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Tam · 01-25-2002, 07:55 PM

PART ONE:

VARADOX COMMUNICATIONS CORP.

As of January 25, 2002, VARADOX COMMUNICATIONS CORP. and its Licensee, VARADOX OPERATING (BARABADOS #1) CORP., has suspended its premium rate US dialer software services and has also suspended payments to its Broker distribution network. The reasons for these suspensions have to do with broker and sub-broker abuse, issuance of unauthorized dialers, and use of unauthorized and potentially illegal dialer distribution methods, in addition to the current breakdown in the 1-900 billing and collection systems in North America.

The Varadox Group is owed millions of dollars by network and local exchange carriers, and has not received the bulk of its receivables from that system since Oct 25 of last year. At this time, in light of recent events in the 1-900 industry with MCI and AT&T removing billing systems and US State and Federal regulators actively promoting broad changes to authorized 1-900 consumer protection and telecom access policies, Varadox Group?s management considers continuing with the 1-900 billing and delivery platform in the US as currently done to be risky, and to have a very short future lifespan.

These freezes in the Varadox Group corporate activities are expected to be temporary.

The Varadox Group is taking every conceivable step to ensure that all monies it is owed are collected from Local Exchange and network Carriers and from that system?s billing providers prior to making final payouts to Brokers, and wishes to inform you that all of the Varadox system Brokers will be paid all monies legitimately owing once these collections have been made.

That being said, the issues between Varadox and certain of its Broker community which involve fraudulent dialer use or breaches of the Broker agreement will be dealt with in accordance with the individual Broker agreements with the Varadox companies.

The Varadox Group will be continuing on with international calls through its dialer and with the co-operation of its international Brokers at this time (subject to enforcement of currently known and discovered breaches of any particular Broker agreement), and expects to launch 2 new US premium billed content distribution/subscription solutions to the global broker community within the next 90 days. Please stand by until those announcements for some exciting news about replacement technologies and revenue enhancement potentials.

The Varadox Group also continues in its firm corporate policy and will deal with its market sector on a hyper-compliance basis with respect to both consumer protection regulations relative to content, transport and system end-users, and with respect to timely and accurate reporting and fair treatment of its distribution partners.

The Varadox Group has also been collecting extensive amounts of data in respect to cheating dialers and boosting minutes by fraudulent means. All information gathered will be sent directly to each Broker and if required, to federal authorities, to help resolve issues that affect the entire industry. Brokers will not be paid commission for any minutes purported to be earned by fraudulent means.

The Varadox Group?s Plan of Attack to Combat and Deal with Broker Fraud

1. Do the accounting ? Varadox will spend time and resources required to get firm numbers relative to identity of sub-brokers involved, costs of non-compliance, etc. and forward the resulting claims and accountings to both brokers and if appropriate, to appropriate police or other authorities.

2. Terminate the dialer?s US operability, which was done as of today?s date.

3. Within roughly 90 days from today?s date; take a legally responsible formal position with each of the Brokers on a case-by-case basis in regards to payouts, adjustments, indemnification, charge-backs and formal dealings with any fraudulent activities.

4. Those Brokers who have not cheated and have continued to demonstrate responsible operations and the monitoring of their down lines will be paid out more promptly than the 90 day period, as their accounts clear the audit process. We believe we have begun to identify patterns of abuse, so the process of paying compliant Brokers may accelerate.

5. Varadox Group will continue to pay brokers on a bi-weekly

basis for all international minutes generated as soon as we have finished compiling all the data as mentioned above (and subject to each Broker?s continual compliance with Varadox Group contracts. We will release funds as quickly as possible to Brokers who have demonstrated good business practices.

GENERALLY

We have always been an organization that prides itself in being honest with our distribution chain and will continue to do so no matter if it is good or bad news.

We realize that with the statements made above (and the news we released to the 1-900 community as a whole), we may lose some or all of our Brokers, but have come to the conclusion, consistent with our ethics, that it is best to be done now when we can still recoup all funds from the Local Exchange Carriers and pay out the Brokers, instead of pretending to operate in ?business as usual? mode and permitting the whole distribution system to default when the regulatory boards and Local Exchange Carriers decide to cause more problems or shut down the whole system in response to shoddy business practices, cheating, breach of consumer confidence, billing abuses and fraud within our industry. That would mean that we wouldn?t get paid and ultimately, neither would the Broker community.

