5. Discussion
The disputed responses pertained to ADMA's disclosure of: (1) other business names in response to Question 1 of the Registration Form; (2) past negative history in response to Questions 7 and 8; and, (3) ability to satisfy the financial requirement to operate as a switchless-reseller in response to Question 9.
5.1. Other Business Names
Question 1 asked ADMA to provide the legal and fictitious names, if any, that it was operating under. ADMA listed only one name, ADMA TELECOM, INC. on its Registration Form. CPSD asserted that ADMA mislead the Commission because CPSD found three fictitious names from its Lexis search of ADMA. Those names were: (1) Hispanic Prepaid Services, (2) International Capital Group, Inc., and (3) Prepaid Telecom Services.
ADMA stated in its June 4, 2009 response to CPSD's protest that none of those fictitious names were on ADMA's Registration Form, because ADMA does not use those names. ADMA acknowledges that applications for fictitious names of Hispanic Prepaid Services, International Telecom Services, and Prepaid Telecom Services were filed with the Florida Department of State, Division of Corporation in June 2001. However, those fictitious names were expired effective December 31, 2006, more than two years prior to ADMA's filing of its registration form. Further, current management has no specific knowledge of the past use of those names.
As to the fictitious International Capital Group, Inc. name, ADMA has no knowledge of its existence. However, ADMA's research did discover that an International Capital Group, LLC existed and was located in Miami, Florida on a street with a similar name as that associated with ADMA Wireless, Inc, a former affiliate of ADMA. However, ADMA has no current relationship with that entity.
The Registration Form only requires applicants to identify their current legal and fictitious names. There is no requirement to identify fictitious names that applicants may have used/not used in the past which have expired or fictitious names which applicants have no knowledge of. ADMA has not misled the Commission with regard to the names under which it operates.
5.2. Past Negative History
Applicants for non-dominant interexchange carrier authority are required to make a reasonable showing that its management is qualified to operate a telecommunications provider in a manner that complies with applicable laws and adequately serves the public. Questions 7 and 8 were included in the Registration Form to ascertain the qualifications of management.
Question 7 asked ADMA to check a true or not true box dependent on whether any affiliate officer, director, general partner, or person owning more than 10% of applicant held one on these positions with an interexchange carrier that filed for bankruptcy or has been found either criminally or civilly liable by a court for a violation of Section 17000 et seq. of the California Business and Professions Code or for any actions that involved misrepresentation to consumers and, to the best of applicant's knowledge whether it was not currently under investigation for similar violations.
Question 8 asked ADMA to check a true or not true box dependent on whether applicant, any affiliate, officer, director, partner, or owner of more than 10% of applicant has not been sanctioned by the Federal Communications Commission (FCC) or any state regulatory agency for failure to comply with any regulatory statue, rule, or order.
Hence, reportable events under Questions 7 included bankruptcies, criminal or civil liability or investigations for misrepresentation to consumers, whether in the past or under present investigation. Reportable events under Question 8 included sanctions by the FCC or any state regulatory agency for failure to comply with any regulatory statue, rule, or order.
CPSD asserted that ADMA misled the Commission because it did not report on its Registration Form (1) a November 19, 2008 ADMA settlement of a civil investigation with the Florida Attorney General's Economic Crimes Division and (2) a January 14, 2009 FCC $672,541 Notice of Apparent Liability (NAL) for violations of several provisions of the 1934 Communications Act.
5.2.1. Florida Settlement
ADMA acknowledged in its June 4, 2009 and July 31, 2009 responses that it did not report the Florida settlement related to the prepaid calling card industry in its response to Question 7 and 8 of its Registration Form. ADMA excluded the Florida settlement because it did not involve a bankruptcy, did not result in a finding of criminal or civil liability, did not result in a finding of misrepresentation to consumers, and does not reflect a pending investigation. It involved credit card industry wide investigation. Further, the Florida Attorney General agreed with ADMA that (1) the settlement could reflect denial of any wrongdoing or liability of any kind by ADMA and (2) released ADMA from any claims the Attorney General might pursue in court with regard to the matter. The Florida settlement is irrelevant to this proceeding because ADMA was not found responsible for any wrongdoing or liability of any kind.
5.2.2. Federal Communications Commission
ADMA also acknowledged in its June 4, 2009 and July 31, 2009 responses that it did not report the FCC NAL in its response to Questions 7 and 8 of its Registration Form.2 The FCC issued a NAL against ADMA for its: (1) failure to register its international services prior to January 30, 2007; (2) late payment of its 2005 to 2007 North American Numbering Plan administrative fees; (3) late payment of its 2005 and 2006 Telecommunications Relay Services fees; (4) late payment of its January through October 2006 Universal Service fees; and, (5) late filing of prepaid calling card worksheets.
