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Federal Communications Commission FCC 16-20
Federal Communications Commission
Washington, DC 20554
In the Matter of
File No.: EB-IHD-14-000149991
NAL/Acct. No.: 201232080024
FRNs: 0009834466, 0021816459
Adopted: February 18, 2016 Released: February 18, 2016
By the Commission: Commissioner O’Rielly concurring in part and dissenting in part.
1. Telecommunications service providers are required to pay federal regulatory fees and
make timely contributions to programs such as the Universal Service Fund (USF). When providers fail to
meet these obligations, they undermine the efficiency of these programs and obtain an unfair competitive
advantage over companies that comply with the Communications Act of 1934, as amended (Act) and the
Commission’s rules (Rules). In a Notice of Apparent Liability (NAL), the Commission detailed apparent
violations of these obligations by Telseven, LLC (Telseven or Company) and Patrick Hines (Hines).2
After opportunity for further submissions by the parties, we impose a penalty of $1,758,465, jointly and
severally, against Telseven and Hines for failing to contribute fully to the USF and the cost recovery
mechanisms for local number portability (LNP) and the North American Numbering Plan (NANP),
failing to pay regulatory fees, and failing to provide good faith estimates of its revenues in its Quarterly
Telecommunications Reporting Worksheet filings (Form 499–Q).
2. For several years, Telseven, at the direction of Hines, offered a service that provided
consumers with the ability to obtain information about recently disconnected or out-of-service toll free
numbers, and the offering of this service obligated the Company as a telecommunications service
provider to contribute to the programs and pay regulatory fees. Although Telseven failed to respond to
the NAL, Hines, sole owner, officer, and director of Telseven, filed a response contending that he should
not be held personally liable.3 On the basis of Hines’ response, we find no reason to cancel, withdraw, or
reduce the proposed penalty, or not to hold Hines personally liable for the violations addressed in the
3. The Enforcement Bureau, acting on a referral from the Universal Service Administration
Company (USAC) regarding Telseven’s failure to make full and timely payments to the USF, initiated an
1 This case was formerly assigned File No. EB-08-IH-1386.
2 See Telseven, LLC and Patrick B. Hines, Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 6636 (2012)
3 See Letter from Joseph D. Pickles, Purcell, Flanagan, Hay & Greene, P.A., Counsel for Patrick B. Hines, to Chief,
Investigations & Hearings Division, FCC Enforcement Bureau (Aug. 17, 2012) (on file in EB-IHD-14-00014999)
4 Telseven, Calling 10, LLC, and Hines are also subject to a separate enforcement action for “cramming” charges
onto consumers’ local telephone bills and for deceptively marketing ENADA service. See Telseven, LLC, Calling
10, LLC, Hines a/k/a P. Brian Hines, Forfeiture Order, FCC 16-20 (rel. Feb. 18, 2016).
Federal Communications Commission FCC 16-20
investigation into Telseven’s compliance with the USF contribution rules and related obligations.
Telseven provided an “Enhanced Number Assistance and Directory Assistance” (ENADA) service
through which consumers could obtain information about recently disconnected or out-of-service toll free
numbers.5 A consumer would dial one of the approximately one million such numbers that Telseven
controlled and would typically hear a message offering Telseven’s assistance in finding the current toll-
free number of the party the consumer was trying to reach. A recorded message would then provide the
consumer with an “equal access code” (i.e., dial-around number) for contacting Telseven’s directory
assistance platform in Nevada. Consumers dialing this equal access code would have their calls
transmitted to the Nevada platform by Telseven, rather than by the consumer’s prescribed long distance
carrier. Since Telseven did not offer service in Nevada, all calls using this equal access number were
interstate long distance calls.6 Offering this service meant that Telseven “held itself out and registered
with the Commission as a provider of interstate telecommunications services.”7
4. Telseven imposed per call charges on many of the consumers who contacted its Nevada
platform.8 These charges included a per call “Federal Universal Service Fund charge.”9 Telseven also
“charge[d] an administrative recovery fee of $1.65 in any month” the consumer dialed its “directory
assistance service . . . to offset the cost Telseven incurs in complying with regulatory obligations”
including “the cost of complying with the Federal Universal Service Charge.”10
5. On June 14, 2012, the Commission issued the NAL proposing a forfeiture against
Telseven and Hines for apparent willful and repeated violations of Sections 251(e)(2) and 254(d) of the
Act and Sections 1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706, 54.711(a) of the Rules.11
6. On April 20, 2012, less than two months before the NAL was released, Telseven filed for
Chapter 7 bankruptcy in the United States Bankruptcy Court for the Middle District of Florida,
Jacksonville Division.12 On August 17, 2012, Hines filed a response, on behalf of himself individually, to
the NAL.13 In his response, Hines does not dispute the USF, NANP, LNP, regulatory fee and
5 See NAL, 27 FCC Rcd at 6639–40, para. 7 (citing Telseven, LLC, Calling 10, LLC d/b/a California Calling 10, and
Patrick Hines, Response to the Order Instituting Investigation and Denial of All Assertions of Possible Violation of
California Law of Telseven, LLC, Calling 10, LLC d/b/a California Calling 10, and Patrick Hines, an Individual,
Case No. I.10-12-010, at 9–10 (Cal. Pub. Util. Comm’n, filed Jan. 21, 2011) (Telseven Response to Cal. Pub. Util.
