NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In re Applications of ) ) Diamond Broadcasting of ) File Nos. BR-900802UL California, Inc. ) BRH-900802VF ) For Renewal of License for ) Stations KKIS(AM)/KKIS-FM ) Pittsburg/Walnut Creek, California ) MEMORANDUM OPINION AND ORDER Adopted: May 29, 1996; Released: June 17, 1996 By the Commission: 1. The Commission has before it for consideration: (i) a timely Reply to Notice of Apparent Liability filed by Randolph E. George, Receiver for Diamond Broadcasting of California, Inc. ("Receiver"), who was at the time of the Reply the licensee of stations KKIS(AM), Pittsburg, California and KKIS-FM, Walnut Creek, California, requesting that we vacate or reduce the forfeiture assessed in our Memorandum Opinion and Order in Applications of Diamond Broadcasting of California, Inc., 8 FCC Rcd 6222 (1993) ("MO&O") based upon violations of our Equal Employment Opportunity ("EEO") Rule, Section 73.2080 of the Commission's Rules, 47 C.F.R.  73.2080, at the stations; (ii) Informal Comments filed by BayBank Boston, N.A. ("BayBank"); and (iii) a statement filed by the Secretary of Diamond Broadcasting of California, Inc. ("Diamond"). 2. The MO&O renewed the licenses for KKIS(AM)/KKIS-FM for a short term subject to reporting conditions and assessed a forfeiture in the amount of $25,000 based on EEO violations that occurred during the period of June 1, 1989 through June 1, 1990. Although there was no evidence of discrimination, we found that the stations' efforts to recruit minority applicants were deficient during the period and that efforts to self-assess the effectiveness of the stations' EEO program were inadequate as a result of the failure to maintain records of applicant and interviewee flow data. Diamond was the licensee of the stations during the period when the violations occurred. The Notice of Apparent Liability was released on August 13, 1993. 3. On May 22, 1992, the Superior Court of the State of California in and for the County of Contra Costa entered an order appointing Randolph E. George the receiver for all the assets utilized in connection with the stations. Pursuant to the Court's order, the Receiver was authorized "to take immediate possession of the Stations' assets, to preserve, occupy, protect and administer the Stations' assets and manage and operate . . . the Stations . . ." The receiver was also authorized to take steps to sell the stations. The order further provided that "Diamond, its shareholders, managers, officers, directors, employees, agents and representatives are prohibited from collecting any debts or demands due to Diamond, except as may be requested by the receiver, or from paying out, assigning, selling, conveying, transferring, encumbering or delivering any of Diamond's assets to any person other than the receiver . . ." On October 27, 1992, we granted the applications for involuntary assignment of the licenses from Diamond to the Receiver (File Nos. BAL-920605EA, BAL-920605EB). On January 27, 1993, an application was filed seeking approval for the assignment of the license for KKIS(AM) to People's Radio, Inc., which was granted on August 10, 1993 and consummated on September 1, 1993 (prior to the filing of the pleadings now under consideration). On June 15, 1993, an application was filed seeking approval for the assignment of the license for KKIS-FM to KZWC Broadcasting, Inc., which was granted on August 10, 1993 and consummated on October 8, 1993 (after the filing of the pleadings now under consideration). Accordingly, neither Diamond nor the Receiver is currently the licensee of the stations. 4. The pleadings now under consideration reflect that the appointment of a receiver was triggered by Diamond's default on its financial obligations to BayBank, its principal institutional secured lender. The Receiver reports that the balance owed to BayBank was in excess of $3,250,000 as of July 31, 1993. The Receiver placed the value of the stations in the neighborhood of $1,600,000 and reports the price for the stations pursuant to the assignment applications to be $1,450,000 (before sales experts). Both the Receiver and BayBank predict that BayBank will suffer a loss in excess of $1,500,000 as a result of Diamond's default. The Receiver asserts that no money from the sale of the stations will go to Diamond. 5. The Receiver, in his Reply to Notice of Apparent Liability, first urges that the MO&O erred in its assessment of the facts concerning the EEO record of KKIS(AM)/KKIS-FM. He further contends that the $25,000 forfeiture imposed by the MO&O is excessive in light of any arguable EEO violation that might be found and is inconsistent with precedent. He next asserts that the financial condition of the stations while under his control made payment of the forfeiture impossible. He finally suggests that the forfeiture should be reduced pursuant to Commission policies that have mitigated sanctions where the effect would be to punish innocent creditors of a financially distressed licensee. The Receiver notes that, in Transnational Network, Inc., 92 FCC 2d 324 (1982) ("Transnational"), we reduced a forfeiture from $8,000 to $100 because the violator had sought bankruptcy protection. He urges that the same result should apply here. BayBank urges that the forfeiture should be wholly vacated since any payment would reduce the funds otherwise available for innocent creditors. The submission from the Secretary of Diamond is limited to pointing out that, under the terms of the order appointing the Receiver, the principals of Diamond no longer have control of the assets of the corporation and are therefore unable to pay the forfeiture. 6. Given the circumstances and the record in its entirety, we conclude that it is appropriate to rescind the forfeiture. In Transnational, we reduced a forfeiture to a "nominal amount" after the violator sought relief under Chapter 11 of the Bankruptcy Act. The violator in that case remained in control of the operation (a resale common carrier) and still had "limited" resources. More recently, in Dennis Elam, Trustee, 11 FCC Rcd 1137 (1996) ("Elam"), we rescinded a $25,000 notice of apparent liability where a licensee's stations had been involuntarily transferred to a trustee under Chapter 7 of the Bankruptcy Act. We found that, unlike Transnational, the violator was no longer associated with the stations and that, in order to satisfy creditors' claims, the sale of the stations to parties other than the bankrupt violator was contemplated. We therefore concluded that to require payment of a forfeiture by the bankruptcy trustee would punish innocent creditors of the former licensee and serve no public interest purpose. The circumstances here are comparable to Elam. Thus, the Receiver, who was not involved in the violations, was appointed to operate the stations pending their sale to other parties for the benefit of creditors of Diamond. The appointment of the Receiver removed the violator from involvement in the operation of the stations and sales of the stations to unrelated parties have since been completed. The imposition of a forfeiture in these circumstances would impact only innocent creditors. Therefore, we will rescind the Notice of Apparent Liability issued by the MO&O. Other matters raised by the Receiver are thereby rendered moot because we have granted the relief sought by the Receiver, who is not implicated in the violations that resulted in the forfeiture. The reporting conditions imposed to monitor the stations' EEO performance remain in effect. 7. Accordingly, IT IS ORDERED that the relief sought in the Reply to Notice of Apparent Liability filed by Randolph E. George, Receiver for Diamond Broadcasting of California, Inc., IS GRANTED to the extent indicated, and is otherwise DISMISSED as moot. 8. IT IS FURTHER ORDERED that the Notice of Apparent Liability issued to Diamond Broadcasting of California, Inc., pursuant to the MO&O, IS HEREBY RESCINDED. 9. IT IS FURTHER ORDERED that the Mass Media Bureau send by Certified Mail--Return Receipt Requested--a copy of this Memorandum Opinion and Order to Randolph E. George, Receiver for Diamond Broadcasting of California, Inc. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary