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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
) File No. EB-01-IH-0339
SBC Communications, Inc. )
) NAL/Acct. No. 200132080059
Apparent Liability for Forfeiture )
NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER
Adopted: October 12, 2001 Released: October
16, 2001
By the Commission:
Paragraph
I. INTRODUCTION 1
II. FACTS 4
A.SBC Applies for Section 271 Authority in Kansas and
Oklahoma 4
B.The Operation And Oversight Of SBC's Loop
Qualification System At The Time The Reply
Affidavits Were Filed 11
C.The Preparation And Submission Of The Inaccurate
Reply Affidavits 15
D.Questions Arise About The Accuracy Of The Reply
Affidavits 31
E.SBC Notifies The Commission Of The Inaccurate
Affidavits 37
III. DISCUSSION 41
A.The Evidence Does Not Warrant A Finding Of Apparent
Liability For Intentional Misrepresentation
Regarding The Three Reply Affidavits 43
B.SBC Apparently Violated Its Duty To Disclose The
Inaccurate Statements In A Timely Manner To The
Commission 47
C.SBC Apparently Misrepresented Facts To The
Commission During The Enforcement Bureau's
Investigation 65
D.SBC Apparently Violated The SBC/SNET Consent Decree
81
E.SBC Did Not Violate Section 271 Of The Act 90
IV. CONCLUSION 91
V. ORDERING CLAUSES 92
I. INTRODUCTION
1. This Notice of Apparent Liability and Order (``NAL'')
relates to a matter at the heart of the Commission's processes --
the completeness and accuracy of information submitted by
regulated companies to the agency. Since April 2001, the
Commission's Enforcement Bureau has conducted an informal
investigation into potential misconduct by SBC Communications,
Inc. (``SBC'') relating to inaccurate statements in three
affidavits filed by the company in the proceeding in which the
Commission granted SBC the authority to provide long-distance
service in Kansas and Oklahoma.1
2. Based on our evaluation of the information that SBC has
supplied to the Commission during the course of this
investigation, we find that SBC is apparently liable for a
forfeiture for: (1) apparently failing to notify the Commission
within 30 days that information contained in its section 271
application for Kansas and Oklahoma was no longer substantially
accurate or complete in all significant respects, in apparent
violation of section 1.65 of the Commission's rules, 47 C.F.R. §
1.65; (2) apparently making a misrepresentation or a willful
material omission bearing on a matter within the jurisdiction of
the Commission in a written statement submitted by SBC in
connection with the investigation into the filing of the
incorrect affidavits in the Kansas/Oklahoma section 271
proceeding, in apparent violation of section 1.17 of the
Commission's Rules, 47 C.F.R. § 1.17; and (3) apparently failing
to comply with the terms of a consent decree that resolved an
earlier investigation of SBC involving analogous issues and
required SBC to train certain employees on Commission rules
relating to contacts with the agency.2
3. Based on these findings, we find SBC apparently liable
for a forfeiture in the amount of two million, five hundred
twenty thousand dollars ($2,520,000), which is the statutory
maximum for these apparent violations. In addition to these
specific apparent violations, we also note our more general
concern that SBC has not exercised the degree of care we expect
from our regulatees in dealing with the Commission. Finally, we
also order SBC to file certain reports regarding future
compliance with section 1.65 and the SBC/SNET Consent Decree.
II. FACTS
II.A. SBC Applies for Section 271 Authority in Kansas
and Oklahoma
4. On October 26, 2000, SBC filed an application with the
Commission seeking authorization to provide in-region, interLATA
services in Kansas and Oklahoma in accordance with section 271 of
the Communications Act of 1934, as amended.3 Under section 271,
SBC had to demonstrate that it provided competitors with
nondiscriminatory access to unbundled network elements, pursuant
to section 251(c) and 252(d) of the Act.4 As part of its
obligation to provide access to these network elements, SBC also
had to show that it provided competing carriers with
nondiscriminatory access to its operations support systems (OSS),
which are used by carriers for pre-ordering, ordering,
provisioning, maintenance and repair, and billing services.5
5. The Kansas/Oklahoma section 271 proceeding marked the
first time that an applicant, as part of its section 271 showing,
had to demonstrate compliance with the terms of the Commission's
UNE Remand Order.6 The UNE Remand Order required, among other
things, that an incumbent local exchange carrier such as SBC make
loop qualification information available to competitors as part
of the pre-ordering functionality of its OSS.7 SBC thus had to
show, as part of the section 271 proceeding, that it provided
competitors with the same level of access to loop information as
that available to itself, so that a competitor could determine
during the pre-ordering stage whether a requested loop was
capable of supporting advanced services equipment.8
6. In its application, SBC maintained that it provided
access to loop qualification information in accordance with the
UNE Remand Order.9 On November 15, 2000, however, IP
Communications Corp. (``IP'') filed comments alleging that SBC
``filtered'' its loop qualification information for requesting
carriers in violation of the UNE Remand Order.10 IP contended
that SBC did not provide access to all of the information
contained in its own electronic databases, but rather provided
information on only the ``best loop,'' as determined by SBC, to
the particular end user. According to IP, this withholding of
information amounted to improper ``filtering'' in contravention
of Commission rules.
7. Two weeks later, IP made a second, but related,
allegation. IP claimed that SBC's loop qualification system
failed to return information on available copper loops to
requesting carriers when an end user was served by both copper
and fiber.11 IP asserted that, where an end user had both copper
and fiber loops to its premises, requesting carriers would not
receive loop qualification information on the copper loop because
SBC's loop qualification system only returned fiber as the ``best
loop.'' As IP noted, competing carriers that were capable of
providing service only over copper loops would effectively be
precluded from offering service because such carriers would not
know that the copper loops existed.12 IP asserted that this
practice also violated the requirements of the UNE Remand Order.
8. On December 11, 2000, SBC filed its reply brief and
supporting affidavits in the Kansas/Oklahoma section 271
proceeding. In response to IP's allegations, SBC denied that it
unlawfully filtered information in its loop qualification system.
SBC first argued that it had no obligation to return information
on more than one loop to a requested address and that therefore
IP's first allegation was irrelevant. Additionally, SBC
contended that the method by which its loop qualification system
retrieved and returned information to requesting carriers was
without regard to the ``best loop.''13 Relying on three
supporting affidavits, SBC claimed that its loop qualification
process utilized the same logic as its provisioning system.
Thus, according to the affiants, in returning loop information,
SBC's system would behave as if it were actually provisioning the
service requested to a particular address, including, where
necessary, piecing together previously unassociated parts of a
loop. Since the system could provision digital subscriber line
(xDSL) service only over a copper loop, the loop qualification
system would provide information about such loops in response to
queries from competitors.14
9. The Commission accepted this explanation. In the Order
granting the application, the Commission found that SBC had
demonstrated that it provided competing carriers with
nondiscriminatory access to the same detailed information about
the loop, in the same time frame, as the company made available
to itself.15 In so finding, the Commission referred to the
representations made by the SBC personnel in their reply
affidavits, including representations that the loop qualification
process used the same logic as the provisioning process.16 In
addressing the IP ``filtering'' allegations, the Commission
determined, with respect to IP's first allegation, that it was
``not self-evident from the UNE Remand Order'' that SBC had to
return information on all loops to a given address.17 As a
result, the Commission declined to find that SBC had violated the
UNE Remand Order on those grounds. The Commission also rejected
IP's allegations that SBC did not return loop information on
copper loops at an address also served by fiber. Although the
Commission stated that, if IP's second allegation was true, this
practice would ``appear to violate the UNE Remand Order,'' it
concluded that SBC had satisfactorily refuted the IP
allegations.18
10. The three affidavits supporting the reply brief that
addressed the loop qualification issue were signed by SBC
employees Carol Chapman, Mark Welch, and Angela Cullen
(collectively, ``the reply affiants''). As noted above, each of
the reply affiants claimed in his or her affidavit that SBC's
loop qualification system searched for information about loops as
if it were provisioning the particular service requested.
Therefore, if a carrier requested xDSL service over a copper
loop, SBC's loop qualification system would return information as
if it were actually provisioning xDSL service over the copper
loop. In reality, however, SBC's system provided information
only about the ``first'' loop in SBC's records, regardless of
whether that loop was a xDSL-capable copper loop or a fiber loop.
Thus, where an address was served by both copper and fiber loops,
unless the copper loop was also the ``first loop'' in SBC's
systems, SBC's loop qualification system would not disclose that
loop to a requesting CLEC.
II.B. The Operation And Oversight Of SBC's Loop
Qualification System At The Time The Reply Affidavits
Were Filed
11. Generally, xDSL service may only be provided via loops
using copper wire, as opposed to loops composed of fiber optic
cable. Thus, before a carrier undertakes to provide xDSL service
to a given customer, the carrier first determines whether that
customer is connected to the wider telephone network via a copper
loop. Without a copper loop, that customer cannot receive xDSL
service. Until April 2001, SBC's loop qualification system
identified only the ``first'' loop loaded in SBC's Loop
Facilities Assignment and Control System (LFACS).19 Thus, when a
carrier sought to learn whether it could provide xDSL service to
a potential customer, SBC's loop qualification system would tell
the carrier about a copper loop only if it was the ``first'' loop
on SBC's system. Otherwise, SBC would only inform the carrier
that the potential customer was served only by a non-copper
loop.20
12. Beginning about June 2000, John Mileham was the loop
qualification project manager for SBC. In that position, Mr.
Mileham was responsible for the day-to-day management of SBC's
loop qualification system and was therefore one of the most
knowledgeable people at the company on the system.21 In August
2000, Mr. Mileham prepared an overview describing the process by
which SBC's loop qualification system searched for information on
behalf of requesting carriers. Mr. Mileham's overview discussed
the process of returning information to a carrier that requested
actual loop information.22 Mr. Mileham wrote that the loop
qualification process would first query a back-end database,
LFACS. LFACS would then return a list of circuit identifiers for
the requested end user address, and the loop qualification system
would search LFACS for the specific loop make-up information on
the ``first circuit'' from that list (as opposed to the first
copper circuit).23 Mr. Mileham forwarded his overview to
numerous persons within SBC, including SBC's legal department and
at least one of the SBC reply affiants, Carol Chapman.
13. In addition, as part of his duties as loop
qualification project manager, Mr. Mileham hosted technical
meetings and conference calls with competing carriers designed to
provide a forum for questions and answers concerning technical
aspects of the loop qualification system. During these sessions,
which began in June 2000, competing carriers complained to him
that they were receiving insufficient information on available
copper loops. After making inquiries, he determined that the
system could be programmed to return information on copper loops.
Mr. Mileham told Enforcement Bureau staff that, beginning in or
around September 2000, he began the pre-work on a copper loop
availability change request. At some point between mid-December
2000 and January 10, 2001, Mr. Mileham submitted a change request
to effectuate this modification.24
14. Mr. Mileham was unquestionably aware that SBC's loop
qualification system did not use provisioning logic, and that the
system sometimes did not return loop make-up information about
available copper loops serving particular end users. As events
unfolded, however, Mr. Mileham's knowledge of the SBC loop
qualification system was not reflected in the reply affidavits.
Instead, each of those affiants submitted an affidavit asserting
that SBC's system worked in a manner contrary to the facts.
II.C. The Preparation And Submission Of The Inaccurate
Reply Affidavits
II.C.1. The Angela Cullen Affidavit
15. Angela Cullen was one of the reply affiants. At the
time the affidavits were filed, Ms. Cullen was a Director in
SBC's information technology organization. As part of her duties
in that position, she measured the performance of SBC's loop
qualification system and stated she was familiar with the loop
qualification process. Earlier in the Kansas/Oklahoma section
271 proceeding, Ms. Cullen had filed an affidavit addressing the
technical method by which competing carriers interacted with
SBC's OSS for pre-ordering and ordering xDSL capable loops.25
After IP made its ``filtering'' allegations, SBC chose Ms. Cullen
to submit another affidavit to accompany the reply brief refuting
IP's claims.
16. Before Ms. Cullen began preparing her affidavit,
however, she received an e-mail from an SBC attorney stating that
SBC's loop qualification system returned information on the loop
that the system would actually provision, if the requesting
carrier had requested xDSL or line sharing service.26 According
to Ms. Cullen, she was asked to ``verify'' that the loop
qualification system worked as described in the attorney's e-
mail. Ms. Cullen told the Enforcement Bureau that she copied the
attorney's description (with minor non-substantive changes) into
an e-mail she sent to two other SBC employees whom she believed
to be subject matter experts on the SBC system. In her e-mail
message, Ms. Cullen stated that ``[w]e need to present rebuttal
testimony that says from a technical perspective LoopQual
provides'' and then inserted the attorney's description.
17. Over the next few days, Ms. Cullen's e-mail message was
forwarded to several other SBC employees, including Mr. Mileham
and Dennis Schuessler, who was an area manager at SBC and
responsible for SBC's pre-ordering OSS electronic interface.27
Although she did not originally direct her e-mail to Messrs.
Mileham and Schuessler, Ms. Cullen told the Enforcement Bureau
that she considered both men to be subject-matter experts
regarding loop qualification.
18. The day after receiving Ms. Cullen's message, Mr.
Schuessler responded that the e-mail's description of the loop
qualification system was ``basically accurate.''28 Mr.
Schuessler said that requesting carriers sent requests for loop
qualification information to SBC's LFACS, which behaved as if it
were actually provisioning the loop requested, and that when the
system ``requests actual information from LFACS, LFACS uses the
same algorithms that it would to provision the order.''29 Mr.
Schuessler noted that he would ``leave the technical details to
John Mileham to answer,'' and copied Mr. Mileham on his
response.30
19. Mr. Schuessler has stated that, at the time he
responded to Ms. Cullen's e-mail, he did not consider himself to
be an expert on SBC's loop qualification system. Mr. Schuessler
has also stated that he did not perform any research into the
company's system following his receipt of the Cullen e-mail.
Rather, he gave an answer that was his best understanding of the
system at the time. In an interview with the Enforcement Bureau,
Mr. Schuessler admitted that he should not have responded
substantively to Ms. Cullen's e-mail, but that he simply wanted
to help her in light of the failure by other persons to respond
to her request for assistance. According to Mr. Schuessler, Mr.
Mileham was the actual expert on the subject at issue, and he
assumed that Mr. Mileham would correct his statement if he were
wrong. Although he and Mr. Mileham had several conversations
regarding SBC's loop qualification system between December 2000
and April 2001, the two claim that they never discussed Ms.
Cullen's e-mail or her subsequent affidavit.
20. Both Ms. Cullen's e-mail and Mr. Schuessler's response
were forwarded to Mr. Mileham while he was on vacation.
According to Mr. Mileham, when he returned home on December 3,
2000, he opened his e-mail from home and read some of
approximately three hundred e-mail messages before shutting down
his computer. The next day at the office, he claims, he
discovered that the e-mails he had downloaded the day before were
missing. As Mr. Mileham told the Enforcement Bureau, when he
returned home to retrieve the ``missing'' e-mails, his computer
crashed for some reason and he was forced to reload his operating
system onto his home computer, apparently deleting the
``missing'' e-mails forever.
21. Mr. Mileham represents that, although his previous job
involved desktop computer support, he did not attempt to recover
the three hundred lost e-mails. As he told the Enforcement
Bureau, he assumed that they were lost when he re-loaded his
operating system. Nor did Mr. Mileham solicit anyone's help in
recovering the lost e-mails or tell any other SBC employees,
including his supervisors, about his computer crash. According
to Mr. Mileham, he was the only SBC employee who had experienced
this problem. Finally, Mr. Mileham did not disclose the deletion
of his e-mails to any of the competing carriers who communicated
with him via e-mail to resolve questions about SBC's loop
qualification system. Mr. Mileham stated that because of this
system crash, he did not review Ms. Cullen's e-mail or Mr.
Schuessler's response until March 2001. According to Mr.
Mileham, had he reviewed either message at the time they were
sent, he would have explained that the loop qualification system
found the first loop to the given address, but would not
necessarily identify a copper loop if one was present.
22. Angela Cullen knew Mr. Mileham was responsible for loop
qualification. Even though she had received no response from
him, however, Ms. Cullen never tried to contact him after
receiving Mr. Schuessler's response. Instead, Ms. Cullen
proceeded to draft an affidavit based upon her own research and
the feedback she received from Mr. Schuessler and another SBC
affiant, Carol Chapman. In the affidavit accompanying SBC's
reply comments, Ms. Cullen asserted that SBC's loop qualification
system returned information to requesting carriers by querying
the LFACS provisioning system. Ms. Cullen stated, consistent
with Mr. Schuessler's e-mail, that when a carrier requested
information from SBC's loop qualification system, LFACS presented
the requesting carrier with information on the loop that the
system would use to provision the requested service.31 More
precisely, Ms. Cullen said that LFACS ``simply provides the
information on the loop that would be assigned to fulfill a
request for DSL service to the address.''32
II.C.2. The Mark Welch Affidavit
23. Mark Welch, a General Manager in SBC's Network
Regulatory organization, also submitted a reply affidavit
responding to IP Communications' allegations. Mr. Welch was
responsible for developing SBC's network policies, primarily with
respect to the outside network.33 Prior to his reply affidavit,
Mr. Welch had never testified or submitted an affidavit on the
topic of SBC's loop qualification system. Rather, Mr. Welch said
his participation in regulatory proceedings had focused on other
topics, such as provisioning, maintenance and repair testing, and
general wholesale products functionality matters.
24. In a five-page affidavit attached to SBC's reply
comments, Mr. Welch explained that SBC would perform a line and
station transfer (``LST'') when provisioning a competitor's order
in the event that the competitor requested DSL or line sharing
service to an end user that was being served by facility already
in use. In such situations, LFACS would identify or create from
existing pieces of the network a spare circuit over which SBC
could provision the service requested by the competitor. In a
single sentence, Mr. Welch's affidavit then claimed SBC would
provide loop qualification information on a xDSL-capable
facility, if available, and would perform the LST to provision
the requested xDSL capable loop, rather than return information
to the requesting carrier on an existing fiber loop.34 This
assertion was wrong.
25. Mr. Welch said that when he drafted his affidavit, he
relied upon his understanding of the loop qualification system,
which developed during his attendance at State collaborative DSL
proceedings. At these proceedings, he primarily discussed
physical provisioning of DSL and line sharing. Mr. Welch said he
gained his loop qualification knowledge not from his official
duties but simply from being ``present'' when others discussed
the loop qualification system. Mr. Welch told the Enforcement
Bureau, however, that he did not write the language in his
affidavit regarding loop qualification and that it was not his
idea to include the subject in his affidavit. Mr. Welch stated
that when he initially drafted his reply affidavit, he did not
include anything about the loop qualification system. Mr. Welch
could not recall how the sentence got into his affidavit, who
wrote it, or whose idea it was to add it to his affidavit. But
in a separate interview with the Enforcement Bureau, Carol
Chapman indicated that she had suggested to Mr. Welch that he
include language regarding SBC's loop qualification system in his
affidavit, although she did not recall drafting any specific
language.
26. On December 6, 2000, Mr. Welch sent a draft of his
five-page affidavit -- which by then contained the loop
qualification sentence -- by e-mail to a number of SBC employees,
including Mr. Mileham, Mr. Schuessler, and Ms. Chapman.35 In the
e-mail, Mr. Welch briefly summarized the main points in his
affidavit, attached it, and asked for comments. The only person
who responded to his request was John Mileham, who (now back from
vacation) sent his response the next day. Mr. Mileham made only
minor edits and failed to correct the one sentence in Mr. Welch's
affidavit that described matters within Mr. Mileham's job
responsibilities.36 Mr. Mileham admits that the Welch affidavit
was incorrect and that he understood at that time how the system
actually worked. Mr. Mileham claimed in an affidavit filed with
the Commission during the Enforcement Bureau investigation that
he reviewed Mr. Welch's affidavit ``late at night'' and that he
``must have `skipped' this important sentence.''37 As discussed
below, however, the evidence demonstrates that Mr. Mileham
actually reviewed Mr. Welch's affidavit around noon.38
II.C.3. The Carol Chapman Affidavit
27. Carol Chapman submitted the third SBC reply affidavit
addressing the IP allegations. At the time SBC filed the reply
affidavits, Ms. Chapman was an associate director in SBC's
wholesale marketing group and, like Ms. Cullen, had drafted a
previous affidavit accompanying SBC's application. In late
November 2000, she was approached to draft a reply affidavit
addressing a number of issues raised by competing carriers,
including the IP allegations concerning loop qualification. Ms.
Chapman told the Enforcement Bureau that, in writing her reply
affidavit, she relied on draft versions of the Welch and Cullen
affidavits, specifically using their explanations of how the loop
qualification system worked. But Ms. Chapman also stated that
she was the person who suggested to Mark Welch that he discuss
loop qualification in his affidavit, although she did not recall
drafting any language for use in the Welch affidavit. Ms.
Chapman did not attempt to contact Mr. Mileham about the issue
even though she knew he oversaw SBC's loop qualification system.
28. Like those of Ms. Cullen and Mr. Welch, Ms. Chapman's
affidavit incorrectly described how the loop qualification system
functioned. Specifically, Ms. Chapman represented that LFACS,
upon receipt of a loop qualification request, would perform the
same type of query as if it were provisioning the service
requested and that the ``the loop qualification process follows
the same process as the assignment process.''39
29. In addition to allegedly relying on Mr. Welch and Ms.
Cullen in her reply affidavit, Ms. Chapman used her own
understanding of the loop qualification process. Specifically,
she had worked on SBC's team that developed the loop
qualification offering between January and May 2000. According
to Ms. Chapman, because of a series of changes in the loop
qualification system during this period, it was not unusual for
team members to have different understandings of how the system
worked. Ms. Chapman stated that at one point, she believed that
the loop qualification system looked only for the first available
loop to an end-user, but was informed otherwise by another SBC
employee.
30. But well before she submitted her reply affidavit, Ms.
Chapman had received and read the loop qualification overview
drafted by John Mileham. As described above, the Mileham
overview accurately stated that SBC's loop qualification system
would provide information only about the ``first'' loop on SBC's
system. Thus, carriers requesting a copper loop to a given
address would be told of such a loop only if that loop was also
the ``first'' loop. Ms. Chapman stated in an interview with the
Enforcement Bureau that she misread the overview at that time and
mistakenly thought that the description referred to the LFACS
search for copper loops during provisioning. Ms. Chapman stated
that Mr. Mileham's overview accurately describes the loop
qualification as it actually worked at that time, that is, by
looking for the ``first'' loop. Ms. Chapman stated that she did
not consult the loop qualification overview during the
preparation of her reply affidavit.
II.D. Questions Arise Regarding The Accuracy Of The
Reply Affidavits
31. On December 11, 2000, SBC submitted its reply brief to
the Commission and included the affidavits from Ms. Cullen, Mr.
Welch and Ms. Chapman. The Commission granted SBC's application
and, in the Order released on January 22, 2001, referred to SBC's
representations concerning the operation of the loop
qualification system and how LFACS would return information to a
requesting carrier as if it were provisioning the service
requested.40
32. In early February 2001, a few weeks after the
Commission released the Order, Dennis Schuessler read the Order's
loop qualification discussion. During his review, Mr. Schuessler
discovered what he believed was an apparent inconsistency between
the Commission's description of how SBC's loop qualification
system worked and what he had learned about the system in a state
loop qualification proceeding in Illinois.41
33. Within the next few days, Mr. Schuessler met with
Angela Cullen regarding this issue.42 In that meeting, he
expressed concern that the Commission had incorrectly described
SBC's loop qualification system, and had done so in reliance on
the reply affidavits. But rather than investigating the matter
further, Ms. Cullen simply reminded Mr. Schuessler that he had
reviewed her affidavit before it was submitted. According to Mr.
Schuessler, she suggested that he raise the issue with Ms.
Chapman. Despite the concerns Mr. Schuessler raised about her
affidavit, Ms. Cullen stated in an interview with the Enforcement
Bureau that she made no attempt to verify whether her statements
had been accurate or to make other SBC employees aware of Mr.
Schuessler's concerns. And although Mr. Schuessler now concedes
that Mr. Mileham would have been the best person with whom to
confer regarding the loop qualification system's functionality,
Mr. Schuessler states he never did so after reviewing the Order.
34. Mr. Schuessler did relay his concerns to Mark Welch.
According to Mr. Welch, around the time that the Commission
released the Order, Mr. Schuessler approached him after a
meeting. Mr. Welch told the Enforcement Bureau that Mr.
Schuessler said he was concerned that the loop qualification
system did not work as described in the reply affidavits. In
response, Mr. Welch said he told Mr. Schuessler that the system
``had to work'' that way. Mr. Welch stated in the Enforcement
Bureau interview that he felt that Mr. Schuessler was wrong and
told him to check the Order and confer with ``the experts.''
Despite this conversation, Mr. Welch claims that he did not
review his affidavit to determine if he had included any
potentially incorrect information or attempt to verify that the
other affidavits containing loop qualification system information
were correct. Mr. Welch also states that he did not contact or
inform anyone else about his conversation with Mr. Schuessler.
35. On March 6, 2001, approximately one month after he
relayed his concerns to Ms. Cullen and Mr. Welch, Mr. Schuessler
spoke with Carol Chapman. In the interim, he had exchanged calls
with Ms. Chapman and left a message explaining that he and Ms.
Cullen had spoken and that they had questions about the
Commission's order. According to Ms. Chapman, Mr. Schuessler
told her that his reading of the Commission's discussion of SBC's
loop qualification system did not match his understanding of how
the system actually worked. Specifically, Mr. Schuessler told
Ms. Chapman that he believed the Commission's statement that the
system followed provisioning logic was incorrect. He then asked
if her affidavit and the Commission's description of the system
in the Order were consistent. She told him they were, and that
it would be a ``problem'' if the system did not work as described
in the affidavits.
36. Almost immediately after her conversation with Mr.
Schuessler, Ms. Chapman called John Mileham and described the
problem. Mr. Mileham told her that the description in the SBC
affidavits was wrong and that the reply affiants should have
checked with him (apparently failing to recall his involvement
with the Welch affidavit). Ms. Chapman, believing that the
affidavits might well contain incorrect statements, called SBC's
legal department. She did not attempt to contact Ms. Cullen or
Mr. Welch to discuss the matter. Soon after that, Ms. Cullen and
Mr. Welch were informed that their affidavits were inaccurate.
