Congressional Report Criticizes FCC and Sorenson
DECEPTION AND DISTRUST
THE FEDERAL COMMUNICATION COMMISSION UNDER CHAIRMAN KEVIN J MARTIN
This investigation was prompted by allegations to the effect that Chairperson Kevin J Martin has abuse FCC procedures by manipulating or suppressing reports, data, and information. Allegations of a broken process at the FCC came from current and former FCC employees, telecommunications industry representatives, and even other commissioners, and were often reported in the press.
According to Mr. Chandler, a single VRS company [Sorenson Video Relay Services] provides 82 percent of all VRS minutes. Continued Mr. Chandler:
‘we know that the dominant provider was overcompensated approximately 80 million in calendar 2006 and 57 million in calendar 2005 ‘
”Despite objections from the FCC staff, three months later Chairman Martin was preparing to circulate a new order setting compensation rates for TRS providers. In a September 4, 2007, e-mail to Chairman Martin’s senior staff, Mr. Chandler delivered what he called ‘last gasp’ on the subject in an attempt to correct the situation:
Does the chairman recognize that these rates perpetuate the enormous (100 million a year) windfall for Sorenson, at the expense of the ratepayers [sic], Does he realize that Sorenson’s own filing shows that its actual cost of proving [sic] VRS in calendar 2006 was in the low $4.00 range, so that the present $6.64 rate was more than 50% higher than Sorenson’s actual costs?
The FCC’s Inspector General (IG) engaged KPMG to conduct an audit for Sorenson. On April 10, 2008, KPMG reported to the FCC that Sorenson had denied the KPMG auditors access to the staff and systems necessary to conduct the audit, and refused to permit them to review the company’s unredacted financial statements for 2004, 2005, and 2006. KPMG was therefore unable to conduct the audit.
Conclusion: We recommend that the FCC immediately initiate a full investigation and audit of Sorenson. It is simply unacceptable that a company subject to Commission regulation and which every year receives millions of dollars from a Government fund can refuse to open its books to Government-authorized auditors. The FCC’s apparent failure to insist on auditing Sorenson’s books indicates an abdication of its responsibility to administer and protect the integrity of the TRS Fund.
In addition, we recommend that GAO investigate the entire TRS program, including the FCC’s efforts to protect the integrity of the Fund and IG’s audits
For the full report: http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/fcc%20majority%20staff%20report%20081209.pdf
For more disucssion on this topic, check out Ed’s blog Ed’s Telecom Alert » Allegations Against FCC Chair Martin
Commentary: Remember how Sorenson used its consumer list to urge the Deaf Community to protest the TRS cuts, in a blatant violation of conflicts of interest? It turns out that the company actually received monies over 50% of its actual costs, with the company being overpaid 80 million dollars in 2006? In other words, they lied to its Deaf consumers about its true operating costs and manipulated them into protesting against the cuts.
Now we hear that Sorenson actually had the audacity to refuse access to the auditors its records.
We witness its monopolistic practices, hugging 82 percent of the market share, and its former unfair practice against the interpreters by insisting that they cannot work for another VRS for a period of time after resigning from Sorenson. Earlier this year Sorenson asked FCC for an extension for the 10 digit numbers, against the wishes of the Deaf Community.
Now this Congressional report alleging corruption.
MZ
DECEPTION AND DISTRUST
THE FEDERAL COMMUNICATION COMMISSION UNDER CHAIRMAN KEVIN J MARTIN
This investigation was prompted by allegations to the effect that Chairperson Kevin J Martin has abuse FCC procedures by manipulating or suppressing reports, data, and information. Allegations of a broken process at the FCC came from current and former FCC employees, telecommunications industry representatives, and even other commissioners, and were often reported in the press.
According to Mr. Chandler, a single VRS company [Sorenson Video Relay Services] provides 82 percent of all VRS minutes. Continued Mr. Chandler:
‘we know that the dominant provider was overcompensated approximately 80 million in calendar 2006 and 57 million in calendar 2005 ‘
”Despite objections from the FCC staff, three months later Chairman Martin was preparing to circulate a new order setting compensation rates for TRS providers. In a September 4, 2007, e-mail to Chairman Martin’s senior staff, Mr. Chandler delivered what he called ‘last gasp’ on the subject in an attempt to correct the situation:
Does the chairman recognize that these rates perpetuate the enormous (100 million a year) windfall for Sorenson, at the expense of the ratepayers [sic], Does he realize that Sorenson’s own filing shows that its actual cost of proving [sic] VRS in calendar 2006 was in the low $4.00 range, so that the present $6.64 rate was more than 50% higher than Sorenson’s actual costs?
