WPCB 2H BX ZW1)n (TT)3|Pmes New Roman (TT)Times New Roman (Bold) (TT)Times New Roman (TT)@^;B\ddBBBdBBBBddddddddddBBDZY}}vBM}rk}BBBdddYdYdYBdd77d7ddddJM7ddddYYdYDZBdd!dddRdddYYYYYY}Y}Y}Y}YB7B7B7B7ddddddddddYdddddrddddYdd}d}d}dddddddddddddBddd}7}RdddJRkMkMNdBddBYQQddddddFdddFBBggd44ddzBgBFtBnnyy2do7cQQnCzohcnonvyXzXshn~|yxxxxxxxxxxxxxxxxxxx;B\ddBBBdBBBBddddddddddBBDZY}}vBM}rk}BBBdddYdYdYBdd77d7ddddJM7ddddYYdYxxBdgdddk4xxxxBBggdddzM4xx;BdddddddddQBdddFFdodBdFdQY}}}}BBBBrdYYYYYYYYYYY7777ddddddddddddddXPPS - PSt 4/4MOM 228 LPT1XPPSPS.WRSSXR  P7jQG"jXP2 z$ 3|U'CG Times (W1)Times New Roman (TT)7]SS.77S_*7*.SSSSSSSSSS77___SxoxxofASoxfx]oxxxxo7.7aS7S]J]J7S].7].]S]]JA7]SxSSJB%BW*7777CE7S]xSxSxSxSxSxxJoJoJoJoJA.A.A.A.x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxJxJxJoJoJoJSSSS]]C]A]A7A]S]o.oEx]x]SxxJxJ]A]AN:*ZS7SSSSSS27}}S2}}S}277SSS77SS7S72t7[[[[_ee*C`_.wRSSn[Cfx`xWlRx[][ceIfIs`Wx[rriwge*7]SS.77S_*7*.SSSSSSSSSS77___SxoxxofASoxfx]oxxxxo7.7aS7S]J]J7S].7].]S]]JA7]SxSSJB%BW7SSSS7]777SS:S7A7xx*7SSSS%S7}2S_7}SC[227`Z*727S}}}SxxxxxxxooooAAAAxx_xxxxxf]SSSSSSxJJJJJ....S]SSSSS[S]]]]S]2F@3P 3 9"5@^2CRdd$CCdq2C28dddddddddd88qqqYzoCNzoozzC8C^dCYdYdYCdd88d8ddddCN8ddddY`(`l2CC!CCPRCddYYYYYYzYzYzYzYC8C8C8C8ddddddddddYdddddoddYYYYYzYzYzYddddddPdCdCCCdNdz8zRdddCRoNoNNF2[dCYddddd7>d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddndddddddTimes New Roman (TT)Times New Roman (Bold) (TT)RomanXPTimes New Roman (TT)Times New Roman (Bold) (TT) (Bold) (TT)CG Times (W1) (Bold)Roman7PC2X DXP\  P6QXP.7UC2X$xXU4  pQX>WC;XAXW  p7sQXCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddndddddddTimes New Roman (TT)Times New Roman (Bold) (TT)RomanRoman2 @xvp.k"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCddddddj<<<@jHHHH((>><WC;XAXW  p7sQXW!0(X h0\  P6QhP P(1(#X5h1  P7jQhP !y.K8?XVqK\  P@QPy.C8*XC\  P6QPMc2c  JMcnL 2B X-     w X- #Xj\  P6G; XP# Federal Communications Commission FCC 97207  X-___________________________________________________________________________ ___ X  ,w G #Xj\  P6G; XP#Before the  X-R  Federal Communications Commission  X- Washington, D.C. 20554 ĐiP ,w,r <I, ,rr   X-In re: Application ofhh,V) ` `  hh,V)  Xv- Choctaw Broadcasting Corporation V)File No. BAPH930601GJ  X_-(Assignor)` `  hh,V) ` `  hh,V)  X1-and ` `  hh,V) ` `  hh,V)  X - New South Communications, Inc. hh,V)  X -(Assignee)` `  hh,V) ` `  hh,V)  X -For Voluntary Assignment of the hh,V)  X -Construction Permit for hh,V)  X-Station KLIP(FM), Monroe, LouisianaV)  XK- MEMORANDUM OPINION AND ORDER ă  X- Adopted : June 9, 1997 hh,V Released: June 17, 1997 By the Commission:    r  1. The Commission has before it an application for review, filed on August 31, 1995 by   Phoenix Broadcasting Company ("Phoenix"), licensee of station KYEA(FM), Monroe, Louisiana.  X-  Phoenix seeks reexamination of a July 24, 1995 action by the Mass Media Bureau ("Bureau") X -ԍ#X\  P6G;pP##C\  P6QpP#Letter to William Silva, Esq. and Aaron Shainis, Esq., reference 1800B3MFW (M.M. Bur., July 24,  yO-1995).   -which denied reconsideration of the Bureau's October 20, 1994 denial of Phoenix' petition to deny   the abovecaptioned application to assign the construction permit of station KLIP(FM) from   Choctaw Broadcasting Corporation ("Choctaw") to New South Communications, Inc. ("New  X7-  >South"), which is the licensee of Monroe stations KLMB and KJLO(FM).7A X)!-ԍ#X\  P6G;pP##C\  P6QpP#William L. Silva, Esq., 9 FCC Rcd 6155 (M.M. Bur., October 20, 1994). New South and   MChoctaw filed oppositions to the application for review on September 22 and September 28,  X -  <respectively; Phoenix filed a "Consolidated Reply" on October 5, 1995.y  X$-ԍ#X\  P6G;pP##C\  P6QpP#Also before us are supplemental filings made by Phoenix on February 1, 1996; a "Joint Response" by Choctaw and New South filed April 26, 1996 and supplemented by staff request on May 8, 1996; Phoenix's reply, filed May 14, 1996; and Choctaw's opposition, filed on May 28, 1996. For the reasons set forth below, we will deny the application for review and grant the assignment application. " 3,))JJ"Ԍ X-: BACKGROUND ă   . 2. The KLIP(FM) construction permit (BPH880602NN) was issued to Choctaw on August   8, 1991; construction was to have been completed by February 8, 1993. On February 2, 1993,  X-  .Choctaw filed an application for extension of time to construct (File no. BMPH930202JN).P X-ԍ#X\  P6G;pP##C\  P6QpP#The application was granted on March 12, 1993. In  X-  the extension application, Choctaw indicated that the transmitter, antenna and studio equipment,   which had been ordered from New South, were ready to be delivered and that some delay was   occasioned because New South was having difficulty in obtaining a necessary coaxial cable.   Two weeks after the filing of the extension request, on February 16, 1993, and prior to the   commencement of operation, Choctaw signed a letter of intent to sell KLIP(FM) to New South   for $400,000, which letter anticipated that New South would acquire and install the necessary   equipment and program the station pursuant to a local marketing agreement ("LMA").   MSubsequently, on March 31, 1993, still prior to operation, the parties signed a binding asset   purchase agreement to sell KLIP(FM) to New South for $400,000. The LMA was signed one   day later, on April 1, 1993. One week later, on April 8, 1993, Choctaw notified the Commission   that it had commenced operations. An application for covering license was filed on May 10,  X-1993,yP X-ԍ#X\  P6G;pP##C\  P6QpP#The license application was granted in the October 20, 1994 Bureau action. Its grant was not appealed. and the instant assignment application approximately three weeks later, on June 1, 1993.  Xb-  \ 3. Phoenix' Petition to Deny. Phoenix filed a petition to deny the assignment application   yon July 15, 1993, alleging that Choctaw and New South participated in an unauthorized transfer   of control of the KLIP(FM) construction permit because New South had been involved in every   aspect of the construction and operation and that Choctaw's principal, Linda Melton, lived in   Arizona during the authorized construction period. Specifically, Phoenix alleged that New South   .had: (1) provided the equipment and constructed the station; (2) hired and fired personnel; (3)   paid KLIP(FM)'s expenses; (4) purchased outdoor advertising for the station; and (5) ran the  X-  zstation out of New South's studios with New South's personnel.I *P X-ԍ#X\  P6G;pP##C\  P6QpP#Phoenix also questioned the propriety of New South's LMA with KLIP(FM) as it relates to attributable interests in radio stations. Phoenix noted that New South principal, Frank E. Holladay, was licensee of stations KLMB and KJLO(FM), Monroe, Louisiana and that his son Clay Holladay owned station KRVV(FM), Bastrop, Louisiana, all of which served the Monroe, Louisiana market. Phoenix stated that these three stations were operated out of common studios and pointed out that, while the KLIP(FM) LMA was signed on April 1, 1993, a prior LMA between New South and KRVV(FM) was not terminated until April 8, 1993. Thus, claimed Phoenix,  yOm!-New South operated four stations in the same area for a period of at least one week in violation of the local radio ownership rules then in effect. As pointed out by the Bureau, however, Phoenix was incorrect in this assertion. While the KLIP(FM) LMA was signed on April 1, 1993, it took effect only when the station commenced operation, on April 8, 1993 (the day the KRVV(FM) LMA was terminated). The Bureau therefore correctly found that at no point did New South operate four stations in the Monroe, Louisiana market. Furthermore, the staff has evaluated the instant application and has determined that it complies with our local  yO&-radio ownership rules, 47 C.F.R. 73.3555(c). Phoenix also alleged that,   ybecause New South acquired the equipment for, constructed, and programmed the station, and";,=(=(JJ4"   because Choctaw had not demonstrated its financial independence from New South, that "either   Lthe whole relationship between New South and Choctaw is a sham or the Commission is being asked to permit the sale of a bare license for $400,000."  X-   4. The Bureau denied the petition to deny in William L. Silva, Esq., supra, holding that: (1)   Phoenix had not demonstrated that New South had exceeded the authority granted by the LMA   with respect to station operations, and the LMA comported with other agreements which the   Bureau had previously approved; and (2) all employees and equipment utilized by New South   yin its construction and operation of KLIP(FM) were hired or acquired with Choctaw's approval,   >and all payments made to Choctaw employees were paid from Choctaw's account, with one   exception. It also noted that a format change during the Summer of 1993 was instituted only   xafter seeking and receiving Ms. Melton's approval, and that Choctaw engineer Roger Bennett was   called upon to resolve an interference problem with station KMGCFM, Camden, Arkansas. The   Bureau indicated that these latter two incidents evidenced that New South recognized and   deferred to the authority of Ms. Melton and Choctaw, and it concluded that no substantial and   material question of fact existed regarding Phoenix' allegations of unauthorized transfer of   Kcontrol. The Bureau also found, on the basis of Choctaw/New South's response to a May 6, 1994   inquiry letter, that the instant transaction did not constitute the sale of a bare license. Finally,   ithe Bureau also determined that the "no profit" provision for the sale of an unbuilt station applied  XK-  to this transaction. See 47 C.F.R. 73.3597(c)(2). Choctaw was afforded an opportunity to document these expenses.  X-   5. Petition for Reconsideration. Phoenix filed a petition for reconsideration of the Bureau   Mruling on November 28, 1994 rearguing that New South was involved in every aspect of the  X-  Kconstruction and current operation of KLIP(FM) and therefore exercised de facto control over the  X-  station.  Phoenix also argued that it had established a prima facie case regarding an unauthorized   jtransfer of control and that the burden therefore shifted to Choctaw to establish that KLIP was   independently owned and operated. It asserted that the Bureau had applied the wrong legal   standard in evaluating its petition. It also asserted that the Bureau erred by not discussing two  Xe-  [ex parte communications in February 1994 from New South principal Bob Holladay to the Chief   of the Bureau's Audio Services Division. Finally, Phoenix contended that Choctaw and New   ySouth lacked candor by failing to disclose that Roger Bennett, purportedly Choctaw's engineer responsible for overseeing construction of KLIP(FM), was a fulltime employee of New South.    