II.E. SBC Notifies The Commission Of The Inaccurate
Affidavits
37. In mid-to-late March 2001, SBC was preparing to file
its application for section 271 authority for Missouri. At the
same time, the company was also investigating the inaccuracies in
its Kansas/Oklahoma affidavits. While SBC was attempting to
determine why it had filed inaccurate affidavits in the
Kansas/Oklahoma proceeding, it also had to ascertain how its loop
qualification system actually functioned before it filed its
Missouri application. In the Kansas/Oklahoma proceeding, SBC had
asserted in numerous places that its OSS (of which the loop
qualification system was a part) was identical throughout its
five-state SWBT region (i.e., Kansas, Oklahoma, Missouri, Texas,
and Arkansas). SBC contended that it used the same systems in
the same locations to provide access to its OSS throughout the
SWBT region and a competitor accessing the system in Texas would
follow the same procedures and use the same functionalities of
the OSS when it accessed the system in Kansas, Oklahoma, or
Missouri.43 Thus, before SBC could file its Missouri
application, it had to conclude its internal inquiry into the
Kansas/Oklahoma affidavits and determine how the system worked
because any uncertainty about the loop qualification
functionality in Kansas and Oklahoma also applied to the system
in Missouri. Once it determined how its system actually worked,
SBC was faced with the prospect of representing to the Commission
and interested parties in the Missouri 271 application that the
loop qualification system functioned differently than as
represented in the Kansas/Oklahoma proceeding.
38. Faced with these parallel, yet inextricably linked,
matters, SBC informed the Commission of the concerns with the
loop qualification system. In a preliminary meeting with the
Commission's Common Carrier Bureau on or about March 26th, when
SBC was on the verge of submitting its Missouri application, SBC
indicated that something had arisen that might affect its
Missouri application. SBC explained to CCB staff that it had
filed affidavits in the Kansas/Oklahoma proceeding that may have
contained inaccurate statements concerning the operation of its
loop qualification system. Moreover, SBC indicated that the loop
qualification system in Kansas, Oklahoma, and Missouri did not
work as described in the Commission's Kansas/Oklahoma Order. The
Common Carrier Bureau advised that SBC should not submit its
section 271 application for Missouri until it had remedied this
matter and that the company should inform the Commission's
Enforcement Bureau of this development. SBC agreed.44
39. On or about March 30, 2001, SBC then met with the
Enforcement Bureau to give its preliminary understanding of the
problem. At the conclusion of the meeting, Bureau staff
requested that SBC file a report describing its understanding of
the circumstances surrounding the filing of the inaccurate
affidavits. On April 6, 2001, SBC filed a report signed by a
Senior Vice President in which it admitted that the reply
affidavits contained inaccuracies. SBC attached to this report a
new round of affidavits from each of the reply affiants (Mr.
Welch, Ms. Chapman and Ms. Cullen) and from Messrs. Mileham and
Schuessler. The affidavits attached to the report described
generally the process by which the reply affiants collected and
included the inaccurate information in their reply affidavits,
how Messrs. Mileham and Schuessler and other SBC employees
responded or, in some cases, failed to respond to inquiries
concerning the functionality of the loop qualification system,
and the information upon which the reply affidavits were based.
40. Shortly thereafter, on or about April 9, 2001,
Enforcement Bureau staff contacted SBC and inquired as to whether
the company intended to file a section 1.65 notice in the
Kansas/Oklahoma proceeding. Under section 1.65 of the
Commission's rules, absent good cause, applicants are required to
disclose inaccuracies in their pending applications as promptly
as possible, and in any event within 30 days, whenever
information furnished in the application ``is no longer
substantially accurate or complete in all significant respects''
or there has been a ``substantial change as to any other matter
which may be of decisional significance.''45 On April 13, 2001,
SBC filed a letter pursuant to section 1.65 of the Commission's
rules in which it advised that certain reply affidavits filed in
the Kansas/Oklahoma proceeding contained inaccurate information
on a loop qualification issue.46
III. DISCUSSION
41. Under section 503 of the Act, any person who is
determined by the Commission to have willfully or repeatedly
failed to comply with any of the provisions of the Act, or any
rule or order issued by the Commission under the Act, shall be
liable for a forfeiture penalty.47 In order to impose such a
forfeiture penalty, the Commission must issue a notice of
apparent liability, the notice must be received, and the person
against whom the notice has been issued must have an opportunity
to show, in writing, why no such forfeiture penalty should be
imposed.48 The Commission will then issue a forfeiture if it
finds by a preponderance of the evidence that the person has
violated the Act or a Commission rule.49 As set forth in more
detail below, we conclude under this standard that SBC is
apparently liable for a forfeiture for its apparent violations of
Commission rules and a Commission Order.
42. The duty of absolute truth and candor is a fundamental
requirement for those appearing before the Commission. Our
decisions rely heavily on the completeness and accuracy of
applicants' submissions because we do not have the resources to
verify independently each and every representation made in the
thousands of pages submitted to us each day. For that reason, we
are disturbed by SBC's apparent actions here. SBC did not
exercise reasonable care in verifying the information regarding
the operation of its loop qualification system before submitting
the three affidavits at issue. Moreover, although our rules
require companies promptly to correct inaccurate or incomplete
information submitted to the Commission, SBC took over two months
after the company first focused on the fact that the affidavits
were (or may have been) incorrect to notify the Commission that
the reply affidavits were wrong. Furthermore, when the
Commission began to investigate those inaccuracies, an SBC
employee apparently intentionally misrepresented facts to the
Commission in an affidavit attached to a report signed by an SBC
Senior Vice President. Finally, SBC apparently violated the
terms of the June 1999 SBC/SNET Consent Decree, in which SBC
promised to train its employees who have regular contact with the
Commission as part of their assigned duties in our rules
governing contacts with, and representations to, the Commission.
III.A. The Evidence Does Not Warrant a Finding of
Apparent Liability for Intentional Misrepresentation
Regarding the Three Reply Affidavits
43. The Commission initiated this investigation primarily
to determine whether SBC intentionally misrepresented the
functionality of its loop qualification system in order to obtain
a grant of its section 271 application. We have determined that
the evidence, although deeply troubling, does not support a
finding that SBC apparently engaged in making intentional
misrepresentations in violation of section 1.17 of the
Commission's Rules in connection with the three reply
affidavits.50 With that said, we do conclude that SBC was
negligent in collecting the information it relied upon in its
reply affidavits and in making its showing under section 271.
While such negligence does not violate the Communications Act or
any Commission rule,51 we expect a higher degree of care from our
regulatees than that exhibited here by SBC.
44. SBC's negligence in collecting the information
submitted to the Commission is easily summarized. First, SBC
began the process when an SBC attorney, apparently without
consulting anyone with specialized knowledge of the loop
qualification system, wrote a description of the functionality
of the system and sent it to Angela Cullen.52 The description
incorrectly indicated that the system returned loop information
as if it were actually provisioning the service requested. Ms.
Cullen copied and pasted the description into an e-mail she sent
to various persons within the company with responsibility for
loop qualification matters. Her e-mail message was then
forwarded to Dennis Schuessler, whose responsibilities included
OSS interfaces (but not the back office systems operations) and
John Mileham, who was SBC's principal loop qualification expert.
Without doing any independent research, Mr. Schuessler told Ms.
Cullen that her description of the system was ``basically
accurate'' and said that he would ``leave the technical details
to John Mileham to answer.'' Mr. Schuessler copied Mr. Mileham
on his e-mail. Mr. Mileham, however, never responded to this
message or Ms. Cullen's initial e-mail. Then, despite never
hearing from the company's foremost loop qualification expert,
and despite Mr. Schuessler's advice that Mr. Mileham should give
her the technical details, Ms. Cullen drafted and SBC submitted
an affidavit that included an incorrect description of the loop
qualification system.
45. SBC also submitted inaccurate affidavits signed by Mark
Welch and Carol Chapman. Mr. Welch, an SBC employee with little
loop qualification experience, included one sentence in his
affidavit that incorrectly described the functionality of the
loop qualification system. While Mr. Welch claims that it was
not his idea to include this sentence in his affidavit, he could
not recall how the sentence made its way into his affidavit or
who suggested that he include it. Ms. Chapman, for her part,
claims that she relied on the draft affidavits of Ms. Cullen and
Mr. Welch when writing the section of her own affidavit
pertaining to the loop qualification system. However, despite
this stated reliance on Mr. Welch's affidavit, Ms. Chapman claims
that she was the one who suggested to Mr. Welch that he include
something in his affidavit concerning the operation of the loop
qualification system. Before submitting his affidavit, Mr. Welch
sent a copy to Mr. Mileham and Mr. Schuessler, among others, for
their review and comment. While Mr. Schuessler failed to
respond, Mr. Mileham did review it. However, Mr. Mileham did not
correct Ms. Welch's inaccurate description, claiming that he must
have ``skipped'' the relevant sentence relating to system because
he read it ``late at night.''53 Ms. Chapman, on the other hand,
never consulted with Mr. Mileham for assistance in writing her
affidavit even though she understood that he was the company's
loop qualification expert.
46. The confluence of errors committed by SBC during this
process is, as noted above, troubling. But after close
consideration of the available evidence, we conclude that the
company did not apparently violate section 1.17 of our rules when
it submitted the three reply affidavits. Though the company's
lack of care could hardly be more evident, we find that it is not
reasonable to infer that the company intentionally submitted
false affidavits to the Commission during the 271 proceeding.54
As we discuss in more detail below, it is certainly permissible,
as a general matter, to infer an intention to mislead from the
circumstances surrounding the making of a false statement.55
However, we believe the evidence here is more indicative of
sloppiness on SBC's part in submitting the three affidavits in
question than any plan to mislead the Commission about the true
workings of the loop qualification system.
III.B. SBC Apparently Violated Its Duty To Disclose The
Inaccurate Statements In A Timely Manner To The
Commission
47. We conclude that SBC apparently violated section 1.65
of the Commission's rules, 47 C.F.R. § 1.65. Under section
1.65(a), applicants generally must disclose inaccuracies in their
pending applications within 30 days: (1) whenever information
furnished in the pending application ``is no longer substantially
accurate or complete in all significant respects''; and
(2) whenever ``there has been a substantial change as to any
other matter which may be of decisional significance in a
Commission proceeding involving the pending application.''56 The
purpose of section 1.65 is to inform the Commission, the public,
and concerned parties of material changes in the application.57
Moreover, section 1.65 imposes an affirmative obligation on
regulated entities to inform the Commission of the facts needed
to fulfill its duties. As one court has stated, ``[t]he
Commission is not expected to `play procedural games with those
who come before it in order to ascertain the truth.'''58
48. There is no question that SBC's principal loop
qualification expert, John Mileham, knew throughout the time
period relevant to this investigation that the system did not
routinely provide loop make-up information regarding copper loops
when both copper loops and fiber loops were present. Mr. Mileham
stated as much in an interview with the Enforcement Bureau, and
his August 2000 memorandum documents his knowledge in this
regard. There is also no question that Mr. Mileham reviewed at
least one of the three reply affidavits before they were
submitted. He received and edited the five-page Welch affidavit,
but claims to have ``skipped'' the sentence that erroneously
described SBC's loop qualification system -- the only sentence in
the affidavit dealing with his area of responsibility. Given Mr.
Mileham's admitted knowledge of the true workings of SBC's loop
qualification system, and his participation in the drafting of at
least one of the three affidavits at issue, a strong argument can
be made that the clock under section 1.65 began running as early
as December 11, 2000 -- the date SBC filed the reply affidavits
with the Commission.
49. Nevertheless, under the facts here presented, we hold
that the section 1.65 clock did not begin to run until the time
that a relevant SBC manager, Dennis Schuessler, first reviewed
the Kansas/Oklahoma Order and recognized the reply affidavits
were or may have been inaccurate.59 While we do not know the
precise date this occurred, the available evidence indicates that
it occurred in early February, more than two months before SBC
filed its section 1.65 statement in the Kansas/Oklahoma
proceeding.60
50. In early February 2001, shortly after the Commission
released the Order on January 22, Mr. Schuessler recognized an
inconsistency between the loop qualification system as described
in the Order and his then-current understanding of the actual
operation of the system. At that time, Mr. Schuessler was a
manager at SBC with substantial responsibilities concerning SBC's
OSS. Mr. Schuessler's concerns upon reviewing the Order led him
to initiate separate conversations in the first week of February
with reply affiants Welch and Cullen. However, neither Ms.
Cullen nor Mr. Welch, also SBC managers, made any effort to
verify the accuracy of their statements or to investigate Mr.
Schuessler's concerns. And, like Mr. Schuessler, they made no
efforts to bring the matter to the Commission's attention or to
urge others to do so. Despite his concerns, Mr. Schuessler
waited an entire month before finally speaking to Ms. Chapman.
By his own admission, he attempted to call her only two or three
times during that month, and left a single message on her
voicemail in which he told her only that he had a question for
her about the Order. He did not attempt to explain his specific
concern to her either in a voicemail or an e-mail. Furthermore,
he made no attempt to ascertain whether his concerns were well-
founded by researching the functionality of the system. Although
Ms. Chapman, soon after her discussion with Mr. Schuessler,
brought the matter to the attention of SBC's legal department on
or about March 6, 2001, the company did not file its section 1.65
statement until April 13, 2001.61
51. Section 1.65 requires applicants to disclose additional
or corrected information whenever prior filings are ``no longer
substantially accurate or complete in all significant respects''
or ``there has been a substantial change as to any other matter
which may be of decisional significance ....''62 We find that
the inaccuracies in the reply affidavits were of such
significance that SBC should have notified the Commission no
later than 30 days of the discovery by Mr. Schuessler that the
affidavits were or may have been inaccurate. The significance of
the inaccuracies to the proceeding is demonstrated by the
Commission's express reliance on the reply affidavits in the text
of the Order. Due to its reliance on the reply affidavits, the
Commission did not reach the question about whether SBC's loop
qualification system, as it actually operated, complied with the
UNE Remand Order.63
52. Moreover, SBC's delay in filing the section 1.65 notice
had potentially important impacts on the Commission's processes.
SBC's delay in submitting the 1.65 statement effectively deprived
the Commission and interested parties of the opportunity for
reconsideration of the Order under the procedures set forth in
sections 1.106 and 1.108 of the Commission's rules. We thus find
that SBC's delay in filing the 1.65 statement materially affected
the Commission's processes.