The FCC’s Inspector General (IG) engaged KPMG to conduct an audit for Sorenson. On April 10, 2008, KPMG reported to the FCC that Sorenson had denied the KPMG auditors access to the staff and systems necessary to conduct the audit, and refused to permit them to review the company’s unredacted financial statements for 2004, 2005, and 2006. KPMG was therefore unable to conduct the audit.
Conclusion: We recommend that the FCC immediately initiate a full investigation and audit of Sorenson. It is simply unacceptable that a company subject to Commission regulation and which every year receives millions of dollars from a Government fund can refuse to open its books to Government-authorized auditors. The FCC’s apparent failure to insist on auditing Sorenson’s books indicates an abdication of its responsibility to administer and protect the integrity of the TRS Fund.
In addition, we recommend that GAO investigate the entire TRS program, including the FCC’s efforts to protect the integrity of the Fund and IG’s audits
For the full report: http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/fcc%20majority%20staff%20report%20081209.pdf
For more disucssion on this topic, check out Ed’s blog Ed’s Telecom Alert » Allegations Against FCC Chair Martin
Commentary: Remember how Sorenson used its consumer list to urge the Deaf Community to protest the TRS cuts, in a blatant violation of conflicts of interest? It turns out that the company actually received monies over 50% of its actual costs, with the company being overpaid 80 million dollars in 2006? In other words, they lied to its Deaf consumers about its true operating costs and manipulated them into protesting against the cuts.
Now we hear that Sorenson actually had the audacity to refuse access to the auditors its records.
We witness its monopolistic practices, hugging 82 percent of the market share, and its former unfair practice against the interpreters by insisting that they cannot work for another VRS for a period of time after resigning from Sorenson. Earlier this year Sorenson asked FCC for an extension for the 10 digit numbers, against the wishes of the Deaf Community.
Now this Congressional report alleging corruption.
MZ
December 10th, 2008 at 12:54 pm
There is no question that what Sorenson initiated with the VRS industry has been a great contribution to the improvement of us Deaf’s quality of life… But if this isn’t a call for a boycott of Sorenson, then I don’t know what is.
They have proven themselves to be socially irresponsible, unethical and having a patronizing attitude towards everyone, particularly with their Deaf customers because they think that since they kick-started the VRS industry, means they can do whatever they please now, without any consequences.
I personally hope some heads roll, and Sorenson is heavily penalized and held accountable for this egregious conduct.
December 10th, 2008 at 4:46 pm
DP, perhaps Sorenson isn’t all that bad…they did start something that no other company was doing at the time, and blazed a trail for other relay services in the process.
Yet, they are apparently sitting back and profiting; not doing anything to improve the relay services with the excess money they are getting. Worse, they are spending heavily just to protect their turf.
Let’s not penalize them, but force them to get back on the innovative wagon. They have the money and resources, let’s make them use it under threat of losing their hold on the market.
December 10th, 2008 at 5:34 pm
Overlook what Sorenson Communications had done to all deaf community include Gallaudet University, Vocational Reh, deaf schools,and more?? They hire many deaf people and interpreters. Repairs, install, and many other things such as USB/ethernet cords, books, etc are at no charge. So deaf people have job working for Sorenson…Nice??? Seems like people are jealous of Sorenson for their wonderful contributions they have given to us. Why pick on Sorenson? Why not pick on CSDVRS, HOVRS, Viable, OJO, etc ?
December 10th, 2008 at 5:47 pm
Hmm, so because Sorenson had been instrumental in helping us gain better accessibility to video communications, we should turn a blind eye when it makes profit illegally, lying to the government and the Deaf Community? Are we to keep quiet while Sorenson ruthlessly maintains its monopolistic practices? Should we keep mum, being thankful while Sorenson drains the Deaf Community its short supply of much needed interpreters? Should we keep mum while Sorenson asked for extensions on 10 digits number and e 911 deadlines, at the risk of our safety? What about its manipulation on Deaf consumers, putting pressure on them to use VRS or lose their equipment or urging them to contact FCC in fears they may lose SVRS, both in flagrant violations of FCC policies?
Where do we draw the line between ever being very thankful and being enablers by turning a blind eye to unethical and illegal practices?
Just wondering…..
December 10th, 2008 at 5:49 pm
Simply because Sorenson has the lion’s share of the money coming in. 82 percent is a huge chunk of the deaf VP market! CSDVRS, HOVRS and others have sent Deaf technicians to homes to set up and install free equipment, too, so the positives are pretty well distributed. The negatives are heavily on Sorenson’s side, however, so prodding them will set the tone for the others as well.
December 10th, 2008 at 6:46 pm
I am not going to thank Sorenson for what they have done. It is true, and I’ve said it in my first comment, that Sorenson did a good thing when they started up the VRS industry, but their conduct afterwards has been despicable.
And gee whiz, they hire Deaf technicians! How about more Deaf employees in the upper management? They are in the extreme minority.
Please. I am tired of being thrown crumbs and being told, ‘Be grateful for what you get, or we’ll take away what we’re giving you!’
The other VRS companies can easily replace Sorenson, and the company knows it. That’s why they’re playing dirty. It’s time they’re called out on it.
December 10th, 2008 at 11:34 pm
If i recall right, Sorenson fought to keep rate at certain level so that other VRS provider can try to make money and start up.
As usual, anti-sorenson people would start classic deaf crab theory and try to pull down sorenson.
Sorenson have provide millions to deaf community such as set up interpreter training program, etc..
So stop crab theory and claiming that they are doing illegal. Congress start to investigate.
Sorenson stop auditor from checking into Sorenson because auditor was focusing on one vrs – not all vrs at same time.
someone need to look at Mr. Chandler’s history..
December 11th, 2008 at 12:34 am
Official Statement from Sorenson Consumer Policy Board- Read below and you will see that Sorenson did not refuse audit.
————————————————–
J E N N E R & B L O C K
Jenner & Block LLP
1099 New York Avenue, NW
Suite 900
Washington, DC 20001-4412
Tel 202 639-6ooo
http://www.jenner.com
Michael B DeSanctis
Tel 202 637-6323
Fax 202 661-4828
mdesanctis@jenner com
Offices:
Chicago
New York
Washington, DC
June 24, 2008
VIA ELECTRONIC AND REGULAR MAIL
To: Mr. Curtis Hagan
Assistant Inspector General – Audits
Office of Inspector General
Federal Communications Commission
445 12th Street, SW, Room 2-C478
Washington, DC 20554
Re: TRS Audit
Dear Mr. Hagan:
The purpose of this letter is to record in writing the following facts: The Office of the Inspector General cancelled KPMG’s on-site visit to Sorenson’s corporate headquarters, which was set to begin June 16, 2008, even though Sorensen was ready, willing and able to accommodate that visit and make substantial data available to your auditors.
As Bill Garay will confirm, I personally inquired at least a dozen times over the last 15 months into when OIG planned to conduct the on-site portion of the audit. On May 27, 2008, Mr. Carnahan told me that he and his staff were ready to visit Sorenson’s offices to conduct the onsite portion of the audit of Sorenson’s recordation and reporting of VRS minutes. I had a
telephonic conversation with Mr. Carnahan on June 3, 2008 in which I confirmed that Sorenson would be available and would welcome the KPMG audit staff beginning Monday, June 16, 2008.
We discussed what his team would need in terms of office space and equipment, and I assured him that we would provide him and KPMG with whatever they needed. We also discussed substantively that we would begin first thing Monday morning by having key employees walk his team through Sorenson’s processes and procedures for the recording and reporting of VRS minutes, and that his team would let us know how they wished to proceed from there. He asked Sorenson to reserve a full week, though he did not know whether KPMG would need all of that time.
Following up on my call with Mr. Carnahan, I sent a confirming letter to you on June 5, 2008, in which I stated “We remain committed to cooperating with OIG in the interests of having the audit completed in a timely manner. To that end, I am writing to confirm that Sorenson has agreed to host Terry Carnahan and his KPMG staff, commencing June 16, 2008, for the onsite
component of the portion of the audit involving Sorenson’s systems and procedures for the recording and reporting of VRS minutes.”
In response, you informed me that you had decided to cancel the on-site visit. You asserted that you and Mr. Carnahan read my June 5 letter as not confirming our willingness to host the on-site audit. In fact, the letter states the exact opposite. Moreover, on June 12,1 told you that we still
were ready, willing and able to host your audit commencing on June 16. Indeed, I called you that day from Salt Lake City, where I was involved in the preparations for KPMG’s visit. You made it clear at that time that KPMG would not visit on June 16, and that you were not interested in rescheduling for a later date.
During our June 12 call, you complained that in my June 5 letter I identified confidential data and information that should not be shared with the public or with other offices or bureaus within the Commission. However, I provided that information in writing to you because you had suggested that I do so in our earlier phone conversation on May 29, 2008. That suggestion was consistent with my previous conversation with David Hunt and Carla Conover, who informed me in an in-person meeting on May 14, 2008, that it is and always has been OIG’s policy to keep confidential all non-public information produced by TRS providers during the course of an audit
and that such information would not be disclosed to the public or shared with other bureaus within the Commission. See Letter from M. DeSanctis to W. Garay, May 22, 2008.
