Settlement talks set in major phone fraud case

AP News
Posted: Sep 17, 2013 6:02 PM

BILLINGS, Mont. (AP) — A Montana family accused of tacking $70 million in unauthorized charges onto phone bills nationwide will enter settlement talks with federal attorneys after pushing to resolve the case short of a trial.

The settlement talks set for Wednesday come after the Federal Trade Commission sued Steven Sann, his wife Terry, son Nathan and accountant Robert Braach in January for allegedly "cramming" unauthorized phone charges onto customers' bills.

The Sanns and Braach have said they took steps to prevent false charges and had a system in place to check that their customers actually wanted the services being offered.

A criminal investigation is ongoing, and at least one witness has been called to testify before a federal grand jury sometime in September, according to court documents filed by the defendants' attorneys.

The settlement conference will take place before Magistrate Judge Jeremiah Lynch in U.S. District Court in Missoula. It was uncertain if representatives of the U.S. attorney's office would participate or be willing to consider a settlement of possible criminal matters.

Any deal in the civil case brought by the Federal Trade Commission would have to be approved by the agency's five commissioners, FTC attorney Richard McKewen said.

Attorney Joshua Van de Wetering, who represents Braach, said his client hoped to walk out of the meeting with a settlement.

"My client doesn't have any interest in being in that sort of business again," Wetering said.

The nine companies run by the Sanns were voicemail and electronic fax services that charged a customer's phone bill through an intermediary called a bill aggregator. The companies had more than 1 million customers, generated by Internet sales through third-party marketers.

The government said hundreds of customers complained that they were hit with unauthorized phone bill charges ranging from $9.95 to $24.95. Other customers didn't even know they were being charged.

The Sanns and Braach have said they signed up customers using unambiguous marketing practices.

Preliminary injunctions in the case issued in May by Judge Dana Christensen froze much of the defendants' assets and halted any further phone charges, although most charges had been stopped about a year earlier. Some residual billing had continued until the injunction was issued.

The asset freeze carved out living and business expenses for the Sanns and their other companies, including enough money for mortgage payments for a ranch in western Montana and $15,000 a month for maintenance, property taxes and other expenses for Bibliologic, a religious organization set up by Steven Sann and Braach.

If a settlement isn't reached, the Sanns want the court to put the FTC civil case on hold until the criminal investigation is resolved. They say that's needed to avoid compromising the defendants' Fifth Amendment right against self-incrimination.

The FTC said in court filings that putting the civil case on hold would drain assets that could otherwise go toward redressing consumers for their losses.

"Defendants are drawing down tens of thousands of dollars each month from assets that represent ill-gotten gains to which the FTC is entitled," McKewen wrote in a recent court filing.

The Sanns' attorneys did not immediately respond to requests for comment from The Associated Press.

Of the $70 million billed since 2008, the Sanns' companies returned more than $40 million after customer challenges, according to the FTC complaint.

Data collected by the federal agency show many customers didn't know that were being charged. From March 2010 to April 2012, fewer than 1 percent of the people purportedly with voicemail accounts through the companies actually accessed them.