WASHINGTON-The Federal Commissions Commission, in a stunning reversal, agreed last week to grant 19 rural cellular applications that an administrative law judge previously dismissed for being part of “a massive scam.”
The FCC’s June 3 ruling, which could spark a flurry of appeals and prompt further settlements, involves thousands of rural cellular applications prepared by The Cellular Corp. and filed between July 1988 and January 1989.
After the FCC banned partial settlements among cellular applicants and took other steps to curb speculation in lottery licensing in the 1980s, applicants affiliated with TCC entered into so-called Mutual-Contingent Risk Sharing Agreements.
The agreements were designed to accomplish the same objective as schemes prohibited by the FCC-to increase chances of winning-but to do it within a stricter regulatory regime.
At three FCC levels-the Common Carrier Bureau, Administrative Law Judge Walter Miller and the Review Board-it was ruled that parties to risk sharing agreements violated the law. Commission officials also found foreign ownership and character problems with the applicants.
“TCC and their brokers embarked on an elaborate plan to circumvent the commission’s newly developed RSA (rural cellular area) rules against alliances and partial settlements,” said Judge Miller in a Dec. 22, 1992, ruling. “They embarked on this plan deliberately. They embarked on this plan willfully.”
However, the FCC ruled that while the agreements “constitute a partial settlement agreement within the plain meaning (of the rules), this violation is not a basis to summarily dismiss the applications to revoke the licenses.”
Two applicants, Alpha Cellular and Crystal Communications Systems, have settled scores of applicants who challenged lottery winners tied to risk sharing agreements.
“The decision is a disappointment, but not a complete surprise,” said Carl Northrop, a Washington D.C., lawyer who represented a coalition of applicants that challenged the agreements.
Northrop and another attorney, who also contested the agreements’ legality and agreed to speak on background, said the FCC in recent years has tended to show leniency towards applicants who have been charged with rule violations.
Thomas Gutierrez, a D.C. attorney who represents NextWave Telecom Inc. and other wireless firms, was approached about sharing agreements but decided they posed legal problems.
He commented, “I haven’t followed this case too closely but I do remember that about five years ago the presiding judge in Algreg stated `why the risk sharers ever believed they could pull off such a massive scam remains a mystery,’ theorizing that perhaps they believed that the magnitude of the undertaking would cause the commission to back off from enforcing its rules. This week’s decision answered his question.”
The FCC proceeding is known as the Algreg case, Algreg Cellular Engineering being one of applicants that entered into the illegal agreements.