53. Neither SBC's meetings with Commission staff in late
March 2001, nor its April 6th report to the Enforcement Bureau
alleviate our concerns about the late section 1.65 filing. More
specifically, we do not find that SBC constructively discharged
its section 1.65 obligations prior to its actual notice filed on
April 13. Section 1.65 requires a written filing in the docket
of the relevant proceeding so that all interested parties may
become aware of the new changed information. Oral
representations to Commission staff do not suffice for this
purpose. Nor could SBC's April 6th report serve as a section
1.65 notification. That report was not served on interested
parties nor was it placed in the record of the 271 proceeding.
Indeed, SBC initially requested confidential treatment of the
report, which, under Commission rules, required the Enforcement
Bureau to keep it confidential for the time being.64 Indeed, as
noted below, the appeal of our Order was and remains pending
before the D.C. Circuit. Without a section 1.65 filing from SBC,
the parties to that appeal had no knowledge of this development.
SBC's contacts with the Commission staff prior to April 13, 2001
thus did not serve the purposes behind section 1.65.65
54. We also note that SBC's Kansas and Oklahoma 271
application was ``pending,'' as that term is defined in section
1.65, during the relevant time period. Under section 1.65, an
application is pending from the time that the Commission accepts
the application's filing until the Commission's decision granting
or denying the application is no longer subject to
reconsideration by the Commission or review by the courts.66
Since the D.C. Circuit still is considering the appeal of the
Commission's Order, SBC's section 271 application for Kansas and
Oklahoma was and remains pending for the purposes of section
1.65.
55. In light of SBC's apparent willful and/or repeated
failure to comply with section 1.65 of the rules, we find that a
forfeiture appears to be warranted. Section 503(b)(1) of the Act
states that any person who willfully or repeatedly fails to
comply with any provision of the Act or any rule, regulation, or
order issued by the Commission, shall be liable to the United
States for a forfeiture penalty.67 For the time period relevant
to this proceeding, section 503(b)(2)(B) of the Act authorizes
the Commission to assess a forfeiture of up to $120,000 for each
violation, or each day of a continuing violation, up to a
statutory maximum of $1,200,000 for a single act or failure to
act.68 In determining the appropriate proposed forfeiture
amount, we consider the factors enumerated in section
503(b)(2)(D) of the Act, including ``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.''69
56. Section 1.80 of the Commission's Rules and the
Commission's Forfeiture Policy Statement establish a base
forfeiture of $3,000 for violations of section 1.65.70 The
circumstances of this case, however, appear to justify a
substantial increase in this base amount under certain upward
adjustment criteria contained in the Rules and the Forfeiture
Policy Statement: the egregiousness of the misconduct and SBC's
ability to pay considered with the deterrent effect of the
forfeiture amount.71 We also consider whether SBC voluntarily
disclosed the inaccuracies to the Commission in determining
whether a downward adjustment to the forfeiture amount is
appropriate.
57. Egregiousness. SBC's conduct here appears particularly
egregious because just two years ago, in June 1999, the company
and the Commission entered into the SBC/SNET Consent Decree,
which resolved a similar investigation. Like here, that
investigation related to statements made by SBC employees before
and shortly after the Commission granted an application. Both
investigations involved a potential violation of section 1.65, a
potential violation of section 271 of the Act (and section 272 in
the case of the SBC/SNET Consent Decree), and whether SBC
employees made intentionally inaccurate statements to the
Commission.
58. In the SBC/SNET Consent Decree, SBC agreed to implement
a compliance plan that involved training certain categories of
SBC employees regarding Commission rules relating to ``contacts
with, and representations to, the FCC ....''72 Section 1.65 was
one of these key rules, and indeed was a subject of the
underlying investigation. So, in addition to the general notice
provided by section 1.65 itself, SBC had actual notice of the
importance of that section (including in the post-grant context)
and had made commitments specifically designed to ensure future
compliance. Nevertheless, less than two years after entering
into this consent decree, SBC appears to have violated section
1.65(a) in a context remarkably similar to the one at issue in
the SBC/SNET Consent Decree.
59. Moreover, the violation occurred on a material issue in
a major Commission proceeding against a backdrop of repeated
Commission references to the importance of section 1.65 in
section 271 proceedings like the one here.73 Section 271
proceedings are at the center of Congress' efforts to promote
competition in the Telecommunications Act of 1996. They are the
subject of significant litigation. For SBC to keep the parties
and the Commission uninformed of material inaccuracies relating
to its section 271 application is extremely serious.
60. Ability to pay/deterrent effect. In the Forfeiture
Policy Statement, the Commission made it clear that companies
with higher revenues, such as SBC,74 could expect higher
forfeitures than those reflected in the base amounts:
[O]n the other end of the spectrum of potential
violations, we recognize that for large or highly
profitable communication entities, the base forfeiture
amounts . . . are generally low. In this regard, we
are mindful that, as Congress has stated, for a
forfeiture to be an effective deterrent against these
entities, the forfeiture must be issued at a high level
.... For this reason, we caution all entities and
individuals that, independent from the uniform base
forfeiture amounts ..., we intend to take into account
the subsequent 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. Such large or highly profitable
entities should expect in this regard that the
forfeiture amount set out in a Notice of Apparent
Liability against them may in many cases be above, or
even well above, the relevant base amount.75
The statutory maximum for a continuing violation of section 1.65
is $1.2 million. While it is unclear whether such a forfeiture
will act as a sufficient deterrent to SBC against future
violations of section 1.65,76 we believe that anything less is
unlikely to do so. This is particularly the case in light of the
fact that the $1.3 million payment made by SBC as part of the
SBC/SNET Consent Decree apparently did not act as a sufficient
deterrent with respect to the situation now before us.
61. Voluntary disclosure. In the Forfeiture Policy
Statement, the Commission stated that forfeiture amounts may be
reduced where a person voluntarily brings a matter to the
Commission's attention.77 We find, however, that a downward
adjustment, for this reason, in the proposed forfeiture is not
warranted in this case. Specifically, we find that SBC did not
voluntarily disclose this problem to the Commission within the
meaning of the Forfeiture Policy Statement. SBC's requisite
disclosure of this problem did not actually occur until it filed
its section 1.65 notice on April 13, 2001, after the Enforcement
Bureau brought the requirement to the company's attention. This
was more than two months after its section 1.65 obligation was
triggered, and more than a month after SBC's attorneys knew the
reply affidavits were (or apparently were) inaccurate.
62. Moreover, SBC knew that it would be required to
demonstrate in its Missouri 271 application that its loop
qualification system complied with the UNE Remand Order and to
describe how this system functioned. However, because it had
claimed that its OSS was identical throughout the SWBT region in
the Kansas/Oklahoma proceeding, any problem with the system
functionality in Kansas and Oklahoma also applied to Missouri.
Any change in SBC's description of the system operation from the
Kansas/Oklahoma 271 application to the Missouri application would
attract attention both from interested parties and the
Commission. SBC thus had every incentive to let the Commission
know of this change before it filed the Missouri application. We
do not believe that bringing the matter to the attention of the
Commission under these circumstances constitutes voluntariness
within the meaning of the Forfeiture Policy Statement and we
decline to reduce the proposed forfeiture amount on this basis.
63. Considering all of the enumerated factors and the
particular circumstances of this case, as discussed above, we
find that SBC is apparently liable for the statutory maximum $1.2
million forfeiture for its apparent violation of section 1.65.
As discussed above, the seriousness of this matter demands that
SBC be held apparently liable for the statutory maximum
forfeiture. For a full two months before it filed the 1.65 notice
in the Kansas/Oklahoma docket, SBC knew that the reply affidavits
were or may have been inaccurate. Under these circumstances,
SBC's apparent failure to comply with its affirmative obligations
under section 1.65 was of a continuing nature in that it failed
to inform the Commission of these matters over a significant
period of time. Thus, in consideration of the facts of this case
and in accordance with section 503(b)(2)(b) of the Commission's
Rules, we find that SBC is apparently liable for a $1.2 million
forfeiture for its apparent continuing violation of section 1.65.
64. In addition to any forfeiture we may impose, we believe
it is important for SBC to inform the Commission regarding the
steps it is taking to ensure compliance with section 1.65.
Accordingly, we order SBC to file a report, within 30 days of the
release date of this NAL, supported by affidavits of persons with
personal knowledge, discussing steps it has taken to ensure
future compliance with section 1.65. In addition, we order SBC
to report, within nine months of the release date of this NAL,
through an independent audit, on the success of its efforts to
comply with section 1.65 for the period beginning 30 days from
the release date of this NAL and concluding six months
thereafter.
III.C. SBC Apparently Misrepresented Facts To The
Commission During The Enforcement Bureau's
Investigation
65. We conclude that SBC is apparently liable for willful
and/or repeated misrepresentations committed in SBC's April 6,
2001 report to the Commission's Enforcement Bureau. That report
was signed by an officer of SBC and was supported by John
Mileham's affidavit, among others. We find that Mr. Mileham's
affidavit, upon which SBC explicitly relied in its report,
contains apparent misrepresentations about his involvement in the
review of the incorrect reply affidavits, in violation of section
1.17 of our rules.
66. Under section 1.17 of our rules, ``[n]o applicant ...
shall in ... any ... written statement submitted to the
Commission ... make any misrepresentation or willful material
omission bearing on any matter within the jurisdiction of the
Commission.''78 The Commission defines misrepresentation as an
``intentional misrepresentation of fact intended to deceive''79
and has concluded that an intent to deceive is an essential
element of a misrepresentation finding.80 The Commission has
also stated that intent is a ``factual question that may be
inferred if other evidence shows that a motive or logical desire
to deceive exists . . .''81 The ultimate facts are often proved
through circumstantial evidence, as such evidence may be the only
way of proving knowledge or intent.82 We consider
misrepresentation to be a serious violation,83 as our entire
regulatory scheme ``rests upon the assumption that applicants
will supply [the Commission] with accurate information.''84 For
this reason, applicants before the Commission are held to a high
standard of candor and forthrightness.85 Therefore, we will
assess a forfeiture if we find by a preponderance of the evidence
that SBC has violated section 1.17.
67. Mr. Mileham's explanation for his failure to correct
the inaccuracies in the Cullen and Welch affidavits, submitted by
SBC as part of its report to the Enforcement Bureau, appears to
constitute misrepresentation. First, with respect to the draft
affidavit from Mark Welch, Mr. Mileham reviewed the Welch
affidavit prior to the time it was filed; and despite his
knowledge of the actual workings of SBC's loop qualification
system, he failed to correct the inaccuracy in the affidavit. In
SBC's April 6, 2001 report and Mr. Mileham's supporting
affidavit, the company explained that Mr. Mileham ``must have
`skipped' this important sentence'' because he reviewed Mr.
Welch's affidavit ``late at night.''86
68. Mr. Mileham apparently has committed misrepresentation
or a willful material omission in this regard. The e-mails
between Messrs. Welch and Mileham, together with Mr. Mileham's
statements during an interview with the Enforcement Bureau, show
that Mr. Mileham did not review the Welch affidavit ``late at
night,'' as he claimed, but rather around noon. SBC provided the
Enforcement Bureau with copies of the e-mail from Mr. Welch to
Mr. Mileham and Mr. Mileham's return e-mail.87 According to the
face of the e-mail, Mr. Welch sent his affidavit to Mr. Mileham
at 3:57 p.m. on December 6, 2000. In his interview, Mr. Mileham
told Commission staff that he usually left his office by 6:00
p.m. each day. He also stated that he did not recall staying
late to review Mr. Welch's affidavit. Mr. Mileham did state,
however, that he reviewed and responded to Mr. Welch's e-mail as
soon as he saw it and that, immediately after he made his
corrections to the document, he sent the red-lined version back
to Mr. Welch. According to the face of this e-mail, Mr. Mileham
sent this version by e-mail to Mr. Welch at 12:08 p.m. on
December 7, 2000.88 Thus, it is apparent from the evidence that
Mr. Mileham did not review Mr. Welch's affidavit late at night,
as he claimed in his affidavit to the Commission. Based on the
totality of the circumstances surrounding Mr. Mileham's inclusion
of this incorrect statement in his affidavit, we conclude that he
made the statement with the specific intention to mislead the
Commission, not merely through inadvertence or mistake.
69. There is another ground supporting our finding of an
apparent misrepresentation in the Mileham affidavit -in a sworn
affidavit filed with the Commission, Mr. Mileham stated that the
Cullen e-mail outlining her understanding of the loop
qualification system was deleted accidentally and that he never
reviewed it. Specifically, Mr. Mileham claimed that he
downloaded approximately 300 e-mails from home after returning
from vacation. He reviewed a few of these e-mails, then shut off
his home computer. When he went into the office, the e-mails he
had previously downloaded were not on his work computer. When he
returned home, his home computer ``crashed'' and he was forced to
reload his operating system, deleting all of his files, including
the previously downloaded e-mails. Thus, according to Mr.
Mileham's affidavit, he never saw the Cullen e-mail and never had
an opportunity to correct the erroneous description of SBC's loop
qualification system.
