Stevensville Businessman Pleads Guilty to Fraud
PACER Case Reference: 13-43
MISSOULA – Steven Vincent Sann, a 59-year-old resident of Stevensville plead guilty today to charges of wire fraud and money laundering. If the maximum sentences were imposed and ordered to be served consecutively, Sann faces 30 years in prison, $500,000 in fines and 6 years supervised release. U.S. District Judge Dana Christensen set sentencing for July 17, 2015. Sann was released pending sentencing.
Assistant U.S. Attorney Tim Racicot told the court that Sann managed the “Sann Companies” which 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 – Emerica Media Corporation. 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. The United States alleged the offense occurred between March 2009 and December 2011.
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. Such unauthorized billing is known as cramming. Cramming is the placing of unauthorized charges on your wireline, wireless, or bundled services telephone bill. The Federal Communications Commission (FCC) has estimated that cramming has harmed tens of millions of American households. Crammers often rely on confusing telephone bills to trick consumers into paying for services they did not authorize or receive, or that cost more than the consumer was led to believe.
In order to place charges on land-line telephone bills for its services, the Sann Companies contracted with billing aggregators such as Transaction Clearing. Transaction Clearing worked with the phone companies (LECs) to facilitate the placing of charges on the monthly phone bills of the Sann Companies’ customers.
The federal charges were based on Sann’s fraudulent misrepresentations to Transaction Clearing related to his and his companies’ business relationships with Transaction Clearing. In March of 2010, Transaction Clearing defined for the Sann Companies what it considered a “cramming complaint” and in its contracts with the Sann Companies 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 or unjustified; it only mattered that a complaint had been made. 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.
An employee of Tri-Data Systems in Montana (Emerica’s accounting firm), at the direction of Emerica in Montana, sent an email 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.
In addition, Sann transferred $100,000 from a bank account to a Charles Schwab and Company 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 the wire fraud scheme described above.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service.