Business News - JD Services Files for Bankruptcy; VoCall CEO to Challenge Bankruptcy Petition

Channel Partners

November 1, 2000

4 Min Read
Business News - JD Services Files for Bankruptcy; VoCall CEO to Challenge Bankruptcy Petition

Posted: 11/2000

JD Services Files for Bankruptcy; VoCall CEO
to Challenge Bankruptcy Petition
By Josh Long

JD Services Inc., a provider of cellular, pre-paid, and long-distance
products and services, filed for bankruptcy in September under Chapter 7 in the
U.S. Bankruptcy Court District of Utah.

Headquartered in Salt Lake City, JD Services initially filed for bankruptcy
with the court in August under Chapter 11, which typically allows a company to
retain control of its business and assets and reorganize its finances pending
approval from creditors.

JD Services closed its doors in September, according to the Washington
D.C.-based International Telecard Association.

According to public records filed in the bankruptcy court, the company owed
WorldCom ( nearly $27.3 million
in trade debt.

After WorldCom, the list of creditors holding the four largest unsecured
claims from JD Services includes BellSouth Long Distance (,
$819,800; Marco Ugalde; 813,900; Star Telecommunications (,
813,500; and Destia Communications (;

In a separate case, four creditors filed a petition under Chapter 7 with the
U.S. Bankruptcy Court in Florida, requesting an order of relief be entered
against Largo, Fla.-based Galaxy Long Distance Inc., (,
a full-service pre-paid phone company. One creditor included WorldCom, which
could not be reached to comment on the petition.

Galaxy ceased business in September and had not responded to the petition by
press time.

The bankruptcy proceedings in the prepaid industry this fall did not end with
JD Services and Galaxy Long Distance Inc.

Three companies – including the largest creditor WorldCom–filed a petition
under Chapter 7 with the U.S. Bankruptcy Court in New Jersey this fall,
requesting that an order of relief be entered against VoCall Communications
Corp., a provider of IP telephony and prepaid calling card services. VoCall (
had 20 days to respond to the petition.

The petitioning creditors also included World Access Telecommunications
Group, Inc. ( and Knowledge LTD.
According to the court record, WorldCom listed a secured claim of approximately
$13 million.

In a statement issued to its distributors, VoCall CEO Gary Frank said the
dispute with WorldCom arose as a result over the transmission of international
calls to Mexico. From November 1999 to May 2000, WorldCom neglected to complete
a significant portion of VoCall’s calls to Mexico, according to Frank.

The CEO said VoCall intends to litigate the disputes over the calls to Mexico
and challenge the bankruptcy petition. A WorldCom spokesperson could not be
reached to comment on the dispute involving calls to Mexico.

WorldCom has provided VoCall Communications and JD its underlying network on
a long-term basis, said Lynn Staggs, WorldCom spokeswoman. Staggs, however,
declined to comment on the bankruptcy proceedings, noting contractual agreements
with the two companies.

"These business problems are indicative of a growing industry facing
consolidation and intense competition," noted Howard Segermark, Executive
Director of the International Telecard Association.

"Regulators will gauge the impact of these events on the consumer and
may be inclined to punish the entire industry with harsher rules,’ Segermark
said in a memo. "It will be up to the ITA and others to bring to their
attention the facts of the marketplace and what fair rules should look

"… I think in the long-term health of the industry it might not be a
bad idea to have some regulations," said Paul Waadevig, research analyst,
of the San Antonio, Texas-based Frost and Sullivan. "I think the industry
has been trying to self regulate for a couple of years now and it just is not

One ITA member, who was identified only by his first name, said in a memo the
recent filings may reflect both competition and individual business decisions as

"It is indeed unfortunate these things are occurring but it is not

surprising to us in lieu of what we see in the marketplace," the ITA
member said. "While there may in fact be competitive factors involved in
the troubles these folks are having we believe some, if not most, are of their
own business decisions. Each of us have to accept that responsibility."

Waadevig said the pre-paid market is a complicated one, requiring large
initial and acquisition costs and a guessing game as to how consumers will use
their minutes. Moreover, the analyst said, the high growth of the last five to
10 years may subside as the industry has reached a saturation point with the
credit challenged – many of whom are joining other consumers in switching to

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