Copyright 2005 Knight Ridder/Tribune Business News

Copyright 2005 Sacramento Bee

Sacramento Bee

January 22, 2005, Saturday

SureWest Communications said Friday that a contractor handling its electronic bill payment program mistakenly withdrew a total of $50,000 from the accounts of 350 former and current customers.

The contractor, which SureWest officials have declined to identify since the mistake surfaced Thursday, "combined a small current computer file with one or more different older computer files before making routine debits," said Phil Grybas, the Roseville firm's senior vice president and chief financial officer.

Roseville-based SureWest provides telephone, Internet, cable and wireless services to 150,000 subscribers in the Sacramento area. Of those, 16,000 pay for the company's broadband service.

"We regret that this occurred at all," Grybas said, "but it seems to be limited to our SureWest Broadband unit, and only a small percentage of its customers."

However, some customers affected by the billing mistake said they were not broadband customers. Simplico and Yolanda Lantin, said that they were SureWest cable TV customers but canceled the service nearly two years ago.

On Friday, Simplico Lantin said, his wife discovered SureWest had debited $74.32 from the couple's checking account the previous day.

"I couldn't believe it after my wife told me," Simplico Lantin said. "SureWest is still holding my account information after all this time? Why?"

Third-party billing is commonly used in the telecommunications and utilities industries, said Penny Gillespie, an analyst for Forrester Research in Centerville, Va. Problems surface occasionally, either from fraud or a software malfunction.

"There's sometimes the case when somebody has access to (customers') bank information and misuses it," she said. "Sometimes the third party puts in some new code and then there's some glitch not covered in the testing. I've seen all kings of things."

Since the billing errors appear unintentional and the company has committed to making affected customers whole, this amounts to little more than negligence, said Michael Malloy, an expert in banking law on the faculty of McGeorge School of Law.

This kind of error is just one of the hazards of hiring a third-party vendor, said Aaron McPherson, research director at Financial Insights, a Boston-area research and consulting firm.

"You have controls on your operation, but you don't always know about your vendor," he said. "Then (your company) gets blamed, even if they didn't have anything to do with it."

SureWest officials scrambled Friday to stem the public relations damage from the gaffe. Company representatives called ruffled customers to apologize for the mistake.

"The SureWest person that I spoke with was really sincerely apologetic," said Ron Middlekauff, whose checking account at Sacramento Credit Union was erroneously debited of $128. "And the credit union returned the money to my account, so I'm whole."

SureWest said in a Friday news release that it will "take steps to assure reimbursement for any service charges or other bank fees incurred as a result of the vendor's error. A method to secure reimbursement will be communicated shortly."

Customers who have concerns about their bills can call SureWest at (916) 789-0095 or (800) 650-2649.

Clint Swett contributed to this report.