Con Air

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"Staff believes that Mr. Wetherald has shown a disdain and contempt for the authority of the commission that is unmatched and unprecedented," the report reads. "Therefore, staff believes that the commission would be well justified in...ordering that Mr. Wetherald has lost the privilege of holding a {license} issued by the commission to operate in this state, and that his involvement in any manner with a commission-regulated public utility in this state so taints such utility that it should be forbidden from operating in this state."

For his part, Wetherald maintains he's been wrongly accused by the agency.

"The PUC staff did not act properly in any of this," he says. "The staff took things at face value and didn't bother to read the agreements, which give me the authority to do what I did."

Despite the PUC staff report's angry tone, the agency has little enforcement power. To crack down on scam operators, under current law the PUC has to go through the courts, a process that could take two years, and the agency lacks the authority to impose fines without a court order. The report itself alludes to this weakness, saying, "It is imperative that however incapable the commission feels it may be of imposing a sanction or meaningful remedy against bad actors, that it not refrain from identifying who the bad actors are for future reference."

Part of the problem is that the PUC is still operating under laws from the days of heavily regulated monopolies and is unprepared to deal with potential swindlers who see the opening of the telephone market to competition as a field day for fraud. "The commission staff is made up of analysts and attorneys who are experts in rate cases, but they don't have a staff of investigators and enforcement folks who can investigate these kinds of activities," says Dian Callaghan, director of administration for the state Office of Consumer Counsel. "What would be useful is for the commission to have authority to issue a cease-and-desist order. They don't have that. There's little they can do in a short period of time."

In the future, Callaghan predicts situations like Mile High Telecom's will become more common, and the PUC's role will have to change.

"The commission's role will become more and more that of enforcement as the market becomes less regulated," she says. "Some of what is happening is a by-product of a competitive marketplace. The PUC needs to have the tools to deal with this."

Especially with con artists moving into the deregulated utility business all over the country. California's deregulated energy market has produced the best-known scams, with huge companies like Enron playing leading roles. But small-scale operators have also used the promise of big profits in the California power market to separate investors from their cash.

In the U.S. Securities and Exchange Commission case against Shiner and several other Florida-based promoters over a bogus plan to sell electricity in California, the complaint indicates that "one investor was told that the only risk was that Los Angeles could fall into the Pacific Ocean. Many investors were elderly and rolled over money from IRA and 401(k) accounts."

Shiner claims that his involvement in the deal never went beyond providing sales leads.

"I was not involved in sales. I sold leads, period," says Shiner. "I did not have any contact with investors. That case will go to trial in two years, and we believe we will prevail."

But he hasn't always. Aside from his 1998 stint in federal prison for tax evasion, in 1986 the SEC barred Shiner from association with any stockbroker or investment company for five years, saying he had failed to disclose a 1984 Massachusetts conviction for insurance fraud and larceny.

"About eight states have taken action against Shiner for the sale of unregulated securities in their states," says Daniel Sotler, an investigator for the Florida Office of the Comptroller. "For the last ten years, Shiner has created three new companies every year, and they always have the same address. After the deals collapse, there's nothing left."

The money raised goes to hefty sales commissions for the boiler-room staff and to Shiner and his associates, Sotler says. They usually lease office equipment, cars, and even their own homes so there are no hard assets, and the paper trail left behind is invariably complex and almost impossible to make sense of.

Shiner refuses to discuss his other projects.

"I have several different business ventures," he says. "To discuss what I do is not germane. Suffice it to say I'm a businessman and have been in business for several years."

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Stuart Steers
Contact: Stuart Steers