Comm’n Investigation Order)).
6 See id. (citing Cal. Pub. Util. Comm’n, Opening Brief of Calling 10, LLC d/b/a California Calling 10, Telseven,
LLC and Patrick Hines, Case No. I.10-12-010, at 41 (Cal. Pub. Util. Comm’n, filed Apr. 6, 2011)).
7 Id. (citing Telseven, LLC, “Registration Detail,” available at https://fjall-
foss.fcc.gov/coresWeb/searchDetail.do?frn=0009834466); International Authorization Granted, Public Notice, 19
FCC Rcd 4036 (Int’l Bur. 2004)) (internal quotation marks omitted).
8 See id. at 6640, para. 8 (citing “Telseven.com – Welcome to Telseven LLC,” available at http://telseven.com (Jan.
23, 2012); “Telseven.com – Rates,” available at http://telseven.com/rate.html (Jan. 23, 2012)) (on file in EB-08-IH-
1386) (internal quotation marks omitted).
9 See id. (citing “Telseven.com – Welcome to Telseven LLC,” available at http://telseven.com (Jan. 23, 2012)) (on
file in EB-08-IH-1386) (internal quotation marks omitted).
10 See id. (citing “Telseven.com – Rates,” available at http://telseven.com/rate.html (Jan. 23, 2012)) (on file in EB-
08-IH-1386) (internal quotation marks omitted).
11 See NAL, 27 FCC Rcd at 6642–46, paras. 13–21 (citing 47 U.S.C. §§ 251(e)(2), 254(d); 47 C.F.R. §§ 1.1154,
1.1157(b)(1), 52.17, 52.32(a), 54.706, 54.711(a)).
12 See Letter from Jason Burnett, Esq., GrayRobinson, Attorneys at Law, to Marlene H. Dortch, FCC Secretary (Apr.
25, 2012) (on file in EB-IHD-14-00014999) (Burnett Apr. 25, 2012 Letter) (notice of Chapter 7 Bankruptcy
regarding Telseven, LLC, U.S. Bankr. Ct., Mid. Dist. Fla., Jacksonville Div., Case No.: 3:11-bk-2682-PMG (Apr.
23, 2012)). That proceeding remains active.
13 See NAL Response.
Federal Communications Commission FCC 16-20
Telecommunications Reporting Worksheet violations addressed in the NAL but contends that the
Commission should rescind the proposed forfeiture against him because the NAL should not have
“pierced the corporate veil” to impose liability on him as an individual. Telseven did not file a response
to the NAL.
7. The Commission proposed a forfeiture in this case in accordance with Section 503(b) of
the Act,14 Section 1.80 of the Rules,15 and the Commission’s Forfeiture Policy Statement.16 When we
assess forfeitures, Section 503(b)(2)(E) requires that we take into account 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.”17 Neither Telseven nor
Hines disputes the facts as alleged in the NAL. As discussed below, we have fully considered Hines’
response to the NAL and find his arguments unpersuasive. Based on the uncontested record of violations
documented in the NAL, incorporated into this Forfeiture Order by reference, we find that Telseven and
Hines violated the Act and Rules by failing to make full and timely USF contributions, NANP
contributions, LNP contributions, regulatory fee payments to the Commission, and failing to provide
good faith estimates of revenue projections on Quarterly Telecommunications Reporting Worksheets.18
We therefore assess $1,758,465 in forfeitures for these violations as proposed in the NAL.19
8. We also affirm our finding in the NAL that Telseven and Hines are jointly and severally
liable. As explained in the NAL, the Commission may hold an entity or individual liable for the acts or
omissions of a different, related entity: (i) where there is a common identity of officers, directors, or
shareholders; (ii) where there is common control between the entities; and (iii) when it is necessary to
preserve the integrity of the Act and to prevent the entities from defeating the purpose of statutory
provisions.20 The U.S. Court of Appeals for the D.C. Circuit held in Capital Telephone Company, Inc. v.