6. On July 24, 1995, the Bureau denied reconsideration. It determined that even were it to  X-  assume, arguendo, that Phoenix' allegations, if true, made a prima facie case that grant of the   subject application would be inconsistent with the public interest, consideration of the entire   record established that Phoenix had raised no substantial and material question of fact of an   -unauthorized transfer of control. The Bureau stated that the only new matters Phoenix presented   =were its concern that Roger Bennett was an employee of New South and its allegation that the  Xh$-  prior ruling neglected to find an ex parte violation and to apply an appropriate sanction. The   Bureau found that the former was adequately explained by Mr. Bennett's sworn statements that   /he was paid by Choctaw for his work for Choctaw. The Bureau also found that, even if the  X#'-  Holladay letters constituted ex parte contacts, it had no prejudicial effect because a copy was"#',=(=(JJ%"   =formally provided to all parties on February 24, 1994, and a response from Phoenix was sought  X-and considered. Therefore, the Bureau denied the petition for reconsideration. l à  X-  X-  L 7. Application for Review. In its Application for Review, Phoenix reiterates that the Bureau   japplied the wrong legal standard in evaluating its petition to deny. Furthermore, it restates the   arguments raised previously, asserting that: (1) the facts in this case demonstrate that there had  Xv-  been an unauthorized transfer of control of station KLIP; vP X-ԍ #X\  P6G;pP##C\  P6QpP#Phoenix claims that the Bureau ignored the three cases cited in its petition for reconsideration, and it cites  yO-two additional cases, WGPR, Inc., 10 FCC Rcd 8140 (1995), and Letter to Patrick Markham, 10 FCC Rcd 8249 (M.M. Bur. 1995) which, it states, underline the importance of viewing the financial relationship between the parties to determine whether or not an unauthorized transfer of control has occurred. These cases are discussed  yO0 -infra at  17 and note 16, respectively. (2) the Bureau "utterly failed" to   support its factual determinations regarding Choctaw's retention of control; (3) the Bureau erred   in relying on the fact that Ms. Melton was consulted prior to a format change during the Summer  X1-  of 1993B1P X{-ԍ#X\  P6G;pP##C\  P6QpP#Phoenix states that the consultation should be discounted because it occurred after the filing of its July 15, 1993 petition to deny alleging that New South had prematurely assumed control of the station.B and on Mr. Bennett's role as a Choctaw employee in finding no unauthorized transfer   !of control; (4) the Bureau failed to consider the allegation that Choctaw and New South   intentionally withheld the fact that Mr. Bennett was and remains a New South employee, as well  X -  as a Choctaw employee; and (5) New South engaged in prejudicial ex parte contacts with Bureau   [decisionmaking personnel and, if the instant application is not dismissed for that reason, New South should at least be sanctioned.  8. Neither Phoenix nor Choctaw has presented for review the Bureau's finding that the   unbuilt station provisions of 47 C.F.R. 73.3597(c) apply to this transaction and that   Lconsideration for the sale is limited to Choctaw's documented outofpocket expenses. In fact,   on January 11, 1996, Choctaw submitted documentation of its outofpocket expenses and we   =have determined that Choctaw is entitled to payment by New South for legitimate and prudent  X-  Nexpenses totalling $196,903.73. AP X-ԍ#C\  P6QpP#Choctaw has itemized and documented these expenses, including: (1) payments totalling $125,000 to mutually exclusive applicants for the Monroe, Louisiana frequency; (2) $47,406.31 in legal fees, as well as $3,182.03 in engineering fees, incurred in prosecuting the appication for construction permit; (3) $8,632.20 in Commission filing fees; and (4) $3,150 in rent payments for its tower site. Our grant of the subject application will be conditioned accordingly.  X-@ DISCUSSION ă  X- Proper Legal Standard  X-   9. It is well settled that, in assessing the merits of a petition to deny, the Commission is   guided by Sections 309(d)(1) and (2) of the Communications Act of 1934, as amended, 47 U.S.C.  Xe-  L309(d)(1) and (2), as explained in Citizens for Jazz and Astroline Communications Co., supra. "e ,=(=(JJ"   First, the Commission determines whether the petitioner makes specific allegations of fact which,  X-  if true, would demonstrate that grant of the application would be prima facie inconsistent with   >the public interest. If so, the Commission proceeds to examine and weigh all of the material   before it, including responsive pleadings, to determine whether or not the petitioner has presented   a substantial and material question of fact requiring resolution in an evidentiary hearing. Such   analysis "permits the Commission to determine 'whether the totality of the evidence arouses a  Xv-  sufficient doubt on the point that further inquiry is called for,'" Astroline Communications Co.,  X_-  {supra, 857 F.2d at 15612, quoting Gencom, Inc. v. FCC, 832 F.2d 171, 181 (D.C. Cir. 1987).   Finally, the Commission must determine whether or not grant of the application would serve the public interest, convenience, and necessity.    10. In this case, the Bureau applied the proper legal standard in its reconsideration ruling.  X -  Pursuant to the Astroline standards, the Bureau assumed that Phoenix had presented a prima  X -  facie case, and proceeded to the second step, holding that, in examining the entire record before   it, Phoenix had not raised any substantial and material questions of fact necessitating a hearing.  X -  [However, it is also clear that, under Section 309(d), the burden of both presenting a prima facie  X-  Mcase and demonstrating the existence of a substantial and material question of fact must be  Xy-  carried by the petitioner. See, e.g., Mobile Communications Corp. of America v. FCC, 77 F.3d   1399, 1410 (D.C. Cir. 1996) (burden on petitioner, not Commission). Phoenix cites no authority  XK-  >for its contention that, once a prima facie case has been presented, the burden shifts to the applicant(s) to demonstrate that no substantial and material questions of fact exist.  