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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 the Matter of ) ) Notice of Apparent Liability for Forfeiture of ) ) ENSERCH CORPORATION ) File No. 92EF0033 ) Licensee of 23 Fixed Microwave Service Stations ) and 147 Private Land Mobile Radio Service Stations ) Operating throughout Texas. ) NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: July 20, 1999 Released: July 23, 1999 By the Commission: I. INTRODUCTION 1. This is a Notice of Apparent Liability for a Forfeiture, pursuant to Section 503(b) of the Communications Act of 1934, as amended ("Act"), and Section 1.80 of the Commission's Rules, against ENSERCH Corporation ("ENSERCH"). For the reasons that follow, we find that ENSERCH transferred control of 23 fixed point-to-point microwave services licenses and 147 private land mobile radio services (PLMRS) licenses without prior Commission consent, in apparent violation of Section 310(d) of the Act and Section 101.53(a) of the Commission's Rules. Based on our review of the facts and circumstances surrounding these apparent violations, we find that ENSERCH is apparently liable for a forfeiture in the amount of five hundred ten thousand dollars ($510,000). II. BACKGROUND 2. On August 5, 1997, ENSERCH, a natural gas company, merged with Texas Utilities Company ("TUC"). TUC issued 15,861,272 shares of common stock, worth approximately $565 million, to former holders of ENSERCH common stock. As a result of the transaction, ENSERCH became a wholly-owned subsidiary of TUC. Prior to consummating the merger, however, ENSERCH did not request or obtain Commission consent to the transfer of control of its stations to TUC, as required by Section 310(d) of the Act, and Section 101.53 of the Rules. ENSERCH had gross revenues of approximately $1.2 billion in 1997, and $2.1 billion in 1998. 3. In October 1997, Texas Utilities Services, Inc. ("TUS"), another subsidiary of TUC, sought to modify one of its private land mobile licenses to add two frequencies that were licensed to ENSERCH at a location just two blocks away. When frequency coordinators questioned the proposed short spacing of the stations, ENSERCH employee Robert Upperman ("Upperman") directed a letter, dated January 22, 1998, to the Wireless Telecommunications Bureau to clarify the status of ENSERCH's licenses. In that letter, Upperman represented: "ENSERCH Corporation is a Texas Utilities Company. Please change the license to read: Texas Utilities Services, Inc." The Upperman letter gave TUS's address as ENSERCH's new address. One day later, on January 23, 1998, TUS employee Rudolph Perry ("Perry") directed a similar letter to the Commission, stating: "ENSERCH Corporation is a wholly owned Texas Utilities company [sic]." Perry stated in his letter that the Commission should contact him or Upperman for further information. Sometime later, TUS abandoned its plan to add the two ENSERCH stations to its network. 4. By letter, dated February 20, 1998, the Commission informed Upperman that if there had been a change of control or ownership of ENSERCH's stations, ENSERCH must file an application for consent to the transfer of control. ENSERCH did not respond immediately to the Commission's letter. Indeed, it was not until several months later that TUC apparently questioned the need to obtain Commission consent for the previously-consummated transactions. On August 20, 1998, counsel submitted two separate applications requesting Commission consent to the transfer of control of ENSERCH's 23 fixed point-to-point microwave and 147 PLMRS licenses, nunc pro tunc. The Commission authorized the transfer of control of the 147 PLMRS licenses on September 8, 1998, and the Commission authorized the transfer of control of the 23 fixed point-to-point microwave licenses on April 30, 1999. III. DISCUSSION 5. Section 310(d) of the Act provides in pertinent part: No . . . station license, or any rights thereunder, shall be transferred, assigned, or disposed of in any manner, voluntarily or involuntarily, directly or indirectly, or by transfer of control of any corporation holding such permit license, to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served thereby. Similarly, Section 101.53(a) of the Commission's Rules stated in pertinent part: No station license, or any rights thereunder, may be transferred, assigned, or disposed of in any manner, voluntarily or involuntarily, directly or indirectly, or by transfer of control of any corporation or any other entity holding any such license, to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served. Section 503(b) of the Act and Section 1.80(a) of the Commission's Rules both state that a licensee that willfully or repeatedly fails to comply with any provisions of the Communications Act or the Commission's Rules, or fails to comply substantially with the terms and conditions of any license, shall be liable for a forfeiture penalty. For purposes of Section 503(b), the term "willful" means that the violator knew it was taking the action in question, irrespective of any intent to violate the Commission's rules. Similarly, a violation is repeated if it occurs more than once. Because each day of a continuing violation is considered a separate violation for purposes of computing a forfeiture, each day of an unauthorized transfer of control thus constitutes a separate, and hence repeated, offense. 