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                                   Before the

                       Federal Communications Commission

                             Washington, D.C. 20554

     In the Matter of                                        
     SM Radio, Inc.              File No. EB-03-DL-228       
     Facility ID No. 60694       NAL/Acct. No. 200432500002  
     Licensee of KUOL(AM)        FRN: 0010045532             
     San Marcos, Texas                                       

                                ORDER ON REVIEW

   Adopted: February 6, 2008  Released: February 8, 2008

   By the Commission:


    1. By this  Order on Review  ("Order"),  we deny the Application for
       Review, filed by SM Radio, Inc. ("SM Radio"), licensee of AM Radio
       Station KUOL, San Marcos, Texas, of an Enforcement Bureau ("Bureau")
       Memorandum Opinion and Order  ("Bureau Order") released December 28,
       2004. In affirming its finding that SM Radio failed to maintain a main
       studio presence within its community of license, in willful and
       repeated violation of Section 73.1125 of the Commission's Rules
       ("Rules"), the Bureau Order granted and denied in part SM Radio's
       petition for reconsideration of a Bureau Forfeiture Order,  and
       reduced the underlying forfeiture amount from $7,000 to $5,600. SM
       Radio has challenged the Bureau Order.


    2. On October 28, 2003, an agent from the Commission's Dallas, Texas
       Office ("Dallas Office") attempted to inspect the main studio of
       Station KUOL. A building located at the station's tower site appeared
       to be the station's studio; however, the building was locked,
       unattended, and appeared to be abandoned. That same day, the agent
       spoke with SM Radio's technical representative, who advised the agent
       that the building at the tower site was KUOL's main studio. SM Radio's
       technical representative informed the agent that the studio was
       staffed only by an unpaid station volunteer from a local church who
       was available to travel to the studio if requested.

    3. On December 19, 2003, the Dallas Office issued a Notice of Apparent
       Liability for Forfeiture ("NAL") to SM Radio in the amount of seven
       thousand dollars ($7,000) for the apparent main studio violation. On
       April 5, 2004, believing incorrectly that SM Radio had not filed a
       response to the NAL, the Bureau issued a Forfeiture Order to SM Radio
       upholding the NAL. SM Radio filed a petition for reconsideration of
       the Forfeiture Order, in which it did not contest the violations;
       instead, SM Radio sought reconsideration of the decision, citing its
       inability to pay and its history of compliance with the Commission's

    4. The Bureau Order upheld the violation of Section 73.1125 of the Rules
       and the forfeiture, but reduced the forfeiture amount from $7,000 to
       $5,600 on the basis of SM Radio's history of compliance. As noted
       below, however, the Bureau Order did not reduce the forfeiture for
       inability to pay, given that "there are several affiliated licensee
       entities whose gross revenues are also relevant to the issue of
       whether SM Radio can pay the proposed forfeiture because the entities
       share common ownership with SM Radio." Commission records at the time
       the Bureau Order was issued reflect that Paulino Bernal was the 100%
       owner of SM Radio. Commission records further reflect that Mr. Bernal
       was the 100% owner of other companies licensed to operate other radio
       stations, specifically, La Radio Cristiana Network, Inc., Paulino
       Bernal Evangelism, and Consolidated Radio, Inc.

    5. In its Application for Review, SM Radio contends that the Bureau's
       finding that a licensee must submit financial data from "affiliated
       entities" or "affiliated licensees" is not consistent with precedent.
       SM Radio asserts that the term "violator" in Section 503(b) of the
       Communications Act of 1934, as amended ("Act"), is, by implication,
       limited to the holder of a Commission authorization and that
       Commission precedent has used the term "violator" as a synonym for
       "licensee." Because it was the licensee, SM Radio, and not any
       affiliated person or entity, that was found to have violated the main
       studio rule, SM Radio argues that only its financial condition may be
       considered in assessing its inability to pay claim. SM Radio argues
       that it is a novel proposition that all "affiliated entities" may be
       combined with the actual "violator," and that the Bureau exceeded its
       delegated authority in stating this proposition. SM Radio further
       argues that consideration of these other affiliated entities would be
       tantamount to piercing the corporate veil. SM Radio asserts that the
       Commission should not pierce the corporate veil in this case,
       particularly because the licensee is part of a religious ministry
       conducted by Mr. Bernal.

