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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Notice of Apparent Liability for Forfeiture of )
)
ENSERCH CORPORATION ) File No. 920EF0033
)
Licensee of 23 Fixed Microwave Service Stations )
and 147 Private Land Mobile Radio Service Stations )
Operating throughout Texas. )
FORFEITURE ORDER
Adopted: July 24, 2000 Released: July 27,
2000
By the Commission:
I. INTRODUCTION
1. In this order, we find that ENSERCH Corporation
(``ENSERCH'')1 transferred control of 152 licenses2 without
obtaining the requisite authority from the Commission, in willful
and repeated violation of Section 310(d) of the Communications
Act of 1934, as amended (``Act''), 47 U.S.C. § 310(d), and former
Section 101.53 of the Commission's rules, 47 C.F.R. § 101.53.3
We conclude, based upon our review of ENSERCH's August 23, 1999,
``Response to Notice of Apparent Liability for Forfeiture''
(``ENSERCH Response''), that ENSERCH is liable for a forfeiture
in the amount of $150,000. II. BACKGROUND
2. On August 5, 1997, ENSERCH, a natural gas company,
merged with Texas Utilities Company ("TUC"). TUC issued
15,861,272 shares of common stock, worth approximately $565
million, to former holders of ENSERCH common stock. As a result
of the transaction, ENSERCH became a wholly owned subsidiary of
TUC. Prior to consummating the merger, however, ENSERCH did not
request or obtain Commission consent to the substantial transfer
of control of its stations to TUC.
3. Eric H. Peterson, a partner in the law firm that serves
as TUC's General Counsel, states that he and counsel for ENSERCH
undertook extensive efforts to obtain the necessary regulatory
approvals for the merger. Mr. Peterson declares that ``those
responsible for the transaction failed to focus on the fact that
ENSERCH held FCC licenses and that, consequently, the transfer of
control of ENSERCH would also require prior FCC consent.'' See
ENSERCH Response, Exhibit 1, p. 2. He speculates that this
failure resulted because TUC was under pressure to consummate the
transaction quickly because of rumors that another company was
interested in acquiring ENSERCH, and that the due diligence
effort therefore did not include a review of ENSERCH's licenses.
4. In October 1997, Texas Utilities Services, Inc.
("TUS"), another subsidiary of TUC, sought to modify one of its
private land mobile licenses to add two frequencies that were
licensed to ENSERCH at a location just two blocks away. When
frequency coordinators questioned the proposed short spacing of
the stations, ENSERCH employee Robert Upperman ("Upperman")
directed a letter, dated January 22, 1998, to the Wireless
Telecommunications Bureau to clarify the status of ENSERCH's
licenses. In that letter, Upperman represented that "ENSERCH
Corporation is a Texas Utilities Company. Please change the
license to read: Texas Utilities Services, Inc." See ENSERCH
Response, Exhibit 5. The Upperman letter gave TUS's address as
ENSERCH's new address. One day later, on January 23, 1998, TUS
employee Rudolph Perry ("Perry") directed a similar letter to the
Commission, stating: "ENSERCH Corporation is a wholly owned
Texas Utilities company [sic]." See ENSERCH Response, Exhibit 6.
Perry stated in his letter that the Commission should contact him
or Upperman for further information.
5. By letter, dated February 20, 1998, the Commission's
staff informed Mr. Upperman:
Your name change indicates a possible change in
ownership, corporate structure, or control, which would
require a modification as defined in Rule 90.135. If
ownership, corporate structure, or control has changed,
you must file FCC Forms 600 and 1046, or FCC Form 490
or FCC Form 703 as appropriate.
See letter dated February 20, 1998 from Informal Complaints &
Public Inquiry Branch, Enforcement and Consumer Information
Division, Wireless Telecommunications Bureau, to Robert E.
Upperman (ENSERCH Response, Exhibit 8). Robert B. Morris, a
senior engineer at TUS, states that he believes he received the
February 20, 1998 letter. Mr. Morris states, however, that he
did not believe a response to the letter was necessary because
TUS no longer needed the two licenses for which they were
applying. Mr. Morris claims that it never occurred to him that
the letter concerned a broader transfer of control issue because
it was his understanding that so long as ENSERCH remained the
licensee, changes in the ownership of ENSERCH did not require
Commission approval. ENSERCH admits, ``to someone who understood
the FCC rules regarding transfers of control, the FCC Letter
would have prompted an immediate response.'' ENSERCH also
concedes that the persons who were involved in licensing
activities for TUS and ENSERCH did not understand the transfer of
control provisions of the Act and the Commission's rules. See
ENSERCH Response, p. 5.
