2 Electricity Marketers Are Shut Down
Regulators moved on two fronts Wednesday against alleged fraud in California’s restructuring electricity market, separately shutting down two companies that have been promising cheap power to residential and business customers.
The California Public Utilities Commission pulled the plug on a Pennsylvania-based electricity marketer that was accused of making fraudulent claims and of operating a pyramid scheme to sell electricity distributorships.
In addition to revoking the registration of Boston-Finney Inc., which it had permitted to do business in California’s electricity market, the commission set a preliminary hearing for March 9 on a potential fine of $97 million.
Also Wednesday, the Federal Trade Commission said it filed suit against FutureNet, a Valencia-based Internet multilevel-marketing firm that recently branched out into electricity marketing, accusing it of operating pyramid schemes.
A federal judge in Los Angeles on Monday issued an injunction against FutureNet’s sales activities, froze the company’s assets and appointed a receiver, said Larry Hodapp, an FTC lawyer.
“The company is not doing business,” Hodapp said.
A pyramid scheme is a marketing operation in which early investors make money by recruiting more investors rather than selling products to consumers. Boston-Finney was accused in a lawsuit filed last month by California Atty. Gen. Dan Lungren of running a pyramid scheme by charging electricity sales agents $295 each for the right to recruit other sales agents.
The company told the PUC it had signed nearly 5,000 sales agents and collected $1.25 million in fees. The PUC proposed fining the firm $20,000 for each so-called distributor, or sales agent, it signed up.
Under electricity deregulation, which is scheduled to begin March 31, electricity customers of California’s big investor-owned utilities will be able to choose from an array of marketers promising lower rates for electricity.
The Boston-Finney controversy prompted state Sen. Steve Peace (D-El Cajon), co-author of California’s electricity deregulation legislation, to criticize the PUC for what he called lax oversight. The PUC responded by tightening the rules and increasing its scrutiny of potential power marketers.
Boston-Finney President Christopher S. Mee, who regulators say is 19, could not be reached for comment, and his lawyer, Jose Guzman, declined to comment on the PUC hearing.
In a statement posted last week on its Web site, Boston-Finney said it had voluntarily agreed to suspend operations on Feb. 13 and would continue to work with the PUC to resolve the agency’s concerns.
“Our objective concerning the CPUC and the attorney general’s office is to rectify all issues regarding marketing strategies used by Boston-Finney,” the statement said.
In the FutureNet case, company Chairman Alan J. Setlin said the FTC charges are without merit.
“We will be going to court at the earliest possible moment to challenge these FTC actions and to have the temporary restraining order against us lifted,” Setlin said. “We would have preferred that the FTC had contacted us to discuss these charges before taking these very injurious and inappropriate actions against the company’s operations.”
