Suit puts One Call on hold: Firm placed in receivership as lender seeks $21 million

One Call Communications has been placed in receivership, a day after a lender for its 2002 management buyout filed a lawsuit alleging the Carmel long-distance and operator-services company owes it more than $21 million.

The May 11 lawsuit in U.S. District Court in Indianapolis by Pittsburgh-based PNC Bank appears to be the knockout blow for a telecommunications firm accused by several states of violating consumer protection laws in billing and collection practices.

Also looming is a proposed $1.1 million fine by the Federal Communications Commission One Call owes for allegedly not paying $2 million in universal service fees.

Receivership cases tend to be filed in local courts rather than in federal court. Filings in federal court are often on behalf of a government agency owed fines or taxes.

James Moloy, of Indianapolis law firm Dann Pecar Newman & Kleiman, which is representing PNC, said the federal court was chosen simply because the bank was more comfortable in that venue.

The collapse of One Call has potential ramifications for other investors in the 2002 management buyout, including Monument Capital Advisors, an Indianapolis private equity firm that led management’s effort to buy the compa- ny from Evansville resident Larry Dunigan. He founded the firm in 1982 that later employed several hundred people at 801 Congressional Blvd. in Carmel.

According to terms of One Call’s revolving credit line with PNC, an arm of Monument Capital was to have provided collateral of at least $2.5 million

It’s unclear whether Monument is on the hook for One Call’s default, however.

An assistant to Monument Capital CEO Larry Wechter hung up the phone on a reporter trying to contact him.

Wechter, who is listed as chairman of One Call and was the quarterback of the 2002 management buyout, did not respond to e-mails.

Other financial partners were locally based CID Equity Partners, Cincinnatibased Fifth Third Bank and Johnson Ventures Inc., a Columbus, Ind., firm that once owned the Bigfoot chain of gasoline and food stores. Officials of the firms could not be reached for comment.

Financial details of the management buyout were never made public.

What’s left of One Call’s finances is being pored over by The Meridian Group, a Pittsburgh private investment banking and management-consulting firm tapped as receiver May 12 by U.S. District Court Judge John Tinder.

Meridian is authorized to charge an hourly rate ranging from $70 to $375.

“Defendant is currently operating at a loss and is unable to meet its current obligations as they become due. Defendant has dismissed all of its employees from the premises and is not providing security or maintenance for its assets,” PNC stated in court filings.

A receiver is necessary “to preserve its assets and to liquidate the same in an orderly manner.”

Meridian may rehire 10 former One Call employees to help look after the company during receivership, said Moloy. He said receivership doesn’t necessarily preclude One Call from filing for bankruptcy and $270 million.

The company’s Web site was still operating May 18. At least one of its long-distance services also appeared to be working.

Whether there are enough assets left to mount a comeback is unclear. Court filings did not indicate the dollar value of assets or liabilities.

Assets listed in court documents include six U.S. patents involving “system and method for providing communications services.” Records also show the company has 11 federal trademarks and two highfrequency radio licenses for Evansville and Bloomington-Bedford-possibly of value to a wireless phone provider.

that it is possible the company could live on in some form.

Neither Meridian nor counsel for One Call returned phone calls.

A source familiar with One Call’s operations said employees were dismissed earlier this month, after the company failed to make payroll. A sign in the company’s lobby wishes employees a happy Memorial Day.

In a statement last year, the company said it employed 70 at its Carmel headquarters.

Trade reports indicate that the privately held company may have had 400 employees in 2003 and revenue of more than

One Call appears to have spent a great deal of money in recent years on litigation.

One of the more recent battles was with the Iowa Office of Consumer Advocate and the Iowa Utilities Board. Regulators there have sought penalties on behalf of at least 14 Iowans who insist they never used One Call. Among those represented by the state is a grandmother billed for collect calls to a phone sex firm.

But One Call challenged the state in federal court, arguing it didn’t have jurisdiction over interstate calls. The federal court recently ruled against One Call in that case, said Craig Graziano, an attorney for Iowa’s Office of Consumer Advocate.

“I’m sure they spent a lot in legal fees here. They put up a fierce resistance here,” he said.

One Call also has been fighting Missouri Attorney General Jay Nixon, who in March filed a suit alleging the company violated state and federal consumer laws by billing customers for calls they never made and then allegedly using hardball collection tactics. One Missouri resident complained of up to 22 collection calls a day from early morning to late in the evening.

“This company is out of control and needs to be stopped,” Nixon declared at the time.

Similar consumer complaints have been reported in Indiana, where the Office of Utility Consumer Counselor has been attempting to reach a settlement with One Call for several months.

One Call dodged a big bullet in 2002, when the Federal Communications Commission proposed a $5.1 million penalty for the company’s failure to identify itself to consumers who misdialed 1-800-Collect, the collect call service by AT&T.

In a so-called “fat finger” scheme, One Call set up several phone numbers, such as 1-800-Coolect, to harvest misdialed calls to its own collect call service.

One Call ultimately paid only $500,000 to the FCC, in a legal move its Washington, D.C., attorney boasted was “the greatest penalty reduction in any FCC enforcement proceeding up to that time.”

Getting One Call off the hook this time might prove much harder.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.