By Terrence McCoy
By Scott Fishman
By Deirdra Funcheon
By Allie Conti
By New Times Staff
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Soon, investigator Andrea Appleman discovered that Soreide had deposited the money into his company's operating account. "No assignments of mortgages to Mrs. Kravontka from Arne Soreide and/or Royal Palm Mortgage Corp. could be found in courthouse records to support Arne Soreide's story that he was investing her money in mortgages," Appleman told a state court.
Around the same time, Appleman was investigating another complaint related to Soreide. In summer 1995, he represented Betty E. Biro, who had mortgages with Royal Palm on properties that were on the market, according to documents from the state Department of Banking and Finance. In June of that year, a buyer secured a mortgage to purchase Biro's properties, and the mortgage company, Nations Credit, contacted Soreide to determine the payoff amount.
Nations Credit sent Soreide a check for $63,326.07. But instead of handing the money over to Biro, Soreide admitted that he deposited the money into his companies' bank accounts. He used it to purchase a $3,400 airplane ticket and then withdraw $6,000 in cash, according to state records. What's more, in an attempt to hide what he'd done, Soreide told Nations Credit to deal directly with Biro and then sent the company a check for the full amount. It bounced.
In a July 21, 1995, letter to state investigators, Soreide explained that the bounced check was a mistake. His company, he said, was embroiled in a temporary cash-flow problem. "I immediately called Nations Credit and told them not to deposit the check...," he wrote. "I told them I could not [take care of the problem] till August 15, 1995. They then told me that the 'Authorities would take care of it.'"
And take care of it the authorities did. On July 28, 1995, the state revoked Soreide's mortgage license and prohibited him from working in the mortgage industry for ten years. Additionally, the state Office of the Comptroller fined Soreide $2,500.
Two years later, the Palm Beach County State Attorney's Office indicted Soreide in the Kravontka case. On July 10, 1997, the state charged Soreide with organizing a scheme to defraud, engaging in grand theft, and exploiting the elderly, all felonies. Soreide faced prison time if convicted. But he wasn't. On November 6, 1997, the state dropped the charges after Soreide paid $204,653 in restitution. Prosecutors would have had trouble convicting Soreide "because Ms. Kravontka's only desire was to have her money completely returned to her so that she could live out the rest of her years comfortably," according to a state attorney's memorandum obtained by New Times.
Donna Kim admits she became aware of Soreide's questionable past after having worked for him only a short time. "He'd say it was a mistake," she explains, "that it wasn't true, and I'd believe him."
In spring 1996, Nortel billed its first customers. Around the same time, according to Donna Kim, Soreide received a cease-and-desist order from another Nortel, the $10.5 billion multinational technology giant. Soreide had no choice but to find another name.
He, in turn, created Accutel to absorb Nortel. He promoted Kim to company president and inked a contract with telecom company Cable & Wireless to buy long-distance minutes. Accutel, like other resellers, purchased bulk time at five cents per minute and charged customers ten cents. Business boomed. By May 31, 1998, according to the federal indictment against Soreide, Accutel had purchased $2.1 million worth of long distance and billed its customers $4.2 million for the time.
But Accutel wasn't playing straight, according to Kim's September 11 grand jury testimony. All the numbers that Soreide billed through local phone companies belonged to people who never requested service from Accutel. When he operated Telemarketing USA, Soreide had contracts to sell long-distance services for AT&T, Qwest, and US Long Distance. He took many of the phone numbers from those contracts and, without the customers' knowledge, transferred them to Accutel for long distance.
Local phone companies never verified that their customers had requested service from Accutel. "They don't question the validity," Kim told the grand jury. In fact, Accutel had only two legitimate customers: Kim's parents in Hawaii and one of her girlfriends in California.
Soreide hired as many as 18 phone staffers to field complaints. Although most customers never noticed they had been slammed, a small percentage called to complain. Those people represented a significant threat to Accutel. If they made enough noise, the company might be prohibited from doing business in some states. "On the slamming complaints, it was the standard modus operandi that we needed to make sure that the customer was not unhappy so they would not file a complaint with the public utilities," Kim explained to the grand jury. To mollify irate customers, Accutel phone staffers would explain that it was a mistake and that the firm would pay the $5 fee to switch the customer to another long-distance provider.
That worked to appease most, Kim says, but some would still complain to state regulators and consumer groups. When that happened, Kim would file a fake transcript that seemed to authorize the service switch. "It would be like a script, and you would fill in the blanks based on the information," Kim explains. In most cases, that seemed to satisfy authorities.
But not all the complaints were about slamming. Soreide had also started to engage in cramming, according to the federal indictment. He claimed that thousands of customers had authorized a monthly recurring fee of $4.95. But not one customer had authorized such a charge. What's more, Accutel wasn't providing any kind of service in exchange for the fee. From June 1997 to April 1999, according to the federal indictment, Soreide crammed consumers to the tune of about $22.5 million.