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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In re Application of ) ) Cope Communications, Inc. ) ) File No. BMPH-931014JB ) For Extension of Permit to Construct) WLUA(FM), Westwood, Kentucky ) ) MEMORANDUM OPINION AND ORDER Adopted: July 24, 1998 Released: July 31, 1998 By the Commission: 1. The Commission has before it an Application for Review from Cope Communications, Inc. ("Cope"). Cope asks us to reverse a staff decision that upheld an earlier decision cancelling Cope's construction permit and deleting the call sign for Cope's unbuilt station, WLUA(FM), Westwood, Kentucky. Letter from Linda Blair, Chief, Audio Services Division, to Derrick A. Humphries, Esq., Ref. No. 1800B3-JR (July 9, 1996); recon. denied, Letter from Linda Blair, Chief, Audio Services Division, to Cope Communications, Inc., c/o Derrick A. Humphries, Esq., Ref. No. 1800B2-DEB (January 27, 1997). Cope bases its Application for Review, in part, on the argument that improper activity by one of Cope's investors, who is also involved in other broadcast stations, deprived Cope of its financing and was beyond its control. For the reasons set forth below, we deny the Application for Review. Background 2. Cope received its construction permit for WLUA on April 14, 1992, following our approval of a settlement agreement between it and a second party that had filed a mutually exclusive application. On October 14, 1993, the date the construction permit expired, Cope filed an application seeking additional time to construct, based on its difficulties in obtaining financing after the withdrawal of an investor. Specifically, Cope stated that it "had secured what [it] believed to be stable investors who would assist with obtaining the financing for the construction," but that "attempts to reach them over the last 6 months have been unsuccessful." Application for Extension of Broadcast Construction Permit, File No. BPH-901115MH, Exhibit 1 (October 14, 1993). Cope continued that its general manager and owner, James L. Powell, Jr., received a phone call on October 13, 1993, the day before the permit expired, "indicating that the major investor wanted to buy Powell's ownership interest for $5,000" and that "Mr. Powell declined the offer to buy him out and has begun to concentrate all of his efforts on initiating construction with his own financing within the next year, subject to the FCC's approval." Id. 3. Because the information provided in Cope's application was ambiguous as to whether or not there were circumstances within the relevant time period warranting an extension, the staff attempted to obtain further information several times. On November 10, 1993, the staff requested additional information on Cope's efforts to build the station and to obtain alternative financing. Although Cope indicated that the information would be forthcoming, it did not submit it for almost a year. Cope provided a supplement to its extension application on October 14, 1994, stating that it had acquired some studio equipment, but provided no further information regarding its financing proposal. Staff called Cope on December 10, 1994, and again requested financing information, but received no response. On June 22, 1995, the staff mailed a letter to Cope's counsel, providing 20 days to provide information about any other construction efforts and details about the committed sources of funds that Cope had said had been withdrawn. Cope filed an amendment to its extension request on July 12, 1995, in which it stated that it had found a possible source of "miscellaneous studio equipment" and financing, but failed to provide the requested information regarding details of the committed sources of funds that were lost during the construction period. Letter from Ivan Dixon, Dixon Broadcasting, and James L. Powell, Jr., Cope Communications, Inc., to William F. Caton, Acting Secretary, (July 11, 1995). Staff called Cope again on that date, July 12, 1995, and again requested the information. Cope twice stated that the information would be forthcoming but it was not received. On January 18, 1996, the staff issued a letter requesting more specific details. On March 7, 1996, Cope filed a copy of a February 12, 1996, letter of conditional commitment from Industrial Bank to finance construction and initial operation of the radio station, subject to the Commission's approval of an extension of the construction permit. 