    6. Finally, SM Radio contends that any requirement that its financial
       documentation include "donations to Pastor Bernal's ministry" would
       place an unconstitutional burden on the practice of religion. In this
       connection, SM Radio states that the programming on its station, and
       that of the other stations owned by Mr. Bernal, is primarily religious
       in nature, and that listeners' monetary donations "help defray the
       costs of station operation and expand the reach of the Bernal

   III. discussion

    7. The proposed forfeiture amount in this case was assessed in accordance
       with Section 503(b) of the Act, Section 1.80 of the Rules, and the
       Commission's Forfeiture Policy Statement. In examining SM Radio's
       Application for Review, Section 503(b) of the Act requires that we
       "take into account the nature, circumstances, extent and gravity of
       the violation and, with respect to the violator, the degree of
       culpability, any history of prior offenses, ability to pay, and such
       other matters as justice may require."

    8. As noted above, SM Radio does not deny that it violated Commission
       rules. Instead, it challenges the Bureau's need for financial
       information concerning its owner and affiliated companies in order to
       assess SM Radio's argument that the forfeiture should be reduced
       because of SM Radio's inability to pay. We conclude that the Bureau
       properly refused to reduce the forfeiture because the evidence
       suggests that SM Radio has not provided complete information on the
       totality of financial resources available to it. We also conclude that
       the status of SM Radio's owner as a religious broadcaster does not
       exempt him or his affiliated companies from providing complete
       information concerning all of the financial support he or his
       companies provide SM Radio in order to substantiate its inability to
       pay claim.

     A. SM Radio Is Not Entitled To A Reduction Of The Forfeiture Based On
        Its Professed Inability To Pay

    9. SM Radio argues that Section 503 of the Act and Commission rules and
       precedent limit consideration of a licensee's ability to pay to the
       revenues of that licensee. According to SM Radio, because it is the
       violator here, only its financial condition, and not that of its owner
       or affiliated entities, should be considered in assessing its ability
       to pay the forfeiture. SM Radio further argues that the forfeiture
       assessed in this case is excessive in light of SM Radio's revenues and
       should be reduced or remitted. For the reasons discussed below, we
       reject SM Radio's inability to pay claim.

   10. In order to make a successful claim of inability to pay, a licensee
       must provide adequate supporting financial documentation. Contrary to
       SM Radio's claims, we have consistently interpreted Section 503 and
       our rules as requiring consideration of all financial sources
       available to that licensee, not just the revenue of that specific
       licensee. As we stated recently:

   [W]hen a violator asserts an inability to pay a forfeiture amount relative
   to its financial situation, the Commission has the authority to look at
   the totality of the violator's particular financial circumstances in
   evaluating that claim. In that regard, the Commission has looked to
   potential sources of income available to a violator when considering a
   violator's ability to pay a forfeiture.

   Thus, if a licensee argues an inability to pay, it must provide evidence
   that it cannot pay the forfeiture as assessed, despite all of the
   financial resources available to it. Consequently, in assessing a
   violator's ability to pay, the Commission has reviewed not only the
   financial condition of the individual station at issue or the portion of
   its operations relevant to the underlying violation, but also in
   appropriate circumstances the revenues of affiliated operations of that
   licensee and even parent companies.

   11. In support of its inability to pay claim, SM Radio provided a
       statement from its accountants showing the licensee's revenues and
       expenses at the time of the violation. SM Radio has indicated,
       however, that it has received significant financial support from
       outside entities. For example, SM Radio has admitted that its
       "programmer" defrays the station's operating expenses, such as
       electric power. Moreover, in describing how it planned to come into
       compliance with our main studio rule, SM Radio stated it renovated
       Station KUOL's main studio and secured the services of two additional
       individuals to staff the studio (one of whom will reside at the
       studio). These expenses are not reflected in the financial information
       provided by SM Radio, nor has SM Radio identified the sources of
       funding for these expenses and remedial actions. Nevertheless, SM
       Radio has refused to provide financial information that would give a
       complete picture of the resources available to it, instead basing its
       inability to pay claim solely on SM Radio's financial statements.

