MCI settles claim of psychic network

Telecom pays $4.1 million

final sum undetermined

November 20, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

The bankruptcy trustee for the parent of the once fabulously lucrative but now defunct Psychic Friends Network has won a multimillion-dollar settlement from MCI WorldCom Network Services Inc., another company that recently emerged from bankruptcy.

Paul Sweeney, the trustee, said MCI paid $4.1 million of the $7.5 million agreed to in the settlement of a federal lawsuit. The lesser amount was the most MCI was allowed to pay under its court-approved bankruptcy reorganization plan, Sweeney said.

Bank of America, the only secured creditor of Inphomation Communications Inc. the Psychic Friends Network's parent, has received about $1.8 million from the payment and will be getting more, Sweeney said. Part will go to pay expenses, Sweeney said.

"The final sum has not been fully determined," he said.

"The case is over," said Douglas J. Furlong, an attorney who represented the bankruptcy trustee for Inphomation. "It has been a long, long arduous path."

A spokesman for Ashburn, Va.-based MCI, once known as WorldCom, declined to comment. MCI emerged from bankruptcy in April.

Inphomation, which was based in Pikesville, filed for Chapter 11 bankruptcy protection in 1998 after running out of cash. It claimed assets of $1.2 million and liabilities of $26 million. The reorganization was converted to a Chapter 7 liquidation.

The company's heavily promoted pay-per-call Psychic Friends Network, which featured singer Dionne Warwick as its celebrity pitch woman, once reported more than $100 million in yearly revenue. Callers paid $3.99 a minute to seek telephone advice from purported psychics.

Inphomation was run by Michael W. Lasky, a flamboyant entrepreneur who once owned a horse racing tip sheet, a yacht, part of an Inner Harbor hotel and paid $300,000 for the baseball Eddie Murray hit for his 500th home run.

The company used AT&T as the primary carrier for its Psychic Friends 900-number service. Inphomation switched to MCI after the telecommunications company said it could deliver carrier services, billing and collection services as well as or better than the competition and save the company 20 cents per "talk minute."

"I will do whatever it takes to become Inphomation's primary vendor," an MCI account executive wrote to Lasky, according to a court document.

Using its new carrier, Inphomation soon ran into problems. Its customers were not billed in a timely fashion, some billing rates were incorrect, and some calls were lost or prematurely terminated, according to a filing.

Lasky blamed MCI for his company's demise. But he was removed as head of Inphomation after creditors raised questions about his handling of company assets.

Sweeney, the trustee, was brought in to run the company and sued MCI, alleging that it couldn't handle the large volumes of phone traffic and that it mismanaged billing and the collection functions, according to the lawsuit filed in 2001 in U.S. District Court in Baltimore.

The lawsuit aimed to recover millions of dollars in damages. It also alleged fraudulent inducement, breach of contract and said MCI had violated the Racketeer Influenced and Corrupt Organizations Act.

The judge in the case ordered the parties to go to arbitration. The case was settled in September and approved by the court Oct. 29.

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