6. At some unspecified time later, Mr. Morris read a trade
journal article about the Commission imposing a penalty upon
another utility that had merged without prior Commission
approval. Mr. Morris then raised questions about the ENSERCH/TUC
merger with his superiors. On August 20, 1998, counsel submitted
two separate applications requesting Commission consent to the
substantial transfer of control of ENSERCH's 23 fixed point-to-
point microwave and 147 Private Land Mobile Radio Service
(``PLMRS'') licenses, nunc pro tunc. The Commission staff
authorized the transfer of control of the 147 PLMRS licenses on
September 8, 1998, and the Commission staff authorized the
transfer of control of the 23 fixed point-to-point microwave
licenses on April 30, 1999. The authorization for the 23
microwave licenses indicated that it was without prejudice to
possible enforcement action. No such condition was placed on the
authorization for the land mobile licenses. The authorizations
did not indicate that the grant of Commission consent was nunc
pro tunc.4
7. On July 23, 1999, the Commission released a Notice of
Apparent Liability for a Forfeiture (``NAL'') in which it found
that ENSERCH had apparently violated Section 310(d) of the
Communications Act of 1934, as amended, 47 U.S.C. § 310(d).
ENSERCH Corporation, 16 Comm. Reg. 864 (1999). The Commission
proposed a $510,000 forfeiture against ENSERCH. ENSERCH filed
its response on August 23, 1999.
8. Frank Donovan, Manager of Telecommunications for TUS,
admits ``that the failure to seek prior FCC consent to the merger
or more quickly to respond to FCC correspondence shows that
greater attention to such matters must be taken by company
executives with appropriate matters referred to legal counsel.''
See ENSERCH Response, Exhibit 4. As a result, all correspondence
from the Commission, except for notices of renewal of licenses,
must be forwarded to the Manager of Telecommunications and the
Transport Technology Manager. If either manager has questions
about the correspondence, they must refer the correspondence to
the Vice President, Information Technology, and to counsel. Mr.
Peterson, in his firm's role as general counsel, has now required
that FCC licensing will now be a separate item on the due
diligence for every merger or acquisition, even if the companies,
on their face, are not involved in communications activities.
III. DISCUSSION
9. In its Response to the NAL, ENSERCH states that it
``does not contest the Commission's determination that a
violation of its rules occurred or even, if found to be within
the relevant statute of limitations, that consistent with
Commission practice, a monetary penalty is appropriate.''
ENSERCH Response, p. 7. It argues, however, that the forfeiture
is barred by the statute of limitations and that the proposed
forfeiture amount exceeds the statutory maximum. It also argues
that a forfeiture cannot be imposed for the 147 private land
mobile licenses because no condition contemplating enforcement
action was placed on the Commission's consent to the transfer of
control. ENSERCH devotes most of its response to arguing that
the $510,000 forfeiture proposed in the NAL is excessive.
ENSERCH argues that the proposed forfeiture is inconsistent with
precedent, that the Commission placed undue weight on the fact
that the transfer involved 170 stations, and that the Commission
placed undue weight on aggravating factors while ignoring
mitigating factors. For the reasons discussed below, we lower
the amount to $150,000.
10. We reject ENSERCH's statute of limitations argument
because it misconstrues the nature of the violation and the NAL.
Although the Commission may not issue a forfeiture against a
wireless licensee for a violation that occurred more than one
year prior to the issuance of the notice of apparent liability
(47 U.S.C. § 503(b)(6)(B)), Commission precedent holds that an
unauthorized transfer of control is a continuing violation that
does not end until the Commission grants a transfer of control
application. Benito Rish, 10 FCC Rcd 2861 (1995), see also Puget
Sound Energy, Inc., 14 FCC Rcd 9111, 9113 (WTB 1999). In this
case, the unauthorized substantial transfer of control began on
August 5, 1997 and continued until, at the earliest, September 8,
1998, when the first transfer of control application was granted.
ENSERCH thus is liable for a forfeiture for the period from July
23, 1998, or one year from the day when the NAL was released,
until, at the earliest, September 8, 1998.
11. Alternatively, ENSERCH argues that the Commission may
not rely upon circumstances that occurred more than one year
prior to the issuance of the NAL. While the Commission may not,
in this case, find ENSERCH liable for violations committed prior
to July 23, 1998, it may consider facts arising before that date
in determining an appropriate forfeiture amount. In Eastern
Broadcasting Corp., 10 FCC 2d 37 (1967), the Commission held that
it could consider acts of a station manager that occurred outside
the statute of limitations in determining the appropriate
forfeiture for acts that occurred inside the statute of
limitations. The Commission held that it could consider matters
occurring outside the statute of limitations period in
determining a licensee's ``degree of culpability.'' Similarly,
in Cate Communications Corporation, 60 RR 2d 1386 (1986), the
Commission considered facts prior to the statute of limitations
period in considering the appropriate forfeiture amount for a
continuing transfer of control. The Commission held that such
facts placed ``the violations in context, thus establishing the
licensee's degree of culpability and the continuing nature of the
violations.'' Similarly, in this case, we used the facts that
took place prior to July 23, 1998 to establish the context for
assessing an appropriate forfeiture amount for the violations
that were subject to a forfeiture from July 23, 1998 forward.
