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With any business, your profits are determined by your income minus your expenditures.  Find a way to increase your income or cut your costs, and you will increase your profits. 

Independent audits are meant to verify the accuracy of this information. Large corporations such as Enron, WorldCom, Tyco, etc. ultimately failed because of their illicit accounting practices that were verified by another accounting agency.

In the year 2000, the FCC released the audit results of the Bells' commercial property records and found that the Bells' accounting records contained $5 billion dollars in missing equipment and an additional $13.8 billion in "unverifiable" equipment.  This equates to nearly $19 billion in missing equipment, or what has become to be known as "vaporware". This finding was only the first of four audit areas that needed to be examined.  In other words, had the other three audits been completed, it was likely that the figure for illicit write-offs would have been close to $80 billion!

So what happened?  Because of political pressure from Congressmen Tauzin, Dingell, and other interested parties, the FCC discontinued it's audits and turned the investigation over to the individual states.  The New York Commission is the only commission known to have independently investigated the initial portion of the audits, and they corroborated much of the FCC's findings. The Report found that $633 million of "non-specific" investment expenses are on the FCC's books but are now missing. They also found both FCC as well as SEC violations. Surprisingly, they did not investigate the rest of the audit areas, nor did they give customers refunds!

What's wrong with this picture?  I own a business.  If I am audited by the IRS, I will be asked to produce receipts for the years in question.  If I cannot produce the receipts for my expenses that I have written off, I will have to pay the difference.  You can count on it.

I'm a Bell company.  After only one-fourth of an audit has taken place, I cannot produce receipts or even the equipment to corroborate the nearly $20 billion worth of write-offs that I have taken.  A secondary organization has also confirmed the findings.  I do not pay a dime on the missing equipment.  How is it that anyone can worm their way out of paying that much after two, federal auditing bodies have confirmed that you have misreported that much data??  Even worse, this has allowed the Bells to appeal to the FCC that the company is not doing very well and that it needs to increase phone charges to cover it! 

As absolutely astounding and ridiculous as that sounds, that is precisely what happened and we are all paying inflated rates as a result.  What a great scam!  Why have the politicians not acted on this?  Personally, I do not believe that most of them understand the details clearly.  Because of the intimidating technical language that is often used to describe these issues, it is much easier to listen to your lobby groups who you represent.  Secondly, Verizon is very good at hedging it's bets.  Many of these politicians receive large campaign contributions, making it very easy for them to look the other way.

A few articles have been produced regarding this subject, however the story will consistently die down until either a politician with courage or a large news publication insists that the audits be completed.  All it takes is one, and eventually, the right person will read this and follow-up on it.