70. In an interview with the Enforcement Bureau, Mr.
Mileham stated that he did not attempt to recover the lost e-
mails from his work or home computer. Mr. Mileham also stated
that he did not disclose the loss of these e-mails to anyone at
SBC -- including his supervisors -- or the competing carriers who
regularly contacted him about loop qualification issues.89
71. We find that Mr. Mileham apparently misrepresented the
facts or made a willful material omission in his affidavit when
describing his lost e-mail problem, and that SBC therefore
apparently violated section 1.17 of our rules when it submitted
his affidavit accompanying its April 6, 2001 report to the
Enforcement Bureau. As an initial matter, neither Mr. Mileham
nor SBC has explained how Mr. Mileham's e-mails could disappear
from his work computer simply because he downloaded them from
home. But even if this were the case, we do not find it credible
that Mr. Mileham -- whose previous job involved desktop computer
support -- not only lost approximately three hundred e-mails in
the first place, but failed to make the slightest effort to
recover them, and failed to notify a single SBC employee --
including his supervisors -- about this important event. By his
own account, Mr. Mileham uses e-mail extensively, referring
questions and complaints from competing carriers to knowledgeable
SBC employees, and relaying answers from those employees back to
the competing carriers. Nevertheless, SBC contends that Mr.
Mileham apparently took no corrective measures upon losing
approximately three hundred unopened e-mails from people inside
the company or competing carriers.
72. Nor do we find credible Mr. Mileham's claim that he
thought he had no obligation to try to recover the lost e-mails
since anyone who ``really'' wanted to contact him would simply
continue trying to reach him upon receiving no response or an
``out of office'' reply. Indeed, SBC has informed us that
neither Mr. Schuessler nor John Williamson -- the SBC employee
who forwarded Ms. Cullen's e-mail to Mr. Mileham and Mr.
Schuessler-- has any record of receiving such an ``out of
office'' message from Mr. Mileham in response to their e-mails.90
We are not aware of any plausible explanation for Mr. Mileham's
statements other than that they apparently constitute
misrepresentation or willful material omissions in violation of
section 1.17. Thus, we conclude it is reasonable to infer that
Mr. Mileham apparently intentionally engaged in
misrepresentation.
73. Mr. Mileham's apparent misrepresentations were material
to the Commission's investigation into the circumstances
surrounding the filing of the inaccurate reply affidavits because
they served to excuse both Mr. Mileham and SBC from
responsibility for submitting the incorrect affidavits in the
Kansas/Oklahoma proceeding. At the time SBC filed the reply
affidavits, Mr. Mileham was the project manager for its loop
qualification offering. Mr. Mileham prepared a loop
qualification overview that was widely circulated within SBC and
that accurately described SBC's ``first loop'' methodology. He
also consulted widely within SBC regarding loop qualification
issues raised by competing carriers. Furthermore, each of the
reply affiants considered him to be a subject-matter expert on
SBC's loop qualification system. Thus, his review of the Cullen
e-mail and the Welch affidavit was essential to their accuracy.
Nevertheless, when Mr. Mileham was contacted by Ms. Cullen and
Mr. Welch, he failed to correct their inaccurate descriptions of
the SBC loop qualification system. As a result, by claiming that
Mr. Mileham never had an opportunity to review the Cullen e-mail
because of his computer crash, and that he only reviewed Mr.
Welch's affidavit ``late at night'' and must have missed the
``important sentence,'' both Mr. Mileham and SBC provided a
reason why the only SBC employee who admitted to understanding
the actual operation of the system failed to correct the
inaccurate affidavits. Thus, Mr. Mileham's explanations were
consistent with and supported SBC's explanation that it did not
intentionally submit incorrect affidavits to the Commission. His
apparent misrepresentations directly benefited SBC in its efforts
to convince the Commission that the filing of the incorrect
affidavits was not intentional.91
74. SBC has argued to the Enforcement Bureau that it has no
responsibility for misrepresentations or willful material
omissions by its employees within the scope of their employment
during a Commission investigation.92 This claim is wholly
without support under the Act or Commission precedent, and SBC
has provided no authority for its assertion. Section 217 of the
Act explicitly states, ``[i]n construing and enforcing the
provisions of this Act, the act, omission, or failure of any
officer, agent, or other person acting for or employed by any
common carrier ... acting within the scope of his employment,
shall in every case be also deemed to be the act, omission, or
failure of such carrier ... as well as that of the person.''93
75. Moreover, we have a long history of holding regulated
entities responsible for the representations of employees or
other agents acting within the scope of their employment,94
including misrepresentation.95 We have consistently found that,
regardless of mitigating factors, an employer is responsible for
the statements or actions of its employees96 and ``those who
control the corporation must be held accountable for the conduct
of those who have been delegated the authority to act in its
name.''97 This is particularly true where, as here, the company
relies on an employee's factual representations in a sworn report
to the Commission, presumably following due diligence by the
company to verify those representations.
76. We reject the argument that, in order for an employee's
actions to be imputed to the company, the employee must be a
partner, shareholder, officer or director of the licensee.98
Such a result would encourage a corporation to delegate as much
authority as possible to the lowest level employee possible in
order to insulate itself from responsibility for misconduct.99
As the Commission has cautioned, ``[m]erely standing back and
waiting for disaster to strike or for the Commission to become
aware of it will not insulate corporate owners from the
consequences of misconduct.''100 Where the transgressions of an
employee are serious, we have held the employing licensees
responsible and imposed sanctions regardless of the employer's
lack of knowledge.101 Indeed, the employee training efforts that
SBC promised to undertake in the SBC/SNET Consent Decree were
directed at avoiding precisely this type of situation.
77. SBC volunteered Mr. Mileham as an employee with
knowledge of the facts and explicitly relied on Mr. Mileham's
affidavit. For instance, SBC's April 6, 2001 report, which was
signed by a SBC Senior Vice President, states that Mr. Mileham's
affidavit ``help[s] to explain how it came about that [the] reply
affidavits contained inaccurate statements.''102 SBC's report
specifically cites Mr. Mileham's apparently untruthful statements
that he did not review the Cullen e-mail because it was
``accidentally deleted'' and that he reviewed the Welch affidavit
``late at night'' and ``must have skipped'' the relevant
sentence.103
78. For these reasons, we hold that SBC is responsible for
Mr. Mileham's apparent misrepresentations in the affidavit
attached to SBC's April 6, 2001 submission to the Enforcement
Bureau.104
79. In light of SBC's apparent willful and/or repeated
failure to comply with section 1.17 of the Commission's rules, we
find that a substantial proposed forfeiture is warranted.
Section 503(b)(1) of the Act states that any person who willfully
or repeatedly fails to comply with any provision of the Act or
any rule, regulation, or order issued by the Commission, shall be
liable to the United States for a forfeiture penalty.105 For the
time period relevant to this proceeding, section 503(b)(2)(B) of
the Act authorizes the Commission to assess a forfeiture of up to
$120,000 for each violation, or each day of a continuing
violation, up to a statutory maximum of $1,200,000 for a single
act or failure to act.106 In determining the appropriate
proposed forfeiture amount, we consider the factors enumerated in
section 503(b)(2)(D) of the Act, including ``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.''107
80. Considering all of the enumerated factors and the
particular circumstances of this case, we find that SBC is
apparently liable for the maximum $120,000 forfeiture for its
apparent violation of section 1.17. First, we note that the base
forfeiture for misrepresentation is the statutory maximum.108 In
this regard, as noted above, the Commission has indicated that
misrepresentation ``always is an egregious violation.''109 We
have further stated that ``[a]ny entity or individual that
engages in this type of behavior should expect to pay the highest
forfeiture applicable to the service at issue.''110 Moreover,
the apparent misrepresentation is particularly egregious here
because it occurred in the context of an investigation into
possible misrepresentation, i.e., in a context where the company
and its employees should have had a heightened awareness of the
importance of not submitting misrepresentations to the
Commission. As with the proposed finding regarding section 1.65,
the relationship to the SBC/SNET Consent Decree and the need for
a sufficient deterrent also support a substantial proposed
forfeiture here.
III.D. SBC Apparently Violated The SBC/SNET Consent
Decree
81. We also conclude that SBC apparently willfully or
repeatedly violated the terms of the June 1999 Consent Decree
arising out of the merger between SBC and Southern New England
Telephone Corporation. The SBC/SNET Consent Decree resolved an
informal investigation by the Commission into allegations
(similar to the ones at issue here) that SBC violated sections
271 and 272 of the Act, that SBC violated section 1.65 of the
Commission's Rules, and that SBC employees made inaccurate
statements to the Commission. The Commission agreed to resolve
the matter by Consent Decree following SBC's promise to, among
other things, institute a training program for employees dealing
with the Commission.111 We conclude that SBC apparently
willfully or repeatedly violated the terms of the SBC/SNET
Consent Decree by ignoring its obligation to train one of its
affiants in the section 271 proceeding in the Commission's rules
regarding contacts with and representations to the agency.
82. Under the terms of the Compliance Plan incorporated by
reference into the SBC/SNET Consent Decree, SBC employees who
engage in regular contacts with the Commission as part of their
assigned duties must be informed of the Plan and the Commission's
rules and regulations regarding contacts with, and
representations to, the Commission through a Compliance
Primer.112 The covered employees subject to this requirement
include, among others, those employees assigned to SBC's
Washington, D.C. office, subject matter experts, attorneys, and
other employees who meet with the Commission on a regular
basis.113 These employees also must certify that they have
reviewed and understand SBC and Commission requirements for
interaction with the agency.114 Finally, these employees must
ensure that other employees participating in Commission contacts
are informed of the Compliance Plan and the applicable Commission
rules and regulations.115
83. In an inquiry letter, the Enforcement Bureau directed
SBC to explain whether certain of its employees, including Carol
Chapman, Angela Cullen, Mark Welch, Dennis Schuessler, and John
Mileham, were informed of the Compliance Plan and to describe any
training these persons received regarding SBC's ethical standards
and the Commission's rules and policies with respect to contacts
and representations to the Commission.116 SBC's response was
silent about whether any of these persons received any
information about the Compliance Plan or received training on the
Commission's rules regarding contacts with and representations to
the agency.117 Rather, SBC represented that the named employees
``were advised of their obligation to provide truthful
information to the Commission at all times ... and each
understood that obligation.''118 These individuals also ``were
advised or were aware that they should advise legal counsel
and/or their superior if they discovered that information they
provided to the Commission was inaccurate.'' SBC added that each
of the individuals also reviewed and acknowledged understanding
of SBC's Code of Business Conduct, which states that SBC
employees ``should comply not only with the letter, but the
intent of the law'' and proscribes ``deliberate
misrepresentations of facts, assets or records in order to
deceive someone who relies on the representation.''119
Additionally, SBC represented that Ms. Cullen, Ms. Chapman and
Mr. Welch knew that they should contact ``271 legal counsel'' in
the event that there was a change in the information they
submitted to the Commission.120 Ms. Chapman and Ms. Cullen also
received witness training emphasizing the obligation to be
truthful in testimony.121
84. We first conclude that SBC was required to inform Ms.
Chapman of the requirements set out in the Compliance Plan.
Specifically, the SBC/SNET Consent Decree required that SBC
employees who ``make regular contacts with the FCC ... as part of
their assigned duties ... will be informed'' of the Compliance
Plan and the Commission's rules and regulations ``regarding
contacts with, and representations to, the FCC through the
Compliance Primer ....''122 Ms. Chapman's responsibilities
demonstrate that she should have received the required training
and instruction. Specifically, in affidavits submitted to the
Commission, including the affidavit supporting the SBC Report in
this investigation, Ms. Chapman describes her responsibilities at
SBC as representing SBC's positions to regulatory bodies and
monitoring state and federal regulatory proceedings affecting
SBC's wholesale marketing.123 Moreover, Ms. Chapman's actual
interaction with the Commission supports this conclusion, as she
was heavily involved with SBC's section 271 applications for
Texas and Kansas/Oklahoma. In those proceedings, she submitted
sworn direct and reply affidavits and met with CCB staff at least
three times to discuss the company's showing.124 In giving
examples of employees having regular contacts with the
Commission, the SBC/SNET Consent Decree made clear that not only
did the requirements cover ``employees assigned to SBC's
Washington, D.C. office,'' but also ``subject matter experts ...
who meet with the FCC on a regular basis.'' Thus, based on her
own description of her job responsibilities and her regular
contacts with the Commission, Ms. Chapman should have received a
Compliance Primer informing her of the Compliance Plan and the
Commission's rules concerning contacts with and representations
to the Commission.
85. We also conclude that SBC's other efforts to train Ms.
Chapman do not demonstrate compliance with the SBC/SNET Consent
Decree. In response to a specific Bureau inquiry, SBC has
provided no information indicating that it educated Ms. Chapman
about the Compliance Plan or about the Commission's rules, as
required by the SBC/SNET Consent Decree.125 Under the Consent
Decree, Ms. Chapman also had to certify that she had reviewed the
SBC Compliance Primer and understood the Commission's standards
for interaction with the agency.126 But in response to the
Bureau's inquiry, SBC has offered no evidence that it fulfilled
any of these requirements with respect to Ms. Chapman. SBC has
asserted, however, that it had a Code of Conduct in place for
many years prior to and after the Consent Decree. Although we
acknowledge the existence and importance of this Code of Conduct,
we also note its apparent ineffectiveness in preventing company
employees from making inaccurate statements to the Commission,
and its apparent failure to ensure timely notification of
inaccuracies in pending applications. We also note that this
Code of Conduct was in effect during the relevant time when the
Commission was investigating SBC's conduct that led to the more
specific requirements in the SBC/SNET Consent Decree. That is
precisely why the more specific requirements were included in the
SBC/SNET Consent Decree.