Accordingly, ENSERCH's argument that the NAL violated the statute
of limitations is rejected.
12. ENSERCH also argues that the forfeiture exceeds the
$82,500 maximum forfeiture for any single action or failure to
act.5 See 47 U.S.C. § 503(b)(2)(C), 47 C.F.R. § 1.80(b)(5)(iii).
We reject that argument because each station that ENSERCH
transferred without Commission approval constitutes a separate
violation of the Act and the Commission's rules. See Courtesy
Communications, Inc., 14 FCC Rcd 4198, 4200 (1999). The $82,500
statutory maximum represents the maximum forfeiture that can be
issued ``for any single act or failure to act described in
paragraph (1) of this subsection.'' See 47 U.S.C. §
503(b)(2)(C).6 Section 503(b)(1)(B) of the Act refers, inter
alia, to a failure ``to comply with any of the provisions of this
Act or of any rule, regulation, or order issued by the Commission
under this Act . . . .'' Because ENSERCH committed over 100
violations, the total proposed forfeiture was, in fact, below the
maximum permitted under the Act.
13. Third, ENSERCH argues that no forfeiture may be
imposed for the 147 private land mobile stations because ENSERCH
requested approval of the transfer nunc pro tunc and the grant of
the transfer of control application did not specifically
contemplate enforcement action. In support, ENSERCH cites
Verilink Corp. v. Tellabs Industries, Inc., 60 RR 2d 1683, 1689
(1986). ENSERCH Response, pp. 11-12. We reject that argument
because while ENSERCH requested that the transfer of control
application be granted nunc pro tunc, the staff did not grant the
applications on that basis. The Commission's database indicates
with respect to the transfer of control application, ``This
Transfer of control authorized on 9/8/98 for the outstanding term
of the license.'' If the staff had intended to grant the
transfer of control on a nunc pro tunc basis, the staff would
have authorized the transfer of control as of August 5, 1997, the
date the transfer took place. Moreover, in Verilink, the
recipient of the NAL had apparently received an oral waiver of
the rule that was the subject of the notice of apparent
liability. Accordingly, the Commission concluded that it was
improper to find a rule violation under those circumstances.
While the grant of consent to the transfer of control of
ENSERCH's private land mobile stations did not specifically
contain a condition mentioning enforcement action, such a
condition was not a necessary prerequisite for enforcement
action, since ENSERCH was the licensee of the stations both
before and after the transfer.
14. ENSERCH reports, and the Commission's records confirm,
that 18 of the private land mobile stations that were part of
ENSERCH's transfer of control application were in fact licensed
after the transfer of control took place. ENSERCH Response, p.
11 n.35.7 Accordingly, we find that there was no unauthorized
transfer of control of those 18 stations.
15. ENSERCH also argues that the $510,000 forfeiture
proposed in the NAL is excessive, its actions were not, as the
NAL concluded, ``cavalier,'' and the proposed forfeiture is
inconsistent with the forfeiture imposed by the Wireless
Telecommunications Bureau in Puget Sound Energy, Inc. After
reviewing the record, we agree that ENSERCH did not intentionally
violate the Commission's rules. Moreover, after we issued this
NAL, we adopted Central Illinois Public Service Company, 15 FCC
Rcd 1750, 1753 (1999), in which we declined to engage in a strict
mathematical exercise of multiplying a base forfeiture amount for
a violation times the number of stations, the calculation used in
this case. In Central Illinois, we explained that continuing to
use this method ``would result in an excessive forfeiture amount
and would be inconsistent with prior enforcement actions.''
Instead, we determined that the number of stations involved
should be treated as an aggravating factor warranting an
increased forfeiture. In light of this, we believe the
forfeiture amount in the instant case should be significantly
reduced.
16. However, we continue to be troubled greatly by
ENSERCH's failure to respond to a specific Commission
notification that, in its own words, ``would have prompted an
immediate response'' from ``someone who understood the FCC rules
regarding transfers of control.'' The Commission expects all
licensees promptly to take appropriate action in response to
Commission correspondence. By its own admission, ENSERCH did
not have the proper procedures in place to ensure that it took
appropriate action responsive to the staff letter. While ENSERCH
did not commit intentional violations, its failure to act
represents a serious breach of its responsibilities as a
Commission licensee. In this regard, we believe that ENSERCH's
failure to respond in a timely fashion to the staff's February
20, 1998 letter is a significant aggravating factor. This
factor, coupled with the facts that this violation involved a
substantial transfer of control for a significant number of
licenses and continued for an extended period of time, leads us
to conclude that a $150,000 forfeiture is warranted.
