WASHINGTON-On the day before the first anniversary of the bidding error that plunged C-block personal communications services applicant PCS 2000 L.P. into the lion’s den of licensing problems, the Federal Communications Commission finally granted the partnership its 15 markets Jan. 22, conditioned on a $1 million fine for “misrepresentation and lack of candor,” which was addressed in a separate action.
PCS 2000, whose general partner SuperTel Communications Corp. is located in Old San Juan, Puerto Rico, had been under investigation by the commission this past year for several alleged transgressions, including bidding errors for which fines already have been assessed and for making major changes in management without the FCC’s approval, which the commission addressed in its decision. There also have been questions regarding the makeup of the current and former general partners and of their suitability to be licensees.
According to the memorandum opinion and order issued by the full commission, both of the petitions to deny filed against the company were dismissed; and all blame for a bidding-error cover up that began Jan. 23, 1996, was put on former partnership director and chief executive officer Anthony Easton, whose wife, Susan, had filed one of the petitions to deny. The accompanying document, a notice of apparent liability for forfeiture, detailed the chain of events following PCS 2000’s Round 11 bidding error on the Norfolk, Va., market.
“We are delighted with the FCC’s ruling. It not only allows us to begin building our excellent markets, it also vindicates the actions of the general partner of PCS 2000, SuperTel, which moved decisively to remove [Anthony] Easton’s interests in PCS 2000,” said President and Chief Executive Officer Richard Reiss in a written statement. “We have stated from the beginning that our actions in removing persons of questionable character from company control greatly enhanced our chances of receiving our licenses, and that has clearly come to pass.”
In a telephone interview with RCR last Friday, Reiss said strategic and financial partnerships would be announced soon along with key equipment agreements, but he could not name the parties, claiming nondisclosure contracts. PCS 2000 probably will pursue Global System for Mobile communications technology in its Puerto Rico market and Code Division Multiple Access technology for the rest of its markets on the West Coast.
Reiss also mentioned that PCS 2000 limited partners will not be hit with additional capital calls for at least 18 months because of the pending outside financial agreements and that an initial public offering also is in the plans sometime down the road; talks with potential underwriters have taken place. SuperTel closed its first capital call Jan. 22, and Reiss said it raised approximately $4 million; much of that money will be used to pay down legal fees accrued during the last year.
Reiss added that PCS 2000 has attached $6.5 million held by Romulus Engineering, which made the bidding error now subject to more than $4 million in fines, to recoup some of the financial damage caused by the FCC’s investigation. The company also is asking the commission to reconsider bid-withdrawal fines assessed to it in December 1996.
The commission’s MOO first addressed the petition to deny filed by WillowRun L.P., a limited partner that holds 14 limited partnership interests in PCS 2000. WillowRun had charged PCS 2000 with three FCC violations: that it was not eligible to participate in the C block because former general partner Unicom did not hold a 25-percent equity ownership in the venture, that misrepresentations were made to the commission during the auction and that PCS 2000 failed to take corrective measures against the misrepresentations when they were discovered. WillowRun also asked for a hearing on these matters if the FCC chose not to deny the licenses.
In its response, the commission found no support to WillowRun’s 25-percent equity ownership dispute, writing instead that “PCS 2000’s partnership agreement … shall participate in 25 percent of the profits, losses and distributions, including distributions upon liquidation.” It also pointed to the removal of Easton and Quentin Breen from the board of directors as a corrective measure following discovery of the Round 11 bidding error, adding, “We do not believe that disqualification in this instance is warranted where the applicant took aggressive steps to remove from ownership and control positions those responsible for the misrepresentations.” Because those two concerns were resolved, the FCC decided that no hearing would be needed.
As far as the million-dollar misrepresentation fine goes, while the FCC believed PCS 2000’s claims that former director Easton did make the mistake and then falsified records to cover his trail, it held PCS 2000 ultimately responsible for Easton’s actions as an officer of the partnership at the time and as the authorized bidding agent. Both Easton and former director Quentin Breen, who was aware of Easton’s actions and who resigned from PCS 2000 at approximately the same time, continue to be scrutinized by the FCC regarding their fitness to be licensees.
