- The Washington Times - Saturday, July 21, 2001

Mississippi regulators yesterday fined Reston telephone company Talk America Holdings Inc. $225,000, the largest it has ever levied, after an investigation into the company's telemarketing practices.

As part of an out-of-court settlement, Talk America agreed to pay the fine but neither admitted guilt nor denied the charges made by the Mississippi Public Service Commission.

"We didn't base the fine on the number of complaints against the company. We based it on similar cases we have dealt with in the past, and this was the most severe case we have faced," Mississippi Public Service Commission Chairman Nielsen Cochran said.

Talk America Holdings Executive Vice President George Vinall signed the order saying the company will pay the fine, but the company didn't return calls seeking comment.

The commission's probe found that Talk America Holdings used questionable telemarketing practices for the purpose of switching the long-distance and local-calling service of Mississippi consumers.

Talk America, founded in 1989 as Tel-Save Inc., markets calling service in 17 states and has 1.4 million customers. It also markets service as Talk.com.

Most of those are long-distance customers who signed up through a Talk America promotion marketing AOL Long Distance.

People pitching service to Mississippi consumers used "a combination of questionable schemes," Mr. Cochran said.

In some instances, consumers thought they were signing up for a discounted AOL long-distance service, but they never received a discount.

In other cases, Talk America switched consumers' local-calling service. But the company is not authorized to market or provide local telephone service in the state.

Mr. Cochran said it was difficult to determine exactly how many complaints consumers made about Talk America. But when the state public service commission filed its initial complaint against Talk America in October, it had received 52 complaints from consumers who said their long-dis-

tance service was changed without their consent.

Talk America will pay its fine in five installments.

The company has been fined in other states, as well. Alabama regulators fined the company $42,000 May 16 in response to 84 verified complaints of slamming.

Regulators in North Carolina and Florida are continuing investigations into the company.

Fines from state public service commissions are simply the cost of doing business, said Vik Grover, wireline-services analyst for New York investment banker Kaufman Brothers.

"All of the [public service commission] stuff is probably just business as usual when you have to work hard to compete for consumers in a competitive market," Mr. Grover said.

Mississippi regulators said they reserve the right to sue the company, despite yesterday's settlement.

"We have made it clear to

Talk.com that we will not hesitate to initiate legal proceedings to cancel their authority to provide telephone service in our state if future misleading telemarketing activities are brought to our attention," Mr. Cochran said.

Talk America's stock closed at 82 cents yesterday on the Nasdaq Composite Index, up 1 cent.

The company lost $61.8 million last year on revenue of $544.5 million.

It lost $10.1 million in the first quarter on revenue of $137.8 million.

Mr. Grover estimates that Talk America's pretax revenue for the second quarter will reach $5.1 million. The company plans to report earnings in early August.

Talk America had 1,910 employees at the end of last year.

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