The staff of the Missouri Public Service Commission raised “grave concerns” that permitting TelexFree’s telecom registration to remain intact in the state could “assist in the perpetuation of a fraud on investors,” records show.
Missouri approved the registration in March 2014. TelexFree applied for it the previous month, according to records.
Those records included a notarized TelexFree affidavit dated Feb. 14 — Valentine’s Day — and signed by “Jim Merrill,” who held the title “Managing Member.” The name and seal of a Massachusetts notary public appear on the document.
Among other things, the document attests that TelexFree is “ready, willing, able, and will comply with all applicable state and federal laws and regulations imposed upon providers of interconnected voice over Internet protocol services.” It also attests that “the Applicant is legally, financially, and technically qualified to provide interconnected voice over Internet protocol services.”
But on April 13, 2014, just weeks after “Jim Merrill” had advised Missouri that TelexFree was “financially” qualified to operate in the state, TelexFree filed for bankruptcy protection in Nevada. (The case since has been moved to Massachusetts.)
In May, Missouri moved to revoke TelexFree’s registration, citing information it had received April 18 from Joseph Isaacs, a TelexFree telecom consultant.
“Mr. Isaacs indicated the affidavit signed by Jim Merrill is not truthful,” a Public Service Commission staffer wrote to the full commission. The staffer recommended revocation of TelexFree’s registration.
Isaacs, according to the staffer’s affidavit, pointed the commission to civil fraud actions against TelexFree filed by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission on April 15, two days after the bankruptcy filing.
By May 9, federal prosecutors had announced the criminal prosecution of TelexFree figures James Merrill and Carlos Wanzeler. The Missouri staffer pointed the commission to a news release by the office of U.S. Attorney Carmen Ortiz on the Merrill/Wanzeler prosecutions for wire-fraud conspiracy.
The Missouri staffer also advised the commission that the FBI and Homeland Security Investigations (HSI), an arm the U.S. Department of Homeland Security, were involved in the TelexFree probe. He also noted that TelexFree itself had acknowledged on its website that service interruptions or discontinuation were possible because “we are not currently in position to support our network.”
The staffer recommended that TelexFree be stripped of its telecom registration. On May 27, the commission gave TelexFree until June 24 to respond to a motion to revoke the registration.
“TELEXFREE did not respond,” the commission said in a July 2 revocation order. The order became effective Aug. 1.
Records in other states show that TelexFree filed a flurry of telecom-registration applications in the weeks leading up to its bankruptcy filing and the exposure of its alleged pyramid- and Ponzi scheme.