*Pages 1--5 from Microsoft Word - 2599.doc* Federal Communications Commission FCC 00- 262 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of ) File No. EB –00- IH- 0057 ) Matrix Telecom, Inc. ) NAL/ Acct. No. X32080022 NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: July 21, 2000 Released: July 27, 2000 By the Commission: I. INTRODUCTION 1. In this Notice of Apparent Liability for Forfeiture (" NAL"), we find that Matrix Telecom, Inc. has apparently violated Section 254( d) of the Communications Act of 1934, as amended (the “Act”), and Section 54.706 of the Commission’s rules by willfully and repeatedly failing to make required contributions to universal service support programs. 1 Based on our review of the facts and circumstances in this case, we conclude that Matrix is apparently liable for a forfeiture in the amount of $113, 000. II. BACKGROUND 2. In 1996, Congress amended the Act to require that: Every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service. 2 In implementing Section 254, the Commission authorized the Universal Service Administrative Company (“ USAC”) to administer universal service support mechanisms and to perform billing and collection functions. 3 As to these matters, the Commission directed USAC to distribute, receive and process the Universal Service Worksheet (now the Telecommunications Reporting Worksheet) (“ Worksheet”), which is used to report certain categories of revenue for the purpose of calculating a carrier’s universal service contribution, and to adjust carriers’ contributions in accordance with factors established by the Commission. 4 In addition, the Commission gave USAC the authority to bill carriers monthly, starting in February 1998. 5 In order to foster 1 47 U. S. C. § 254( d); 47 C. F. R. § 54.706. 2 47 U. S. C. § 254( d). 3 See Amendment of Parts 54 and 69 – Changes to Board of NECA, Inc., 12 FCC Rcd 18400, 18415 (1997) (“ NECA Changes Order”); 47 C. F. R. § 54.702( b). 4 See NECA Changes Order, 12 FCC Rcd at 18424- 25; 47 C. F. R. §§ 54. 709( a)( 1- 3), 54.711( a). 1 Federal Communications Commission FCC 00- 262 2 compliance with universal service requirements, the Commission’s rules provide that a carrier’s failure “to submit the required . . . contributions may subject the contributor to the enforcement provisions of the Act and any other applicable law.” 6 3. Matrix, a provider of interstate telecommunication services, does not appear to dispute its liability for universal service contributions and has paid a portion of the amount it owes for universal service. USAC’s records reflect that since January 1999, Matrix has made over fourteen payments to USAC, totaling more than $1.3 million. During that period, however, Matrix has missed eight monthly payments and failed to cure its arrearages. As a result, USAC’s records indicate that, as of April 17, 2000, Matrix owed over $1 million in universal service payments. 4. In February 2000, the Enforcement Bureau sent a letter to Matrix explaining that Matrix was the subject of a potential enforcement action. 7 In its response, Matrix states that it “wishes to ensure full compliance with the Commission’s Rules and seeks to retire its outstanding universal service obligation as soon as practicable.” 8 In a follow- up letter, Matrix explained that Platinum Equity Holdings, LLC acquired Matrix from Netlojix Communications, Inc. (formerly Avtel) on November 30, 1999 and a new management team is now in place. 9 Also in that letter, Matrix reported that it had presented USAC with a payment plan designed to cure its current arrearage in thirty- six months. Matrix represented that each month it will pay an amount equal to its current monthly obligation and an additional $21,500 toward the amount it is in arrears. Matrix has been making payments pursuant to this plan since May 2000. III. DISCUSSION 5. We conclude that Matrix is apparently liable for forfeiture for willful and repeated violations of Section 254 of the Act and the Commission’s rules governing universal service contributions. Since early 1999, Matrix has paid only a portion of its universal service obligations. As noted above, Section 254( d) of the Act and Sections 54.706 and 54. 709 of the Commission’s rules require that interstate telecommunications carriers make universal service contributions in the amount calculated by USAC. 10 We find that Matrix’s failure to make the required contributions is both willful and repeated. The term “willful” means that the violator knew that it was taking the action in question, irrespective of any intent to violate the Commission’s rules, 11 and “repeated” means more than once. 12 Considering the record before us, it appears that 5 See Amendment of Part 54 – Universal Service, 12 FCC Rcd 22423, 22425 (1997); 47 C. F. R. §§ 54. 