Prepaid calling card distributor is awarded $4 million judgment.
On February 5, 2009, an Orange County, California jury rendered a $4 million fraud verdict against a prepaid calling card reseller. This fraud verdict resulted from a case (click here) that involved the fraudulent sale of prepaid telephone calling cards. The company against whom the verdict was entered is West Coast Distribution, Inc. (”WCDI”) which is a company that issues prepaid telephone calling cards.
In the prepaid telephone calling card industry, it is customary for issuers to periodically “sweep” their prepaid cards. What this means is that if a customer has time remaining on a card, then the issuer will every so often “sweep” off some amount. For example, if a customer has 20 minutes remaining on a card then the issuer may “sweep” off 5 minutes, leaving the customer with only 15 minutes remaining. This is generally illegal, but it happens all the time and when customers complain about this then the minutes are restored. However, few customers ever bother complaining.
In this case, a distributor who resells these cards to sub-distributors who ultimately sell the cards to consumers was defrauded by WCDI. This distributor knew how the industry works and so he negotiated a deal with WCDI whereby it agreed to “guarantee” that an absolute minimum number of minutes were to be delivered on each card that was sold to consumers, even after all "sweeping".
What the jury found, though, is that WCDI never intended to honor this “guarantee.” Furthermore, the jury also found that when the distributor complained to WCDI about its failure to deliver as promised, WCDI responded by shutting off approximately $736,000 of cards that he had already paid for, it overbilled the distributor by approximately $170,000, and it damaged the distributor's reputation in the amount of $325,000.
On top of all this, the jury also sent a message to WCDI and the prepaid telephone calling card industry by hitting it with $2,750,000 of punitive damages and one of its officers with an additional $40,000. All told, the amount of the final verdict (and judgment) was $4,020,883.48.
Derek Banducci was co-chair at trial on this case.