4. The staff on July 9, 1996 found that Cope did not merit an extension under Section 73.3534(b) of the Commission's Rules. It found that no construction efforts had been undertaken prior to expiration of its permit, the relevant period. Further, the staff found that the loss of financing was not sufficiently beyond Cope's control and that Cope did not do everything possible within the relevant period to attempt to replace the financing. The staff noted that Commission policy generally does not allow grant of a construction permit extension on the basis of financial inability or unwillingness to construct. See High Point Community Television, Inc., 2 FCC Rcd 2506, 2507 (1987); L.E.O. Broadcasting, Inc., 2 FCC Rcd 1810, 1811 (MMB 1987) (collapse of financial arrangements, of itself, does not constitute a sufficient reason for not building). Further, the staff noted that in order to receive an extension based upon financial inability to construct, a permittee is required to show that construction was unexpectedly and summarily defeated by the repeated cancellation of committed financing from traditional capital sources, and Cope did not make that showing in this case. See Horseshoe Bay Centex Broadcasting Co., 5 FCC Rcd 7125, 7128 (1990). The staff denied reconsideration in a letter dated January 27, 1997, and Cope requests our review of that decision, stating that its situation was beyond its control. In Cope's Application for Review, Powell explains that he had difficulty obtaining $500,000 in funding in the state of Kentucky as a young African American with only a construction permit. Discussion 5. Applications to extend a construction permit must satisfy one of the three factors set forth in 47 C.F.R.  73.3534(b). Under that "one-in-three" test, we will grant an application for extension only where a permittee can show that (1) construction is complete and testing is underway; or (2) substantial progress toward construction has been made; or (3) no progress has been made for reasons clearly beyond the control of the permittee, if the applicant nonetheless took all steps possible to proceed. Significantly, extension applications are evaluated based upon construction progress occurring during the most recent construction period. See, e.g., Mansfield Christian School, 10 FCC Rcd 12589, 12590 (1995). Efforts occurring after the construction period may not be considered. See Revision of FCC Form 301, 50 RR 2d 381, 382 (1981). Our policy regarding post-authorization construction furthers two policy goals: (1) to discourage applicants from attempting to rely on such efforts as a means to persuade the agency to grant extension requests; and (2) to make it clear that any voluntary action after the construction period is done at the applicant's own risk. Rainbow Broadcasting Company, 11 FCC Rcd 1167, 1167-68 and cases cited at n.7 (1995) (designating application for hearing), decision granting application, 12 FCC Rcd 4028 (ALJ 1997). We also note that reliance on belated post-authorization period efforts rather than on timely action by a permittee would encourage the warehousing of spectrum while denying the public prompt local radio service. See generally Memorandum Opinion and Order, Amendment of Section 73.3598, 102 FCC 2d 1054, 1057 (1985). Thus, when determining whether to grant an extension permit, established Commission policy permits credit only for construction efforts during the authorized construction period. 6. Cope was supposed to complete construction by October 14, 1993. In its Application for Review, Cope erroneously argues that an action occurring after the relevant construction period (a February 12, 1996 conditional commitment letter from The Industrial Bank of Washington to lend it $500,000 for construction) mandated grant of its extension request. The staff was correct in noting that, because Cope's construction permit expired two years and four months before Cope acquired the conditional financing letter, the letter cannot form the basis for extending Cope's construction permit. 7. Further, Cope includes in its Application for Review a discussion and diagrams of a proposed radio station structure by which WLUA's signal would be sent via satellite to an unspecified city in Africa, apparently part of a proposal by an outside party to design, engineer, install and maintain an FM radio station for Cope under the requested construction permit extension. Again, we cannot regard these submissions as relevant. First, the proposal was prepared in April 1996, two and a half years after the construction permit expired. Second, even if the proposal had been received during the construction period, it would be insufficient to form the basis for an extension. See 47 C.F.R.  73.3534(b); See also Deleted Station WPHR(FM), Ashtabula, Ohio, 11 FCC Rcd 8513 (1996) (non-construction business decisions are not substantial progress toward construction under our rules). Finally, these submissions were first submitted with the Application for Review, and the Commission will not review facts which the staff has been afforded no opportunity to consider. 47 C.F.R.  1.115(c). 