ADMA contends that the NAL does not fall within the ambit of Question 7 or 8, because (1) the issue does not involve "misrepresentations to consumers" and thus, does not require disclosure under Question 7; and (2) is not a sanction and thus, not reportable under Question 8. ADMA had asserted that the NAL is related to the question of whether ADMA should have registered with the FCC and that the NAL has not yet resulted in a sanction or forfeiture order from the FCC. Irrespective of not meeting the reporting criteria of Question's 7 and 8, ADMA had asserted that the NAL based on prior activities is unfounded and predicated on several factual errors and a legally questionable interpretation of both past practices regarding a registration requirement and of a statue of limitations.
5.2.3. Discussion
ADMA has not mislead the Commission by its exclusion of the Florida settlement because the terms of the settlement did not specifically fit any of the reportable events required under Questions 7 or 8 of the Registration Form. It did not involve or result in a: (1) bankruptcy, (2) criminal or civil liability, (3) current investigation or misrepresentation to consumers, or (4) sanction by a regulatory agency.
Further, ADMA's failure to disclose the NAL in the registration form was not a violation of Rule 1.1 with regard to responding to the questions in the Registration Form. ADMA explained that the basis for the NAL did not relate to misrepresentations to consumers and that the NAL has not resulted in a sanction from the FCC.
The matters brought to our attention by CPSD demonstrate that the Registration Form questions provide for a very narrow interpretation of what should be reported in the Registration Form. In this regard, CPSD and other parties have an opportunity to revisit the Registration Form process in the Commission's recently issued Order Instituting Rulemaking (R.09-07-009) looking into revising the simplified registration process.
Therefore, we do not find that ADMA has violated Rule 1 or failed to provide information that was required by our Registration Form. However, while the Registration Form does not technically require these disclosures, applicants that volunteer potentially relevant information in an affirmative manner may be able to counter proactively such allegations of nondisclosure and frame the issues positively in their application. We also note that the FCC's NAL suggests that there may have been a failure to pay fines or comply with regulatory requirements. Such conduct, if proven, is troubling. However, we also note that these alleged activities occurred two years ago, and do not appear to have continued beyond 2007. We caution ADMA that we take seriously any failure to comply with our rules and regulations and urge it to ensure that it complies with out rules and regulations in California. ADMA has sufficient knowledge and technical expertise in the telecommunications business.
5.3. Financial Requirement
To be granted a Certificate of Public Convenience and Necessity (CPCN), an applicant for authority to provide resold local exchange and interexchange services must demonstrate that it has a minimum of $25,000 of cash or cash equivalent to meet the firm's start-up expenses.3 An applicant must also demonstrate that it has sufficient additional resources to cover all deposits required by local exchange carriers and/or interexchange carriers in order to provide the proposed service.
Question 9 asked ADMA to check a true or not true box dependent on whether it has a minimum of $25,000 reasonably liquid and available to meet its first-year expenses, including deposits required by local exchange carriers or interexchange carriers or has profitable interstate operations to generate the required cash flow. Documentation to support the minimum financial requirement is required if the true box is checked.
ADMA checked the true box and attached its most recent six months of bank statement to substantiate that it has reasonably liquid cash to meet its first-year expenses, including deposits that may be required by local exchange carriers or interexchange carriers. However, CPSD asserted that ADMA misled the Commission because "ADMA did not attach a balance sheet to the application or include a third party undertaking, as is required."4
Contrary to CPSD's protest, ADMA was not required to attach a balance sheet or include a third party undertaking to its Registration Form. ADMA has not misled the Commission in regards to its financial ability to operate as a switchless local and interexchange carrier within California. ADMA has sufficient cash to satisfy the financial requirements and any deposits that may be required.
2 A NAL is a notice, not a sanction, of a FCC violation which provides an entity the opportunity to respond to the NAL. In this instance ADMA submitted a response to the FCC on February 13, 2009. That response is under consideration by the FCC and could be either affirmed or withdrawn by the FCC. If the NAL is affirmed, is subject to de novo review by a U.S. District Court.
3 41 CPUC2d (1991) 505, at 517 as modified by 49 CPUC2d (1993) 197, at 208.
4 CPSD Protest of April 15, 2009, at 4.
