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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.