Under these circumstances, the OIG bears complete and total responsibility for not undertaking the planned on-site minute audit. We did exactly as you had asked in identifying our confidential information and confirming that we would host the KPMG team beginning June 16. Moreover, over the past 15 months, we have now incurred substantial costs for an audit that you apparently no longer wish to hold. We remain willing, as always, to host the on-site minute audit and would be amendable to speaking with you about rescheduling.
Sincerely,
Michael B. DeSanctis
Counsel for Sorenson Communications, Inc.
cc: Kent Nilsson, Inspector General
December 11th, 2008 at 1:09 am
In the hearing world, this report calls for an official investigation. Some Deafies whine crab theory!
Sheesh! We are talking about Congressional Report. Crab Theory? Oh, gimme a break!
December 11th, 2008 at 3:15 am
I thought CSD was the first in VRS industry? Am I wrong?
December 11th, 2008 at 12:38 pm
Deaf Advocate:
Yes, Communication Service for the Deaf (not CSDVRS) was the first company ever to roll out VRS. In fact, we had VRS booths set up at Deaf Way II in 2002 before Sorenson and HOVRS rolled out their VRS services shortly afterward. Sorenson, because of their huge cash reserves (millions if not billions of dollars) from other businesses, were able to invest a lot of money into new technology and VPs and engage in overly aggressive, and maybe even unethical practices to capture their market share.
I am thankful that this has resulted in wonderful video equipment for Deaf people, but at what price?
December 11th, 2008 at 5:13 pm
Hmmmm, hello? We are talking about Congressional Report. Please tell me how this is interpreted to be crab theory.
Even though Sorenson had provided millions of dollars to the Deaf Community, they were reimbursed by the government directly or via taxes. This ‘generosity’ doesn’t excuse their unethical and/or illegal acts, including milking the government in excess of whopping 180 million dollars within TWO years while guarding 80% of the market share, harming other VRSes These selfish acts may hurt the Deaf Community in the long run, too. Don’t you care about that? What if the Congress decides to ignore any feedback of the VRS companies next time and goes ahead to make steep budget cuts because they were ‘lied to’ by a VRS company the last time? What will then happen to VRS corporations, the interpreters and the Deaf Community? When we think these acts won’t affect the Deaf Community, too often they end up damaging us more than we realize.
Why would demanding a corporation to be socially responsible, ethical, and transparent considered as crab theory?
December 12th, 2008 at 8:44 am
Mishakena-
I agree! Also the “crab theory” (not really a theory) assumes that people from a specific group prevent the progress from others in that specific group from being successful. Sorenson management is made up of predominantly hearing people with a few token deaf in customer interfacing positions (there only Deaf person I know of on the Executive Team). So this is definitely not a case of Deaf people preventing other Deaf people from being successful.
Like you said, it’s about holding companies accountable in ensuring proper stewardship of the NECA funds, which were designed for the purpose of providing access to the telephone network for Deaf and Hard of Hearing people as mandated by Title 4 of ADA, not to fatten a few people’s already very fat pocketbooks.
December 12th, 2008 at 2:46 pm
So….this is why interpreters are being fired. Because Sorenson has had to pay this money back, and the only way to stay afloat is to FIRE MANY MANY interpreters. I think sorenson needs to SELF ASSESS, and look at WHY they have had to fire so many interpreters who were apparently making “fraudulent” calls. Interpreters who work for sorenson are PRESSURED with necca numbers and PRESSURED to perform. If you do not perform, you are called into the office and threatened. Sorenson uses many scare tactics. I used to work for them. I now work for another relay company that has a heart, and that allows for the morale of the company to be fantastic. People at work here SMILE and are HAPPY to come to work. Sorenson is the “TINMAN” of all vrs companies. They pressured people, good people, to perform at 83% minimum log-in. That’s a helluva job to do, and increases burn out and desperation. Desperation is what drove these interpreters to do whatever it was they allegedly did. And Sorenson needs to look at THEMSELVES. Because interpreters at other vrs companies do NOT feel the need, do not feel the DESPERATE need to do what the interpreters did at Sorenson.
July 26th, 2009 at 6:06 am
Fyi…Sorenson still has a non-compete contract that all the interpreters must sign in order to be employed. It used to be for one year after you leave the company. It is now six months.