Yesterday the FCC (Federal Communications Commission) announced that they have reached a settlement of $9.1 million with two VRS companies: Purple Communications and CSDVRS, who owns ZVRS — in this story I will refer CSDVRS as ZVRS. The settlement is for the companies to repay the FCC for improper billing and for FCC to stop any further investigation of both companies.
This FCC announcement yesterday came on the same day ZVRS announced they were acquiring Purple Communications. Neither ZVRS or Purple mentioned the $9.1 million settlement yesterday on their social media.
The $9.1 million settlement resolves a previous FCC investigation and fine against Purple Communications (in 2015) for $11.9 million.
It’s a little complicated — so let’s go back — in 2014, the FCC investigated Purple Communications and their previous, now-closed IP Relay service. The FCC found that Purple had 40,000 “customers” who had false names/false addresses. The names were either gibberish, random keystrokes, vulgarities, or obviously false names such as “First Name Last Name.”
To be precise, the FCC said Purple failed to implement a reasonable verification process and improperly billed the FCC* for minutes used by the fake/unverified names. So, the FCC penalized them with a $11.9 million fine.
Purple disputed this and tried to defend themselves, asking for either a reduction or cancellation of the penalty, but the FCC declined and in December 2015 ordered Purple to pay $11.9 million.
Now, let’s leave Purple and go to ZVRS. In February 2015 CSDVRS was sold/acquired by a private investment firm named Kinderhook Industries (based in NYC). Kinderhook acquires mid-level companies and has over 2 billion in capital. They formed a “parent” company named ZVRS Holding placed CSDVRS (ZVRS) and a VRI platform, Stratus Interpreting under it.
Interesting fact: the CEO of ZVRS, Sherri Turpin, used to work for Kinderhook from 2008-2010. She was announced as ZVRS’ new CEO in August 2015 after the retirement of CSDVRS’ then-CEO, Sean Belanger.
The acquisition of ZVRS by Kinderhook was a normal acquisition — there were no “pending actions” or fines from the FCC.
Now — back to the FCC — in December 2015, the FCC issued a Letter of Inquiry (LOI) to CSDVRS and Purple — for the FCC to check their customer verification and billing practices. It was the start of a “new” investigation.”
In 2016 there was no recorded “public” activity, from what I have seen, in the proceedings/investigations.
The only notable event in 2016 would be in May-June when Greg Hlibok, who had worked for the FCC since 2001, announced he was leaving the FCC to join the ZVRS team as their new general counsel and compliance officer.
Now let’s go to 2017 — on February 14, ZVRS Holding Company (which owns CSDVRS/ZVRS) acquired Purple Communications. This means ZVRS Holding Company owned two VRS companies — of which both were “under investigation” by the FCC, because of the LOI that was issued in December 15.
Then on February 15, the FCC announced the $9.1 million settlement with Purple and CSDVRS/ZVRS, both owned by ZVRS Holding (under Kinderhook). This settlement with the companies would “satisfy and close” the previous $11.9 million fine against Purple in 2015 — and terminate any ongoing investigations of both VRS companies.
So, you can see that the timing of ZVRS’s acquisition of Purple is almost the exact time as this FCC settlement. One can imagine that there were plenty of talks and negotiations behind the scenes between the FCC and the VRS companies to both “approve” the acquisition and to reach the $9.1 million settlement and end the investigation.
Because ZVRS Holding owns both ZVRS and Purple, it will be responsible to pay the settlement.
The $9.1 million is split into two areas — $6.1 million is to reimburse the FCC for improper billing and the remaining $3 million is a civil penalty.
$5.1 million was due to the FCC immediately (yesterday) — with $1 million spread out in 60 installment payments. The $3 million civil penalty is also spread out in 60 installment payments.
That translates to roughly 60 payments of $66,666. Kinderhook will make the payments.
As a part of the settlement, the FCC will stop all pending investigation or enforcement actions against Purple or ZVRS — (the VRS companies are in the “clear.”)
The settlement also says the FCC won’t request a hearing to question Purple or ZVRS’ ability to have a FCC certification/license.
At the end of the FCC’s settlement papers — Sherri Turpin, the CEO of ZVRS Holding Company is named as the representative for both ZVRS and Purple.
The FCC settlement says that both Purple and VRS will continue to operate as normal and submit monthly requests for reimbursement from FCC as separate VRS companies with their own certifications (even though both are under the same company), but that within 3 years (36 months), Purple is to relinquish (give up) their FCC certification and be “absorbed/merged” with ZVRS’ FCC certification.
The settlement orders both Purple and ZVRS to maintain a customer database that clearly segments registered users from those who were previously and are no longer registered with them. They will have to keep detailed call records. Purple and ZVRS also must report to the FCC within 10 business days if they realized they improperly billed or improperly got reimbursements from the FCC.
Both Purple and ZVRS also must develop annual FCC compliance training and have their executives and staff undergo the training annually.
I’ve included all the details and links of the settlement below.
*(CSDVRS also operates VRI platform Stratus Interpreting).
*FCC reimburses relay operators via the Telecommunications Relay Fund (TRS).
FCC Press Release:
2017 FCC Settlement Announcement With Purple and CSDVRS: https://www.fcc.gov/document/fcc-settles-investigation-relay-service-providers
2015 FCC Forfeiture Order Against Purple Communications: https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-169A1_Rcd.pdf
2014 FCC Notice of Apparent Liability (NAL) For Forfeiture Against Purple: https://apps.fcc.gov/edocs_public/attachmatch/FCC-14-57A1_Rcd.pdf
Kinderhook Press Release: Acquisition of CSDVRS: https://www.pehub.com/2015/02/kinderhook-buys-csdvrs/#