Thomas K. Crowe, Partner
Law Offices of Thomas K. Crowe, P.C. via TA:
On June 14, 2012, the Federal Communications Commission (“Commission” or “FCC”) issued a Notice of Apparent Liability for Forfeiture (“NAL”) in the amount of $1,758,465 against Telseven, LLC (“Telseven” or “Company”) as well as personally against the Company’s sole owner. The Company apparently filed inaccurate FCC Forms 499-Q, failed to pay regulatory fees and failed to contribute fully to the funds for Universal Service (“USF”), the North American Numbering Plan, and local number portability. Telseven is a provider of enhanced number assistance directory services.
This case is notable because the FCC took the unusual step of “piercing the corporate veil” to hold the sole owner of Telseven, which filed for Chapter 7 bankruptcy earlier in 2012, personally liable for Telseven’s large financial penalty under the NAL.
It is uncommon for the Commission to extend corporate liabilities to shareholders, officers or directors and may only do so when the following criteria are met:
1) There is common identity of officers, directors or shareholders;
2) There is common control between the entities; and
3) It is necessary to preserve the integrity of the Communications Act of 1934, as amended (the “Act”), and to prevent the entities from defeating the purpose and provisions of statutory provisions.
In this case, the Commission found that the sole owner of Telseven exercised singular control over the Company. According to the FCC, “Telseven appears to be the corporate vehicle for the activities of just one person…”. The agency went on to state that it needed to look beyond the corporate structure in order to keep the owner from using Telseven to avoid the Commission’s rules.
The Commission also warned that additional violations of its rules could bring future penalties against Telseven and its owner, including being banned from operating any business that falls under the Commission’s regulatory jurisdiction.
Telseven’s forfeiture total included a $1,598,465 penalty for failure to fully contribute to the USF between December 2007 and April 2012. The Company was also assessed $100,000 for failing to provide good faith estimates on two FCC Forms 499-Q, which projected revenue in the third and fourth quarters of 2009 significantly lower than actual revenue for those quarters.
This FCC action could signal that the agency, under appropriate circumstances, may increasingly pursue singular corporate owners, or officers/directors exercising complete control over an entity, as well as the target corporations for violations of the Act.
If your company requires assistance in navigating the process of becoming compliant with the FCC’s regulations or with maintaining ongoing compliance, please do not hesitate to contact us at firstname.lastname@example.org