   12. SM Radio's position is squarely contradicted by our precedent. In
       Radio X, for example, the licensee cited its limited revenues in
       support of its inability to pay claim, yet its financial statements
       indicated that the licensee had received substantial financial support
       from its parent company. Specifically, Radio X submitted financial
       statements indicating that its parent company made "all payments" on
       the licensee's behalf over a two-year period, and was obligated on
       debt incurred to finance Radio X's operations. Notwithstanding the
       relevance of this information, Radio X refused to submit its parent
       company's financial documents, arguing that the Commission should
       examine only the violating licensee's finances. We rejected Radio X's
       claim, concluding that "we cannot fully evaluate Radio X's ability to
       pay the forfeiture, including all its potential sources of income,
       without evaluating the financial condition of its parent company."

   13. Another case contradicting SM Radio's position is A-O Broadcasting
       Corporation, in which the licensee claimed limited or no revenues in
       support of its inability to pay argument, yet a number of
       circumstances indicated that the licensee had access to additional
       financial resources. Specifically, despite A-O  Broadcasting's claimed
       inability to pay the forfeiture, the licensee had the financial
       resources to construct and operate the previously silent station from
       a new location. In taking official notice of financial information
       provided in another proceeding, we noted that A-O Broadcasting's
       financial statements indicated that its operations and capital
       investments were funded primarily by loans from its shareholder and by
       a foundation whose president was also the owner and president of the
       licensee. Citing these apparent resources, we rejected A-O
       Broadcasting's inability to pay claim, concluding that the licensee
       had failed to "prove that it does not have access to the resources
       necessary to pay the forfeiture."

   14. Like the licensees in Radio X and A-O Broadcasting,  SM Radio clearly
       has financial resources beyond those described in its financial
       statements, yet has failed to provide information about those
       resources. By SM Radio's own admission, its programmer pays its
       operating expenses, and its owner or affiliated companies appear to
       have paid its ownership fees, for renovation of its main studio, and
       for the hiring of new employees. As noted in A-O Broadcasting, the
       licensee has the burden of proving that it lacks the financial means
       to pay a Commission forfeiture. Because SM Radio has not provided
       financial data concerning all "potential sources of income available
       to" it, we conclude that the record is insufficient to substantiate SM
       Radio's inability to pay claim and we therefore affirm the Bureau's
       order rejecting it.

   15. With respect to SM Radio's argument that consideration of the revenues
       of its affiliated entities would be tantamount to piercing the
       corporate veil, we note that we do not have sufficient information at
       this time to determine whether the corporate veil should be pierced,
       nor do we seek to do so. Rather, our only objective is to evaluate SM
       Radio's inability to pay claim by looking at all of its financial
       resources, consistent with precedent and policy.

   B. SM Radio's Gross Revenues Are Appropriately Considered In Assessing Its
   Inability  To Pay

   16. SM Radio further argues that the Commission may not seek information
       about its owner and affiliated companies because those revenues are
       primarily religious in nature. The Commission typically has relied
       upon a licensee's documented gross revenue in gauging its ability to
       pay a forfeiture. In reviewing a licensee's financial documentation,
       the Commission does not consider nor distinguish the sources of a
       licensee's income. Additionally, the Commission does not consider the
       status of the broadcaster or the nature of the programming. In this
       connection, the Commission has stated that "a religious group, like
       any other, may buy and operate a licensed radio or television
       station.... But, like any other group, a religious sect takes its
       franchise `burdened by enforceable public obligations.'" Accordingly,
       SM Radio, by conducting its ministry through use of a radio license,
       "has elected to occupy a forum that is not only distinctly public in
       character, but one of a limited number of such public forums" and is
       subject to the Commission's requirements and policies. We conclude
       that SM Radio's status as a religious broadcaster does not shelter it
       from its obligations to operate in accordance with its
       responsibilities as a Commission licensee, nor exempt certain sources
       of income from consideration in gauging its ability to pay.


   17. Accordingly, IT IS ORDERED that, pursuant to Section 1.115 of the
       Rules, SM Radio, Inc.'s Application for Review of the Memorandum
       Opinion and Order IS DENIED and the Enforcement Bureau's Memorandum
       Opinion and Order IS AFFIRMED for the reasons set forth herein.