14 47 U.S.C. § 503(b).
15 47 CFR § 1.80.
16 Commission’s Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the
Forfeiture Guidelines, Report and Order, 12 FCC Rcd 17087, 17099 (1997) (Forfeiture Policy Statement), recons.
denied, Memorandum Opinion and Order, 15 FCC Rcd 303 (1999).
17 47 U.S.C. § 503(b)(2)(E).
18 See NAL, supra note 4; 47 U.S.C. §§ 251(e)(2), 254(d); 47 CFR §§ 1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706;
19 As we explained in the NAL and below, we treat Hines and the common carrier corporate entity he controlled as
the same entity for purposes of finding that Hines violated Sections 251(e)(2), 254(d) of the Act and Sections
1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706, 54.711(a) of the Rules. See NAL, 27 FCC Rcd at 6649–50, paras. 29–
31 and discussion infra.
20 See NAL, 27 FCC Rcd at 6649, para. 29. The Commission and the courts have long stated that “[w]here the
statutory purpose could . . . be easily frustrated through the use of separate . . . entities, the Commission is entitled to
look through corporate form and treat the separate entities as one and the same for purpose of regulation.”
Improving Pub. Safety Commc’ns in the 800 MHz Band, Fifth Report and Order, Eleventh Report and Order, Sixth
Report and Order, and Declaratory Ruling, 25 FCC Rcd 13874, 13887–88 (2010) (citing Gen. Tel. Co. of the S.W. v.
United States, 449 F.2d 846, 854 (5th Cir. 1971)); see also Capital Tel. Co., Inc. v. FCC, 498 F.2d 734, 739 (D.C.
Cir. 1974) (Capital Telephone) (finding that the Commission correctly treated the individual and the corporation he
controlled as the same entity and granted only one license and that “substantial evidence supports the Commission’s
decision to pierce Capital’s corporate veil in order to carry out the statutory mandate ‘to provide a fair, efficient, and
equitable distribution of radio service.’”). The courts have also looked through the corporate form in analogous
situations, such as cases involving: the parent and subsidiaries where an entity was created to circumvent agency
liability, Transcontinental Gas Pipe Line Corp. v. FERC, 998 F.2d 1313, 1321–22 (5th Cir. 1993) (finding that
FERC correctly looked behind corporate forms and treated the parent and subsidiaries as a single entity where the
parent pipeline set up subsidiaries to sell gas at prices at which the parent could not legally sell); two corporations
Federal Communications Commission FCC 16-20
FCC that “a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason
to the contrary appears; but, when the notion of a legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.”21
9. As in Capital Telephone, it is necessary to look beyond the corporate name and take
“cognizance of the identity of ownership and control” between Telseven and Hines in order to advance
core statutory directives and our implementing rules.22 We affirm the conclusion in the NAL that all three
of these factors were met in this case.
10. With respect to the first two factors—“common identity” and “common control”—Hines
has not offered any action or failure to act by Telseven that he did not perform individually. Indeed, the
evidence demonstrates Hines shared common identity with and total control over Telseven at all relevant
times when the Company willfully and repeatedly failed to make full and timely payments to federal
contribution programs and regulatory fees.23 Hines wholly owned Telseven,24 and he shared the same
address with Telseven.25 He was the sole director and officer of Telseven.26 He was Telseven’s only
(Continued from previous page)
that were controlled by one family, Mansfield Journal Co. (FM) v. FCC, 180 F.2d 28, 37 (D.C. Cir.
1950) (concluding that although two newspapers were separate corporations, with separate editorial staffs, and
located in communities over fifty miles apart, the Commission correctly denied applications of both corporations
when the record showed that one family owned all of the stock in both corporations, the owners took active part in
the control and policy formulation of the newspapers, and the true applicant in each case was the same group of
individuals); and several corporations that were used to operate one business, Schenley Distillers Corp. v. United
States, 326 U.S. 432, 437 (1946) (“The fact that several corporations are used in carrying on the business does not
relieve them of their several statutory obligations more than it relieves them of the taxes severally laid upon them.”).
