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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Application of ) ) Fatima Response, Inc., Assignor ) ) and ) File No. BAPED-960514GK ) Dennis Michael Crepps d/b/a ) Big Tree Communications, Assignee) ) For Assignment of the Construction Permit for) Station KZRO(FM), Dunsmuir, CA ) MEMORANDUM OPINION AND ORDER Adopted: October 6, 1999 Released: October 12, 1999 By the Commission: 1. The Commission has before it a July 29, 1997 application for review of an action by the Mass Media Bureau ("Bureau") regarding the captioned application to assign the permit and sell the assets of station KZRO(FM), Dunsmuir, California, from Fatima Response, Inc. ("FRI") to Dennis Michael Crepps d/b/a/ Big Tree Communications ("Crepps"). By letter, dated June 26, 1997, the Bureau (1) denied a petition to deny the application filed by The State of Oregon Acting By and Through the State Board of Higher Education for the Benefit of Southern Oregon State College ("Oregon"), as well as an informal objection to the application by Tristar Broadcasting Corporation, licensee of station KWHO(FM), Mt. Shasta, California ("Tristar"); and (2) granted both the assignment application and an application (File No. BMPED-970224KC) to modify KZRO's license to permit commercial operation. Oregon filed an application for review of the Bureau's June 26 action; Tristar did not lodge an appeal. For the reasons set forth below, we deny the Application for Review and admonish FRI for its carelessness and inattention in both internal corporate organizational matters and its responses to Commission inquiries. 2. Background/Arguments. In its petition to deny, Oregon argued that FRI had been administratively dissolved in the State of Oregon several years ago and therefore lacked the legal authority to transact business (including filing the instant application). FRI opposed the petition, arguing -- without providing supportive documentation -- that it had been incorporated since 1986 and remained validly incorporated. In evaluating Oregon's allegation, the Bureau staff sent an inquiry letter to FRI on December 10, 1996, asking for: (1) a certification from the appropriate Secretary of State indicating that FRI was in fact validly incorporated on April 1, 1993, when it filed its construction permit application for the Dunsmuir, California frequency; and (2) a certification from the appropriate Secretary of State, as well as current articles of incorporation and by-laws, demonstrating that FRI presently is validly incorporated and in what state it is validly incorporated. 3. In its February 11, 1997 response, FRI's counsel traced its history back to early 1986, indicating that, from that time forward, it had functioned as a corporation and conducted itself as a corporation. FRI indicated that, while a 1990 review indicated that its papers were in order, in mid-1993, its new legal counsel discovered that "there were some irregularities in the filing of FRI corporate documents." However, counsel stated, review of the law affecting FRI's corporate status revealed that FRI was legally recognized in California, as FRI had "met all of the legal requirements to constitute a de facto corporation in California." FRI response, at 3 (emphasis in original). FRI continued that, upon discovery of this situation in 1993, it filed its Articles of Incorporation in the State of Oregon on July 7, 1993, receiving the registry number 353377-81; it thus shifted from de facto to de jure corporate existence. While FRI acknowledged that its corporate charter in Oregon was suspended on October 22, 1995 for non-payment of an annual filing fee, it stated that this matter is easily correctable and that FRI had in fact taken the necessary steps to reinstate its corporate charter. 4. The Bureau rejected Oregon's allegation, noting that, although whether or not an applicant is properly incorporated or legally qualified to do business under pertinent state law is a relevant Commission inquiry, the Commission has generally declined to consider issues of a licensee's compliance with the requirements of state corporate law where no challenge has been made in state court. The Bureau concluded that it would adhere to that policy here, since no party had challenged in California state court FRI's claim that it is a recognized de facto corporation and thus qualified to do business in California. However, it noted that FRI clearly had not been attentive to its corporate obligations under state law. 5. In its application for review, Oregon insists that the material question is not whether or not FRI's corporate status is a proper inquiry for the Commission, but whether FRI made misrepresentations or lacked candor with the Commission in its statements regarding its legal qualifications vis-a-vis its corporate status. Specifically, Oregon states that FRI misrepresented its corporate status when it filed its construction permit application in 1993, as FRI was not validly incorporated in California at that time. Additionally, notwithstanding FRI's claim that it had taken the necessary steps to reinstate its corporate charter in Oregon, appellant submits that, as of July 2, 1997, FRI had not done so and remained a dissolved corporation in the State of Oregon. Finally, Oregon points to a representation by FRI President Kimberly Thompson in an August 26, 1996 response to Tristar's informal objection that FRI is a "legally incorporated 501(c)(3) nonprofit corporation," and notes that, despite diligent efforts, it has been unable to find any evidence of FRI having been issued a determination letter by the Internal Revenue Service that it is a qualified tax-exempt corporation under 26 U.S.C. 501(c)(3). Oregon concludes that "substantial and material questions of fact exist as to whether [FRI] has continually and intentionally misrepresented itself to the Commission," and states that the Commission should reverse the Bureau determination and designate the assignment application for evidentiary hearing with appropriate qualifying issues. 6. In light of Oregon's allegations, the staff issued an inquiry letter to FRI on January 27, 1998, directing FRI to submit documentary evidence to support its prior claim that, as of February 11, 1997, it "had taken the necessary steps to reinstate its corporate charter in the State of Oregon," a detailed account of "subsequent events" that led to the discontinuance of its active status in Oregon, and information concerning its status as a qualified tax-exempt non-profit corporation under 26 U.S.C. 501(c)(3). 7. FRI replied to the staff letter on February 16, 1998. Initially, FRI states several times that, as of February 11, 1997, it "had submitted what we believed to be all of the necessary documents and filing fees to the State of Oregon" and that "as far as we were concerned, we had done everything that we could to reinstate our corporate status in Oregon." February 16, 1998 response, at p. 1. Therefore, counsel's statement in the February 11 response was "completely accurate." Second, FRI indicates that its submission to the State of Oregon was "rejected for filing due to defects in the documents which made them unacceptable for filing . . . We had several problems with our documents including failure to properly designate a registered agent in the State of Oregon. We were unaware of the defects in our documents when the February 11, 1997 response was filed with the Commission." FRI continues that, upon receipt of the State's rejection of its corporation reinstatement documents, it did not retender those documents because, upon the advice of local counsel, reinstatement of its corporate status in the State of Oregon was unnecessary due to the existence of its de facto corporate status in California Finally, with respect to FRI's statements that it was a "501(c)(3) corporation," FRI admits that it did not (and does not yet) have a determination letter from the Internal Revenue Service. Rather, it explains that FRI "was formed within the meaning of Section 501(c)(3) as we understand it, and we believed that we could use this reference to describe our organization . . . When the reference to Section 501(c)(3) was used, it was only in a good-faith effort to describe our organization and certainly not to mislead the Commission or to misrepresent anything." Response, at p. 2. 8. Discussion. FRI clearly has been careless and inattentive both as to matters regarding its corporate organization/registration and in its representations to the Commission. The issues are whether those inaccurate responses also constitute willful misrepresentations to the Commission and, if not, whether FRI's operation "was conducted in an exceedingly careless, inept and negligent manner and the licensee is either incapable of correcting or unwilling to correct the . . . deficiencies." See Heart of the Black Hills Stations, 32 FCC 2d 196, 198 (1971). 9. Misrepresentation is a false statement of material fact made with an intent to deceive the Commission. Fox River Broadcasting, Inc., 93 FCC 2d 127, 129 (1983). Thus, intent to deceive is a "necessary and essential element" of misrepresentation. Trinity Broadcasting of Florida, Inc., 10 FCC Rcd 12,020, 12,063 (1995); see Swan Creek Communications, Inc. v. FCC, 39 F.3d 1217 (D.C. Cir. 1994). Intent to deceive may be found from the false statement of fact coupled with proof that the party making it had knowledge of its falsity, see David Ortiz Radio Corp. v. FCC, 941 F.2d 1253, 1260 (D.C. Cir. 1991). Intent may also be inferred from motive, see Joseph Barr, 10 FCC Rcd 32, 33 (Rev. Bd. 1994). However, carelessness, exaggeration, or slipshoddiness, which lack that necessary element, do not constitute misrepresentation. California State University, Sacramento, FCC 98-215, 13 FCC Rcd 17,960 (1998), citing F.B.C. Incorporated, 3 FCC Rcd 4595, 4597 (1988). 