86. Moreover, under the terms of the SBC/SNET Consent
Decree, Ms. Chapman (as an SBC employee ``who make[s] regular
contacts with the FCC'' and as a ``subject matter expert ... who
meet[s] with the FCC on a regular basis'') should have informed
Mr. Welch, Ms. Cullen, Mr. Schuessler, and Mr. Mileham about the
Compliance Plan and the applicable FCC rules and regulations.127
Once again, SBC has offered no evidence on this point in response
to the Bureau's inquiry.128
87. In light of SBC's apparent willful and/or repeated
failure to comply with the terms of the SBC/SNET Consent Decree,
we find that a proposed forfeiture is apparently warranted. As
noted above, section 503(b)(1) of the Act states that any person
who willfully and/or repeatedly fails to comply with any
provision of the Act or any rule, regulation, or order issued by
the Commission, shall be liable to the United States for a
forfeiture penalty.129 For the time period relevant to this
proceeding, section 503(b)(2)(B) of the Act authorizes the
Commission to assess a forfeiture of up to $120,000 for each
violation, or each day of a continuing violation, up to a
statutory maximum of $1,200,000 for a single act or failure to
act.130 In determining the appropriate forfeiture amount, we
consider the factors enumerated in section 503(b)(2)(D) of the
Act, including ``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.''131
88. We note that there is no base amount for violations of
consent decrees in the Forfeiture Policy Statement and section
1.80 of the Commission's Rules. The Commission has made clear,
however, that such an omission ``should not signal that the
Commission considers any unlisted violation as nonexistent or
unimportant.''132 We believe that a consent decree violation,
like misrepresentation, is particularly serious. The whole
premise of a consent decree is that enforcement action is
unnecessary due, in substantial part, to a promise by the subject
of the consent decree to take the enumerated steps to ensure
future compliance.133 Where, as here, it appears that a
regulated entity violated a consent decree, we believe a
substantial proposed forfeiture is warranted. This is
particularly true where, as here, it appears that the consent
decree violation may have caused the precise type of violations
it was designed to avoid. Although we can only speculate, had
SBC properly carried out the compliance provisions of the
SBC/SNET Consent Decree regarding contacts with the Commission,
these troubling events, or at least significant parts of them,
might never have occurred.
89. As with the section 1.65 proposed forfeiture, in
addition to the seriousness of the violation, we believe
considerations of ability to pay/deterrent effect and the
repeated/continuing nature of the violation also counsel in favor
of a substantial proposed forfeiture. Accordingly, considering
all of the enumerated factors and the particular circumstances of
this case, we find that SBC is apparently liable for a $1.2
million forfeiture, the statutory maximum, for its apparent
willful or repeated violation of the terms of the Consent Decree.
As with the section 1.65 issue, in addition to any forfeiture we
may impose, we believe it is important for SBC to inform the
Commission about the steps it is taking to ensure future
compliance with the portions of the SBC/SNET Consent Decree
dealing with Commission contacts. Accordingly, we order SBC to
file a report, within 30 days of the release date of this NAL,
supported by affidavits of persons with personal knowledge,
discussing steps it has taken to ensure future compliance with
the relevant portions of the SBC/SNET Consent Decree. In
addition, we order SBC to report, within nine months of the
release date of this NAL, through an independent audit, on the
success of its efforts to comply with the relevant portions of
the SBC/SNET Consent Decree for the period beginning 30 days from
the release date of this NAL and concluding six months
thereafter.
III.E. SBC Did Not Violate Section 271 of the Act
90. Finally, we hold that the evidence before us does not
demonstrate that SBC ceased to meet a condition of the
Commission's approval of its 271 application.134 During the
Kansas/Oklahoma proceeding, IP suggested that, where both fiber
and copper loops served an end user address, SBC returned
information on only the fiber loop, thereby failing to inform the
carrier that a copper loop was available. IP asserted that this
practice violated the UNE Remand Order.135 In the Order granting
SBC's application, the Commission found that, if true, this
practice would ``appear to violate the UNE Remand Order.''136
Based on the evidence generated during this investigation, we
conclude that SBC's provision of loop qualification information
between October 26, 2000 and April 3, 2001 met the requirements
of section 271. Although the evidence indicates that SBC's loop
qualification system in some instances provided detailed
information on a fiber loop even when a copper loop was available
for a particular address, we find this was not competitively
significant under the circumstances in this case.137
IV. CONCLUSION
91. We find SBC apparently liable for a total forfeiture of
$2,520,000. SBC has apparently willfully or repeatedly violated
section 1.65 of the Commission's rules concerning the disclosure
of information that is of ``decisional significance'' or that
renders prior filings ``no longer substantially accurate or
complete in all significant respects.'' Additionally, we
conclude that SBC apparently willfully or repeatedly violated
section 1.17 of the Commission's rules by submitting an affidavit
with misrepresentations or willful material omissions to the
Commission during its investigation into SBC's inaccurate reply
affidavits in the Kansas/Oklahoma proceeding. We also find that
SBC apparently willfully or repeatedly violated the terms of the
SBC/SNET Consent Decree by failing to inform its employees who
made regular contacts with the Commission about the Compliance
Plan and about the Commission's regulations regarding contacts
with, and representations to, the Commission and by those persons
failing to relay that information to other relevant employees.
Finally, we order SBC to file certain reports regarding future
compliance with section 1.65 of the Rules and the SBC/SNET
Consent Decree.
V. ORDERING CLAUSES
92. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section
503(b) of the Act,138 and section 1.80 of the Commission's
Rules,139 SBC Communications, Inc. is HEREBY NOTIFIED of its
APPARENT LIABILITY FOR FORFEITURE in the amount of two million,
five hundred twenty thousand dollars ($2,520,000.00) for
willfully or repeatedly violating sections 1.17 and 1.65 of the
Commission's Rules and the terms of the SBC/SNET Consent Decree.
93. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of
the Commission's Rules, within thirty (30) days of the release
date of this NOTICE OF APPARENT LIABILITY AND ORDER, SBC
Communications, Inc. SHALL PAY to the United States the full
amount of the proposed forfeiture OR SHALL FILE a written
statement showing why the proposed forfeiture should not be
imposed or should be reduced.
94. Payment of the forfeiture amount may be made by mailing
a check or similar instrument payable to the order of the Federal
Communications Commission, to the Forfeiture Collection Section,
Finance Branch, Federal Communications Commission, P.O. Box
73482, Chicago, Illinois 60673-7482. The payment should note
the ``NAL/ Acct. No.'' referenced above.
95. The response, if any, must be mailed to Charles W.
Kelley, Chief, Investigations and Hearings Division, Enforcement
Bureau, Federal Communications Commission, 445 12th Street S.W.,
Room 3-B443, Washington, D.C., 20554, and must include the
``NAL/Acct. No.'' referenced above.
96. IT IS FURTHER ORDERED that a copy of this Notice of
Apparent Liability shall be sent by Certified Mail/Return Receipt
Requested to SBC Communications, Inc. c/o Sandra L. Wagner, Vice
President-Federal Regulatory, 1401 I Street, N.W., Suite 1100,
Washington, D.C. 20005.
97. IT IS FURTHER ORDERED that, pursuant to sections 4(i),
218 and 403 of the Act,140 SBC Communications, Inc. SHALL FILE a
report within thirty (30) days of the release date of this NOTICE
OF APPARENT LIABILITY AND ORDER, supported by affidavits of
persons with personal knowledge, discussing steps it has taken to
ensure future compliance with section 1.65. IT IS FURTHER
ORDERED that SBC Communications, Inc. SHALL REPORT within nine
(9) months of the release date of this NOTICE OF APPARENT
LIABILITY AND ORDER, through an independent audit, on the success
of its efforts to comply with section 1.65 for the period
beginning thirty (30) days from the release date of this NOTICE
OF APPARENT LIABILITY AND ORDER and concluding six months
thereafter.
98. IT IS FURTHER ORDERED that, pursuant to sections 4(i),
218 and 403 of the Act, SBC Communications, Inc. SHALL FILE a
report within thirty (30) days of the release date of this NOTICE
OF APPARENT LIABILITY AND ORDER, supported by affidavits of
persons with personal knowledge, discussing steps it has taken to
ensure future compliance with the portions of the SBC/SNET
Consent Decree concerning training of relevant employees
regarding contacts with the Commission. IT IS FURTHER ORDERED
that SBC Communications, Inc. SHALL REPORT within nine (9) months
of the release date of this NOTICE OF APPARENT LIABILITY AND
ORDER, through an independent audit, on the success of its
efforts to comply with portions of the SBC/SNET Consent Decree
concerning training of relevant SBC Communications, Inc.
employees regarding contacts with the Commission for the period
beginning 30 days from the release date of this NOTICE OF
APPARENT LIABILITY AND ORDER and concluding six months
thereafter.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
_________________________
1 Joint Application by SBC Communications, Inc., Southwestern
Bell Tel. Co., and Southwestern Bell Commun. Serv., Inc. d/b/a
Southwestern Bell Long Distance for Provision of In-Region,
InterLATA Services in Kansas and Oklahoma, Memorandum Opinion and
Order, FCC 01-29 (rel. Jan. 22, 2001) (``Kansas/Oklahoma Order''
or ``Order''), appeal pending sub nom. Sprint Communications Co.
L.P. et al. v. FCC, No. 01-1076 (D.C. Cir. 2001). The
Enforcement Bureau also is separately investigating additional
inaccurate affidavits filed by SBC in the Kansas/Oklahoma section
271 proceeding relating to the company's Loop Maintenance
Operating System (``LMOS''). SBC, on June 8, 2001, notified the
Commission pursuant to section 1.65 of our rules that information
filed concerning LMOS was inaccurate. Letter from Geoffrey M.
Klineberg, Esq., Kellogg, Huber, Hansen, Todd & Evans, P.L.L.C.
to Magalie Roman Salas, Secretary, Federal Communications
Commission at 1 (June 8, 2001).
2 SBC Communications, Inc., Order, 14 FCC Rcd 12741 (1999) (
``SBC/SNET Consent Decree'') (resolving investigation into
potential violations by SBC of sections 271 and 272 of the
Communications Act and section 1.65 of the Commission's rules,
and potentially inaccurate statements made by SBC employees, all
in relation to SBC's application for transfer of various
authorizations from Southern New England Telephone Company
(``SNET'') to SBC).
3 47 U.S.C. § 271. Although our decision granting SBC's section
271 application refers to the SBC affiliates that applied for
section 271 approval as ``SWBT'' (the acronym for the SBC
affiliate Southwestern Bell Telephone Co.) throughout this Notice
of Apparent Liability and Order we will refer to SBC and its
affiliates simply as ``SBC.''
4 See 47 U.S.C. § 271(c)(2)(B)(ii).
5 Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, First Report and Order, 11 FCC
Rcd 15499, 15752, paras. 516-18 (1996) (subsequent history
omitted); see also Application by Ameritech Michigan Pursuant to
Section 271 of the Communications Act of 1934, as amended, to
Provide In-Region, InterLATA Services in Michigan, Memorandum
Opinion and Order, 12 FCC Rcd 20,543, 20,614, paras. 131-32
(1997).
6 Kansas/Oklahoma Order, para. 121.
7 See Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996, Third Report and Order, 15 FCC
Rcd 3696, 3885, paras. 427-31 (``UNE Remand Order'').
8 Kansas/Oklahoma Order, para. 121 n.325 (citing UNE Remand
Order, 15 FCC Rcd at 18426, para. 148).
9 See Affidavit of Carol Chapman, para. 105-08, attached to
Brief in Support of Joint Application by Southwestern Bell for
Provision of In-Region, InterLATA Services in Kansas and
Oklahoma, CC Docket No. 00-217 (filed Oct. 26, 2000) (``SBC
Brief'').
10 Comments of IP Communications Corp. on SBC's Applications
for 271 Relief in Kansas and Oklahoma, CC Docket No. 00-217, at
12-14 (filed Nov. 15, 2000) (``IP Comments'').
11 Letter from Howard J. Siegel, Vice President of Regulatory
Policy, IP Communications Corp. to Magalie Roman Salas,
Secretary, Federal Communications Commission, CC Docket No. 00-
217 (filed Nov. 30, 2000) (``IP Ex Parte Letter'').
12 Id. at 2.
13 See Reply Brief of Southwestern Bell In Support of InterLATA
Relief in Kansas and Oklahoma, CC Docket No. 00-217, at 69-70
(filed December 11, 2000) (``SBC Reply Brief'').
14 See Affidavit of Mark Welch paras. 5-6, Affidavit of Angela
Cullen paras. 2-7, and Affidavit of Carol Chapman paras. 5-12,
attached to SBC Reply Brief.
15 Kansas/Oklahoma Order para. 124.
16 See, e.g., id. para. 126 n.342, para. 128 n.352, para. 129
nn.355-56.
17 Id. para. 128.
18 Id. para. 129.
19 Letter from Priscilla Hill-Ardoin, Senior Vice President,
SBC Communications, Inc. to David H. Solomon, Chief, Enforcement
Bureau, Federal Communications Commission at 4 (Apr. 6, 2001)
(``SBC Report'').
20 SBC estimates that this scenario could have happened no
more than five percent of the time. See Letter from Edwardo
Rodriguez, Jr., Director, Federal Regulatory, SBC Communications,
Inc. to Magalie Roman Salas, Secretary, Federal Communications
Commission at 5 (Apr. 13, 2001) (``SBC 1.65 Report'').
21 After submitting its April 6 report, SBC produced additional
information in response to a letter of inquiry from the
Enforcement Bureau dated May 4, 2001. Letter from David H.
Solomon, Chief, Enforcement Bureau, Federal Communications
Commission to Sandra L. Wagner, Vice President-Federal
Regulatory, SBC Telecommunications, Inc. (May 4, 2001) (``Letter
of Inquiry''). Additionally, at the request of the Enforcement
Bureau, SBC made available six employees for informal interviews:
Carol Chapman, Angela Cullen, John Mileham, Edwardo Rodriguez,
Jr., Dennis Schuessler, and Mark Welch. Unless otherwise
indicated, references to statements by these employees refer to
their statements in these interviews.