X-  X- Unauthorized Transfer of Control  X-   11. Section 310(d) of the Communications Act prohibits the transfer of control of a station   permit or license, or any rights thereunder, without prior Commission consent. In determining   .whether or not an unauthorized transfer of control has occurred, the Commission looks to any   acts or agreements vesting in a "new" entity the right to determine basic policies concerning the  X-  operation of the station. See, e.g., WHDH, Inc., 17 FCC 2d 856 (1969), aff'd sub nom. Greater  X|-  zBoston Television Corporation v. FCC, 44 F.2d 841 (D.C. Cir. 1971), cert denied, 403 U.S. 923   k(1971). The Commission inquiry with respect to the locus of control of a station's operation  XN-  .focuses on three factors: the programming, the personnel, and the finances. Southwest Texas  X7-  Public Broadcasting Council, 85 FCC 2d 713, 716 (1981); Stereo Broadcasters, Inc., 55 FCC 2d  X -  819 (1981), recon. denied, 50 RR 2d 1346 (1982). Additionally, as in WGPR, Inc., supra, 10   FCC Rcd at 8142, we must examine the instant transaction in light of the April 8, 1993 LMA   and evaluate it on the basis of past Commission and staff pronouncements on the matter of local  X-  -marketing and time brokerage agreements. P XT"-ԍ#X\  P6G;pP##C\  P6QpP#See, e.g., CanXus Broadcasting Corp., 10 FCC Rcd 9950 (1995); Gisela Huberman, Esq., 6 FCC Rcd  yO=#-5397 (M.M. Bur. 1991); Salem Broadcasting, Inc., 6 FCC Rcd 4172 (M.M. Bur. 1991); J. Dominic Monahan,  yO$-Esquire., 6 FCC Rcd 1867 (M.M. Bur. 1991); Peter D. O'Connell, Esquire, 6 FCC Rcd 1869 (M.M. Bur. 1991);  yO$-Brian M. Madden, Esquire, 6 FCC Rcd 1871 (M.M. Bur. 1991); Roy R. Russo, Esquire, 5 FCC Rcd 7586 (M.M.  yO%-Bur. 1990); and Joseph Belisle, Esquire, 5 FCC Rcd 7585 (M.M. Bur. 1990).  Those cases hold that the tripartite standard against   which we assess control applies with equal force to a licensee which is a party to an LMA.   Thus, a licensee involved in an LMA is not relieved of its responsibility to retain ultimate"! ,=(=(JJ "  X-  control; i.e., to mandate basic policies pertaining to the fundamental station operations of  X-  programming, personnel, and finances. Cosmopolitan Broadcasting Corporation, 59 FCC 2d 558,  X-  /recon. denied, 61 FCC 2d 257 (1976); Salem Broadcasting, supra, 6 FCC Rcd at 4173. But as   is true with any broadcaster, even one whose station is not brokered, Section 310(d) permits the   delegation of daytoday operations relating to those three areas, so long as the licensee continues  X-  to set the policies guiding those operations. Southwest Texas Public Broadcasting Council, supra;  Xv-  .The Alabama Educational Television Commission, 33 FCC 2d 495, 508 (1972). The touchstone   iof control, in short, is not divining who executes that station's policies, but who establishes those  XH-  policies governing the three areas and exercises ultimate control. WGPR, Inc., supra, 10 FCC   Rcd at 8142. Our examination should be thorough where, as here, the broker is also the  X -  Lprospective purchaser of the station and was directly involved in constructing the station and  X -  .making it operational. See, e.g., Bee Broadcasting Associates, 5 FCC Rcd at 6586, and Roy M.  X -Speer, FCC 96258 (released June 14, 1996).  X -   12. Programming. KLIP(FM) is currently operated pursuant to the April 1, 1993 LMA.   Under the terms of that agreement, Choctaw makes available to New South "substantially all the   Station's air time" for a payment of $1,000 per month, which payment includes a "base   Zcompensation" plus Choctaw's anticipated reasonable and prudent operating expenses. Choctaw   is responsible for compliance with the Communications Act and Commission's rules, regulations,  XK-  and policies including, inter alia, the political broadcasting, equal employment opportunity, main   mstudio, and public file rules. LMA,  2.1, 3.2(b), (g). Choctaw is also responsible for   monitoring New South's programming and for preparing up to three hours per week of  X-  programming material responsive to the needs and interests of Monroe residents. Id., at 3.2(3),   (f). Choctaw retains the right to reject programming offered by New South if it believes such  X-  kprogramming to be contrary to the public interest, id., at  4.2, 4.3, and Choctaw retains the   right to terminate the LMA if at any time it believes the agreement to be contrary to the public  X-  /interest or is otherwise inconsistent with its obligations as a Commission licensee. Id., at    5.1(c). Thus, the Bureau is correct that the LMA comports with agreements approved in the   cases cited above. While Phoenix charges that the LMA confers a "paper right" of control only,   it has proffered no evidence that New South exceeded those rights with respect to KLIP(FM)   programming. Furthermore, as noted by the Bureau, when New South proposed a format change   in the Summer of 1993, it did so only with the prior consent of Ms. Melton. This is evidence   [that, in fact as well as in theory, New South recognized and deferred to Ms. Melton's authority   with respect to station programming, and we reject Phoenix' contention that we should not consider that evidence because it occurred after Phoenix filed its petition to deny.  X -   13. Personnel. Under the terms of the LMA, Choctaw is to retain and compensate two   employees, one of whom is to be its own fulltime operations manager, who is to be responsible   .for overseeing the operation and programming of the station. Choctaw is also to retain a Chief   Operator to oversee compliance with engineering requirements; this licensed operator will,   =however, be paid by New South during those duty periods when New South's programming is   being aired. LMA, at 3.2(h). Phoenix charges that New South has hired and fired employees   and paid at least one station employee, Frederick Gordon, directly. We have acknowledged that   [an LMA, which entails the broker's provision of programming and the sale of advertising to be"#' ,=(=(JJ%"   yaired on the station, by its very nature necessitates that the broker employ a staff which will be  X-  [present at the station's studio. See, e.g., Gisela Huberman, Esquire, 6 FCC Rcd at 5937; WGPR,  X-  @Inc., 10 FCC Rcd at 8143. That New South employs a staff to produce and broadcast   programming on KLIP(FM) does not, in and of itself, demonstrate that New South had the right to control station operations or mandate station policy.  14. The LMA also indicates that Choctaw will employ, and Choctaw has repeatedly   averred, that it does in fact currently employ and compensate two employees: Chief Operator  XH-  LRoger Bennett and General Manager Mick Lane. HP X -ԍ#X\  P6G;pP##C\  P6QpP#Choctaw maintains that it has paid Roger Bennett for his duties as KLIP Chief Operator since May of  yO -1993. See Choctaw Opposition to Petition for Reconsideration, at 5 and Declaration of Walter J. Frank, Jr. appended thereto. This comports with Choctaw's representations that payments made to Mr. Bennett were not included in its itemized expenses because it listed only expenses incurred in prosecuting its application and  yO -putting the station on the air; Mr. Bennett, Choctaw states, was not paid until after the station commenced operations. Joint Response, filed April 26, 1996, at 23. Additionally, while Phoenix states that New   South directly paid Choctaw employee Frederick Gordon in April of 1993, Choctaw indicates that   zNew South only did so because Choctaw's payroll system was not yet in place and that Mr.   |Gordon subsequently reimbursed New South for money it paid to him upon receiving  X -  \compensation from Choctaw. A aP X-ԍ#X\  P6G;pP##C\  P6QpP#This representation is consistent with Choctaw's claim that, while Mr. Bennett was hired as Choctaw's engineer and Chief Operator in March of 1993, he was not paid by Choctaw until May of 1993, when its payroll was in place. Choctaw states that Mr. Bennett was not paid by New South for services performed for Choctaw  yOw-during that period.#K\  P@QpP# Choctaw also indicates, and Mr. Bennett avers, that he was   xinvolved in the construction of the station and charged Choctaw for that work; Choctaw supports   this claim in its May 8, 1996 filing, which both reaffirms Mr. Bennett's role and includes a $200   =check to Mr. Bennett (dated May 3, 1993, ostensibly after Choctaw had put in place its payroll   system) for his duties pertaining to the construction of the station during a fourday period in   April of 1993. While Mr. Bennett is an employee of New South, he also provides engineering   services to other broadcast stations in the Monroe vicinity on a contract basis. With respect to   jhis role in the construction of KLIP(FM), he was directed and paid by Choctaw for his work on   kbehalf of that company. We are concerned with Choctaw's failure to disclose Mr. Bennett's   \relationship with New South in its initial responses to Phoenix' pleadings, but in light of the   extant declarations and documentation that he was paid by Choctaw for work done for Choctaw,  X-  kwe cannot find that the omission was accompanied by the necessary intent to deceive. See  X-  Trinity Broadcasting of Florida, Inc., 10 FCC Rcd 12,020, 12,063 (1995) ("A necessary and essential element of both misrepresentation and lack of candor is intent to deceive.")  ^15. Finally, Choctaw states that all employees hired by New South in its operation of   >KLIP(FM) pursuant to the LMA were hired or acquired with Choctaw's approval. Choctaw   indicates that, while Ms. Melton lived in Arizona, she was represented in Monroe by her business   .partner/agent, Walter Frank, Jr. and her daughter, Julie Frank; both Ms. Melton and Mr. Frank   have submitted unconstested affidavits to this effect. Upon her return to Monroe, claims"7j ,=(=(JJ{"   Choctaw, Ms. Melton "meets regularly with station employees as well as oversees the station's   -operations." Opposition to Petition to Deny, at 7. Phoenix presents no evidence that New South   employees have displaced Ms. Melton and general manager Mick Lane in ultimate decision X-  making functions. See WGPR, id. Therefore, we find that Phoenix has raised no question warranting further inquiry with respect to this factor.  Xv-  = 16. Station Finances. The LMA obligates New South to pay Choctaw $1,000 per month for  X_-  its airtime. Choctaw is responsible for paying all costs of station operation, LMA at 2.1,   although it will be reimbursed for such expenses by New South as part of the $1,000 monthly  X1-  =payment for "reasonable and prudent" expenses. 