8. Cope raises only one event occurring during the construction period as a basis for review. Cope states that the station's original primary investor, Kenneth L. Ramsey, was responsible for the collapse of the original financial arrangement because Cope's principal, James L. Powell, Jr., would not assign all interests in the construction permit to him. Cope alleges that Ramsey, who is Caucasian, was attempting to defraud the Commission by using Powell, who is African American, to obtain the construction permit based on the enhancement credit given minority applicants in proceedings subject to comparative hearings at the time. Cope states that Ramsey arranged financing through Shelby County Trust Bank, but that the bank would not honor the financing arrangement in the absence of Ramsey, who Cope says had personal influence with bank personnel. Cope's original application shows that Ramsey also promised to personally guarantee to repay up to 80 percent of the funds needed to construct in the event of default. Cope states that its repeated attempts to reach Ramsey through friends, business associates, frequent telephone calls, and Ramsey's attorney were unsuccessful during the 15 months before the construction permit expired and that it diligently sought other sources of financing during that time, but to no avail. Therefore, it believes that an extension is warranted. 9. Cope did not provide any showing that it sought any alternative means of financing until after the construction permit had expired, even though it apparently had been unable to reach Ramsey for 15 months and it had become clear that the loan on which Cope was relying was not forthcoming. In an effort to assist Cope, the staff on June 22, 1995 requested that Cope provide additional information on its financing and construction efforts. Neither then nor now did Cope document any efforts made for alternate financing prior to expiration of the permit. Rather, Cope responded that Dixon Broadcasting had since become interested in purchasing the station and was prepared to obtain $500,000 in construction funds conditioned upon grant of an extension permit, and that additional information concerning construction progress would follow. Cope has also submitted the copy of the February 12, 1996 "conditional commitment" letter from The Industrial Bank of Washington to lend it $500,000 for construction, conditioned on Cope's securing a one- year permit extension. Both of these conditional commitments fall well outside of the construction period, and cannot be considered. While we are not unsympathetic to Cope's circumstances, we will not extend a construction permit when, as here, the permittee made a private business decision to continue to rely on previous promises of a private individual, even if, as Cope contends, that investor was unresponsive to Cope's attempts to contact him and unwilling to proceed with financing the station in a timely manner. See Hymen Lake, 56 FCC 2d 379 (Rev. Bd. 1975) (a failure to construct based upon a private business judgment within the control of the permittee is not a basis to extend a construction permit). See also Zephyr Broadcasting, Inc., 11 FCC Rcd at 19631 (1996) (several financial setbacks insufficient to justify grant of extension application). Although Shelby County Trust Bank, a traditional source of funding, was also involved in the financing, Cope asserts that the bank's potential loan was based on investor Ramsey's personal relationship with the bank and would require Ramsey's personal guarantee of the loan. Thus, if Ramsey was unresponsive to Cope's attempts to contact him for 15 months, as Cope contends, and the bank required Ramsey's personal guarantee, which Cope states Ramsey did not give before his absence, then Cope should have expected the bank's cancellation of financing and acquired financing from another source. 10. Cope urges us to distinguish this case from policy enunciated in previous decisions because of the alleged unusual circumstances surrounding its initial investor, Ramsey. However, private contractual matters, like those between Cope and Ramsey, are most appropriately considered by state courts, not the Commission. See John F. Runner, Receiver, 36 RR 2d 773, 778 (1976). Even accepting arguendo (1) that Cope's allegations against Ramsey are true, and (2) the argument that loss of financing was beyond Cope's control, and (3) that alternative financing for Cope was difficult to arrange because the company is controlled by a minority, Cope has been unable to document any efforts to obtain alternative financing prior to expiration of the permit. Although Cope has since made efforts to locate financing, and has in fact located a potential source of funds, our rules, based on the well-established precedent described above, will not allow us to consider efforts occurring after the authorized construction period. 11. Thus, there is no error in the staff's decision that Cope did not take all steps possible to proceed. Section 73.3534(b). Therefore, we uphold the staff decision. While Cope's allegations against Ramsey do not impact our decision regarding Copes' failure to construct, we note here that those allegations are being investigated separately to determine whether there has been a violation of any Commission rule or policy. The staff sent a letter to Ramsey requesting information regarding Cope's allegations against him, to which Ramsey has responded. The staff is currently evaluating this information and will take whatever action, if any, that it finds appropriate. Ordering Clause 12. Accordingly, IT IS ORDERED that Cope Communications, Inc.'s Application for Review IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary