STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 2, 2001

TO: PARTIES OF RECORD IN CASE 00-04-029

This proceeding was filed on April 18, 2000, and is assigned to Commissioner Carl Wood and Administrative Law Judge (ALJ) Myra Prestidge. This is the decision of the Presiding Officer, ALJ Prestidge.

Any party to this adjudicatory proceeding may file and serve an Appeal of the Presiding Officer's Decision within 30 days of the date of issuance (i.e., the date of mailing) of this decision. In addition, any Commissioner may request review of the Presiding Officer's Decision by filing and serving a Request for Review within 30 days of the date of issuance.

Appeals and Requests for Review must set forth specifically the grounds on which the appellant or requestor believes the Presiding Officer's Decision to be unlawful or erroneous. The purpose of an Appeal or Request for Review is to alert the Commission to a potential error, so that the error may be corrected expeditiously by the Commission. Vague assertions as to the record or the law, without citation, may be accorded little weight.

Appeals and Requests for Review must be served on all parties and accompanied by a certificate of service. Any party may file and serve a Response to an Appeal or Request for Review no later than 15 days after the date the Appeal or Request for Review was filed. In cases of multiple Appeals or Requests for Review, the Response may be to all such filings and may be filed 15 days after the last such Appeal or Request for Review was filed. Replies to Responses are not permitted. (See, generally, Rule 8.2 of the Commission's Rules of Practice and Procedure.)

If no Appeal or Request for Review is filed within 30 days of the date of issuance of the Presiding Officer's Decision, the decision shall become the decision of the Commission. In this event, the Commission will designate a decision number and advise the parties by letter that the Presiding Officer's Decision has become the Commission's decision.

/s/ LYNN T. CAREW

Lynn T. Carew, Chief

Administrative Law Judge

LTC:tcg

Attachment

ALJ/TOM-POD/tcg

PRESIDING OFFICER'S DECISION (Mailed 5/2/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

George M. Sawaya, Complainant, vs. MCI Telecommunications Corp. (U-5011-C) a.k.a. MCI WorldCom and MCI WorldCom, Inc. Defendant.

Case 00-04-029 (Filed April 18, 2000)

George M. Sawaya, for complainant.

Maria L. Woodbridge, Attorney at Law, for MCI Telecommunications Corp., for defendant.

O P I N I O N

Summary

In this decision we find that complainant has failed to meet his burden of proving that sanctions are warranted, and this complaint is dismissed with prejudice.

Background

On April 18, 2000, George M. Sawaya filed this complaint seeking Commission enforcement of Decision (D.) 00-02-004. In that decision, we ordered WorldCom¹ to pay Sawaya $1,036.13, plus interest from September 12, 1998, as intervenor compensation for his work in docket R.97-01-009. In the complaint, Sawaya stated that such payment had not been made. He sought a Commission order directing such payment, and sanctions against WorldCom.

On May 26, 2000, Sawaya received a check for the full amount, plus applicable interest. Hence, the only remaining issue is the imposition of sanctions.

On February 6, 2001, hearings were held on factual issues relating to the basis for any sanctions. The parties filed opening and closing briefs.

In his brief, Sawaya stated that WorldCom did not act reasonably in attempting to make timely payment of the intervenor compensation award. He stated that the Commission should impose a fine in the upper reaches of its statutory authority because (1) WorldCom's delay in payment harmed the Commission's regulatory process by setting an undesirable precedent, (2) WorldCom did not take adequate steps to prevent, detect, or rectify the violation, and (3) WorldCom's financial resources would support a large fine.

WorldCom argued that sanctions were unwarranted. At hearing and in its brief, WorldCom provided exhaustive detail of its administrative efforts to make timely payment of its intervenor compensation obligations. WorldCom explained that its accounts payable department is located in Arlington, Virginia, and that it submitted a request for checks to be issued promptly after it received D.00-02-004. Delay resulted from a subsequent request from the accounts payable department for all recipients' tax identification numbers. Further delay resulted when a check issued by WorldCom was misdirected. When Sawaya informed WorldCom that he had not received the misdirected check, WorldCom stopped payment on that check, and re-issued a new check, recalculated to include up-to-date interest, for $1,142.75. Based on its detailed recitation of its efforts to pay Sawaya, WorldCom argues that its response to the Commission's order was reasonable, in good faith, and should not form the basis for a penalty.

Discussion

Pursuant to Pub. Util. Code §§ 2104 and 2107, the Commission may impose fines for violations of law or Commission orders. Such fines, payable to the State of California, must be between $500 and $20,000 per offense. Each day of a continuing offense constitutes a separate and distinct offense per § 2108.

The complainant bears the burden of proving by a preponderance of the evidence that a fine is warranted under the circumstances of the case. Communications TeleSystems International, 72 CPUC 2d 621, 633 (1997).

The Commission has recently distilled the principles that it has historically relied upon in assessing fines and restated them so that they may form the basis for future decisions assessing fines. See Rulemaking to Establish Rules for Enforcement of the Standards of Conduct Governing Relationships between Energy Utilities and Their Affiliates Adopted by the Commission in Decision 97-12-088, D.98-12-075, App. B. Those principles begin by distinguishing reparations from fines. The purpose of reparations is to return improperly collected amounts to customers. The purpose of fines, in contrast, is to deter further violations. In determining whether to impose a fine and, if so, at what level, the Commission will consider the severity of the offense, the utility's conduct, the financial resources of the utility, the totality of circumstances in furtherance of the public interest, and the role of precedent.

Here, no reparations are due. Sawaya has received the full amount, with correct interest, that he is owed.