   18. IT IS FURTHER ORDERED that a copy of this Order on Review shall be
       sent by First Class and Certified Mail Return Receipt Requested to SM
       Radio, Inc., P.O. Box 252, McAllen, Texas, 78502, and to its counsel,
       Barry D. Wood, Esq., Wood, Maines & Brown, Chartered, 1827 Jefferson
       Place, N.W., Washington, DC 20036.


   Marlene H. Dortch


   SM Radio's Application for Review (filed on January 27, 2005)
   ("Application for Review").

   SM Radio, Inc., Memorandum Opinion and Order, 19 FCC Rcd 24812 (Enf. Bur.
   2004) ("Bureau Order").

   47 C.F.R. S: 73.1125.

   SM Radio, Inc., Order of Forfeiture, 19 FCC Rcd 6155 (Enf. Bur. 2004)
   ("Forfeiture Order").

   Notice of Apparent Liability for Forfeiture, NAL/Acct. No. 200332500011
   (Enf. Bur., Dallas Office, released December 19, 2003). The Bureau issued
   an erratum on January 9, 2004, amending the NAL to reflect that the
   NAL/Acct. No. is "200432500002." Erratum, NAL/Acct. No. 200432500002 (Enf.
   Bur., Dallas Office, released January 9, 2004).

   Bureau Order, 19 FCC Rcd at 24813, P: 6 (noting specifically that Paulino
   Bernal was the 100% owner of SM Radio, Inc., Paulino Bernal Evangelism, La
   Radio Cristiana Network, Inc., and Consolidated Radio, Inc. as well as the
   individual licensee of several broadcast stations.).

   Personally and through a network of companies, SM Radio's owner controls
   19 commercial radio stations, including Station KUOL(AM). SM Radio is
   owned by Paulino Bernal, who also is the individual licensee for two AM
   and two FM radio stations in Texas. Mr. Bernal also the 100% owner of La
   Radio Cristiana Network, Inc., and Consolidated Radio, Inc., which control
   three AM and three FM radio stations in Texas. Through his company,
   Paulino Bernal Evangelism, Mr. Bernal and his family control eight
   additional Texas FM radio stations, as well as 26 noncommercial
   educational FM translator stations in various locations. See Ownership
   Report For Noncommercial Educational Broadcast Station (FCC Form 323-E)
   filed by Paulino Bernal Evangelism, April 1, 2005 (File No.

   Application for Review at 2.

   47 U.S.C. S: 503(b).

   Application for Review at 3.

   Application for Review at 7.



   47 U.S.C. S: 503(b).

   47 C.F.R. S: 1.80.

   The Commission's Forfeiture Policy Statement and Amendment of Section 1.80
   of the Rules to Incorporate the Forfeiture Guidelines, Report and Order,
   12 FCC Rcd 17087 (1997), recon. denied, 15 FCC Rcd 303 (1999) ("Forfeiture
   Policy Statement").

   47 U.S.C. S: 503(b)(2)(E).

   See PJB Communications of Virginia, Inc., Memorandum Opinion and Order, 7
   FCC Rcd 2088, 2089 P: 8 (1992) ("PJB Communications"); see also Forfeiture
   Policy Statement, 12 FCC Rcd at 17106-07 P: 43.

   Radio X Broadcasting Corporation, Memorandum Opinion and Order, 21 FCC Rcd
   12209, 12216 (2006) ("Radio X") (emphasis added); see also Forfeiture
   Policy Statement, 12 FCC Rcd at  17158 P: 113 ("As for forfeitures that a
   licensee believes it cannot afford to pay relative to its financial
   situation, we must look to the totality of the circumstances surrounding
   the individual case.")

   KASA Radio Hogar, Memorandum Opinion and Order, 17 FCC Rcd 6256, 6258
   (2002) ("[I]t is the Commission's general policy to consider the financial
   condition of a licensee's consolidated operations, not just the financial
   condition of an individual station or a limited portion of its
   operations.") ;  Emery Telephone, Memorandum Opinion and Order, 13 FCC Rcd
   23854, 23859-60 P: 13 (1998), recon. denied, 15 FCC Rcd 7181 (1999)
   ("income from other affiliated operations, as well as the financial status
   of the station(s) in question, can be taken into account" in evaluating an
   inability to pay claim); Hinton Telephone Co., Memorandum Opinion and
   Order, 7 FCC Rcd 6643, 6644 (CCB 1992), review denied, 8 FCC Rcd 5176)
   ("We find reviewing the data for consolidated operations rather than
   financial data for Station WQZ687 more accurately portrays whether a
   licensee can pay a proposed forfeiture. Our determination of a licensee's
   ability to pay should reflect whether the licensee in general is
   financially capable of paying a forfeiture, not whether financial data
   from a limited portion of its operations can sustain a forfeiture.").