1P X -ԍ#X\  P6G;pP##C\  P6QpP#The LMA places no limitation on what expenses Choctaw may incur. This is substantially more than the $20 per  X -  month netted by the licensee in Salem Broadcasting, Inc., 6 FCC Rcd at 4172, yP XD -ԍ#X\  P6G;pP##C\  P6QpP#In Salem, the licensee's revenue totalled $20 per month from the LMA when the proceeds from the sale of airtime were offset against the rental fee the licensee paid to the broker for station equipment. This fact, coupled with the lack of station revenue other than the $20 monthly net payment from the programmer, suggested "a decided lack of control over station finances." Here, as indicated, Choctaw pays no monthly rent to New South for the equipment but must pay full value for the equipment should the sale not go through; its net payment of $1,000 was expected by the parties to be sufficient to cover the station's operating expenses. and is thus not demonstrative that Choctaw lacks control of station finances.  X -   17. It is apparently true that, as in WGPR, Inc., the $1,000 per month payment to Choctaw   under the LMA constitutes its sole source of funding for the term of the brokering arrangement.  X -  However, also as in WGPR Inc., the LMA is identical to those we have previously approved,   =and is not atypical of such contractual arrangements for making airtime available to a broker in   exchange for consideration calculated to incorporate the station's fixed and operating costs plus  Xb-  a builtin profit. WGPR, Inc., 10 FCC Rcd at 8145. The Commission went on to state in  XK-WGPR, Inc. that:  |  So long as the time brokerage arrangement is one which retains the ultimate decision making authority in the licensee, the receipt of [the monthly payment] does not amount  X- to an abdication of its control over finances . . . We caution licensees engaged in time  @brokerage arrangements, however, that they must operate . . . as a standalone entity  discrete from the broker. Thus, we require that licensees must maintain their own bank  ?accounts, pay the salaries of their own employees, and remain responsible for their own  ^obligations to programmer, utility companies, and other operational matters. In other  words, the licensee should be ready to operate independently from the broker at any time it believes the arrangement does not fulfill its public interest responsibilities.     X7-  \Id. Notwithstanding Phoenix' contrary protestations, it has not provided any evidence that   LChoctaw is unable to operate the station in the absence of New South. Choctaw has a right to   Zuse the equipment now in operation, and in fact is obligated to pay for the equipment in the event   that the sale is not consummated. Choctaw has claimed, and Phoenix has not contradicted, that",=(=(JJ" it has paid station expenses and its own two employees.    18. Additionally, although there is no evidence that New South advanced money to Choctaw   \for construction of KLIP(FM), New South purchased all of the equipment necessary for the   construction and initial operation of KLIP(FM) pursuant to the February 16, 1993 agreement   between Choctaw and New South. The cost of acquisition and installation of the equipment was   $69,246.21, as itemized in Exhibit 3 appended to New South's May 26, 1994 response letter.   jWhile legal title to the equipment is held by New South, that equipment will remain in use even   if the instant transaction is not consummated; as indicated above, Choctaw will in that event pay  X1-  full cost for the equipment and its installation.01P X -ԍ#X\  P6G;pP##C\  P6QpP#In WGPR, Inc., the equipment used was, and remained, the property of purchaser/broker CBS, Inc. and was to be returned to CBS if the transaction at issue there was not consummated.0  Phoenix has submitted no evidence which   indicates that New South's delegated authority to construct the station gave it control of   KLIP(FM) finances to the extent that it will take part in making financial policy, conducting   financial operations, or dictating to Choctaw the station's physical operations. Thus, as in  X -  WGPR, Inc., this case is distinguishable from cases in which the control of the licensee or   permittee was at issue because another party had supplied all funds for acquisition or construction   of the station and had attempted to exercise a level of control corresponding to that financial  X-  contribution. See, e.g., WLOX Broadcasting Company v. FCC, 260 F.2d 712 (D.C.Cir. 1958);  Xy-  lHeitmeyer v. FCC, 95 F.2d 91 (D.C. Cir. 1937).ayAP Xk-ԍ#X\  P6G;pP##C\  P6QpP#This case is also clearly distinguishable from Patrick Markham, supra. In Patrick Markham, pursuant to a "Station Service Agreement," the broker (Brooke Communications, Inc.): (i) acquired all the station's equipment from the licensee and leased it back for the nominal payment of $100/month; (ii) made all payments to the station's program supplier; (iii) placed all of the licensee's employees on its payroll; (iv) closed the station's existing studio and moved the studio operation to a space adjacent to another station it owned in a building it owned; (v) paid all station operating expenses; and (vi) rebuffed any attempt by the licensee's president to exercise any management authority over personnel or daytoday operations. The facts are completely different in the case before us. See also Lowrey Communications, L.P., 7 FCC Rcd 7139, 71489 (Rev. Bd. 1992).  