22 SBC's loop qualification system allows competitors to
request access to three different types of loop make-up
information. Most relevant, competitors could request access to
actual loop information that SBC may have in its electronic
databases based on a particular address. The pre-ordering
transactions at the heart of this NAL involve actual loop
information requests. Competitors could also request design loop
information, which is the theoretical make-up of a loop based on
the standard loop design for the longest loop to the end-user's
distribution area, or could request that SBC perform a manual
search of its paper records to determine actual loop information.
Order, para. 122 & n.329.
23 As fully described in Mr. Mileham's loop qualification
overview:
Process: Loop Qual performs a facility assignment
query into LFACS based on the service address. LFACS
returns a list of circuit id's associated with that
address. The list order is not in any predictable
order but is repeatable for any given address. Loop
Qual then performs a loop makeup query into LFACS
using the first circuit id from the facility
assignment list. LFACS builds the loop makeup
starting at the service address and working backwards
toward the central office gathering cable length,
gauge break, load coil, bridged tap, disturber and
risk data. Added to this is information based on the
distribution area such as Pronto RT capability and
Loop Medium Type. The loop makeup (LMU) is then
presented to the requestor.
John D. Mileham, SBC Loop Qual System Overview 2 (Aug. 22,
2000) (emphasis added).
24 In his interview with the Enforcement Bureau, Mr. Mileham
said that he submitted the change request in mid-December,
following his review of Mr. Welch's Reply Affidavit in the
Kansas/Oklahoma proceeding.
25 Affidavit of Angela Cullen, para. 2, attached to SBC Brief.
26 See Attachment G to SBC Report. Ms. Cullen's block quote,
and the portion of her e-mail that originated from the SBC
attorney's e-mail to her, states (emphasis in original):
. . .loop qual info on the loop that would be
provisioned if the customer requested an xDSL-capable
loop or a HFPL UNE for the customer (address
searched). Our systems are provisioning systems,
which, when an order is placed, search for a specific
loop at that ... requested address on which we can
provision an xDSL capable loop. The systems aren't
designed to merely provide ``information;'' they
design service and tell technicians what to provision
so that we can provide that service. If a specific
telephone number using a specific loop is requested
for line sharing (note that this doesn't or shouldn't
matter with a new, stand-alone xDSL-capable loop),
and the loop provisioned isn't the same as the
existing loop used for voice service, we do a line
station transfer (LST) to ensure that the voice
service is transferred to the xDSL-capable loop.
27 See Attachment G to SBC Report.
28 Id.
29 Id.
30 Id.
31 Reply Affidavit of Angela Cullen, para. 4, attached to SBC
Reply Brief (``Cullen Reply Aff.'').
32 Id. para. 4.
33 Reply Affidavit of Mark Welch para. 1, attached to SBC Reply
Brief (``Welch Reply Aff.'').
34 Welch Reply Aff. para. 6. Mr. Welch wrote: ``If there is an
available DSL-capable facility to that address, SWBT will provide
the loop qualification information for that DSL-capable facility
and perform the LST versus providing loop qualification
information for the line that is served by DLC and therefore is
not DSL-capable.'' Id.
35 See Letter from Sandra L. Wagner, Vice President-Federal
Regulatory, SBC Telecommunications, Inc. to Brad Berry, Deputy
Chief, Enforcement Bureau, Federal Communications Commission (May
3, 2001) (``May 3, 2001 Letter'').
36 Mileham Aff. para. 7.
37 Id.
38 See May 3, 2001 Letter.
39 Reply Affidavit of Carol Chapman para. 5, attached to SBC
Reply Brief.
40 Kansas/Oklahoma Order, para. 128 n.352.
41 Affidavit of Dennis W. Schuessler (``Schuessler Aff.'')
para. 10, SBC Report, Attachment F.
42 Id. para. 11.
43 See SBC Brief at 19-20.
44 On April 3, 2001, SBC implemented an enhancement to its loop
qualification system that caused the system to return actual loop
make-up information on a loop connected to the customer address
requested by the competitive carrier, if such information exists
in SBC's LFACS system and can be located, retrieved and returned
within two minutes. The enhancement causes the system to search
LFACS first for a non-loaded copper loop connected to the end
user for which actual information exists. If the system finds
such actual information, then it will return it to the requesting
carrier. See Affidavit of Brian Horst, attached to Brief in
Support of Application by Southwestern Bell for Provision of In-
Region, InterLATA Services in Missouri, CC Docket No. 01-88
(filed April 4, 2001). Moreover, in a footnote to an affidavit
submitted with its 271 application for Missouri, SBC stated that
it ``has learned that, contrary to its subject matter experts'
early understanding of the interrelationship between LFACS and
the loop qualification system software, the LFACS provisioning
logic was not being used to search for loop makeup information.
The recent enhancement to the loop qualification system, however,
was designed to search for loop makeup information in a manner
similar to how LFACS would attempt to provision an xDSL-capable
loop if one were requested by a CLEC.'' See Affidavit of Derrick
Hamilton at 4, n.3, Attachment J to SBC Report.
45 Section 1.65 of the Commission's Rules, 47 C.F.R. § 1.65,
states in relevant part:
Section 1.65(a). Substantial and significant changes
in information furnished by applicants to the
Commission. Each applicant is responsible for the
continuing accuracy and completeness of information
furnished in a pending application or in Commission
proceedings involving a pending application. Whenever
the information furnished in the pending application is
no longer substantially accurate and complete in all
significant respects, the applicant shall as promptly
as possible and in any event within 30 days, unless
good cause is shown, amend or request the amendment of
his application so as to furnish such additional or
corrected information as may be appropriate. Whenever
there has been a substantial change as to any other
matter which may be of decisional significance in a
Commission proceeding involving the pending
application, the applicant shall as promptly as
possible and in any event within 30 days, unless good
cause is shown, submit a statement furnishing such
additional or corrected information as may be
appropriate, which shall be served upon parties of
record in accordance with § 1.47. Where the matter is
before any court for review, statements and requests to
amend shall in addition be served upon the Commission's
General Counsel. For the purposes of this section, an
application is ``pending'' before the Commission from
the time it is accepted for filing by the Commission
until a Commission grant or denial of the application
is no longer subject to reconsideration by the
Commission or to review by any court.
46 SBC 1.65 Report at 1.
47 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(a).
48 47 U.S.C. § 503(b)(4); 47 C.F.R. § 1.80(f).
49 See, e.g. Tuscola Broadcasting Co., Memorandum Opinion and
Order, 76 FCC 2d 367, 371 (1980) (applying preponderance of the
evidence standard in reviewing Bureau level forfeiture order).
Cf. 47 U.S.C. § 312(d) (assigning burden of proof in hearings to
Commission).
50 Section 1.17 of the Commission's Rules, 47 C.F.R. § 1.17,
states in relevant part:
Section 1.17 Truthful written statements and responses
to Commission inquiries and correspondence. . . .No
applicant, permittee or licensee shall in any response
to Commission correspondence or inquiry or in any
application, pleading, report or any other written
statement submitted to the Commission, make any
misrepresentation or willful material omission bearing
on any matter within the jurisdiction of the
Commission.
51 Commission precedent makes clear that misrepresentation
requires an intent to deceive on the part of the allegedly
offending party. See Swan Creek Communications v. FCC, 39 F.3d
1217, 1222 (D.C. Cir. 1994); Fox Television Stations, Inc.,
Memorandum Opinion and Order, 10 FCC Rcd 8452, 8478, para. 60
(1995). Cf. Ass'n of American Physicians and Surgeons, Inc. v.
Clinton, 187 F.3d 655, 661-662 (D.C. Cir. 1999) (reversing
district court finding that party's declaration filed with court
had been submitted in bad faith; holding that district court had
not cited any evidence that at the time the declaration was
drafted, declarant disbelieved what he was stating or that the
declarant's statements were objectively unreasonable).
52 Although SBC has declined to identify the attorney, the
evidence shows that none of the persons from SBC's legal
department who worked on the 271 application possessed any
expertise on loop qualification matters.
53 Mileham Aff., para. 7.
54 As noted above, Commission precedent makes clear that
misrepresentation requires an intent to deceive on the part of
the allegedly offending party. See Swan Creek Communications, 39
F.3d at 1222; Fox Television Stations, Inc., 10 FCC Rcd at 8478,
para. 60.
55 See para. 66, infra.
56 47 C.F.R. § 1.65(a).
57 See Pinelands, Inc. and BHC Communications, Inc., Memorandum
Opinion and Order, 7 FCC Rcd 6058, 6064 n.25 (1992); WPIX, Inc.,
Memorandum Opinion and Order, 33 FCC 2d 782, 783-84, para. 3
(1972).
58 RKO General, Inc. v. FCC, 670 F.2d 215, 229 (D.C. Cir. 1981)
(internal citations omitted).
59 We note that under section 1.65, which requires applicants
to notify the Commission of substantial changes ``as promptly as
possible and in any event within 30 days,'' the 30-day time limit
is the maximum amount of time that an applicant is allowed before
it must file its notification, absent ``good cause.'' 47 C.F.R.
§ 1.65(a).
60 In his affidavit, Mr. Schuessler states that he received a
copy of the Order on January 31, 2001 and reviewed it sometime
between that date and February 5, 2001. Schuessler Aff. at 4-5,
paras. 10-11.
61 Even assuming the 30-day clock did not begin until March 6,
2001, SBC still apparently violated the requirements of section
1.65 by failing to file its report until April 13, 2001. Even
then, the Enforcement Bureau had to remind SBC of its obligations
under section 1.65 before the company ultimately filed its
notice.
62 47 C.F.R. § 1.65(a).
63 UNE Remand Order, para. 129.
64 After discussions with Bureau staff concerning its request
for confidential treatment, SBC withdrew its request by letter on
April 18, 2001. See Letter from Sandra L. Wagner, Vice
President-Federal Regulatory, SBC Telecommunications, Inc., to
Brad Berry, Deputy Chief, Enforcement Bureau, Federal
Communications Commission (April 18, 2001).
65 In any event, SBC's earliest conversations with Commission
staff occurred more than thirty days after Mr. Schuessler became
aware of the inaccuracies in the reply affidavits, which
demonstrates that SBC apparently would have violated section 1.65
even if its oral representations in late March constituted
adequate notice under that provision.
66 47 C.F.R. § 1.65(a).
67 47 U.S.C. § 503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).
We note that ``willful'' is defined in the statute as not
requiring specific intent to violate the law. See, e.g.,
Southern California Broad. Co., Memorandum Opinion and Order, 6
FCC Rcd 4387, 4387, para. 5 (1991) (quoting 47 U.S.C. § 312(f))
(``willful ... means the conscious and deliberate commission or
omission of such act, irrespective of any intent to violate'' the
Act or Commission rules; ``this definition applies to Section 503
as well as Section 312''). A violation is repeated if, among
other things, it continues over more than one day. Id. 6 FCC Rcd
at 4388.
68 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R § 1.80(b)(2).
6947 U.S.C. § 503(b)(2)(D); see also The Commission's Forfeiture
Policy Statement and Amendment of Section 1.80 of the Rules to
Incorporate the Forfeiture Guidelines, 12 FCC Rcd 17087, 17100,
para. 27 (1997) (``Forfeiture Policy Statement''); recon. denied
15 FCC Rcd 303 (1999); 47 C.F.R. § 1.80(b)(4).
70 47 C.F.R. § 1.80; Forfeiture Policy Statement, 12 FCC Rcd at
17114, Appendix A, Section I.
71 Forfeiture Policy Statement, 12 FCC Rcd at 17001, para. 27.
72 SBC/SNET Consent Decree, 14 FCC Rcd at 12751.
73 See, e.g., Application by Ameritech Michigan Pursuant to
Section 271 of the Communications Act of 1934, as amended, to
Provide In-Region, InterLATA Services in Michigan, Order, 12 FCC
Rcd 3309, 3323, para. 23 (1997) (citing 47 C.F.R. § 1.65(a) and
reminding applicants of their obligation under Commission rules
to maintain ``the continuing accuracy and completeness of
information'' furnished to the Commission); Application by SBC
Communications Inc., Pursuant To Section 271 Of The
Communications Act of 1934, as amended, To Provide In-Region,
InterLATA Services In Oklahoma, Memorandum Opinion and Order, 12
FCC Rcd 8685, 8720, para. 60 (1997) (citing Ameritech Michigan
Order's reference to section 1.65 and noting that ``[g]iven the
expedited time in which the Commission must review these
applications, it is the responsibility of the ... [applicant] to
submit to the Commission a full and complete record upon which to
make determinations on its application.'').
74 In 2000, SBC had operating revenues of $51.4 billion with
operating income of $10.7 billion. See SBC Telecomm., Inc., 2000
Annual Report at 4 (2001).
75 Forfeiture Policy Statement, 12 FCC Rcd at 17099-100, para.
24.
76 We note that Congressman Fred Upton, Chairman of the
Subcommittee on Telecommunications and the Internet of the House
Committee on Energy and Commerce, has introduced legislation to
increase the statutory forfeiture caps. See H.R. 1765, 107th
Cong., 1st Sess. (2001).
77 Forfeiture Policy Statement, 12 FCC Rcd at 17101, para. 27;
see also 47 U.S.C. § 503(b)(2)(D) and 47 C.F.R. § 1.80(b)(4).
78 47 C.F.R. § 1.17.
79 Silver Star Communications-Albany, Inc. 3 FCC Rcd 6342, 6349
(Rev. Bd. 1988).
80 See Swan Creek Communications v. FCC, 39 F.3d 1217, 1222
(D.C. Cir. 1994).
