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Before the
Federal Communications Commission
Washington, D.C. 20554
)
In the Matter of )
File No. EB-09-IH-0012
CASCADE ACCESS, L.L.C. )
NAL/Acct. No.200932080027
Applicant for 700 MHz band licenses in )
Auction 73 FRN No. 0004381547
)
)
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: February 10, 2009 Released: February 10, 2009
By the Chief, Enforcement Bureau:
I. Introduction
1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we find
that Cascade Access, L.L.C. ("Cascade"), an applicant to participate
in the Commission's Auction 73, apparently engaged in a prohibited
communication and failed to notify the Commission, in apparent
violation of Sections 1.2105(c)(1) and (c)(6) of the Commission's
rules. For the reasons stated below, we conclude that Cascade
apparently is liable for a monetary forfeiture in the amount of
$75,000.
II. Background
2. Cascade and Cellco Partnership d/b/a Verizon Wireless ("Verizon
Wireless") each timely submitted short-form applications to
participate in Auction 73. Cascade selected one license on which to
bid, CMA547-B (Nevada 5-White Pine), while Verizon Wireless selected
all 1,099 of the licenses available in the auction. Cascade did not
identify any other party with which it had an agreement. Verizon
Wireless disclosed that it had entered several agreements with other
entities relating to the licenses being auctioned, which did not
include Cascade or any Cascade-affiliated entities. Because the two
entities did not disclose the existence of a bidding agreement between
themselves, the Commission's anti-collusion rule prohibited them from
communicating with each other about bids or bidding strategies during
the period that the rule was in effect.
3. For Auction 73, the prohibitions of the anti-collusion rule applied
from 6:00 p.m. ET on December 3, 2007, the short-form application
filing deadline, until 6:00 p.m. ET on April 3, 2008, the down payment
deadline. Bidding in Auction 73 began on January 24, 2008 and
concluded on March 18, 2008.
4. While bidding remained underway, counsel for Verizon Wireless
submitted a letter, dated February 15, 2008, to the Chief of the
Auctions and Spectrum Access Division of the Wireless
Telecommunications Bureau ("WTB"). Therein, Verizon Wireless reported
the unsolicited receipt of a February 11, 2008 e-mail communication,
in possible violation of Section 1.2105(c) of the Commission's rules,
from Bob Milliken. Verizon Wireless's report states that it "believes
Mr. Milliken is associated with Rio Virgin Telephone Company, Inc.
("Rio Virgin"), the parent company of Cascade Access, L.L.C., an
applicant in FCC Auction 73." Thereafter, WTB referred the matter to
the Commission's Enforcement Bureau for investigation.
5. The Enforcement Bureau commenced its investigation of Cascade's
compliance with Section 1.2105(c) of the Commission's rules by sending
a letter of inquiry ("LOI") to Cascade requesting information about
the referenced e-mail communication. In its response to the LOI,
Cascade identifies Mr. Milliken as a board member of Cascade
Utilities, Inc. Cascade clarifies that Cascade Utilities is the 100
percent owner of Rio Virgin and an affiliate of Cascade. Cascade
confirms that on February 11, 2008, while bidding in Auction 73 was
underway, Mr. Milliken, sent an e-mail to William Hickey, Executive
Director - Strategic Alliances for Verizon Wireless, stating, "[w]e
have dropped out of the 700 mhz auction" and are "ready to talk/meet"
with Verizon Wireless. Cascade states that the purpose of the e-mail
was "to address when a representative of Cascade could communicate
with Verizon Wireless regarding Verizon's interest in the acquisition
of Rio Virgin Telephone's 33.333% ownership in the AZ 1 RSA Mohave
Wireless Partnership."
6. Cascade did not report this communication to the Commission because,
according to Cascade, the e-mail did "not include any information
requiring disclosure." In its February 15, 2008, letter to WTB
reporting the communication, Verizon represented that Hickey promptly
responded to Milliken that the parties could not have discussions
because they were then subject to the Commission's anti-collusion
rule. We have no evidence that Verizon Wireless violated any
Commission rule.
