Click here for Adobe Acrobat version
Click here for Microsoft Word version
********************************************************
NOTICE
********************************************************
This document was converted from Microsoft Word.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Microsoft Word or Adobe Acrobat version.
*****************************************************************
Before the
Federal Communications Commission
Washington, D.C. 20554
)
In the Matter of ) File No. EB-07-IH-9075
SkyPort Global Communications, Inc. ) NAL Acct. No. 200932080006
Apparent Liability for Forfeiture ) FRN No. 0011544913
)
ORDER OF FORFEITURE
Adopted: March 27, 2009 Released: March 30, 2009
By the Chief, Investigations and Hearings Division:
I. INTRODUCTION
1. In this Order of Forfeiture, we assess a monetary forfeiture of $3,000
against SkyPort Global Communications, Inc. ("SkyPort"), licensee of
an international section 214 authorization and two earth stations, and
its ultimate controlling affiliate, Balaton Group, Inc. ("Balaton").
Following the Notice of Apparent Liability that the Commission's
Enforcement Bureau ("Bureau") issued on November 5, 2008, we find that
SkyPort and its affiliates willfully and repeatedly violated the
Commission's rules by engaging in unauthorized transfers of control.
Specifically, we find that SkyPort and its affiliates violated section
214 of the Communications Act of 1934, as amended (the "Act"), and
sections 25.119 and 63.24 of the Commission's rules by consummating
pro forma transfers of de jure control of SkyPort and its two
international satellite earth station authorizations to one of its
existing minority shareholders.
II. BACKGROUND
2. Section 214 of the Act requires telecommunications carriers to obtain
a certificate of public convenience and necessity from the Commission
before constructing, acquiring, operating or engaging in transmission
over lines of communication, or before discontinuing, reducing or
impairing service to a community. In accordance with sections 63.12
and 63.18 of the Commission's rules, any international carrier seeking
authorization for such activities pursuant to section 214 of the Act,
including any transfer of control of facilities, must obtain approval
from the Commission. In particular, pursuant to section 63.24 of the
Commission's rules, a transfer of control of an international section
214 authorization requires application to, and approval from, the
Commission. A licensee engaging in a substantial transfer of control
of a section 214 authorization needs prior authorization from the
Commission, whereas a licensee engaging in a pro forma transfer does
not, although the latter must notify the Commission of the transfer
within 30 days thereafter.
3. The Commission employs a public interest standard under section 214(a)
of the Act that involves the examination of the positive and negative
public interest impact of a proposed transaction. For transfer of
control of an international section 214 authorization, the Commission
defines control to include "actual working control in whatever manner
exercised and is not limited to majority stock ownership." "Control"
also includes direct or indirect ownership or control, such as through
intervening subsidiaries. The Commission further defines a transfer of
control of an international section 214 authorization as a transaction
in which the authorization continues to be held by the same entity,
but where there is a change in the entity or entities that control the
authorization holder. A change from less than 50 percent ownership to
50 percent or more ownership shall always be considered a section 214
transfer of control. Because the issue of control inherently involves
issues of fact, it must be determined on a case-by-case basis and may
vary with the circumstances presented by each case.
4. Authorizations for operation and transfer of satellite earth stations
require an application and approval process pursuant to 47 C.F.R. Part
25, similar to that in 47 C.F.R. Part 63 described above for
international section 214 authorizations. This includes special
provisions for transfer of control pursuant to section 25.119 of the
rules, similar to section 63.24 of the rules for transfer of control
of international section 214 authorizations discussed above. Unlike
section 214 authorizations, transfer of control of international
satellite earth station authorizations must be approved by the
Commission in advance, even for pro forma transfers of de jure or de
facto control. In addition, there is a 30-day notification requirement
after the transfer similar to the requirement for international
section 214 authorizations. Transfer of control is defined as a change
in the party controlling the licensee or the controlling ownership
interest of the licensee.
5. The facts and circumstances surrounding this case are set forth in the
SkyPort NAL and are summarized here. SkyPort Global Communications,
Inc., licensee of an international section 214 authorization and two
earth stations, is a Houston-based global provider of managed, secure
broadband satellite and terrestrial telecommunications services. In
early 2006, SkyPort was acquired by Balaton Group, Inc., a Canadian
private equity firm specializing in turnarounds of distressed
businesses, and it received authorization for these transfers of
control in August 2006. At that time, Balaton was led by Robert
Kubbernus as President and a member of the Board and was owned 30
percent by Kubbernus and, in other non-controlling percentages, by
four other investors.
6. In July 2006, the five owners began a process of reorganization
intended to leave Kubbernus with complete control as the sole
shareholder, Chief Executive Officer ("CEO"), and Chairman of the
Board ("COB") of Balaton. SkyPort and its affiliates state that,
pending consummation of the reorganization, Kubbernus assumed complete
control of SkyPort regarding the composition of the Board, status of
senior executives, major management decisions, and payment of major
financial obligations. On April 11, 2007, the Balaton reorganization
was consummated and Kubbernus became the sole shareholder and COB of
Balaton and continued as its CEO. He also continued as COB of SkyPort.
SkyPort and its affiliates did not file any applications with the
Commission at that time relating to the reorganization. SkyPort and
its affiliates note that they did not have regulatory counsel at the
time and did not understand that the reorganization affected transfers
requiring prior or subsequent approval because SkyPort remained the
licensee, Balaton remained the majority shareholder of SkyPort,
Kubbernus remained in day-to-day control and he continued to be
compensated based on SkyPort's performance rather than his equity
share.
7. In August 2007, the new regulatory counsel for SkyPort and its
affiliates discovered the undisclosed reorganization and informed the
Commission of that fact in the middle of September 2007. SkyPort and
its affiliates thereupon filed an application on September 24, 2007
for approval nunc pro tunc of the pro forma transfer of control of the
section 214 authorization. The application was granted on November 14,
2007, without prejudice to any enforcement action in this case.
SkyPort and its affiliates filed similar applications on September 20,
2007 for Commission consent to the transfers of control of the two
earth station licenses, which were granted on the same terms on
November 8, 2007.
8. On February 27, 2008, the Enforcement Bureau issued a letter of
inquiry ("LOI") to SkyPort, directing it to provide information and
documents regarding, among other things, the nature of the transfers
of control and the corporate structure of SkyPort and its affiliates.
SkyPort responded to the LOI on March 28, 2008 and June 6, 2008.
9. On November 5, 2008, the Bureau issued the SkyPort NAL , finding that
SkyPort apparently committed willful and repeated violations of
section 214 of the Act and sections 25.119 and 63.24 of the
Commission's rules and that it was apparently liable for a $3,000
forfeiture. The SkyPort NAL ordered that, within 30 days of its
release, SkyPort must pay the full amount of the proposed forfeiture
or file a written statement seeking reduction or cancellation of the
proposed forfeiture. SkyPort has failed to either respond to the NAL
or pay the full amount of the proposed forfeiture.
III. Discussion
10. The proposed forfeiture amount in this case was assessed in accordance
with section 503(b) of the Act, section 1.80 of the Commission's
rules, and the Commission's forfeiture guidelines set forth in its
Forfeiture Policy Statement. In assessing forfeitures, section 503(b)
of the Act requires that we take into account 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 other matters as justice may require. We
issued a notice of apparent liability to Skyport and provided it with
an opportunity to show, in writing, why no forfeiture penalty should
be imposed. Skyport did not avail itself of that opportunity. As
discussed further below, we have examined our rules and the Forfeiture
Policy Statement, and find no basis for cancellation of the NAL. As
set forth below, we conclude, therefore, that SkyPort and its
affiliates are liable for a forfeiture of $3,000 for their willful and
repeated violations of section 214 of the Act and sections 25.119 and
63.24 of the Commission's rules.
A. Unauthorized Transfer of Control
11. We find that SkyPort willfully and repeatedly violated section 214 of
the Act and sections 25.119 and 63.24 of our rules by engaging in
unauthorized transfers of control. Specifically, we find that SkyPort
and its affiliates consummated pro forma transfers of de jure control
of SkyPort to one of its existing minority shareholders in violation
of Commission rules.
