GTE Services To Hollywood Probed

Thursday, June 29th 2000, 12:00 am
By: News On 6

LOS ANGELES (AP) — GTE Corp. on Thursday acknowledged that it illegally gave millions of dollars worth of telecommunications services to California customers.

GTE reportedly wooed Steven Spielberg and other Hollywood heavyweights with free or discounted services in an attempt to win entertainment industry contracts.

GTE spokesman Peter Thonis said there were ``blatant breakdowns in judgment'' at its Los Angeles offices.

The services in question amounted to a fraction of 1 percent of the $3.5 billion GTE gains annually in California revenue, Thonis said from the company's Dallas headquarters.

The company discovered the illegal freebies, some worth thousands of dollars, in mid-1998 during an audit of account contracts after similar charges involving phone service to the University of California at Los Angeles, Thonis said.

``We voluntarily turned ourselves in to the PUC,'' Thonis said.

State auditors found that GTE gave free or reduced service to the Oscar-winning director at his Los Angeles home and at his DreamWorks SKG studio, the Los Angeles Times reported, citing sources.

The Texas-based phone company, which is in the final stages of merging with Bell Atlantic, gave similar deals to the Creative Artists Agency and the Media Ventures music studio and non-entertainment companies.

Thonis declined to identify the customers or industries involved.

Favoritism is prohibited in the state's regulated local telephone market.

GTE is negotiating with the California Public Utilities Commission to settle allegations of wrongdoing, the Times reported. An agency review and audit found violations in more than 100 GTE customer contracts from 1995 to mid-1998.

``The scope is very broad ... There are a lot of contracts that have problems,'' said Jack Leutza, director of the agency's telecommunications division.

As a result of its internal probe, the company discovered and has resolved similar issues in other states, Thonis said. There were some disciplinary actions involving GTE employees in California, but Thonis declined to say if anyone was fired.

The customers would not be asked to make up for the discounts they received.

``Certainly, the concept is that customers would not be punished,'' he said.

The Times reported that GTE's violations included fake technical ``trials,'' billing manipulations and other deals.

In addition to the Hollywood elite, GTE offered cut-rate services to the Spielberg-backed Survival of the Shoah Visual History Foundation, the Los Angeles-based Simon Wiesenthal Center and the University of California, Los Angeles. Other major customers that reportedly received special treatment included city and state governments, Blue Cross of California and biotech company Amgen Inc.

In one arrangement, GTE provided DreamWorks with a high-capacity communications links between its offices that was worth thousands of dollars, the Times said. The value was paid to the studio in a ``promotional consideration'' fee that allowed GTE to use a photo of the studio's three partners in a testimonial.

GTE paid nearly $1 million in fines and penalties to the utilities commission 18 months ago when the contract violations with UCLA were exposed.

Shares of GTE were down $1.312 to $62.563 in trading on the New York Stock Exchange.