6. We find that ENSERCH engaged in an unauthorized transfer of control of its 170 licenses to TUC, in apparent willful and repeated violation of Sections 310(d) of the Act and Section 101.53(a) of the Commission's Rules. ENSERCH clearly intended to, and did, merge with TUC. ENSERCH concedes that its merger with TUC resulted in a shift of control of ENSERCH's stations. As counsel for ENSERCH acknowledges, the merger resulted in a "change in the ultimate control of the company [ENSERCH] at the time that it became a subsidiary of TUC." Although ENSERCH and TUC consummated the transactions on August 5, 1997, they did not request Commission consent to the transfers of control until August 20, 1998, more than one year after the merger. Furthermore, the parties did not receive Commission consent to the transfer of control of ENSERCH's 147 PLMRS licenses until September 8, 1998; likewise, they did not receive Commission consent to the transfer of control of ENSERCH's 23 fixed point-to-point microwave licenses until April 30, 1999. Thus, the violations continued for a significant period of time. 7. The Wireless Telecommunications Bureau has regularly issued forfeitures for unauthorized transfers of control. The Commission's Forfeiture Policy Statement, which became effective on October 14, 1997, provides that cases arising from facts that occurred prior to the effective date of the Forfeiture Policy Statement shall be decided on a case-by-case basis. Since the violations in question began in August 1997, we will determine the appropriate forfeiture using the case-by-case method. Section 503(b)(2)(D) of the Act requires that the Commission consider "the nature, circumstances, extent, and gravity of the violation, and with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require" when assessing a forfeiture. 8. In this case, we believe several factors require the imposition of a substantial forfeiture. First, the unauthorized transfer of each license represents a separate violation of the Act and of the Commission's Rules. Thus, because this case involves 170 violations, it is one of the largest unauthorized transfer-of-control cases to come before the Commission. Second, we are particularly troubled by ENSERCH's failure to act promptly in response to a Commission advisory letter that explicitly warned of a possible violation. ENSERCH's apparent willingness to rely on its interpretation of the Commission's rules, especially in light of the number of licenses involved, displays a cavalier attitude toward its obligations as a licensee. Third, given that ENSERCH had average gross revenues of 1.7 billion dollars for 1997 and 1998, we believe that a substantial forfeiture is necessary in order to act as a meaningful sanction and deterrent against future misconduct. We have stated our intent "to take into account the subject violator's ability to pay in determining the amount of a forfeiture to guarantee that forfeitures issued against large or highly profitable entities are not considered merely an affordable cost of doing business." To ensure that ENSERCH's presumed extraordinary ability to pay a forfeiture does not attenuate the remedial effect forfeitures are designed to impart, we are compelled to issue a forfeiture commensurate with the serious nature of the violation and this licensee's ability to pay. 9. In Telecourier Communications Corp., 10 FCC Rcd 10014 (Wireless Tel. Bur. 1995), the Enforcement Division of the Wireless Telecommunications Bureau determined that $3,500 was an appropriate base forfeiture for an unauthorized pro forma transfer of control of two public land mobile stations. The Bureau reduced the forfeiture to $2,500 ($1,250 per station), however, due to Telecourier's voluntary notification of its violation and its history of overall compliance with Commission Rules. The facts of the instant case warrant a forfeiture substantially more than $1,250 per station: ENSERCH's merger resulted in a substantial transfer of control, and ENSERCH failed to respond promptly after receiving Commission notification of a possible violation. After weighing all the facts presented -- including, but not limited to, the large number of licenses transferred; ENSERCH's private use of the licensed services; ENSERCH's eventual, albeit tardy, disclosure of the circumstances surrounding the substantial transfer; and ENSERCH's ability to pay -- we find that it is appropriate to set the forfeiture base amount at $3,000 per station. ENSERCH failed to receive consent for the substantial transfer of control of 170 stations; therefore, we find that the proposed forfeiture amount should be $510,000. IV. CONCLUSION AND ORDERING CLAUSES 10. Based on the foregoing, we find that ENSERCH engaged in the unauthorized transfer of control of 170 of its stations, in apparent willful and repeated violations of Sections 310(d) of the Act and 101.53(a) of the Commission's Rules. We conclude, for the reasons discussed above, that a forfeiture of $510,000 is warranted in this instance. 11. ACCORDINGLY, pursuant to Section 503(b) of the Communications Act of 1934, as amended, and Section 1.80 of the Commission's Rules, ENSERCH is hereby NOTIFIED of its APPARENT LIABILITY FOR FORFEITURE in the amount of five hundred ten thousand dollars ($510,000) for willful and repeated violations of Section 310(d) of the Communications Act of 1934, as amended, and Section 101.53(a) of the Commission's Rules. 12. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's Rules, that within thirty days of the release of this Notice, ENSERCH SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture. 13. IT IS FURTHER ORDERED that copies of this Notice shall be sent, by Certified Mail/ Return Receipt Requested, to ENSERCH's counsel, Jonathan L. Wiener, Esq., Goldberg, Godles, Wiener & Wright, 1229 Nineteenth Street, N.W., Washington, D.C. 20036. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary