California-based paging carrier/reseller Power Page L.L.C. and its marketing arm, Wireless Marketing Inc.-profiled last June in RCR for its uncommon practice of enlisting independent marketing associates to help it acquire customers-declared bankruptcy April 2.
Rod Kahn, president and chief executive of Power Page and president of both Wireless Marketing and carrier South Bay Wireless Inc., said he sought bankruptcy protection because of a faulty software system. He dismissed claims that the company was run secretly by an unscrupulous silent partner, as his competitors claim.
Power Page provides pagers and airtime to customers in several markets across the country via either its own network in the Los Angeles area or through resale agreements with PageMart Wireless Inc. and Paging Network Inc., the company said. Of the 10,000 subscribers the company claims, the vast majority are resale customers.
Wireless Marketing recruits marketing associates through an infomercial and other means. For a startup package of about $60, these associates are given 1,000 certificates, which they distribute. Consumers can redeem these for a free pager once they pay an activation fee and three months (prepaid) of airtime.
Each certificate has a code unique to the marketing associate who distributed it, and each associate is paid $5 for every certificate activated, plus a percentage of the airtime revenue. These associates also can recruit others and gain a percentage of their commissions through the multilevel marketing plan. The company claims about 20,000 distributors.
According to a reliability report published by the Better Business Bureau, Wireless Marketing has had several complaints from both marketing associates and from customers who tried to redeem certificates. Most complaints are from distributors who claim the company did not pay commissions, did not provide records of the number of certificates redeemed and did not provide refunds for kits returned within the 90 day money-back-guarantee period.
Kahn said these complaints are generally from marketing associates who think they signed on more customers than they actually did.
Several consumer complaints allege that Wireless Marketing did not deliver pagers once the activation fee and airtime was paid and that the company made multiple unauthorized credit-card charges.
Kahn said he suffers from guilt by association because he bought his Los Angeles paging frequency and the infomercial used to recruit marketing associates from Robert Winter, who owned several paging companies that also recruited marketing associates to generate subscribers.
Winter created several companies in his career, each of which engaged in the same marketing practice and each received similar complaints. One, called North American Paging-also known as Ameripage-had 233 complaints filed against it at the BBB and was investigated by the Glendale, Calif., police department’s Bunco-Forgery Division. It closed its doors in 1996.
His most recent company, Paging America-which listed his mother, Margaret Winter, as president-originally produced the infomercial that Kahn bought.
Paging America customers complained to the BBB about defective or inoperable merchandise, pagers that wouldn’t activate and disputes over billing.
“Many customers alleged they acquired a certificate for a free pager conditional on activating the pager through this company,” read a BBB report. “When they called to activate, bank account or charge-card numbers were taken as payment. Some customers learned after they paid that the frequency used for the pagers was not available in their area.” The company then would not refund the money, the report said.
Paging America also was sued by a Japanese Internet service provider called Typhoon Inc. Paging America sent out mass e-mail messages to Internet subscribers recruiting them in the multilevel distributor plan using Typhoon’s e-mail server without permission. According to Typhoon lawyer Andrew Mansfield, the lawsuit was settled late last year.
Winter recently pled guilty to one count of tax evasion and two counts of bankruptcy fraud in California stemming from his actions as owner of a paging provider called International Paging Corp. At his upcoming sentencing in June, he faces a maximum 15 years in prison and a $600,000 fine.
According to Kendra McNalley, prosecutor for the U.S. District Court for the Central District of California, and various court documents, Winter created International Paging, Pasadena, Calif., in 1986 under the name Jack Rodgers. His wife Susan was listed as president, chief executive officer and 100-percent stockholder while Robert was listed as vice president, chief financial officer, treasurer and secretary.
According to the plea agreement he signed, Winter actually ran the company while his wife merely was a part-time employee. The charges stem from his failing to report any income or file any tax returns from 1991 through 1993. He owes about $12,000 in federal income tax.
The plea agreement also said that in 1994, Winter, knowing a bankruptcy case would be filed by or against the company, directed co-defendant Terence Lynch to open a checking account under the company name Acom Inc., to which he diverted two cashier’s checks of about $40,000 each from his IPC account. He used IPC funds to buy a house, a boat and a Ferrari, the agreement said.
A BBB reliability report on IPC said customers complained that their pagers continually received busy signals and pages would not go through in local coverage areas.
Winter could not be reached for comment, but he defended himself in a March 1, 1996, issue of a Glendale community newspaper that investigated Ameripage.
“We’re not trying to rip anybody off,” he was quoted as saying.
Kahn contends that Winter’s history has no bearing on either Power Page or Wireless Marketing because he just bought frequency and the infomercial from Winter.
“Whatever his past is and whatever he does is his business,” Kahn said. “It’s like buying something from a grocery store and worrying about what the store clerk does.”
Kahn also strongly denied rumors that Winter was in some way running the company. “He has nothing to do with us whatsoever,” Kahn said. “He’s not an officer or an employee or anything.”
Kahn said Wireless Marketing and Power Page sought bankruptcy protection to allow it time to fix a customized tracking, commission and residual software system that was integral to the success of the company but had too many problems. It failed to properly determine which distributor was responsible for what subscriber and give commissions accordingly.
“The tracking system was key and it just never worked,” he said.
Once these software issues are resolved, Kahn said the company would be back in business, which he predicted would be “in the next two to three weeks.”