709( a)( 4), 54.709( d). 6 47 C. F. R. § 54. 713. 7 Letter from David H. Solomon, Chief, Enforcement Bureau, to Matrix Telecom, Inc. dated February 16, 2000. 8 Letter from Thomas K. Crowe, Esq., counsel for Matrix to David H. Solomon, Chief, Enforcement Bureau, dated March 10, 2000. 9 Letter from Todd Murcer, Manager of Business Development, Matrix Telecom, Inc. to Suzanne M. Tertrault, Assistant Chief, Enforcement Bureau, dated May 30, 2000. 10 47 U. S. C. 254( d); 47 C. F. R. §§ 54.706, 54.709. 11 See Jerry Szoka, 14 FCC Rcd 9857, 9865 (1999); Southern California Broadcasting Co., 6 FCC Rcd 4387 (1991). 2 Federal Communications Commission FCC 00- 262 3 Matrix knowingly failed to make universal service payments in the full amounts set forth in USAC’s monthly invoices. 6. Section 503( b)( 1)( B) of the Act provides that any person who willfully or repeatedly fails to comply with the Act or the Commission’s rules shall be liable for a forfeiture penalty. 13 Section 503( b)( 2)( B) of the Act authorizes the Commission to assess a forfeiture of up to $110, 000 for each violation, or each day of a continuing violation, up to a statutory maximum of $1, 100,000 for a single act or failure to act. 14 In assessing a forfeiture, we take into account the statutory factors set forth in Section 503( b)( 2)( D) of the Act, which include 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 7. Although Matrix’s delinquency has continued since early 1999, we limit the scope of this NAL to Matrix’s apparent failures to make the contributions assessed in USAC invoices for November and December 1999, 16 each of which sought a monthly contribution of $149,614 for the universal service programs. Although, in the past, we have sanctioned carriers for failure to make the required universal service contributions for only one month of a continuing violation, we expressly stated that: [I] n light of the accumulating record of non- compliance, we are prepared to impose substantially greater forfeitures in the future. . . . [O] ur future notices likely will cover greater periods of non- payment than a single month . . . [and] will be based on some variant of [our] formula, which includes, as a component of the forfeiture, one half of the unpaid contribution amount for the period in question. 17 8. Taking into account the factors listed in Section 503( b)( 2)( D) of the Act, 18 as well as Commission precedent, we find Matrix apparently liable for a forfeiture of $113,000. This forfeiture consists of three components. First, we have assessed a base figure of $40,000 as a general fixed penalty of $20,000 for each of the two violations at issue. 19 As we noted in the Conquest Forfeiture Order, it is necessary to set a base figure designed to deter delinquencies 12 See Hale Broadcasting Corp., 79 FCC 2d 169, 171 (1980). 13 47 U. S. C. § 503( b)( 1)( B); 47 C. F. R. § 1.80( a)( 2). 14 47 U. S. C. § 503( b)( 2)( B); 47 C. F. R. § 1.80( b)( 2). 15 47 U. S. C. § 503( b)( 2)( D). See also The Commission’s Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines, 12 FCC Rcd 17087, 17100- 01 (1997), recon. denied, 15 FCC Rcd 303 (1999) (“ Forfeiture Guidelines”). 16 According to USAC’s records, Matrix’s November universal service contribution was due on December 16, 1999 and its December contribution was due on January 14, 2000. 17 ConQuest Operator Services Corp., 14 FCC Rcd 12518, 12528 (1999) (“ ConQuest Forfeiture Order”). 18 47 U. S. C. § 503( b)( 2)( D). 19 See ConQuest Forfeiture Order, 14 FCC Rcd at 12527 (The Commission determined that $20, 000 should be the general penalty for failure to pay the assessed universal service contribution in a timely manner). 3 Federal Communications Commission FCC 00- 262 4 regardless of their amount. 20 Second, consistent with the ConQuest Forfeiture Order, we have added to the base amount of $40,000 an amount equal to one half of the unpaid $299,228 universal service contributions for the months of November and December1999, or an addition of $149,614. 21 We have imposed this component of the forfeiture to illustrate that a delinquent carrier’s culpability and the consequential damage it causes to the goal of universal service may vary with the size of the contributions it fails to make. 22 9. Finally, for the reasons explained below, we have applied a downward adjustment of $76,614, approximately 40% of the sum of the first two components. The Act and the Commission’s rules provide a framework for adjusting the forfeiture amounts imposed depending on the facts and circumstances of the particular case. 23 Although Matrix has repeatedly failed to pay in full outstanding balances when due, Matrix has acknowledged its liability for the amounts assessed, and has made significant efforts to rectify its failure to make required universal service contributions. As noted, since January 1999, Matrix has made over fourteen payments totaling over $1.3 million toward its universal service obligations. Further, Matrix has submitted a plan designed to cure its arrearage. We consider Matrix’s significant efforts to pay to be a factor warranting a downward adjustment of the amount of the forfeiture. We also consider its submission of a plan to cure its outstanding balance and commencement of payments on that plan to be an additional factor warranting a downward adjustment. 10. Although Matrix’s failure to make payment in other months represents separate violations of the Act and our rules, we are not imposing any sanction for these apparent violations at this time. Nevertheless, we note that these violations could form the basis for additional notices of apparent liability. 24 If Matrix continues to violate our universal service rules, such violations could result in future NALs proposing substantially greater forfeitures, or could result in issuance of a show cause order to revoke Matrix’s operating authority. 25 IV. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED THAT, pursuant to Section 503( b) of the Act, 26 and Section 1.80 of the Commission’s rules, 27 Matrix Telecom, Inc. is hereby NOTIFIED of its 20 See id. 21 Id. See also Operator Communications, Inc., 13 FCC Rcd 16082, 16087 (1998) 22 See Conquest Forfeiture Order, 14 FCC Rcd at 12, 527, ¶ 19. 23 See 1.80( b)( 4) of the Commission’s rules and accompanying note, 47 C. F. R. 1.80( b)( 4). See also Forfeiture Guidelines, 12 FCC Rcd at 17100- 01 (“[ T] he adjustment factors we evaluate in considering the actions of the violator include egregious misconduct, ability or inability to pay, intentional violations, prior violation of the same or other requirements, good faith or voluntary disclosure, and history of overall compliance. 47 U. S. C. § 503( b)( 2)( D). In sum, although the base amount is the starting point in assessing a forfeiture, the forfeiture may be decreased below the base amount or increased to the statutory maximum when the adjustment criteria are considered based on the facts of the case”). 24 ConQuest Forfeiture Order, 14 FCC Rcd at 12527. 25 See CCN, Inc. et al., 12 FCC Rcd 8547 (1997) (the “Fletcher Companies”). 26 47 U. S. C. § 503. 4 Federal Communications Commission FCC 00- 262 5 APPARENT LIABILITY FOR A FORFEITURE in the amount of one hundred thirteen thousand dollars ($ 113,000) for violating the Act and the Commission's rules requiring regular contributions for universal service. 12. IT IS FURTHER ORDERED THAT, pursuant to Section 1.80 of the Commission's rules, 28 within thirty days of this NOTICE OF APPARENT LIABILITY Matrix Telecom, Inc. SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture. 13. Payment of the forfeiture may be made by credit card through the Commission's Credit and Debt Management Center at (202) 418- 1995 or by mailing a check or similar instrument, payable to the order of the Federal Communications Commission, to the Forfeiture Collection Section, Finance Branch, Federal Communications Commission, P. O. Box 73482, Chicago, Illinois 60673- 7482. The payment should note the NAL/ Acct. No. referenced above. 14. The response, if any, must be mailed to the Federal Communications Commission, Enforcement Bureau, Investigations and Hearings Division, 445 12th Street, S. W., Washington, D. C. 20554 and MUST INCLUDE THE NAL/ Acct. No. referenced above. 15. The Commission will not consider reducing or canceling a forfeiture in response to a claim of inability to pay unless the respondent submits: (1) federal tax returns for the most recent three- year period; (2) financial statements prepared according to generally accepted accounting practices (“ GAAP”); or (3) some other reliable and objective documentation that accurately reflects the respondent’s current financial status. Any claim of inability to pay must specifically identify the basis for the claim by reference to the financial documentation submitted. 16. Requests for payment of the full amount of this Notice of Apparent Liability under an installment plan should be sent to: Chief, Credit and Debt Management Center, 445 12th Street, S. W., Washington, D. C. 20554. 29 17. IT IS FURTHER ORDERED THAT a copy of this NOTICE OF APPARENT LIABILITY shall be sent by Certified Mail Return Receipt Requested to Thomas K. Crowe, Esq. counsel for Matrix Telecom, Inc., 2300 M Street, N. W. Suite 800, Washington, D. C. 20037. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary 27 47 C. F. R. § 1.80. 28 Id. 29 See 47 C. F. R. § 1.1914. 5