12. As discussed in the SkyPort NAL, we find that while the de jure nature
of the change in control under these circumstances may not have
required applications for a substantial change of control, it clearly
did require applications for a pro forma change, and the failures of
SkyPort and its affiliates to file such applications are willful and
repeated violations of sections 25.119 and 64.24 of the Commission's
rules. The claim that SkyPort and its affiliates misunderstood the
necessity for a pro forma transfer of control of the section 214
authorization because SkyPort remained the licensee and Balaton
remained the majority shareholder does not insulate them from
enforcement action. Section 63.24(c) of the rules clearly states that
"a transfer of control is a transaction in which the authorization
remains held by the same entity, but there is a change in the entity
or entities that control the authorization holder." Here, the change
in Kubbernus'share of Balaton from 30 percent to 100 percent is a de
jure change requiring a pro forma application. Similar considerations
apply to the failure of SkyPort and its affiliates to file
applications for transfer of the two earth station licenses pursuant
to section 25.119 of the rules.
13. The Commission's grant of the nunc pro tunc requests for authority to
transfer control of the international section 214 authorization and
the two earth station licenses were granted without prejudice to
enforcement action. The record demonstrates that SkyPort and its
affiliates willfully and repeatedly violated section 63.24 of the
rules by not filing within 30 days after the consummation of the
reorganization on April 11, 2007 a pro forma application for, and
notification of, the transfer of de jure control of SkyPort and its
international section 214 authorization from the Balaton minority
shareholders to Kubbernus. Similarly, SkyPort and its affiliates
willfully and repeatedly violated section 25.119 of the rules by not
filing in advance of the consummation of the reorganization on April
11, 2007 applications for permission to transfer de jure control of
each of SkyPort's two earth station licenses from the Balaton
shareholder group to Kubbernus as sole shareholder. For these reasons,
we affirm our preliminary holding in the SkyPort NAL.
B. Forfeiture
14. Section 503(b)(2)(B) of the Act authorizes the Commission to assess a
forfeiture for each violation or each day of a continuing violation,
up to a statutory maximum for a single act or failure to act. In
determining the appropriate forfeiture amount, we consider the factors
enumerated in section 503(b)(2)(D) of the Act, including "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."
15. The Commission's Forfeiture Policy Statement and implementing rules
prescribe a base forfeiture of $1,000 for an unauthorized pro forma
transfer of control. In consideration of the factors enumerated in
section 503(b)(2)(D) for establishing the forfeiture amount, we affirm
the calculation methodology set forth in the SkyPort NAL. Accordingly,
we find that the base forfeiture of $1,000 against SkyPort and its
affiliates for the section 214 authorization and each of the two earth
station licenses is appropriate, and we assess a total forfeiture of
$3,000.
16. On October 24, 2008, SkyPort filed a Voluntary Petition under Chapter
11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the Southern District of Texas. The Commission
will seek to collect the forfeiture through filing a timely claim in
the bankruptcy case.
IV. ORDERING CLAUSES
17. ACCORDINGLY, IT IS ORDERED THAT, 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
SkyPort Global Communications, Inc., IS LIABLE FOR A MONETARY
FORFEITURE in the amount of $3,000 for willfully and repeatedly
violating the Act and the Commission's rules. For collection the
Commission will file a proof of claim at the appropriate time in
SkyPort's bankruptcy action.
18. IT IS FURTHER ORDERED that a copy of this ORDER OF FORFEITURE shall be
sent by certified mail, return receipt requested, to Robert D.
Primosch, Wilkinson Barker Knauer LLP, Counsel for SkyPort Global
Communications, Inc., 2300 N Street N.W., Washington, D.C. 20037.
FEDERAL COMMUNICATIONS COMMISSION
Hillary S. DeNigro
Chief, Investigations and Hearings Division
See SkyPort Global Communications, Inc., Notice of Apparent Liability for
Forfeiture, DA 08-2457 (rel. Nov. 5, 2008) ("Skyport NAL").