21 Capital Telephone, 498 F.2d at 738.
23 After the Commission began its investigation into Telseven’s violations, but prior to the issuance of the NAL,
Hines transferred his membership interests to the Patrick Hines Revocable Trust (Hines Trust). This ownership
transfer from Hines to the Hines Trust was disclosed to the Commission during the pendency of the bankruptcy
proceeding on April 23, 2012. See Burnett Apr. 25, 2012 Letter, supra note 11; see also In re Telseven, LLC, Case
No. 3:12-bk-02582-PMG, U.S. Bankr. Ct., Mid. Dist. Fla., Corporate Ownership Statement (Rule 7007.1) (May 4,
2012) (on file in EB-IHD-14-00014999) (disclosing the Patrick Hines Revocable Trust). Even after the transfer,
Hines retained sole control of Telseven as the trustee of the Hines Trust, which he managed for his sole benefit as
the beneficiary of the Hines Trust. Testimony of Patrick Hines, Proceeding No. I1012010, Consumer Protection and
Safety Division, California PUC at 302, 431 (Nov. 16 and 17, 2011) (stating Hines is the beneficiary of the trust).
Moreover, neither Telseven nor Hines disputed the finding in the NAL that Hines is the sole beneficiary of the Hines
Trust. Importantly, Telseven and Hines represented to the Commission without equivocation that he was the sole
owner of Telseven and controlled the Company. See International Section 214 Application of Telseven, LLC, FCC
File No. ITC2142004020900047, Attachment 2, granted Dec. 1, 2005, DA 05-3129, Report No. TEL-00970 (Hines
identified as 100% owner of Telseven in Company’s Commission license application) (cited in NAL, 27 FCC Rcd at
6649 n.111); [BEGIN CONFIDENTIAL]Letter from Wendy M. Creeden, Counsel for Telseven, LLC, Sullivan &
Worcester, LLP, to Elizabeth Mumaw, Attorney Advisor, Investigations & Hearings Division, FCC Enforcement
Bureau, at Response to Inquiry 4, Exhibit B (Sept. 22, 2008) (Patrick Hines 100% owner of Telseven) (on file in
EB-IHD-14-00014999); see also Letter from Kathy L. Cooper, Counsel for Telseven, to Robert B. Krinsky,
Attorney Advisor, Investigations & Hearings Division, FCC Enforcement Bureau (July 12, 2010) at 1 & Attachment
A at 1 (Telseven identified as one of 13 companies “shar[ing] common ownership or management with Telseven
through the owner/manager of Telseven, Patrick Hines”) (on file in EB-IHD-14-00014999) [END
24 See Hines Telseven Deposition at 53, Lines 12 – 15 (“Q. ‘Okay. Just to clarify, I believe you stated before that
you own Telseven. You own all the membership interest?’ – – A. ‘Correct.’”).
25 The Telseven address provided on the FCC Registration systems is identical to the address that Hines provided for
himself while under oath for purposes of a deposition provided as part of the Telseven Chapter 7 bankruptcy
proceeding. Compare FCC Registration Database at
Federal Communications Commission FCC 16-20
manager27 and employee.28 Hines executed and signed all transactional documents on behalf of Telseven,
including amendments to Telseven’s Articles of Organization, and all declarations attesting to the truth
and accuracy of Telseven’s responses to the Commission.29 These facts demonstrate that Hines and
Telseven share a common identity and that Hines exercises common control over both.
11. The third criterion–the need to preserve the integrity of the Act and to prevent the defeat
of the purpose of the statutory provisions at issue–is also clearly satisfied here. As stated in the NAL,
Section 254(d) of the Act requires that “[e]very telecommunications carrier that provides interstate
telecommunications services shall contribute, on an equitable and nondiscriminatory basis” to the USF.30
Similarly, Section 251(e)(2) of the Act requires that all telecommunications carriers shall bear
telecommunications numbering and number portability costs on a competitively neutral basis.31 Finally,
Section 9(a)(1) of the Act directs that the Commission “shall assess and collect regulatory fees to recover
the costs” of its regulatory activities.32
12. As we discussed above and in the NAL, Hines is the sole owner and officer of Telseven
and controlled every aspect of the Telseven operation.33 Failure to hold Hines responsible for Telseven’s
violations of the requirements to contribute to these programs would establish a loophole in our rules for
others to emulate, significantly undermining the statutory mandates that all telecommunications service
providers must make such payments and face enforcement penalties if they fail to do so. To determine
otherwise would “defeat public convenience [and] justify wrong.”34
13. Hines argues we should not “pierce the corporate veil” to hold an individual owner of a
corporate entity liable for the entity’s violations, but rather that the test should only apply when two
(Continued from previous page)
https://apps.fcc.gov/coresWeb/simpleSearch.do?btnSearch=true (last visited Mar. 19, 2015) with Hines Telseven
Deposition at 6, lines 10 – 11.
