Opinion ID: 2305757
Heading Depth: 1
Heading Rank: 2

Heading: Mr Grayson's Amended Complaint

Text: On March 26, 2004, Mr. Grayson filed an amended complaint in which he set forth two causes of action: (1) Violation of the Unclaimed Property Act and False Claims Act (First Claim for Relief); and (2) Consumer Protection and Violation of the False Claims Act (Second Claim for Relief), which he brought as a qui tam plaintiff in the interest of himself and the general public. [4] His complaint included the following allegations: he served as the President of a communications business in 1990 and 1991 which sold prepaid calling cards; [h]e is a member of the International Prepaid Communications Association, the trade association for prepaid calling cards, and has edited one of the two leading industry surveys of prepaid communications; and he has obtained and used prepaid calling cards in [the] District.[ [5] ] An owner of a prepaid calling card pays a deposit for the card . . . [to] establish[] an account with the prepaid communications company holder of the funds, and his prepayment is a deposit or advance payment. [T]he Defendants record the balance of the owner's prepayment in terms of dollars and cents. They then deduct the cost for using the prepaid calling card from the advance payment until the owner of the card exhausts the advance payment. When an owner of a prepaid calling card fails to exhaust the value of the card, the remaining balance is known as breakage. The appellees account for a substantial amount of the $4 million to $6 million a year of breakage in the District of Columbia (the District), which constitutes intangible personal property [that] escheat[s] to the District. The Unclaimed Property Act (UPA) requires persons holding such property to report and deliver the property to the Mayor.[ [6] ] The appellees, however, have been retaining [the] breakage since 1992. Mr. Grayson discussed this misconduct with . . . MCI's Unclaimed Property Reporting Manager who confirmed. . . that MCI has retained millions of dollars in prepaid communications breakage. MCI's Unclaimed Property Reporting Manager also confirmed that . . . his peers at . . . AT & T and Sprint, . . . verified that they followed the same practice. This practice stems from a widespread deviant view in the industry that the customer's loss is the industry's gain. Moreover, the appellees knew that they had a duty to report and deliver the calling card breakage to the Mayor because their employees are members of the Unclaimed Property Holders Liaison Council (Holders Council). As members, they receive and read newsletters from the National Association of Unclaimed Property Administrators (NAUPA), the central organization for state administration of unclaimed property. In the Winter of 1995, the NAUPA issued a newsletter which contained an article entitled Virtual Money that stated, in part: In Europe, for a number of years stored value technology has been used for pay telephones. . . . Could stored value cards create a whole new class of unclaimed property? Absolutely. For those of us in unclaimed property, there is no question that an unclaimed money card balance represents an intangible asset which is due and owing.[ [7] ] The Holders Council held meetings in which they discussed the duty to report and pay or deliver prepaid calling card breakage as unclaimed property. During a CCH State Tax Advisory Board discussion, held on April 16, 1997, accounting firms hired to conduct appellees' annual financial examinations confirmed that prepaid calling card breakage must be reported and paid or delivered to the States and the District.[ [8] ] That discussion was reported in `Trends in Taxation: Trends in State and Local Taxation,' CCH State Tax Review (June 9, 1997) and reprinted in the September 1997 issue of Taxes. Whenever appellees fail to include breakage on their unclaimed property reports filed with the District; or include calling card breakage as revenue in their financial records; or substantially under-report prepaid calling card revenue to the Federal Communications Commission (FCC); or include breakage as revenue or profit on their tax returns and revenue reports; or certify on a Clean Hands Self-Certification Form that they do not owe more than $100.00 to the District,[ [9] ] the carriers make false statements to conceal, avoid or decrease the obligation to pay or transmit breakage to the Mayor in violation of the FCA. Appellees made at least one or more of these false statements each year from November 1, 1997 to 2003, and have engaged in the trade practice of soliciting and accepting communications prepayments, and then failing to pay or deliver to the Mayor the unused balances of prepaid calling cards . . ., in violation of D.C.Code § 41-119 and D.C.Code § 2-308.14; that practice is unlawful under D.C.Code §§ 28-3904(a), (e), (f), (h), and (r) of the CPPA.[ [10] ]