17. ENSERCH's response does not demonstrate that a further
reduction is warranted. The Puget Sound case relied on by
ENSERCH involved fewer stations (125 versus 152), continued for a
lesser period of time (approximately two months versus just over
one year), and did not involve a failure to respond to a
Commission warning or notification. Similarly, the facts of this
case are also more egregious than the facts in Central Illinois
Public Service Company, where we imposed a $30,000 forfeiture for
an unauthorized substantial transfer of control. Central
Illinois also involved significantly fewer stations (88 versus
152), occurred for a lesser period of time (approximately three
and a half months versus just over one year), and did not involve
a failure to respond to a Commission warning or notification.
Finally, the other mitigating factors ENSERCH cites do not
warrant further reduction. Accordingly, in light of the facts
presented in ENSERCH's response, including its implementation of
a compliance program to prevent future violations, we conclude
that a $150,000 forfeiture is appropriate.
IV. ORDERING CLAUSES
18. Accordingly, IT IS ORDERED THAT, pursuant to Section
503(b) of the Act, 47 U.S.C. § 503(b), and Section
1.80(f)(4) of the Commission's rules, 47 C.F.R. § 1.80(f)(4),
ENSERCH Corporation (now known as TXU Gas Company) IS LIABLE FOR
A MONETARY FORFEITURE in the amount of one hundred and fifty
thousand dollars ($150,000), for willful and repeated violations
of Section 310(d) of the Communications Act of 1934, as amended,
47 U.S.C. § 310(d), and former Section 101.53 of the Commission's
rules, 47 C.F.R. § 101.53.
19. Payment of the forfeiture shall be made in the manner
provided for in section 1.80 of the Commission's rules within 30
days of the release of this Order. If the forfeiture is not paid
within the period specified, the case may be referred to the
Department of Justice for collection pursuant to section 504(a)
of the Act, 47 U.S.C. § 504(a). Payment may be made by credit
card through the Commission's Credit and Debt Management Center
at (202) 418-1995 or by mailing a check or similar instrument,
payable to the order of the Federal Communications Commission, to
the Federal Communications Commission, P.O. Box 73482, Chicago,
Illinois 60673-7482. The payment should note the NAL/Acct. No.
referenced above. Requests for full payment under an installment
plan should be sent to: Chief, Credit and Debt Management Center,
445 12th Street, S.W., Washington, D.C. 20554. See 47 C.F.R. §
1.1914.
20. IT IS FURTHER ORDERED that copies of this Notice shall
be sent, by Certified Mail/Return Receipt Requested, to counsel
for ENSERCH, Jonathan L. Wiener, Esq., Goldberg, Godles, Wiener &
Wright, 1229 19th Street, N.W., Washington, DC 20036.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
_________________________
1 ENSERCH has changed its name to TXU Gas Company. See ENSERCH
Response, p. 1 n.1. For ease of reference, we will refer to the
licensee by its former name.
2 As explained in paragraph 14 below, while the Notice of
Apparent Liability for Forfeiture (see ¶7, infra) found ENSERCH
apparently liable for the transfer of 170 stations, we conclude
that no unauthorized transfer of control took place with respect
to 18 of those stations because those stations were not licensed
until after the transfer of control of ENSERCH took place.
3 47 C.F.R. § 101.53. That rule was replaced by Section 1.948
of the Commission's rules on February 16, 1999. In the Matter of
Biennial Regulatory Review -- Amendment of Parts 0, 1, 13, 22,
24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules
to Facilitate the Development and Use of the Universal Licensing
System in the Wireless Telecommunications Services, 13 FCC Rcd
21027 (1998). During the period prior to the time that ENSERCH
filed its applications, however, Section 101.53 of the
Commission's rules was the pertinent rule.
4 See authorizations issued to ENSERCH dated September 8, 1998
(land mobile stations) and April 9, 1999 (microwave stations).
5 ENSERCH Response, p. 20.
6 The figure contained in the text of the statute is $75,000.
Pursuant to the Debt Collection Improvement Act of 1996, Public
Law 104-134 (110 Stat. 1321-358), the maximum has been adjusted
for inflation up to $82,500. See Section 1.80(b)(5)(iii) of the
Commission's rules, 47 C.F.R. § 1.80(b)(5)(iii).
7 The call signs of those stations are WPKY559, WPKZ419,
WPKZ641, WPKZ649, WPLP281, WPLQ920, WPLW533, WPLW534, WPLW819,
WPLW822, WPLW824, WPLW825, WPLW827, WPMB979, WPMB983, WPMK681,
WPPMK682, AND WPMK683.