Turning to the factors for deciding whether to impose a fine and, if so, for what amount, the severity of the offense is the first factor. The severity of the offense includes consideration of the economic harm imposed as well as the economic benefit gained by the public utility. Here, the decision provided for the payment of interest such that Sawaya incurred no economic harm, and WorldCom accrued no gain. The severity of the offense also includes consideration of the effects of disregarding a Commission order because compliance is essential to the proper functioning of the regulatory process. In this case, the facts show that WorldCom did not disregard the Commission directive, but attempted to comply, albeit belatedly. For example, WorldCom used overnight mail to send requests for needed tax information to the intervenors, and had several of its personnel proactively track the issuance of the checks. These facts are not consistent with an intent on the part of WorldCom to disregard a Commission directive. Severity can also include the scope of the violation. Here, WorldCom's violation of a Commission order did not have widespread effects but was limited to seven intervenors. To these seven intervenors, however, the additional delay in receiving payment could impose hardship and inconvenience. On balance, and in light of the overall circumstances of this violation, we find that it was not a severe violation.

The next factor is the utility's efforts to prevent, detect, and rectify the violation. In this case, WorldCom did not prevent the violation, but once it had detected the violation, used its best efforts to rectify the violation.

The next factor is the financial resources of the utility. WorldCom is a large corporate conglomerate with substantial financial resources.

The role of precedent is also important in our consideration of imposing a fine. Here, no party has provided a citation to any decision where a fine has been imposed for delay in making intervenor compensation payments.

The final factor is the totality of the circumstances in furtherance of the public interest. In considering this factor, we are guided by the need for timely compliance with Commission decisions, but we also realize that, despite everyone's best efforts, administrative processes are not perfect, and occasionally delays will occur.² Here, WorldCom has carefully explained its attempts to issue intervenor compensation checks in timely manner, and has documented the unforeseen administrative hurdles it encountered in issuing its first intervenor compensation payments. Ultimately, WorldCom issued the check, with up-to-date interest, to Sawaya. In sum, the totality of the circumstances does not support imposing a fine on WorldCom.

Section 2107 allows this Commission discretion in determining whether a fine should be imposed. As the complaining party, Sawaya bears the burden of proving that a fine is warranted by a preponderance of the evidence. Guided by our consideration of the factors discussed above, we find that a fine is unwarranted under the circumstances of this case. Instead, we admonish WorldCom to either timely comply with Commission decisions, or seek an extension through Rule 48(b) of the Commission's Rules of Practice and Procedure (Rules) for such compliance.

Sawaya also filed a motion for sanctions against WorldCom for stating in its answer that it had paid him twice. WorldCom explained that as of the date of the answer, its Arlington staff had informed its San Francisco staff that they had sent Sawaya two checks. The first check had been misdirected and was presumed lost. Therefore, WorldCom's Arlington staff issued a second check, and the San Francisco staff informed Sawaya they were issuing a stop payment on the first check. The first check, however, arrived at Sawaya's, who, perhaps thinking it was the second check, deposited it. The next day a second check arrived, which he also deposited. After making this deposit, he informed WorldCom of receipt and deposit of the second check. These were the facts as WorldCom knew them when it filed its answer. The first check was subsequently returned to Sawaya by his bank due to WorldCom's stop payment request. Sawaya contended that WorldCom violated Rule 1.

Rule 1 prohibits every person appearing before the Commission or signing a pleading from misleading the Commission by an artifice or false statement of law or fact. WorldCom's answer, as of the date it was filed, reflected the facts of which WorldCom was aware at that time. However, WorldCom could reasonably have assumed, based on normal banking practices, that the bank would honor the stop payment request. Although as of the date the answer was filed, WorldCom was not making a false statement, the statement that WorldCom had paid Sawaya twice was at best unclear. WorldCom has since acknowledged that Sawaya received only one payment. Under these circumstances, we will not impose sanctions against WorldCom pursuant to Rule 1 based on its statement in the answer that Sawaya had been paid twice. WorldCom is advised, however, to ensure that statements in future pleadings are clear and are not misleading in order to avoid the imposition of sanctions under Rule 1. Accordingly, Sawaya's request for sanctions is denied.

Findings of Fact

1. WorldCom was 67 days late in making the intervenor compensation payment to Sawaya ordered in D.00-02-004.

2. Sawaya received the full amount, with correct interest, that he was due.

3. The payment of interest prevented Sawaya from incurring economic harm, and WorldCom from accruing gain.

4. WorldCom did not disregard a Commission directive.

5. WorldCom's offense is not severe.

6. WorldCom did not prevent the violation but once it had detected the violation, used its best efforts to rectify the violation.

7. WorldCom has substantial financial resources.

8. The totality of the circumstances does not support imposing a fine.

9. At the time it filed its answer, WorldCom had issued two checks to Sawaya for payment of intervenor compensation, because the first check was misdirected.

10. WorldCom had directed its bank to stop payment on the first check, but Sawaya deposited both checks.

11. WorldCom's bank did not honor the first check because of the stop payment request.

Conclusions of Law

1. Sawaya has not met his burden of proving that a fine is warranted in this case.

2. Sawaya has not met his burden of proving that WorldCom violated Rule 1 of the Commission's Rules of Practice and Procedure.

3. Sawaya's motion for sanctions should be denied, but WorldCom is cautioned to ensure that statements in future pleadings are not misleading in order to avoid sanctions under Rule 1.

4. This complaint should be dismissed.

ORDER

THEREFORE, IT IS ORDERED that:

1. George M. Sawaya's motion for sanctions is denied.

2. This complaint is dismissed with prejudice.

3. This proceeding is closed.

This order is effective today.

Dated , at San Francisco, California.