III. Discussion
7. Under Section 503(b)(1) of the Communications Act of 1934, as amended
(the "Act"), any person who is determined by the Commission to have
willfully or repeatedly failed 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. 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.
The Commission will then issue a forfeiture if it finds, by a
preponderance of the evidence, that the person has willfully or
repeatedly violated the Act or a Commission rule. As discussed below,
we conclude under this standard that Cascade is apparently liable for
a forfeiture for its apparent willful violation of Section 1.2105(c)
of the Commission's rules.
A. Cascade Apparently Violated The Anti-Collusion Rules
8. Section 1.2105(c)(1) of the Commission's rules states, in pertinent
part:
[A]fter the [FCC Form 175] short-form application filing deadline, all
applicants for licenses in any of the same geographic license areas are
prohibited from cooperating or collaborating with respect to, discussing
with each other, or disclosing to each other in any manner the substance
of their own, or each other's, or any other competing applicants' bids or
bidding strategies, or discussing or negotiating settlement agreements,
until after the down payment deadline, unless such applicants are members
of a bidding consortium or other joint bidding arrangement identified on
the bidder's short-form application . . . .
In addition, Section 1.2105(c)(6) of the Commission's rules requires "any
applicant that makes or receives a communication of bids or bidding
strategies prohibited under [Section 1.2105(c)(1) of the Commission's
rules to] report such communication in writing to the Commission
immediately, and in no case later than five business days after the
communication occurs."
9. The Commission adopted its anti-collusion rule to prevent collusive
conduct during auctions, to facilitate the detection of such
misconduct, and to maintain public confidence in the integrity of the
auction process. In so doing, the Commission expressed concern "that
collusive conduct by bidders prior to or during the auction process
could undermine the competitiveness of the bidding process and prevent
the formation of a competitive post-auction market structure." Thus,
Section 1.2105(c) of the Commission's rules prohibits applicants for
any of the same geographic license areas from communicating with each
other during an auction about their own, or each other's, or any other
competing applicant's bids or bidding strategies, or discussing
settlement agreements, unless such applicants are members of a bidding
consortium or other bidding arrangement that they have identified in
their FCC Form 175 ("short-form") applications. The Commission has
also stressed that any applicant found in violation of the
anti-collusion rule faces the potential sanctions of license
revocation or monetary forfeiture and may be prohibited from
participating in future auctions.
10. The prohibition against certain communications set forth in Section
1.2105(c) takes effect on the pre-auction short-form application
deadline and remains in place until the down payment deadline, after
the close of the auction. This prohibition expressly relates to all
auction applicants, which are defined by Section 1.2105(c)(7)(i) to
include "all controlling interests in the entity submitting a
short-form application to participate in an auction (FCC Form 175), as
well as all holders of" certain ownership interests, "and all officers
and directors of that entity." In the instant case, the prohibition on
certain communications for applicants in Auction 73, including Cascade
and Verizon Wireless, commenced on December 3, 2007, and ended on
April 3, 2008.
11. Cascade does not dispute that it was an applicant and qualified bidder
in Auction 73, and that during such auction, Milliken sent the
referenced e-mail to Verizon Wireless. Although Cascade asserts that
Milliken acted on behalf of Rio Virgin, it also acknowledges that the
communication apparently was intended to address when a representative
of Cascade could talk to Verizon Wireless about matters relating to
Verizon Wireless's interest in a transaction involving Rio Virgin. Mr.
Milliken's email was sent from his account at cuaccess.net. In
addition, in referring to Cascade, Mr. Milliken's email used the term
"we." Thus, Mr. Milliken represented himself as speaking for Cascade
and his e-mail plainly disclosed to Verizon Wireless information about
Cascade's status in Auction 73. Indeed, by representing to Verizon
Wireless that Cascade had dropped out the auction, Cascade
affirmatively disclosed to another auction applicant information about
its bidding strategy, in apparent violation of Section 1.2105(c)(1) of
the Commission's rules. By informing Verizon Wireless that Cascade was
no longer bidding, Cascade's disclosure could have undermined the
competitiveness of the bidding process and jeopardized the formation
of a competitive post-auction market structure. Furthermore, given the
nature of the communication, Cascade was required, but failed, to
disclose this communication to the Commission, in apparent violation
of Section 1.2105(c)(6) of the Commission's rules.
A. Proposed Forfeiture
12. The Commission's Forfeiture Policy Statement specifies that the
Commission shall impose a forfeiture based upon consideration of the
factors enumerated in Section 503(b)(2)(E) of the Act, 47 U.S.C. S:
503(b)(2)(E), such as "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."
13. In considering the factors set forth in the Forfeiture Policy
Statement. we believe a forfeiture is warranted in this instance
against Cascade for its apparent willful violation of Sections
1.2105(c)(1) and (c)(6) of the Commission's rules. It is of no matter
that the underlying intent of the e-mail communication may have
involved a possible transaction between Rio Virgin and Verizon
Wireless involving their interests in a third communications entity,
which the party alleges is not auction related. In this regard,
Section 312(f)(1) of the Act defines willful as "the conscious and
deliberate commission or omission of such act, irrespective of any
intent to violate . . . any rule or regulation of the Commission . . .
." Thus, although Milliken may not have intended to violate Section
1.2105(c), it is clear that he presented himself as a representative
of Cascade and initiated a communication with Verizon Wireless
containing information on Cascade's bidding. Consequently, for the
purposes of Section 503(b)(1) of the Act, Cascade's conduct was
willful.
14. We have carefully considered the facts of this case, including
Cascade's explanation for its conduct and its history of compliance,
as well as the importance that the Commission's anti-collusion and
collusion notification provisions play in protecting the integrity of
its auctions. On balance, and in light of our legal precedent, we find
that a forfeiture in the amount of $75,000 against Cascade is
appropriate in this instance.
IV. ordering clauses
15. ACCORDINGLY, IT IS ORDERED, pursuant to Section 503(b) of the
Communications Act of 1934, as amended, 47 U.S.C. S: 503(b), and
Section 1.80 of the Commission's rules, 47 C.F.R. S: 1.80, that
Cascade Access, L.L.C., is hereby NOTIFIED of its APPARENT LIABILITY
FOR FORFEITURE in the amount of seventy five thousand dollars
($75,000) for its willful violation of Sections 1.2105(c)(1) and
(c)(6) of the Commission's rules, 47 C.F.R. S:S: 1.2105(c)(1) and
(c)(6).
16. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's
rules, 47 C.F.R. S: 1.80, that within thirty (30) calendar days of the
release date of this Notice, Cascade Access, L.L.C., SHALL PAY the
full amount of the proposed forfeiture or SHALL FILE a written
statement seeking reduction or cancellation of the proposed
forfeiture.
17. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Account Number and FRN Number referenced
above. Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payment by wire transfer may be made to ABA Number 021030004,
receiving bank TREAS/NYC, and account number 27000001. For payment by
credit card, an FCC Form 159 (Remittance Advice) must be submitted.
When completing the FCC Form 159, enter the NAL/Account number in
block number 23A (call sign/other ID), and enter the letters "FORF" in
block number 24A (payment type code). Requests for full payment under
an installment plan should be sent to: Chief Financial Officer -
Financial Operations, 445 12th Street, S.W., Room 1-A625, Washington,
D.C. 20554. Please contact the Financial Operations Group Help Desk
at 1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
regarding payment procedures. Cascade shall also send electronic
notification on the date said payment is made to
Hillary.DeNigro@fcc.gov and to Gary.Schonman@fcc.gov.
18. The response, if any, must be mailed to Hillary S. DeNigro, Chief,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, 445 12th Street, SW, Room 4-C330,
Washington, D.C. 20554, and must include the NAL/Account Number
referenced above. In addition, to the extent practicable, a copy of
the response, if any, should also be transmitted via e-mail to
Hillary.DeNigro@fcc.gov, Gary.Schonman@fcc.gov, and
Judy.Lancaster@fcc.gov.
19. The Commission will not consider reducing or canceling a forfeiture in
response to a claim of inability to pay unless the respondent submits:
(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 respondent'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.
20. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
For Forfeiture shall be sent, by Certified Mail Return Receipt
Requested, to Brenda C. Crosby, President, Cascade Access, L.L.C., 303
SW Zobrist, Estacada, Oregon 97023, and to Thomas Gutierrez, Esq.,
Lukas, Nace, Gutierrez & Sachs, LLP, 1650 Tysons Boulevard, Suite
1500, McLean, Virginia 22102.
FEDERAL COMMUNICATIONS COMMISSION
Kris Anne Monteith
Chief, Enforcement Bureau
See 47 C.F.R. S:S: 1.2105(c)(1) and (c)(6).
See FCC Form 175 of Cascade Access, L.L.C., Application to Participate in
an FCC Auction, submitted on December 1, 2007, 9:49 a.m. ET, resubmitted
with modifications on January 4, 2008, 2:47 p.m. ET; FCC Form 175 of
Cellco Partnership d/b/a Verizon Wireless, Application to Participate in
an FCC Auction, submitted on December 3, 2007, 2:00 p.m. ET, resubmitted
with modifications on December 31, 2007, 2:06 p.m. ET. Cascade and Verizon
Wireless were classified as eligible to participate in the auction. See
"Auction of 700 MHz Band Licenses: 214 Bidders Qualified to Participate in
Auction 73," Public Notice, 23 FCC Rcd 276 (2008).
See 47 C.F.R. S: 1.2105(c)(1).
Letter from David H. Solomon and Lawrence J. Movshin, Counsel to Cellco
Partnership d/b/a Verizon Wireless, to Margaret Wiener, Chief of the
Auctions and Spectrum Access Division, Wireless Telecommunications Bureau,
dated February 15, 2008, at 1. Verizon Wireless properly requested
confidential treatment of the letter on the basis of anonymous bidding
procedures then in effect. See Public Notice, Auction of 700 MHz Band
Licenses, AU Docket No. 07-157, DA 08-83 (WTB, rel. Jan. 14, 2008). Those
procedures, as they applied to Auction 73, and, consequently, the basis
for confidential treatment of the Verizon Wireless letter, have since
lapsed.
See Letter from Gary Schonman, Special Counsel, Investigations & Hearings
Division, Enforcement Bureau, Federal Communications Commission, to Brenda
C. Crosby, President, Cascade, L.L.C., dated January 14, 2009.
See Letter from Thomas Gutierrez, Esq., to Marlene H. Dortch, Secretary
Federal Communications Commission, dated January 26, 2009 ("Response") at
1.
Response at 1, 2 and Declaration of Robert G. Milliken.
Response at 2 and Exhibit I (copy of 2/11/2008 email from Bob Milliken's
cuaccess.net account to William Hickey).
Response at 2.
Response at 3.
See 47 U.S.C. S: 503(b)(1)(B); 47 C.F.R. S: 1.80(a)(1); see also 47 U.S.C.
S: 503(b)(1)(D)(forfeitures for violation of 18 U.S.C. S: 1464). Section
312(f)(1) of the Act defines willful as "the conscious and deliberate
commission or omission of [any] act, irrespective of any intent to
violate" the law. 47 U.S.C. S: 312(f)(1). The legislative history to
Section 312(f)(1) of the Act clarifies that this definition of willful
applies to both Sections 312 and 503(b) of the Act, H.R. Rep. No. 97-765,
97th Cong. 2d Sess. 51 (1982), and the Commission has so interpreted the
term in the Section 503(b) context. See, e.g., Southern California
Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388
(1991) ("Southern California Broadcasting Co.").
See 47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).
See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589,
7591, P: 4 (2002) (forfeiture paid).
47 C.F.R. S: 1.2105(c)(1).
47 C.F.R. S: 1.2105(c)(6).
See Implementation of Section 309(j) of the Communications Act -
Competitive Bidding, Second Report and Order, 9 FCC Rcd 2348, 2386-88,
P:P: 221-226 (1994) ("Competitive Bidding Second Report and Order") ("[W]e
believe that the competitiveness of the auction process and of
post-auction market structure will be enhanced by certain additional
safeguards designed to reinforce existing laws and facilitate detection of
collusive conduct."); Amendment of Part 1 of the Commission's Rules -
Competitive Bidding Procedures, Seventh Report and Order, 16 FCC Rcd 17546
(2001) (adopting rule imposing continuing obligation on auction applicants
to disclose communications that appear to violate the anti-collusion
rule).
Competitive Bidding Second Report and Order, 9 FCC Rcd 2348, 2387, P: 223;
see also Implementation of Section 309(j) of the Communications Act -
Competitive Bidding, Memorandum Opinion and Order, 9 FCC Rcd 7684,
7687-7688, P: 10 (1994) ("Our anti-collusion rules are intended to protect
the integrity and robustness of our competitive bidding process.").
See, e.g., Implementation of Section 309(j) of the Communications Act -
Competitive Bidding, Fifth Report and Order, 9 FCC Rcd 5532, 5570-71
(1994). In anticipation of Auction 73, WTB issued several Public Notices
specifically warning auction applicants against violating the
anti-collusion rule by communicating about bids, bidding strategies or
settlements with another applicant seeking to bid for licenses in the same
geographic license areas, unless the applicants identified each other in
their applications as having entered into agreements under section
1.2105(a)(2)(viii). See also "Auction of 700 MHz Band Licenses Scheduled
for January 24, 2008; Notice and Filing Requirements, Minimum Opening
Bids, Reserve Prices, Upfront Payments, and Other Procedures for Auctions
73 and 76," Public Notice, 22 FCC Rcd 18,141, 18,149-54 P:P: 15-34 (2007).
See 47 C.F.R. S: 1.2105(c)(1). See also Amendment of Part 1 of the
Commission's Rules - Competitive Bidding Procedures, Order on
Reconsideration of the Third Report and Order, Fifth Report and Order, and
Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 15,923,
15,297-298, P:P: 7-8 (2000).
Cascade states that Milliken is a director of Cascade Utilities, an
affiliate of Cascade. We note that the two entities appear to be commonly
controlled.
The Commission's Forfeiture Policy Statement and Amendment of Section 1.80
of the Rules to Incorporate the Forfeiture Guidelines, 12 FCC Rcd 17,087,
17,113 (1997), recons. denied 15 FCC Rcd 303 (1999) ("Forfeiture Policy
Statement"); 47 C.F.R. S: 1.80(b).
Id. at 17,100-101, P: 27.
47 U.S.C. S: 312(f)(1) (emphasis added). See, e.g., Southern California
Broadcasting Co.
See, e.g., Star Wireless, LLC and Northeast Communications of Wisconsin,
Inc., Order on Review, 22 FCC Rcd 8943 (2007), appeal denied, Star
Wireless, LLC v. FCC & USA, No. 07-1190 (D.C. Cir. April 22. 2008). In the
Order on Review, the Commission affirmed the Bureau's determination that
Star Wireless and Northeast Communications were each liable for a monetary
forfeiture for violating Section 1.2105(c) of the Commission's rules, but
reduced the forfeiture from $100,000 to $75,000 in light of each company's
past history of compliance with Commission rules.
(Continued from previous page)
(continued....)
Federal Communications Commission DA 09-207
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Federal Communications Commission DA 09-207