X4- 19. Conclusion regarding control. This case presents facts which are extremely   troubling. Where a prospective purchaser who is not a broker "is involved in virtually every   aspect of getting the station built and on the air" negotiating with equipment suppliers and   programming services, arranging with an engineer for tower inspection, filing applications in the   Kname of the permittee, purchasing the studio building, arranging for financing to complete station   construction, and ultimately becoming station manager prior to Commission approval, such  X-  involvement may constitute an unauthorized transfer of control. See Bee Broadcasting  X-  [Associates, supra 5 FCC Rcd at 6586. We have also found that the complete construction of a   \new station's facilities by a programmer or time broker suggests an unauthorized transfer of  Xe-  control, particularly when coupled with a lack of financial control by the permittee, see Salem,  XN-  ?supra, 6 FCC Rcd at 4173, and Roy M. Speer, supra, FCC 96258 at  2224. Indeed, our   general concern with the pervasive influence which can be exercised by program suppliers is"7 j ,=(=(JJ{"   clearly evidenced by our decision to consider a "brokered" radio station an attributable interest   of the program supplier for purposes of the local radio ownership rules where the program   isupplier provides more than 15% of the brokered station's weekly programming and owns another  X-  radio station in the same market.  See 47 C.F.R. 73.3555(a)(2). We have recently proposed to  X-  extend this treatment to television LMA's and expand its application in the radio context. See  X-  Further Notice of Proposed Rulemaking In re Review of the Commission's Regulations  Xv-  yGoverning Attribution of Broadcast and Cable/MDS Interests, FCC 96436 (released November 7, 1996),  27.  20. In this case, not only is New South providing substantially all programming for the  X -  station, but it is the prospective purchaser as well. For these reasons alone, New South's   selection and installation of the equipment for KLIP(FM), albeit with Choctaw's approval and   oversight, raises serious concerns regarding Choctaw's retention of control. This concern is   xexacerbated by the fact that the Choctaw engineer responsible for overseeing construction, Roger   jBennett, was also a New South employee. Such circumstances clearly provide an environment   conducive to the unauthorized transfer of control of the brokered station. We urge all permittees   to avoid putting themselves in situations so precarious as this and warn them that similar arrangments will be subject to extremely close Commission scrutiny.  21. However, notwithstanding our very serious concerns with the arrangements between   Choctaw and New South, based on the totality of the evidence before us, we do not believe that   Choctaw has abdicated the ultimate control which it is required to retain. New South is obligated   to sell the KLIP(FM) operating equipment to Choctaw at full cost should the station sale not be   .consummated. Additionally, Choctaw has provided evidence that it, not New South, paid Mr.   -Bennett for his services in overseeing station construction, that it, not New South, is responsible  X-  -for paying all station expenses,AP X:-ԍ#C\  P6QpP#Reimbursement of station operating expenses by the broker is not necessarily improper, although direct payment of such expenses is a factor considered by the Commission in determining whether or not an  yO-unauthorized transfer of control has occurred. See, e.g., Roy M. Speer, supra, FCC 96258 at  24, and WGPR,  yO-Inc., supra, 10 FCC Rcd at 8145. and that it employs and compensates two of its own employees.   Choctaw also has submitted an uncontested affidavit from Walter Frank, Ms. Melton's exhusband   and business partner, that he approved the acquisition of all equipment as well as the construction   ltimetable while Ms. Melton was in Arizona and that no decision was made regarding the   koperation of KLIP(FM) without Choctaw's input or consent. These facts, coupled with New   South's apparent deference to Choctaw principal Linda Melton with respect to the KLIP(FM)   Lformat change in the summer of 1993, persuade us that the instant facts do not rise to the level  X -  of Salem, Roy M. Speer, or Bee. Rather, they indicate that Choctaw has retained a sufficient   -measure of control of station operations and that Choctaw will be able to operate KLIP(FM), with the equipment currently in place, should the proposed sale to New South not be consummated.  X - Ex Parte Communication  X!-   22. Phoenix' allegations of ex parte communication are based on two letters dated February"! ,=(=(JJ "   16, 1994 from New South principal Bob Holladay to the Chief of the Bureau's Audio Services   Division. In the first and introductory of these letters, Mr. Holladay states that he did not want   /to "take any action that would delay the outcome of this case. If I feel any more delays are   caused by anyone, I feel that Ms. Melton will probably cancel her contract with my station and  X-  jwithdraw the application."P X-ԍ#X\  P6G;pP##C\  P6QpP#The letter closes with the exhortation that "[y]our advice, as a friend in the radio business, is always greatly appreciated." The second letter essentially alleges bad faith by Phoenix in filing  X-  the petition to deny, based primarily upon the following: (1) in January of 1993, Mr. Holladay   "released" Bradley Wilkinson from his position as Sales Manager of New South's station   KRVV(FM); (2) Mr. Wilkinson, who "harbored bad feelings" toward Mr. Holladay, was   subsequently hired as general manager of Phoenix' KYEA(FM), with whose format KLIP directly   kcompeted when it commenced operation in April of 1993; and (3) Phoenix offered to assume   New South's Asset Purchase Agreement with Choctaw, in return for which it would withdraw its  X -  petition to deny.G AP X-ԍ#X\  P6G;pP##C\  P6QpP#Mr. Holladay indicates that, when this tactic failed, Phoenix entered into negotiations to purchase New South's KRVV(FM) with the stipulation that the Holladays sign noncompetition agreements regarding format.G Mr. Holladay concludes that "[t]he intent of this letter is not to have Phoenix   put in the hot seat with the FCC, but to ask your office to bring this matter to a timely and   favorable conclusion, and let the free enterprise system of the Louisiana consumer pick the best product."   \ 23. On February 24, 1994, the Bureau provided a copy of the Holladay letters to Phoenix'  Xy-  ycounsel and invited its comments. Letter to William Silva, Esq. and Hon. Bennie G. Thompson,   reference 1800B3MW (Chief, FM Branch, Audio Services Division, Mass Media Bureau,   February 24, 1994). On April 5, 1994, Phoenix submitted its response. On April 5, 1994,   Phoenix submitted its response, which included an affidavit from Mr. Wilkinson to the effect   [that: (1) he was not "released" from employment with New South, but rather left voluntarily, as   he did not want to move to Alexandria, Louisiana to run a New South station there, as requested   .by Mr. Holladay; (2) he harbored no ill will against New South at the time he left the company,   and he had not hired or harassed any New South employees; and (3) he did not know of New   South's negotiations with Satellite Music Network regarding the "Touch" format, and it was not   yhis idea to contact that program supplier for KYEA, the decision having been made by KYEA's program director, Gene Kelly.  Xe-  L 24. The purpose of the Commission's ex parte rules is to ensure that the agency's decisions   are fair and impartial and based on a public record free of influence from nonrecord  X7-  kcommunications between decisionmakers and outside persons. Report and Order, Ex Parte  X -  Communications, 2 FCC Rcd 3011, 3012 (1987). To this end, the Commission's Rules prohibit  X -  \ex parte presentations those not served on the parties made to or from decisionmaking   personnel in restricted proceedings. 47 C.F.R. 1.1202(b). This prohibition applies to "[a]ny   communication directed to the merits or outcome of a proceeding" as well as to a status inquiry   /"which states why timing is important to a particular party, or which in any other manner is" ,=(=(JJ" intended as a means, direct or indirect, to address the merits or outcome, or influence the timing,   >of a proceeding." 47 C.F.R. 1.1202(a). "Decisionmaking personnel" is defined broadly as   "[a]ny member, officer, or employee of the Commission who is or may reasonably be involved   in the decisional process in the proceeding," 47 C.F.R. 1.1202(c), and adjudicative proceedings   jare restricted upon the filing of a "formal opposition" such as a procedurally sufficient petition  X-to deny. 47 C.F.R. 1.1208(c). hh,Vpp    X_-   25. We conclude that Mr. Holladay's communications did not comport with the ex parte   requirements applicable to this restricted proceeding. Mr. Holladay's February 16, 1994   Kcommunications, which were not served on Phoenix, were addressed to the Chief, Audio Services   Division, the staff official with the delegated authority to rule on Phoenix' petition. Additionally,   <the communication both addressed the merits of Phoenix' petition by ascribing to it an illegitimate   Zintent and attempted to influence the timing of the decision by indicating that further delay would  X -  cause Ms. Melton to withdraw the application to assign KLIP to New South. See Ex Parte  X -  =Communications, supra, 2 FCC Rcd at 3013. However, Phoenix has not alleged, and the record  X -  does not demonstrate, that Mr. Holladay's ex parte communications intentionally violated the ex  X-  parte rules. Furthermore, because the Bureau forwarded a copy of Mr. Holladay's letters to   yPhoenix and solicited and considered Phoenix' response, Mr. Holladay's February 16 letters did   not ultimately constitute "nonrecord communications" between a party and the decisionmaker  XK-  and Phoenix was not prejudiced by the ex parte contacts.yKP X-ԍ#X\  P6G;pP##C\  P6QpP#Under 47 C.F.R. 1.1212(d), even prohibited written ex parte presentations may be considered in determining the merits of a proceeding upon notice and disclosure to the parties to the proceeding. Here, not only was notice provided, but a response was solicited and considered. We find that Mr. Holladay's ex parte  X4-  Npresentations were an isolated incident not warranting severe remedial action. See, e.g.,  X-  /Catherine L. Waddill, 8 FCC Rcd 2169, 2172 (1993), Centel Corporation, supra, 8 FCC Rcd at  X-  6165. See also  Pepper Schultz, 4 FCC Rcd 6393, 6403 (Rev. Bd. 1989), rev. denied, 5 FCC  X-  yRcd 3273 (1990). We do, however, admonish Mr. Holladay and New South to heed the ex parte rules in the future.  X-G= CONCLUSION ă    26. For the reasons set forth above, we find that Phoenix has failed to raise a substantial and   =material question of fact that grant of the application before us would be inconsistent with the   public interest, convenience, and necessity. We also find that New South is legally, financially,   ]and otherwise qualified to be the licensee of KLIP(FM) and that grant of the assignment application would serve the public interest. " ,=(=(JJ"    27. Accordingly, IT IS ORDERED, that the Application for Review filed by Phoenix   Broadcasting Company IS HEREBY DENIED, and the application (File No. BAPH930601GJ)   to assign station KLIP(FM) from Choctaw Broadcasting Corporation to New South   Communications, Inc. IS GRANTED subject to the condition that the consideration for the transaction shall not exceed $196,903.73.  X_- ` `  hh,FEDERAL COMMUNICATIONS COMMISSION  ` `  hh,William F. Caton ` `  hh,Acting Secretary