81 Black Television Workshop, 8 FCC Rcd 4192, 4198, n. 41
(1993), recon. denied, 8 FCC Rcd 8719 (1993), rev. denied, 9 FCC
Rcd 4477 (1994), aff'd sub nom. Woodfork v. FCC, 70 F.3d 639
(D.C. Cir. 1995) (affirming ALJ's finding that the record
encompasses documents containing misrepresentations).
82 Ned N. Butler and Claude M. Gray, D.B.A. The Prattville
Broadcasting Co., Prattville, Ala., Memorandum Opinion and Order,
5 FCC 2d 601, 603-604 (Rev. Bd. 1966) (internal citations
omitted). In criminal cases, where the burden of proof is
higher, the D.C. Circuit has recognized that ``[i]ntent may, and
generally must, be proved circumstantially . . .,'' United States
v. Jackson, 513 F.2d 456, 461 (D.C. Cir. 1975) (footnotes
omitted), and has stated that it does not distinguish between
``direct and circumstantial evidence in evaluating the
sufficiency of the evidence.'' United States v. Lam Kwong-Wah,
924 F.2d 298, 303 (D.C. Cir. 1991), cert. denied, 506 U.S. 901,
113 S.Ct. 287, 121 L.Ed.2d 213 (1992).
83 Fox Television Stations, Inc., Memorandum Opinion and Order,
10 FCC Rcd 8452, 8478, para. 60 (1995).
84 Policy Regarding Character Qualifications in Broadcast
Licensing, 102 FCC 2d 1179, 1210, para. 58 (1986) (subsequent
history omitted) (``Character Policy Statement''). ``The
integrity of the Commission's processes cannot be maintained
without honest dealing by regulated companies.'' See id., 102
FCC 2d at 1211, para. 61. ``Regardless of the factual
circumstances of each case, misrepresentation to the Commission
is always an egregious violation.'' Forfeiture Policy Statement,
12 FCC Rcd at 17098, para. 21. The Commission may treat even the
most insignificant misrepresentation as an event disqualifying a
licensee from further consideration. Character Policy Statement,
102 FCC 2d at 1210, para. 60. See also Forfeiture Policy
Statement, 12 FCC Rcd at 17098, para. 21.
85 WHW Enterprises Inc., v. FCC, 753 F.2d 1132, 1138 (D.C. Cir.
1985) (upholding Commission sanctions against license applicant
for misrepresentation); Sea Island Broadcasting Corp. of S.C., 60
FCC 2d 146, 147, para. 3 (1976) (``The Commission insists on
complete candor from its licensees and where . . . that candor
has been found lacking in response to official Commission
inquiries, the Commission has terminated the license.''), aff'd,
Sea Island Broadcasting Corp. of S.C. v. Federal Communications
Commission, 627 F.2d 240 (D.C. Cir. 1980).
86 See SBC Report at 5, nn. 5-6; Mileham Affidavit, ¶¶ 6-7.
87 See May 3, 2001 Letter.
88 In submissions to the Commission, SBC has not suggested that
the times on the face of the e-mails were incorrect.
89 Mr. Mileham claimed that he may have disclosed this
information to contractors, but SBC never provided the
Enforcement Bureau with access to these persons.
90 See Sworn Statement of Vincenzo Leone, attached to Letter
from Sandra L. Wagner, Vice President-Federal Regulatory, SBC
Telecommunications, Inc., to Trent Harkrader, Enforcement Bureau,
Federal Communications Commission (May 11, 2001) (``May 11, 2001
Letter'').
91 In this regard, we note that SBC has not filed anything with
the Enforcement Bureau distancing itself from Mr. Mileham's
apparent misrepresentations. Thus, SBC continues to rely on Mr.
Mileham's apparently intentionally false statements as a basis
for its explanation of how it unintentionally submitted the
incorrect reply affidavits and continues to gain potential
benefit from such apparently intentionally false statements.
92 See Letter from Reid M. Figel, Kellogg, Huber, Hansen, Todd
& Evans, P.L.L.C., to David H. Solomon, Chief, Enforcement
Bureau, Federal Communications Commission (June 20, 2001).
93 47 U.S.C. § 217. See also Vista Services Corp., Order of
Forfeiture, FCC 00-378, para. 9 (rel. Oct. 23, 2000) (rejecting
argument that company not liable for conduct of telemarketing
firms and third party verifiers); Long Distance Direct, Inc.,
Order, 15 FCC Rcd 3297, 3300, para. 8 n.8 (2000); Amer-I-Net
Services Corp, Order of Forfeiture, 15 FCC Rcd 3118, 3120, para.
7 (2000); Heartline Communications, Inc., Notice of Apparent
Liability for Forfeiture, 11 FCC Rcd 18487, 18494, para. 13
(1996).
94 See, e.g., Russellville Educational Broadcast Foundation,
Letter, 14 FCC Rcd 11208, 11209 (Mass Media Bur. 1999)
(``[L]icensees cannot be excused from responsibility for the acts
of their employees.''); Hemmingford Media, Inc., Order of
Forfeiture, 14 FCC Rcd 2940, 2941, para. 7 (Compl. and Info. Bur.
1999) (``[The Commission] remind[s] respondent that the
responsibility for compliance with the terms of ... [the radio
station's] license rests solely and exclusively with the
licensee.''); Zapis Communications Corp., Memorandum Opinion and
Order, 7 FCC Rcd 7859, para. 5 (Mass Media Bur. 1992) (``[I]t is
well established that an employer remains responsible for the
actions of its employees.'')
95 See, e.g., Rocket Radio, Inc., Memorandum Opinion and Order,
70 FCC 2d 413, 424-425 (holding licensee responsible for an
employee's false affidavit that was submitted to the Commission),
recon. denied, 66 FCC 2d 193 (Rev. Bd. 1977); Sea Island
Broadcasting Corp., 61 FCC 2d at 944, para. 43 (``It is
undisputed that the denial of knowledge of fraudulent billing
contained in the ... statement ... constituted a knowing
misrepresentation by an officer or director of the licensee
corporation. Moreover, even if he had been a mere employee, the
licensee could not escape responsibility for his
misrepresentation.''); Ned N. Butler and Claude M. Gray, D.B.A.
The Prattville Broadcasting Co., Prattville, Ala., Decision, 4
FCC 2d 555, 563 (Rev. Bd. 1966) (``The Commission has repeatedly
refused to absolve a licensee of responsibility for deceptions
practiced by his employees, and in instances of serious
transgressions has imposed sanctions upon the licensee
notwithstanding his professed lack of knowledge.'')
96 See, e.g., Zapis Communications Corp., 7 FCC Rcd at 7859,
para. 5 (licensee held responsible for employee's action when, in
violation of station policy, employee broadcast telephone
conversation without the other party's knowledge or consent);
Frank Battaglia, Letter, 7 FCC Rcd 2345 (Mass Media Bur. 1992)
(admonishing licensee for employee hoax broadcast even though
station denounced broadcast, fired employees involved, and took
other corrective measures).
97 See generally Northwestern Indiana Broadcasting Corp.,
Initial Decision, 65 FCC 2d 73 (ALJ 1976) (station's renewal
license denied after discovery that general manager/vice
president submitted false information to the Commission).
98 See, e.g., Sea Island Broadcasting Corp., 61 FCC 2d at 944,
para. 43 (license revoked where management misrepresented
station's billing practices to Commission and Commission noted
that even if offending person had been ``a mere employee''
instead of an officer or director of the company, licensee would
still be responsible).
99 Character Policy Statement, 102 FCC 2d at 1218, para. 78
(``A corporation must be responsible for the FCC-related
misconduct occasioned by the actions of its employees in the
course of their broadcast employment. To hold otherwise would,
inter alia, encourage corporate owners to improperly delegate
authority over station operations in order to `neutralize' any
future misconduct.'').
100 Id.
101 KWK Radio, Inc., 34 FCC 1039 (1963) (revoking broadcast
license due to fraud by station's general manager in conducting a
``treasure hunt'' contest), aff'd, KWK Radio, Inc. v. FCC, 337
F.2d 540 (1964); Eleven Ten Broadcasting Corp., Decision, 32 FCC
706, 708-09, paras. 6-7 (1962) (denying renewal in part because
of log alterations made by station employee), aff'd sub nom.
Immaculate Conception Church v. FCC, 320 F.2d 795 (D.C. Cir.
1963); Carol Music, Inc., Decision, 37 FCC 379, 380, para. 3
(1964) (adopting in relevant part initial decision revoking
license based in part on refusal by station manager to furnish
information requested by the Commission).
102 SBC Report at 4.
103 SBC Report at 5, nn. 5-6.
104 SBC's argument that it is not responsible for the statements
of its employees in this context raises potentially troubling
concerns in other contexts as well. Regardless of whether SBC
continues to make this legal argument in any response to this
NAL, we request that, as part of any such response, or separately
if it does not file a response (e.g., if it simply pays the
proposed forfeiture), SBC identify any other situations where it
believes the Commission should treat SBC employees acting within
the scope of their employment as not speaking on behalf of SBC.
This will assist us in considering the extent to which it is
appropriate for us to rely (or not to rely) on written or oral
statements by SBC employees in any such other contexts.
105 47 U.S.C. §503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).
106 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R § 1.80(b)(2).
107 47 U.S.C. § 503(b)(2)(D); see also Forfeiture Policy
Statement, 12 FCC Rcd 17087, 17100, para. 27; 47 C.F.R. §
1.80(b)(4).
108 47 C.F.R. §1.80.
109 Forfeiture Policy Statement, 12 FCC Rcd at 17098, para. 21.
110 Id.
111 Order, para. 3.
112 See SBC/SNET Consent Decree, 14 FCC Rcd at 12751 (``SBC
employees who make regular contacts with the FCC (``SBC's FCC
representatives'') as part of their assigned duties (e.g.
employees assigned to SBC's Washington D.C. office, subject
matter experts, attorneys and other employees who meet with the
FCC on a regular basis) will be informed of this Plan and the
FCC's rules and regulations regarding contacts with, and
representations to, the FCC through a Compliance Primer and will
be required to ensure that other employees participating in FCC
contacts are informed of the Plan and the applicable FCC rules
and regulations.'')
113 See SBC/SNET Consent Decree, 14 FCC Rcd at 12751.
114 Id., 14 FCC Rcd at 12749.
115 Id., 14 FCC Rcd at 12751.
116 See Letter of Inquiry at 4.
117 See Affidavit of Sandra L. Wagner, Vice President--Federal
Regulatory, SBC, attached to May 11, 2001 Letter.
118 Id. at 2-3.
119 Id. at 3.
120 Id.
121 See id. SBC also described other company policies but,
from its response, did not make clear that the individuals about
whom the Enforcement Bureau inquired knew or were informed about
these policies. Specifically, SBC represented that legal counsel
repeatedly and routinely advised all witnesses that information
presented in 271 proceedings must be accurate and complete.
Additionally, SBC represented that its practice is ``to advise
all employees submitting sworn testimony or information to the
Commission that they must provide true and correct information.''
Id.
122 SBC/SNET Consent Decree, 14 FCC Rcd at 12751.
123 See e.g., Attachment B to SBC Report, para. 1; Affidavit of
Carol Chapman, para. 1, attached to SBC Brief.
124 We also note that, subsequent to the Kansas/Oklahoma
proceeding, Ms. Chapman submitted affidavits in SBC's Missouri
and Missouri/Arkansas 271 proceedings.
125 See Letter of Inquiry at 4. Indeed, it appears from this
and other information submitted to the Bureau that SBC failed to
train any employees who regularly submitted affidavits to the
Commission.
126 SBC/SNET Consent Decree, 14 FCC Rcd at 12749.
127 Id. at 12751 (SBC employees who make regular contacts with
the Commission as part of their assigned duties ``will be
required to ensure that other employees participating in FCC
contacts are informed of the Plan and the applicable FCC rules
and regulations.'')
128 We are concerned by the lack of training provided to Ms.
Cullen, Mr. Welch, Mr. Schuessler and Mr. Mileham but find that
their contacts with the Commission were not sufficiently regular
under the terms of the SBC/SNET Consent Decree to warrant their
inclusion in the same group as Ms. Chapman.
129 47 U.S.C. §503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).
130 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R § 1.80(b)(2).
131 47 U.S.C. § 503(b)(2)(D); see also Forfeiture Policy
Statement, 12 FCC Rcd at 17100, para. 27; 47 C.F.R. § 1.80(b)(4).
132 Forfeiture Policy Statement, 12 FCC Rcd at 17099, para. 22.
133 See, e.g., SBC/SNET Consent Decree, 14 FCC Rcd at 12741
(citing SBC's promises regarding its compliance program and
employee training efforts as factors supporting adoption of
Consent Decree).
134 See 47 U.S.C. § 271(c) and (d)(6).
135 IP also claimed that SBC's failure to return information on
all available loops to an address was a violation of the
Commission's requirements in the UNE Remand Order. In the order
granting SBC's Kansas and Oklahoma applications, the Commission
found that, despite SBC's acknowledgement that it returned
information on only one loop, it was not self-evident from the
UNE Remand Order that SBC was required to provide information on
all loops serving a particular address. Therefore, the
Commission found that SBC was not in violation of the UNE Remand
Order. See Order, para. 128.
136 Id., para. 129.
137 Based on the record in this proceeding, (i) these
circumstances occurred no more than five percent of the time, and
(ii) even in those cases, the inquiring customer would be
informed about copper loops in the distribution plant serving a
customer's general area, at which point the customer could
request detailed information on copper loops through a manual
query at no additional charge. See SBC 1.65 Report.
138 47 U.S.C. § 503(b).
139 47 C.F.R. § 1.80.
140 47 U.S.C. §§ 154(i), 218 and 403.