The unauthorized charging has has precipitated myriad changes in the industry. In order to place charges on land-line telephone bills for its services, the Sann Companies contracted with billing aggregators such as Transaction Clearing, which worked with the phone companies (LECs) to facilitate the placing of charges on the monthly phone bills of the Sann Companies’ customers.
Sann’s guilty pleas relate to misrepresentations he caused to be made to Transaction Clearing concerning customer complaints. Specifically, in March of 2010, Transaction Clearing defined what it considered a “cramming complaint.” The Sann Companies’ contracts with Transaction Clearing required them to report complaints meeting that definition on a monthly basis. The reporting obligation applied whether or not the complaint actually related to a customer being signed up for the service without their consent or knowledge, or was justified. If the complaints reached a certain threshold, the LECs and billing aggregators would require entities such as the Sann Companies to submit action plans in an effort to reduce the volume of complaints. If complaints persisted, the LECs could suspend the Sann Companies and terminate the billing arrangement.
The contracts also required each Transaction client, including the Sann Companies, to disclose the names of other companies or entities owned or controlled by that client’s officers or principals. In order to continue to receive revenue for the Sann Companies from Transaction Clearing, Sann and his agents failed to accurately report complaints meeting Transaction Clearing’s definition of cramming, and also failed to fully disclose Sann’s interest in the Sann Companies.
In relation to Sann’s wire fraud conviction, an employee of Emerica’s accounting firm in Montana, at the direction of Emerica in Montana, sent an e-mail to Transaction Clearing in Texas on March 3, 2011, representing the Sann Companies had no complaints meeting Transaction Clearing’s definition of cramming during February 2011. In fact, the Sann Companies received approximately 479 complaints that met Transaction Clearing’s definition of cramming during February 2011. As it relates to the money laundering conviction, Sann transferred $100,000 from a bank account to a personal investment account on April 4, 2011. The money involved in that transfer was paid to the Sann Companies in connection with funds received from utilizing LEC billing and therefore was derived from Sann’s criminal wire fraud scheme.
Assistant U.S. Attorney Tim Racicot prosecuted the case, which was investigated by the FBI and IRS. Sann will have to serve at least 85% of his sentence before being released from federal prison.