Federal Communications Commission Washington, D.C. 20554 In reply refer to: 1800C1-KMS 98050360 July 13, 1999 Released: July 14, 1999 CERTIFIED MAIL -- RETURN RECEIPT REQUESTED Colorado West Broadcasting, Inc. P.O. Box 1028 Glenwood Springs, CO 81602 Re: Stations KGLN(AM) and KMTS(FM), Glenwood Springs, Colorado K244CO, West Glenwood Springs, Colorado K244DB, New Castle/Rural, Colorado K244AN, Rifle, Colorado K296BY, Carbondale/Silt, Colorado Dear Licensee: The Chief, Mass Media Bureau, pursuant to authority delegated him under Section 0.283(c)(3) of the Commission's Rules, has before him for consideration: applications for transfer of control and for renewal of licenses of Colorado West Broadcasting, Inc. ("CWB"), licensee of the above-captioned primary and translator radio stations; and information concerning possible unauthorized transfers of control of the stations contained in a pleading filed April 18, 1997, by Allen Bell, and a response thereto filed by CWB. For the reasons discussed herein, this letter grants the transfer of control and license renewal applications and constitutes a NOTICE OF APPARENT LIABILITY FOR A FORFEITURE pursuant to Section 503(b) of the Communications Act of 1934, as amended, (the "Act"), for violations of Section 310(d) of the Act, and Sections 73.3540 (transfer of control), 73.3615 (ownership reports) and Section 73.3526 (public file) of the Commission's Rules. Background. By objection filed April 18, 1997, Allen Bell, shareholder and former officer, director, and station general manager of the licensee, alleges that CWB failed to seek Commission approval of its transfer of control, involving two separate stock transactions that took place in October 1996 and March 1997. Mr. Bell further contends that the stock transfers should have been reported to the FCC, and reflected in the stations' public files, but that they were not disclosed. In response, CWB first contends that six October 1996 stock transfers of 4.98% each from William R. Dunaway to six employees constituted the transfer of minority interests (29.88%) that did not require prior Commission consent, either individually or in the aggregate, and that were reportable, if at all, in the licensee's annual ownership update in December 1996. CWB concedes, however, that the March 21, 1997 stock transaction, involving the conveyance of a 25.01% interest from one of its shareholders, Keith Hefner, to Dalmation Communications, Inc. ("DCI"), when combined with the prior unreported transaction, constituted the transfer of an aggregated controlling interest of 54.89% to persons whose qualifications had not yet been passed upon by the Commission. The licensee claims that this transfer was not undertaken to deceive or to conceal information from the Commission, but upon the mistaken belief that the transaction did not require prior FCC consent. The licensee further submits that, after reviewing Bell's objection, it demonstrated good faith by retaining communications counsel and promptly filing the appropriate applications, in conjunction with a full account of the circumstances surrounding the transactions in question. In addition, Mr. Bell, who had served as general manager of KGLN(AM) and KMTS(FM), contends that he had been instructed by the stockholders not to disclose the changes of stock on the annual ownership report due December 1, 1996, but that he had done so in spite of these instructions, and had also placed the information in the stations' public inspection files. Mr. Bell further contends that when he subsequently examined the public files in April 1997, he was unable to locate the ownership report. In response, CWB denies that its principals gave instructions to Mr. Bell to conceal any relevant information from the Commission, or that they removed information from the stations' public inspection files. CWB concedes, however, that it "cannot now determine what was, in fact, filed by Mr. Bell," who was responsible for the preparation and filing of these materials with the Commission and for their inclusion in the stations' public files, and submits that, on the assumption that the ownership report was not filed December 1, 1996, it took corrective action in July 1997. Discussion. Section 310(d) of the Act prohibits the transfer of control of a station license, and any rights thereunder, without prior Commission consent. There is no exact formula by which control of a broadcast station can be determined. It is well settled that "control," as used in the Act and pertinent Commission rules, encompasses all forms of control, actual or legal, direct or indirect, negative or affirmative, and that the passage of de facto as well as de jure control demands the prior consent of the Commission. Stereo Broadcasters, Inc., 55 FCC 2d 819, 821 (1975) (citing WWIZ, Inc., 36 FCC 561, 2 RR 2d 169 (1964) and cases cited therein). In ascertaining whether a transfer of control has occurred, we traditionally look beyond the legal title to whether a new entity or individual has obtained the right to determine the basic operating policies of the station. See WHDH, Inc., 17 FCC 2d 856 (1969), aff'd sub nom. Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971). We have carefully considered the record in this case, including all the materials cited and supplied by both the objector and the licensee. We conclude that an apparent unauthorized transfer of de jure control of the subject stations occurred in this case. Specifically, we find that the March 21, 1997, consummation of the 25.01% transfer of CWB stock from Keith Hefner to DCI, considered cumulatively with the prior transfer of 29.88% of the licensee's stock to those not previously passed upon by the Commission, resulted in an apparent unauthorized transfer of a 54.89% controlling interest in the licensee, in continuing violation of the Section 310(d) of the Act and Section 73.3540 of the Commission's Rules since March 21, 1997. In addition, it appears that CWB apparently violated Section 73.3615(a) and Section 73.3526(a) of the Commission's Rules because it did not file its 1996 annual ownership report, or place the report in its stations' public files, until July 16, 1997. The ownership report should have been filed on or by December 1, 1996, the anniversary of the date that the licensee's renewal application was due. See 47 C.F.R. Secs. 73.3615(a), 73.1020(a)(10) and 73.3539(a). We find CWB's apparent violation of Sections 73.3615 and 73.3526 to be de minimis. While the licensee's 1996 annual ownership report was submitted late, it contained information that was fully accurate, and CWB represents that the stations' public files have since been reviewed and completed. Moreover, CWB's apparent lapse in maintaining complete public files appears to have stemmed directly from its failure to file the appropriate transfer of control application and to timely submit its annual ownership report. Although CWB attempts to blame Mr. Bell, its former station general manager, for these lapses, that explanation is not availing, because the Commission has long held that licensees remain ultimately responsible for the acts and omissions of their employees. Gaffney Broadcasting, Inc., 23 FCC 2d 912, 913 (1970), citing Eleven Ten Broadcasting Corp., 33 FCC 706 (1962). However, we will not impose an additional forfeiture amount for these apparent violations. Instead, we will direct the licensee to exercise greater care with regard to its reporting obligations in the future. Sanction. For the reasons set forth above, we find that a forfeiture is warranted for the apparent violation of Section 310(d) of the Act, and Section 73.3540 of the Commission's Rules. From the information supplied, it appears that an unauthorized transfer of control occurred on March 21, 1997, and has continued since then. Accordingly, pursuant to Section 503(b) of the Act, Colorado West Broadcasting, Inc., licensee of the captioned primary and translator radio stations, is hereby advised of its apparent liability for a forfeiture of Seven Thousand Five Hundred Dollars ($7,500.00) for its apparent willful, repeated violations of Section 310(d) of the Act and Section 73.3540 of the Commission's Rules. In assessing this monetary forfeiture, we have taken into account the nature, circumstances, extent and gravity of the violations, as well as the degree of culpability and the stations' prior enforcement history. Section 503(b)(2)(D) of the Act, 47 U.S.C. Sec. 503(b)(2)(D). The nature of the unauthorized transfer of control in this case was similar to that which took place in First Broadcasting Corp., 3 FCC Rcd 2758 (1988), where the radio station licensee was fined $20,000 for an unauthorized transfer of control effectuated through unreported stock transactions over a six-year period. Unlike that case, the violation herein was based on a single unauthorized transfer of control. Accordingly, the appropriate amount would be comparable to that imposed in Salem Broadcasting, Inc., 6 FCC Rcd 4172, 4173 (MMB 1991), where the licensee was fined $10,000 for an unauthorized transfer of control and a main studio rule violation that continued for approximately ten months. Based on the documents provided, it appears that while the parties' understanding of the relevant facts and applicable law was incorrect, they nevertheless attempted, in good faith, to comply with Commission requirements when DCI principal Gabe Chenowith sought staff advice concerning the latter stock transaction. In similar mitigating instances, a reduction in forfeiture was found to be justified. See Liability of Delta Radio, Inc., 10 FCC Rcd 12538 (MMB 1995) ($7,500 forfeiture imposed for single instance of unauthorized transfer of control where licensee made "good faith efforts" to comply with Commission rules), recon. granted, DA 98-1676 (MMB, released August 24, 1998) (forfeiture subsequently reduced due to prior history of rule compliance and demonstrated inability to pay); Liability of Monte Corporation, 11 FCC Rcd 20535 (MMB 1996), citing Victor Valley Broadcasting, Inc., 2 FCC 2d 495 (1966); cf. Hualapai Broadcasters, Inc., 8 FCC Rcd 4914 (MMB 1993) (forfeiture reduced in part because licensee relied upon legal opinion of a recognized authority). Consequently, we believe that a forfeiture amount of $7,500 is appropriate in this case. In regard to this forfeiture proceeding, CWB is afforded a period of thirty (30) days from the date of this letter "to show, in writing, why a forfeiture penalty should not be imposed or should be reduced, or to pay the forfeiture. Any showing as to why the forfeiture should not be imposed or should be reduced shall include a detailed factual statement and such documentation and affidavits as may be pertinent." 47 C.F.R. Section 1.80(f)(3). Other relevant provisions of Section 1.80 are summarized in the attachment to this letter. Accordingly, for the reasons set forth above, the April 18, 1997 petition to deny filed by Allen Bell, when considered as an informal objection, IS GRANTED to the extent indicated above, and DENIED in all other respects. Furthermore, having found that they satisfy the standards set forth under 47 U.S.C. Section 309 and the relevant Commission rules, consistent with the public interest, convenience and necessity, the foregoing transfer of control and license renewal applications ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau Attachment cc: Mr. Allen Bell Mr. Brian M. Madden, Esq.