10. With respect to the status of FRI's incorporation in Oregon, we find that FRI had no intent to submit knowingly false statements to the Commission. Oregon has provided no evidence that FRI knowingly misrepresented its corporate status when it filed for the Dunsmuir frequency or that FRI knowingly misstated in its February 11, 1997 response letter that it had taken the necessary steps to reinstate its corporate charter in Oregon. Additionally, we can ascribe to FRI no motive to misrepresent these matters because, as stated by the Bureau, we do not generally consider issues of a licensee's compliance with the requirements of state corporate law where no challenge has been made in state court. See Aspen FM, Inc., 12 FCC Rcd 17,852 (1997); see also Letter to Kathleen N. Benfield et al., and North American Broadcasting Co., Inc., supra. We have not been apprised of any court proceedings involving FRI's compliance with state requirements for proper incorporation in either Oregon or California. Accordingly, FRI would have no reason to misrepresent its corporate status: it would not be logical for FRI to knowingly make false statements to the Commission on a matter about which the Commission was unlikely to inquire. While FRI's statements about the validity and reinstatement of its corporate charter in Oregon appear to be incorrect, we find that the misstatements result from FRI's ignorance of and inattention to state corporate law matters and not from any willful intent to deceive the Commission. FRI will be admonished for this carelessness and cautioned to exercise more diligence with respect to pending or future applications it may file with this agency. 11. Similarly, with respect to FRI's status as a Section 501(c)(3) corporation under the Internal Revenue Code, we can ascribe to FRI no motive to misrepresent such status to the Commission. Under 47 C.F.R. 73.503, each NCE-FM applicant must demonstrate that it is a "nonprofit educational organization" that will use the proposed station "for the advancement of an educational program." This determination does not hinge on whether or not the applicant has received tax-exempt status from the I.R.S. Thus, FRI would gain no benefit from falsely informing the Commission that it has obtained such status. There being no motive for misrepresenting that FRI is a 501(c)(3) corporation, we believe that, as indicated in its February 16, 1998 response letter, FRI made this claim based on a faulty understanding of the requirements for seeking tax- exempt status from the I.R.S. and without investigating or verifying those requirements prior to making the statements. Again, FRI will be admonished for its carelessness and inattention. 12. Conclusion/actions. In light of the above discussion, we find that Oregon has failed to proffer grounds for overturning the Bureau's action. While the record in this case is clearly not that of an ideal broadcast applicant or permittee, it is also not one which is so permeated by intentional misconduct or reckless disregard of law as to compel denial or designation of the subject assignment application. Additionally, we cannot find on the basis of the record here that FRI has been so careless or inept that it cannot be relied upon to fulfill the responsibilities imposed upon it as a licensee of this Commission. See, e.g., George E. Cameron, Jr. Communications, 67 FCC 2d 143, 147-8 (1977); Arizona Mobile Telephone Company, 66 FCC 2d 691 (1977). Because we find FRI qualified to continue holding the KZRO(FM) authorization, it is qualified to assign station KZRO(FM). See generally Jefferson Radio v. FCC, 340 F.2d 781 (D.C. Cir. 1964) (as a matter of general policy, the Commission will not approve an assignment or transfer application where a licensee's qualifications to continue holding the license are at issue). 13. Accordingly, the July 29, 1997 application for review filed by The State of Oregon Acting By and Through the State Board of Higher Education for the Benefit of Southern Oregon State College IS DENIED, and Fatima Response, Inc. IS ADMONISHED for its careless and inaccurate representations to the Commission concerning the validity of its corporate charter in Oregon and its status as a tax-exempt nonprofit corporation under 26 U.S.C. 501(c)(3). FEDERAL COMMUNICATIONS COMMISSION Magalie Rom n Salas Secretary