47 U.S.C. S: 214; 47 C.F.R. S:S: 25.119, 63.24.
See 47 U.S.C. S: 214(a).
47 C.F.R. S:S: 63.12, 63.18. Certain kinds of applications, including the
one at issue here, are subject to streamlined procedures under these
provisions. Cf. 47 C.F.R. S: 63.03 on streamlined procedures for domestic
section 214 authorizations.
47 C.F.R. S: 63.24.
See 47 C.F.R. S: 63.24(e).
See 47 C.F.R. S:S: 63.24(f)(1)-(f)(2).
See 47 C.F.R. S: 63.09(b). Cf. 47 C.F.R. S: 63.03, note 1, regarding
domestic section 214 authorizations.
See 47 C.F.R. S: 63.09(b).
See 47 C.F.R. S: 63.24(c).
See id.
47 C.F.R. S: 63.24(d). Note 1 states:
The factors relevant to a determination of control in addition to equity
ownership include, but are not limited to the following: power to
constitute or appoint more than fifty percent of the board of directors or
partnership management committee; authority to appoint, promote, demote
and fire senior executives that control the day-to-day activities of the
licensee; ability to play an integral role in major management decisions
of the licensee; authority to pay financial obligations, including
expenses arising out of operations; ability to receive monies and profits
from the facility's operations; and unfettered use of all facilities and
equipment.
See also 2000 Biennial Regulatory Review, Report and Order, 17 FCC Rcd
11416, 11419 n. 18 (2002) (describing these factors as indicia of "de
facto control"). Note 2 to section 63.24(d) lists several types of
structural business changes that are presumptively pro forma, some of
which are comparable to the transfer here involving Balaton and SkyPort.
See 47 C.F.R. Part 25.
See 47 C.F.R. Part 63.
See 47 C.F.R. S: 25.119.
See 47 C.F.R. S: 63.24.
See 47 C.F.R. S: 25.119(d)-(f).
See 47 C.F.R. S: 25.119(f).
See 47 C.F.R. S: 25.119(b).
SkyPort NAL at 3-4, P:P: 5-8.
SkyPort is a wholly-owned subsidiary of SkyComm Technologies Corporation,
a holding company with no other functions and whose Board members are
identical to those of SkyPort.
See SkyPort NAL at 3, P: 5. See also Letter from Robert D. Primosch,
Wilkinson Barker Knauer LLP, Counsel for SkyPort Global Communications,
Inc., to Gerald Chakerian, Attorney Advisor, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, dated
March 28, 2008 ("March 28, 2008 LOI Response") at 2-3. See also Letter
from Robert D. Primosch, Wilkinson Barker Knauer LLP, Counsel for SkyPort
Global Communications, to Marlene H. Dortch, Secretary, Federal
Communications Commission, re: ITC-214-19990211-00083;
ITC-T/C-20060407-00244, dated September 24, 2007 ("September 24, 2007
Section 214 Application"), at Ex. F.
See March 28, 2008 LOI Response at 2.
See SkyPort NAL, at 3, P: 6; March 28, 2008 LOI Response at 2-3; September
24, 2007 Section 214 Application at Ex. F.
See SkyPort NAL at 4, P: 7
March 28, 2008 LOI Response at 4-5, Inquiry 9; June 6, 2008 LOI Response
at 1-2.
Id.
See Public Notice, Report No. TEL-01206, DA 07-4612 (rel. Nov. 15, 2007)
(File No. ITC-T/C-20070927-00392; grant of authority).
Public Notice, Report No. SES-00981 (rel. Nov. 11, 2007) (File No.
SES-T/C-20070919-01298; grant of authority for E00361); Public Notice,
Report No. SES-00981 (rel. Nov. 11, 2007) (File No. SES-T/C-2007092001301;
grant of authority for E050044).
Letter from Trent B. Harkrader, Deputy Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, to
Patrick Brant, President, SkyPort Global Communications, Inc., dated
February 27, 2008 ("LOI").
