Before the Federal Communications Commission Washington, D.C. In the Matter of Liability of ) ) HILL COUNTRY RADIO, INC. ) ) Licensee of Station KGUL (FM), Edna Texas ) Licensee of Station KHLT (AM), Halletsville, Texas ) Licensee of Station KTXM (FM), Halletsville, Texas ) Licensee of Station KYKM (FM), Yoakum, Texas ) ) For a Forfeiture ) Memorandum Opinion and Order and Forfeiture Order Adopted: October 19, 1999 Released: October 20, 1999 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to authority delegated by Section 0.283(c)(3) of the Commission's Rules, 47 C.F.R.  0.283(c)(3), has before it for consideration: (1) four Notices of Apparent Liability ("NALs") for forfeitures in the amount of $8,000 each, issued on August 5, 1999, to Hill Country Radio, Inc. ("HCR"), licensee of radio stations KGUL(FM), Edna, Texas; KHLT(AM), Halletsville, Texas, KTXM(FM), Halletsville, Texas, and KYKM(FM), Yoakum, Texas; and (2) four responses thereto submitted by counsel for HCR on September 1, 1999. HCR requests that each of the forfeitures be substantially reduced. For the reasons that follow, we grant HCR's request for reduction of the original forfeiture amounts, pursuant to Section 503(b) of the Communications Act of 1934, as amended (the "Communications Act"), 47 U.S.C.  503(b). 2. Four separate NALs, each for $8,000, were issued to HCR for engaging in unauthorized transfers of control of the four radio stations licensed to HCR. The unauthorized transfers of control occurred as a result of HCR's issuance of stock in exchange for contributions of equity and forgiveness of debt to the corporation. Before issuing the stock, HCR was incorrectly advised by its corporate counsel that it need not seek prior Commission approval of changes in control of the company. Thus, HCR did not file the requisite applications (FCC Form 315) with the Commission for consent prior to issuing the stock. Rather, relying on the advice of its counsel that it only had to report its current stockholders to the Commission, HCR consistently filed Ownership Reports with the Commission which accurately identified the then-current list of stockholders. Subsequently, upon being notified by its communications counsel of the need to file applications requesting permission for the transfers of control, HCR promptly and voluntarily disclosed the unauthorized transfers of control to the Commission. In its responses to the NALs, HCR contends that the forfeitures should be reduced due to its good faith, voluntary disclosure of the violations, its history of compliance with the Communications Act and the Commission's Rules, and its inability to pay. HCR claims that the stations' expenses exceed its revenues and that payment of the forfeitures would create financial hardship for the stations and jeopardize the ability of HCR to continue operating the stations. 3. We have reexamined the forfeitures imposed in view of the statutory factors set forth in Section 503(b(2)(D) of the Communications Act pertaining to the nature, circumstances, extent and gravity of the apparent violations. We affirm the prior finding that HCR engaged in unauthorized transfers of control of the four stations at issue. However, for the reasons set forth below, we conclude that, in this case, reduction of the $8,000 monetary forfeitures proposed in each of the NALs is warranted. 4. In support of its request for reduction of the forfeitures, HCR reiterates that it did not intend to deceive the Commission about the ownership of its stock, but had simply relied on the incorrect advice of its general counsel in transferring the stock. Reliance on inaccurate legal advice will not absolve a licensee of responsibility for a violation, but can serve as evidence that the licensee made an effort to assess its obligations, that its assessment was reasonable, if erroneous, and was made in good faith. Hualapai Broadcasters, Inc., 8 FCC Rcd 4914 (1993). However, as we acknowledged in the NALs, HCR's principals were novice broadcasters who were neither aware of nor otherwise acquiesced in a course of conduct they knew to be improper or even questionable. Once it was aware of the problems, HCR also promptly brought the omissions to the Commission's attention, and tried to rectify them. We find HCR's good faith dealings with the Commission in this matter, as well as its history of compliance with our Rules, to be mitigating factors that justify reduction of the forfeitures at issue. 5. HCR also raises the issue of its ability to pay the total amount assessed for all four forfeitures in support of its request for reduction. The Commission has previously held that a licensee's gross income is generally the best indicator of its ability to pay a forfeiture. Although net losses may be relevant in some cases, if gross revenues are sufficiently great, the fact that a business is operating at a loss does not by itself mean that it cannot afford to pay a forfeiture. See PJB Communications of Virginia, Inc., 7 FCC Rcd 2088-89 (1992) ($8,000 forfeiture not excessive where gross income was $395,469; and net loss information submitted reflected only expected losses). See also Hinton Telephone Co., 8 FCC Rcd 5176, 5177 (1993) ($5,000 forfeiture not excessive where gross revenues were over $2 million, despite negative net income of $46,000). 6. Generally, in cases where requests for reduction of forfeiture amounts have been denied, the forfeitures have been relatively small in proportion to the licensees' gross incomes. See, e.g., Hinton Telephone Co., supra (forfeiture equal to .002% of licensee's total operating revenues deemed not excessive); PJB Communications, supra (forfeiture, equal to 2.02% of gross income, upheld); David L. Hollingsworth d/b/a Worland Services, 7 FCC Rcd 6640 (1992) (forfeiture, equal to 1.21% of licensee's gross income and 1.34% of projected gross, upheld); Afton Communications Corp., 7 FCC Rcd 6741 (1992) (forfeiture, equal to 3.91% of gross income and 2.75% of projected gross, upheld). 7. In support of its claim of inability to pay, HCR has submitted financial data listing gross income of $257,969.93, and a net loss of $30,722, for the period between August 1998 and August 1999. In addition, HCR claims to have lost a total of $613,497.14 since its inception in 1995. Moreover, in contrast to the relatively low ratio of forfeitures to gross income in the cases cited above, the total amount of the forfeiture assessed in the instant case amounts to approximately 12% of HCR's gross income for the last year. Thus, given HCR's strained financial status, we believe a reduction in the forfeitures is appropriate in this instance. 8. Under these circumstances, we will take into consideration the element of good faith and the poor financial condition of the licensee, and reduce the four proposed forfeitures to three thousand dollars ($3,000) each, for a total forfeiture amount of twelve thousand dollars ($12,000). 9. In view of the foregoing, HCR's request for reduction of the forfeiture amounts IS GRANTED. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  503(b), Hill Country Radio, Inc. FORFEIT to the United States the sum of Twelve Thousand Dollars ($12,000) for willful and repeated violations of Section 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  310(d), and Section 73.3540 of the Commission's Rules, 47 C.F.R.  73.3540, as described above. Hill Country Radio, Inc. may take any of the steps outlined in the attachment to this letter regarding payment of the forfeiture pursuant to Section 1.80 of the Commission's Rules. 10. The Mass Media Bureau will send by Certified Mail -- Return Receipt Requested, copies of this Memorandum Opinion and Order and Forfeiture Order to Hill Country Radio, Inc. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief Mass Media Bureau