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lessees of the premises where the pay phones were to be
installed, installing the pay phones, obtaining all licenses
needed to operate the pay phones, insuring and maintaining the
pay phones, collecting and accounting for the revenues generated
by the pay phones, and paying vendor commissions and fees.
In return, Alpha Telcom was entitled to 70 percent of the
revenues the pay phones generated, while petitioners were
entitled to the balance. In the event that a pay phone’s
adjusted gross revenue was less than $194.50 for the month, the
Alpha Telcom service agreements provided that Alpha Telcom would
waive or reduce the 70-percent fee and pay petitioners at least
$58.34, so long as the equipment generated at least that amount.
In the event that a pay phone’s adjusted gross revenue was less
than $58.34 for the month, petitioners would receive 100 percent
of the adjusted gross revenue. Notwithstanding this formula,
Alpha Telcom made it a practice to pay its investors $58.34 per
pay phone, regardless of the revenue actually received.
Petitioners’ pay phones were never installed, and they never
received a monthly return because Alpha Telcom filed for
bankruptcy shortly after petitioners entered into the ATC pay
phone agreements. Petitioners never saw or took possession of
the pay phones.
On August 24, 2001, Alpha Telcom filed for bankruptcy under
chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court
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Last modified: March 27, 2008