01-25-2002, 07:55 PM
Tam Confirmed User Industry Role: Join Date: Jan 2001 Location: In your face Posts: 8,488	Varadox Announcement PART ONE: VARADOX COMMUNICATIONS CORP. As of January 25, 2002, VARADOX COMMUNICATIONS CORP. and its Licensee, VARADOX OPERATING (BARABADOS #1) CORP., has suspended its premium rate US dialer software services and has also suspended payments to its Broker distribution network. The reasons for these suspensions have to do with broker and sub-broker abuse, issuance of unauthorized dialers, and use of unauthorized and potentially illegal dialer distribution methods, in addition to the current breakdown in the 1-900 billing and collection systems in North America. The Varadox Group is owed millions of dollars by network and local exchange carriers, and has not received the bulk of its receivables from that system since Oct 25 of last year. At this time, in light of recent events in the 1-900 industry with MCI and AT&T removing billing systems and US State and Federal regulators actively promoting broad changes to authorized 1-900 consumer protection and telecom access policies, Varadox Group?s management considers continuing with the 1-900 billing and delivery platform in the US as currently done to be risky, and to have a very short future lifespan. These freezes in the Varadox Group corporate activities are expected to be temporary. The Varadox Group is taking every conceivable step to ensure that all monies it is owed are collected from Local Exchange and network Carriers and from that system?s billing providers prior to making final payouts to Brokers, and wishes to inform you that all of the Varadox system Brokers will be paid all monies legitimately owing once these collections have been made. That being said, the issues between Varadox and certain of its Broker community which involve fraudulent dialer use or breaches of the Broker agreement will be dealt with in accordance with the individual Broker agreements with the Varadox companies. The Varadox Group will be continuing on with international calls through its dialer and with the co-operation of its international Brokers at this time (subject to enforcement of currently known and discovered breaches of any particular Broker agreement), and expects to launch 2 new US premium billed content distribution/subscription solutions to the global broker community within the next 90 days. Please stand by until those announcements for some exciting news about replacement technologies and revenue enhancement potentials. The Varadox Group also continues in its firm corporate policy and will deal with its market sector on a hyper-compliance basis with respect to both consumer protection regulations relative to content, transport and system end-users, and with respect to timely and accurate reporting and fair treatment of its distribution partners. The Varadox Group has also been collecting extensive amounts of data in respect to cheating dialers and boosting minutes by fraudulent means. All information gathered will be sent directly to each Broker and if required, to federal authorities, to help resolve issues that affect the entire industry. Brokers will not be paid commission for any minutes purported to be earned by fraudulent means. The Varadox Group?s Plan of Attack to Combat and Deal with Broker Fraud 1. Do the accounting ? Varadox will spend time and resources required to get firm numbers relative to identity of sub-brokers involved, costs of non-compliance, etc. and forward the resulting claims and accountings to both brokers and if appropriate, to appropriate police or other authorities. 2. Terminate the dialer?s US operability, which was done as of today?s date. 3. Within roughly 90 days from today?s date; take a legally responsible formal position with each of the Brokers on a case-by-case basis in regards to payouts, adjustments, indemnification, charge-backs and formal dealings with any fraudulent activities. 4. Those Brokers who have not cheated and have continued to demonstrate responsible operations and the monitoring of their down lines will be paid out more promptly than the 90 day period, as their accounts clear the audit process. We believe we have begun to identify patterns of abuse, so the process of paying compliant Brokers may accelerate. 5. Varadox Group will continue to pay brokers on a bi-weekly basis for all international minutes generated as soon as we have finished compiling all the data as mentioned above (and subject to each Broker?s continual compliance with Varadox Group contracts. We will release funds as quickly as possible to Brokers who have demonstrated good business practices. GENERALLY We have always been an organization that prides itself in being honest with our distribution chain and will continue to do so no matter if it is good or bad news. We realize that with the statements made above (and the news we released to the 1-900 community as a whole), we may lose some or all of our Brokers, but have come to the conclusion, consistent with our ethics, that it is best to be done now when we can still recoup all funds from the Local Exchange Carriers and pay out the Brokers, instead of pretending to operate in ?business as usual? mode and permitting the whole distribution system to default when the regulatory boards and Local Exchange Carriers decide to cause more problems or shut down the whole system in response to shoddy business practices, cheating, breach of consumer confidence, billing abuses and fraud within our industry. That would mean that we wouldn?t get paid and ultimately, neither would the Broker community.