   Radio X, 21 FCC Rcd at 12217 (parent company financial statements relevant
   to evaluate inability to pay reduction request by parent's subsidiary
   company);  Forfeiture Policy Statement, 12 FCC Rcd at  17158 P: 113
   ("[t]he parent company's ability to pay, therefore, is relevant in
   evaluating the subsidiary company's ability to pay the forfeiture"); Alpha
   Broadcasting Corporation, Memorandum Opinion and Order, 102 FCC 2d 18 P: 6
   (1984) ("In assessing the solvency of a broadcast licensee for purposes of
   reducing a forfeiture, the Commission will examine the finances of the
   parent corporation as well as its subsidiary to determine how the
   forfeiture will affect the entire corporate financial position.").

   Petition for Reconsideration at Attachment B. SM Radio has requested
   confidential treatment of its revenue information; therefore, we do not
   discuss the specific amounts here. Id. at 2-5.

   See Petition for Reconsideration at 5, n.  See also id. at 5 (describing
   its programmer as "the religious organization that provides the bulk of
   the programming aired on KUOL"). But see Application for Review at 7
   (suggesting the "programmer" is the station owner).

   See Supplement to Petition for Reconsideration, Declaration of Paulino
   Bernal. In addition, Commission records indicate that one of the
   affiliated licensees, La Radio Cristiana Network, Inc., has paid SM
   Radio's ownership fees. See, e.g., KUOL-AM Station File, Facility ID#
   60694, FCC Reference Information Center.

   Application for Review at 3.

   Radio X, 21 FCC Rcd at 12217, P:19.


   A-O Broadcasting Corporation, Memorandum Opinion and Order, 20 FCC Rcd
   756, 761-762 (2005) ("A-O Broadcasting").

   Id., 20 FCC Rcd at 758, 761.

   Id., 20 FCC Rcd at 762, P:18..

   See paragraph 11 and note 24 supra.

   In light of our decision here, SM Radio's argument that the Bureau lacked
   delegated authority is moot.

   See Publix Network Corporation et al., Order to Show Cause and Notice of
   Opportunity for Hearing, 17 FCC Rcd 11487, 11504-05 (2002), consent decree
   ordered, 20 FCC Rcd 5857 (2005).

   See A-O Broadcasting, 20 FCC Rcd at 756 n. 23 (noting that a violator's
   whole financial picture is needed to fully assess its inability to pay
   claim, and is not an attempt to pierce the corporate veil).


   See Forfeiture Policy Statement, 12 FCC Rcd at 17106-07; see also KASA
   Radio, 17 FCC Rcd at 6257; PJB Communications, 7 FCC Rcd at 2089.

   Licensees that wish to claim reduction in forfeiture for inability to pay
   are instructed to provide: (1) federal tax returns for the most recent
   three-year period; (2) financial statements prepared according to
   generally accepted accounting practices ("GAAP"); or (3) some other
   reliable and objective documentation that accurately reflects the
   petitioner's current financial status. Any claim of inability to pay must
   specifically identify the basis for the claim by reference to the
   financial documentation submitted.

   See, e.g., Rev. Yvon Louis, Forfeiture Order, 18 FCC Rcd. 16187 (Enf. Bur.
   2003), recon. denied, 19 FCC Rcd. 17699 (Enf. Bur. 2004).

   King's Garden, Inc. v. FCC, 498 F.2d 51, 60 (D.C. Cir. 1974), cert.
   denied, 419 U.S. 996 (1974) (citing Office of Communication of the United
   Church of Christ, 359 F.2d 994, 1003 (D.C. Cir. 1966)).

   Faith Center, Inc., Memorandum Opinion and Order, 82 FCC 2d 1, P: 44

   47 C.F.R. S: 1.115.

   (...continued from previous page)


   Federal Communications Commission FCC 08-32


   Federal Communications Commission FCC 08-32