See March 28, 2008 LOI Response; Letter from Robert D. Primosch, Wilkinson
Barker Knauer LLP, Counsel for SkyPort Global Communications, Inc., to
Gerald Chakerian, Attorney Advisor, Investigations and Hearings Division,
Enforcement Bureau, Federal Communications Commission, dated June 6, 2008
("June 6, 2008 LOI Response").
See 47 U.S.C. S: 214(a); 47 C.F.R. S:S: 25.119, 63.24.
SkyPort NAL, at 6-7, P:P: 17, 19.
See 47 U.S.C. S: 503(b).
See 47 C.F.R. S: 1.80.
See The Commission's Forfeiture Policy Statement and Amendment of Section
1.80 of the Rules to Incorporate the Forfeiture Guidelines, Report and
Order, 12 FCC Rcd 17087 (1997), recons. denied, 15 FCC Rcd 303 (1999)
("Forfeiture Policy Statement").
See 47 U.S.C. S: 503(b)(2)(E).
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 U.S.C. S: 214; 47 C.F.R. S:S: 25.119, 63.24.
Id.
47 C.F.R. S: 63.24(c).
See 47 C.F.R. S: 25.119.
See Public Notice, Report No. TEL-01206, DA 07-4612 (rel. Nov. 15,
2007)(File No. ITC-T/C-20070927-00392; grant of authority); Public Notice,
Report No. SES-00981 (rel. Nov. 11, 2007)(File No. SES-T/C-20070919-01298;
grant of authority for E00361); Public Notice, Report No. SES-00981 (rel.
Nov. 11, 2007)(File No. SES-T/C-2007092001301; grant of authority for
E050044).
47 U.S.C. S: 503(b)(2)(B); see also 47 C.F.R. S: 1.80(b)(2); Amendment of
Section 1.80(b) of the Commission's Rules, Adjustment of Forfeiture Maxima
to Reflect Inflation, Order, 19 FCC Rcd 10945 (2004). See 73 FR 44645
7/31/08 (new maxima). An unauthorized transfer of control is a continuing
violation that does not end until the Commission grants a transfer of
control application or other authorization. See Ensearch Corporation, 15
FCC Rcd 13551, 13554, P: 10 (2000).
47 U.S.C. S: 503(b)(2)(D).
See 47 C.F.R. S: 1.80; Forfeiture Policy Statement, 12 FCC Rcd 17087,
17113 (1997). The base forfeiture amount for an unauthorized substantial
transfer of control is $8,000. Id.
The filing for bankruptcy does not necessarily preclude the imposition of
a forfeiture. See 11 U.S.C. S: 362(b); see also United States v.
Commonwealth Companies, Inc., 913 F.2d 518, 522-26 (8th Cir.
1990)(excepting from bankruptcy imposed stays, suits by government to
obtain monetary judgment for past violations of the law); Coleman
Enterprises, Inc., 15 FCC Rcd 24385, 24389 nn.27-28 (2000), recon. denied,
16 FCC Rcd 10016 (2001)(noting that a bankruptcy filing does not preclude
the Commission from assessing forfeitures for violations of the Act and
rules). Moreover, the filing for bankruptcy does not necessarily justify
an adjustment or cancellation of the forfeiture amount for a violation of
the rules. See Adelphi Communications, 18 FCC Rcd 7652, 7654 P: 8 (Enf.
Bur. 2003)(finding that a Chapter 11 bankruptcy filing - alone, without
financial documentation - does not support an inability to pay claim and
thus does not provide a basis to adjust or cancel an assessed forfeiture;
see also North American Broadcasting Co., Inc., 19 FCC Rcd 2754 P: 6 (Enf.
Bur. 2004); Pinnacle Towers, Inc., 18 FCC Rcd 16365, 16366-67 P: 7 (Enf.
Bur. 2003); Friendship Cable of Texas, Inc., 17 FCC Rcd 8571, 8572-73 P: 9
(Enf. Bur. 2002).
See Coleman Enterprises, Inc.15 FCC Rcd at24390. See also Commonwealth
Companies, 913 F.2d at 523 n.15.
(Continued from previous page)
(continued...)
Federal Communications Commission DA 09-697
2
Federal Communications Commission DA 09-697