26 See Letter from Wendy M. Creeden, Counsel for Telseven, LLC, Sullivan & Worcester, LLP, to Elizabeth
Mumaw, Attorney Advisor, Investigations & Hearings Division, FCC Enforcement Bureau, at Response to Inquiry 3
(Sept. 22, 2008) (on file in EB-IHD-14-00014999) (Telseven Sept. 22 Letter).
27 See United States Bankruptcy Court, Middle District of Florida, Jacksonville Division, Case No.: 3:12-bk-02682-
PMG; In re: Telseven, LLC, Debtor, Transcript of Examination of Witness Patrick Brian Hines, at 6, lines 13 – 21
(“[Hines:] ‘I was the manager, authorized representative’”; “[Hines:] ‘I’m the sole manager, right.’”); 19, line 9
(“[Hines:] ‘I am the owner of Telseven.’”) (Aug. 6, 2012) (Hines Telseven Deposition).
28 See Hines Telseven Deposition at 12, lines 15–21 (“Q. ‘So, we’ve got Telseven as the entity of which you were
the managing member and the only member. Who else worked for Telseven property?’ – – A. ‘We had – – no. We
had – – we – – this is a sophisticated business in the sense that we had to hire outside consultants, you know, who
ran computer systems, billing, et. cetera.’”); 15, line 14 (“[Hines]: ‘So everything got outsourced, so to speak.’”);
23, lines 24 – 25; 24, line 1 (“Q. ‘But there were no regular employees working for Telseven.’ – – A. ‘No.’”).
29 See NAL, 27 FCC Rcd at 6649, para. 30; Telseven Sept. 22 Letter at Responses to Inquiries 1–2 (Declaration of
Hines certifying the truth and accuracy of information concerning Telseven provided to the Bureau); see also id. at
Exhibit A (Telseven Articles of Organization) (Public Version). Hines also was the signatory attesting to the truth
and accuracy of the data provided on Telecommunications Reporting Worksheets (Forms 499-A and Forms 499-Q)
filed on behalf of Telseven. See, e.g., Telseven Form 499-A filings for 2006 through 2008 (on file in EB-IHD-14-
30 See NAL, 27 FCC Rcd at 6638, para. 4 (citing 47 U.S.C. § 254(d)).
31 47 U.S.C. § 251(e)(2); see also id. § 159(a) (requiring that the Commission collect regulatory fees to recover the
costs of its regulatory activities).
32 47 U.S.C. § 159(a)(1).
33 See supra paragraph 9; NAL, 27 FCC Rcd at 6649–50, para. 30.
34 Capital Telephone, 498 F.2d at 738.
Federal Communications Commission FCC 16-20
corporate entities are involved. He asserts that the piercing the corporate veil test “makes no sense with
respect to an individual owner of a corporate entity”35 because all three of the factors would always apply
in the case of a small business, making the test meaningless.36 We disagree. Among other things, Hines’
argument ignores the objective of the third factor—the “necess[ity] to preserve the integrity of the
Communications Act and to prevent the entities from defeating the purpose and provisions of statutory
provisions.”37 Indeed, the test captures individuals similarly situated to Hines because that is who the test
is designed to capture—egregious violators of the Act who create sham corporate forms to evade liability.
Accepting Hines’ assertion would create a blanket exemption from corporate veil-piercing for the very
inequity the doctrine is intended to address. We accordingly conclude that both the three factor test— and
our review of the equities—clearly urges piercing Telseven’s corporate veil, and Hines has provided no
basis to disturb that conclusion.38
14. Moreover, the D.C. Circuit’s decision in Capital Telephone upheld the Commission’s
decision to pierce the corporate veil between an individual and his wholly owned corporation. In Capital
Telephone, the Commission pierced the corporate veil of the Capital Telephone Company, Inc. when both
it and its sole owner, Mr. Peter Bakal, sought licenses for the only two high band paging channels
available in a certain region of New York. Affirming the FCC, the D.C. Circuit stated “[t]he Commission
recognized [that] injustice … would be done to [a competing applicant] if both the Bakal and Capital
applications were granted. This would, in effect, grant to one individual the use of all the most desirable
available high-band paging channels in the … area ….”39 The court found that “substantial evidence
supports the Commission’s decision to pierce Capital’s corporate veil in order to carry out the statutory
mandate ‘to provide a fair, efficient, and equitable distribution of radio service.’”40 Here, the Commission
is acting to prevent reliance on corporate form to frustrate our efforts to implement core statutory
provisions.41 Contrary to Hines’ argument, we are not “eviscerat[ing] automatically” corporate legal
15. Hines also argues that the Commission’s goal of promoting small businesses counsels
against piercing the corporate veil here.43 Hines cannot reasonably rely upon this goal where the small
business in question has, for several years, imposed charges on consumers to offset the costs of regulatory
obligations it did not, itself, meet.
35 NAL Response at 1-3.
37 Contrary to Hines’ assertion, there are instances where violations would not rise to the level of frustrating the
purpose of the Act and thus implicate this test. See Lockheed Martin Corp., Order on Reconsideration, 17 FCC Rcd.
13160, 13167, para. 18 (2002) (determining that the public interest would not be served by additional Commission
action against a licensee for a minor rule violation); David A. Davila, et al., Memorandum Opinion & Order, 6 FCC
Rcd 2897, 2899, para. 10 (1991) (late disclosure of a loan agreement is a minor rule violation that, without more,
does not raise a substantial and material question of fact with respect to licensee’s character qualifications).
However, egregious violations such as those committed by Hines undoubtedly qualify.
38 Capital Telephone, 498 F.2d at 737 (“The broad equitable standards of the statute, enacted to further public
convenience, clearly support the Commission’s decision to look beyond the corporate entity to serve the interests of
fairness, justice and equity.”) (emphasis added).
39 Capital Telephone, 498 F.2d at 736.
40 Id. at 739 (quoting 47 U.S.C. § 307(b)).
41 See 47 U.S.C. §§ 159, 251(e)(2), 254(d).
42 NAL Response at 3.
Federal Communications Commission FCC 16-20
16. Hines also protests that, “in its almost 80 year history, the FCC has not applied the
‘pierce the corporate veil’ test described in the NAL to find an individual owner … separately liable for a
forfeiture against that entity.”44 As discussed above, the applicable standard permits us to pierce the veil
of a corporation to reach an individual owner who has acted to undermine the statute under which his
company is regulated. It does not, moreover, preclude us from finding that owner liable for a forfeiture
and we do so here based upon the clear record before us.
17. Finally, Hines contends that because Telseven is a Florida limited liability company, the
Commission should apply Florida corporate law to determine whether to pierce the corporate veil.45 We
disagree. As an initial matter, the Commission is enforcing federal law, which Telseven and Hines
violated. Therefore, it is appropriate for the Commission to rely on federal common law, which clearly
supports the Commission’s decision to pierce the corporate veil.46 Even if we were to apply Florida law,
the outcome would not be altered, as it is appropriate to pierce the corporate veil under that state’s law if
“it [can] be shown that the corporation is formed or used for some illegal, fraudulent or other unjust
purpose,”47 which accurately describes Telseven.48
18. Hines nonetheless contends that “the [NAL] is devoid of any allegations that Telseven
was established or used for an improper, illegal or fraudulent purpose.”49 We disagree. The NAL details
how Hines used Telseven to engage in practices in violation of Sections 251(e)(2) and 254(d) of the Act
and Sections 1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706, 54.711(a) of the Rules.50
19. Hines does not dispute the underlying allegations that Telseven was a
telecommunications service provider obligated to contribute to the programs, pay regulatory fees, and file
good faith estimates of projected revenue on Quarterly Telecommunications Reporting Worksheets. As
the sole corporate officer and manager, he had the power to ensure the contributions were made as
required. In an investigation such as this one, where the activities of the corporate enterprise consisted of
significant violations of the rules governing telecommunications providers’ payments to contribution and
44 Id. at 2.
45 Id. at 4–5.
46 See Ivy Broad. Co. v. Am. Tel. & Tel. Co., 391 F.2d 486, 491 (2d Cir. 1968) (As a result of the Act’s
comprehensive regulatory scheme, “the duties, charges, and liabilities of telegraph or telephone companies with
respect to interstate communications service are to be governed solely by federal law,” and the states are precluded
from acting in this area.”); MCI Telecomms. Corp. v. O’Brien Mktg., Inc., 913. F. Supp. 1536, 1541 (federal
common law, rather than state law, applies to the issue of piercing the corporate veil in a proceeding interpreting the
Act). Hines’s reliance on Stromberg Metal Works v. Press Mech., Inc., 77 F.3d 928 (7th Cir. 1996) for his argument
that Florida law controls is unavailing. Hines inappropriately seeks to rely on a case subject to federal jurisdiction
only because of a diversity of citizenship, as opposed to cases such as Ivy Broad Co. and MCI Telecomms Corp.,
which pertain to the enforcement of a valid federal statute. In Stromberg, the U.S. Court of Appeals for the Seventh
Circuit addressed the veil piercing matter as a subsidiary issue to resolving a choice of law question in a contractual
dispute. Only after deciding that Illinois law applied because of the controlling contract did the court apply that
state’s standard for piercing the corporate veil. See Stromberg, 77 F.3d at 933-34. And under Illinois law, the
corporate veil piercing law of a company’s state of incorporation is applied. See id. (citing Kern v. Chicago &
Eastern Illinois R.R., 6 Ill.App.3d 247, 250-51, 285 N.E.2d 501, 503-04 (1st Dist. 1972). The laws of the state of
incorporation do not always govern corporate veil piercing. See id.
47 Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114, 1121 (Fla. 1984) (quoting Robert’s Fish Farm v. Spencer,
153 So.2d 718, 721 (Fla. 1963)).
48 Other cases cited by Hines do not support his argument that the Commission erred in piercing the corporate veil
here and merely repeat the same finding quoted above. See, e.g., Ally v. Naim, 581 So.2d 961 (Fla. 3d DCA 1991);
Hilton Oil Transport, et al. v. Oil Transport Co., 659 So. 2d 1141 (Fla. 3d DCA 1995).
49 NAL Response at 5–6.
50 NAL, 27 FCC Rcd at 6642–50, paras. 13––31.
Federal Communications Commission FCC 16-20
regulatory fee programs, and the corporation has since sold its assets and then filed for bankruptcy
protection, we find that statutory purposes would otherwise be frustrated if we permitted Hines to hide
behind his corporate entities and avoid personal liability for such violations.51
20. Based on the record before us and in light of the applicable statutory factors, we find that
Telseven and Hines willfully and repeatedly failed to make required USF, NANP, LNP, regulatory fee
payments, and failed to make good faith estimates of quarterly telecommunications revenue in violation
of Sections 251(e)(2) and 254(d) of the Act and Sections 1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706,
54.711(a) of the Rules. We decline to cancel or reduce the proposed forfeitures of one million, five
hundred ninety-eight thousand, four hundred sixty-five dollars ($1,598,465) for failure to make full and
timely USF contributions; one hundred thousand dollars ($100,000) for failure to file accurate Quarterly
Telecommunications Reporting Worksheets; ten thousand dollars ($10,000) for failure to make full and
timely NANP contributions; thirty thousand dollars ($30,000) for failure to make full and timely LNP
contributions; and twenty thousand dollars ($20,000) for failure to make full and timely regulatory fee
payments to the Commission.52. We thus conclude that Telseven and Hines are jointly and severally
liable for total forfeitures of one million, seven hundred fifty-eight thousand, four hundred sixty-five
IV. ORDERING CLAUSES
21. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act,54 and Section
1.80 of the Rules,55 Telseven, LLC and Patrick B. Hines, ARE JOINTLY AND SEVERALLY
LIABLE FOR A MONETARY FORFEITURE in the amount of one million, seven hundred fifty-eight
thousand, four hundred sixty-five dollars ($1,758,465) for willfully and repeatedly violating Sections
251(e)(2) and 254(d) of the Act and Sections 1.1154, 1.1157(b)(1), 52.17, 52.32(a), 54.706, 54.711(a) of the
22. Payment of the forfeiture shall be made in the manner provided for in Section 1.80 of the
Rules within thirty (30) calendar days after the release of this Forfeiture Order.56 For collection against
Telseven, LLC, the Commission will comply with 11 U.S.C. §101 et seq. as and to the extent necessary.
For collection against Patrick B. Hines, if the forfeiture is not paid within the period specified, the case
may be referred to the U.S. Department of Justice for enforcement of the forfeiture pursuant to Section
504(a) of the Act.57
51 The imposition of a forfeiture on Hines is also consistent with other cases in which the courts have held corporate
officers personally liable for participating in or authorizing an entity’s violations of law. See Texas v. Am. Blastfax,
164 F. Supp. 2d 892, 897–98 (W.D. Texas 2001) (“[I]f the officer directly participated in or authorized the statutory
violation, even though acting on behalf of the corporation, he may be personally liable” for violations of the TCPA).
See also U.S. v. Pollution Servs. of Oswego, Inc., 763 F.2d 133, 134–35 (2nd Cir. 1985) (“In light of the clear
congressional intent to hold ‘person[s]’ liable for violations [of the Rivers and Harbors Appropriations Act], we see
no reason to shield from civil liability those corporate officers who are personally involved in or directly responsible
for statutorily proscribed activity”); 47 U.S.C. § 153(39) (defining a “person” to include individuals as well as
corporate entities). In other contexts, the courts have found the responsible corporate officer of a company to be
personally liable for unlawful acts where the corporate officer was in a position of responsibility vis-à-vis the illegal
conduct, had the power to prevent others from engaging in such conduct or to promptly correct the violation, and
failed to take action. See, e.g., U.S. v. Hodges X-Ray, Inc., 759 F.2d 557, 560–62 (6th Cir. 1985).
52 NAL, 27 FCC Rcd at 6650–51, para. 32.
53 See id.
54 47 U.S.C. § 503(b).
55 47 CFR § 1.80.
57 47 U.S.C. § 504(a).
Federal Communications Commission FCC 16-20
23. Payment of the forfeiture must be made by check or similar instrument, wire transfer, or
credit card, and must include the NAL/Account Number and FRN referenced above. Telseven LLC and
Patrick B. Hines shall send electronic notification of payment to Jeffrey J. Gee at Jeffrey.Gee@fcc.gov,
Kalun Lee at Kalun.Lee@fcc.gov and Robert B. Krinsky at Robert.Krinsky@fcc.gov on the date said
payment is made. Regardless of the form of payment, a completed FCC Form 159 (Remittance Advice)
must be submitted.58 When completing the Form 159, enter the Account Number in block number 23A
(call sign/other ID) and enter the letters “FORF” in block number 24A (payment type code). Below are
additional instructions that should be followed based on the form of payment selected:
? Payment by check or money order must be made payable to the order of the Federal
Communications Commission. Such payments (along with completed Form 159) must be
mailed to the Federal Communications Commission, P.O. Box 979088, St. Louis, MO
63197-9000, or sent via overnight mail to U.S. Bank–Government Lockbox #979088,
SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101.
? Payment by wire transfer must be made to ABA Number 021030004, receiving bank
TREAS/NYC, and Account Number 27000001. To complete the wire transfer and ensure
appropriate crediting of the wired funds, a completed Form 159 must be faxed to U.S. Bank
at (314) 418-4232 on the same business day the wire transfer is initiated.
? Payment by credit card must be made by providing the required credit card information on
FCC From 159 and signing and dating the Form 159 to authorize the credit card payment.
The completed Form 159 must then be mailed to Federal Communications Commission,
P.O. Box 979088, St. Louis, MO 63197-9000, or sent via overnight mail to U.S. Bank–
Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
24. Any request for making full payment over time under an installment plan should be sent
to: Chief Financial Officer–Financial Operations, Federal Communications Commission, 445 12th Street,
SW, Room 1-A625, Washington, DC 20554.59 Questions regarding payment procedures should be
directed to the Financial Operations Group Help Desk by telephone, 1-877-480-3201, or by e-mail,
25. IT IS FURTHER ORDERED that a copy of this Forfeiture Order shall be sent by first
class mail and certified mail, return receipt requested, to Jacob A. Brown and J.C. Van Lierop, III,
Attorneys for Telseven Chapter 7 Trustee Doreen Abbott, Ackerman Senterfitt, 50 North Laura Street,
Jacksonville, Florida 32202 and to Telseven, LLC, 200 Executive Way, Ponte Verde Beach, Florida
26. IT IS FURTHER ORDERED that a copy of this Forfeiture Order shall be sent by first
class mail and certified mail, return receipt requested, to Joseph D. Pickles, Attorney for Patrick B. Hines,
at Purcell, Flanagan, Hay and Greene, 1548 Lancaster Terrace, Jacksonville, FL 32204.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
58 An FCC Form 159 and detailed instructions for completing the form may be obtained at
59 See 47 CFR § 1.1914.