Citing Missing Affidavit And Inconsistencies, Indiana Rejected TelexFree Telecom Application

UPDATED 6:20 P.M. EDT U.S.A. The Indiana Utility Regulatory Commission rejected TelexFree’s telecom application on June 11, 2014, according to records in the state.

TelexFree filed the application on March 24, requesting “CONFIDENTIAL TREATMENT OF THE FINANCIALS OF TELEXFREE, LLC,” according to records.

On April 13, TelexFree filed for bankruptcy protection in Nevada. On April 29, Indiana informed TelexFree via a docket entry that information it had submitted in March was “Missing [an] affidavit to support the March 24, 2014, request for confidential treatment of certain financial, technical, and/or managerial information.”

The state also noted that TelexFree had provided “Inconsistent descriptions of the services Applicant proposes to offer in Indiana.”

Indiana gave TelexFree until May 15 to correct the deficiencies. No corrections were received, according to the state.

The state formally rejected TelexFree’s application on June 11.

One of the issues with TelexFree is whether it supplied false, misleading or inconsistent information to various state regulators during the process of applying for telecom registrations.

In March  [April], the Massachusetts Securities Division alleged that TelexFree’s financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided investigators in Massachusetts.

Certain regulatory filings by TelexFree in early 2014 suggest it was financially capable of delivering telecom services and even strong enough to provide intracompany loans to other TelexFree-related businesses. But by April 13, TelexFree was in bankruptcy court seeking to reject its contracts with promoters — this after adopting a new compensation plan on March 9.

On April 17, the U.S. Securities and Exchange Commission publicly accused former TelexFree President James Merrill of making false statements about how long TelexFree had been in the VOIP business.

The SEC also accused Merrill and other TelexFree defendants of not disclosing that “several banks and at least one payment processor stopped doing business with TelexFree, apparently due to concerns about the legality of its multilevel marketing program.”

Certain financial documents prepared by former TelexFree accountant Joe Craft referenced asserted loans TelexFree made to other TelexFree enterprises, according to the SEC.

After assuring state telecom regulators that it was healthy, records show, TelexFree went to bankruptcy court only weeks later.

“. . . defendants TelexFree, Inc. and TelexFree, LLC and relief defendant TelexFree Financial Inc. filed for bankruptcy in Nevada under Chapter 11,” the SEC alleged in April. “The three companies claimed to have liabilities of as much as $600 million but assets of no more than $120 million.”

In seeking to have the SEC’s fraud charges against him dismissed, Craft has said in court filings that he concluded in March 2014 that TelexFree was a Ponzi scheme selling unregistered securities. He further contends he had been “misinformed about the company’s activities and material information was withheld by company officers.”

In a filing on the docket of the TelexFree bankruptcy case, Craft contends that TelexFree plaintiffs who assert they are owed money have “fully recovered their ‘investments’ through benefits received from the TelexFree entities and are not owed anything.”

TelexFree managers or executives James Merrill and Carlos Wanzeler were indicted last month on criminal charges of wire-fraud and wire-fraud conspiracy.

In telecom filings docketed in Alabama on March 20, TelexFree asserted it was “financially qualified” to operate in the state and that its “current financials Show considerable net worth.” A hearing was scheduled for April 10. Prior to that date, however, TelexFree asked for a postponement for a month, listing unspecified “scheduling conflicts” as the reason.

With the April 10 Alabama hearing postponed, TelexFree was in bankruptcy court just three days later.