ALJ/TOM/MOD-POD/tcg Mailed 11/9/2001

Decision 01-11-017 November 8, 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.

OPINION DISMISSING COMPLAINT

Summary

In this decision we find that sanctions against WorldCom are not warranted for paying an intervenor compensation award 67 days late, 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 seven parties intervenor compensation for work in docket R.97-01-009. Sawaya's share was $1,036.13, plus interest from September 12, 1998. 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 acted unreasonably by failing to make timely payment of the intervenor compensation award. He argued 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 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 argued 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.

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 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. 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.

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, because the decision provided for the payment of interest, 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. Prompt payment of intervenor compensation awards is important to facilitate intervenor participation in Commission proceedings, so failure to comply with compensation orders harms the regulatory process. In this case, however, WorldCom attempted to comply, albeit belatedly. WorldCom used overnight mail to send requests for needed tax information to the intervenors, and had several of its personnel track the issuance of the checks. Severity can also be gauged from the scope of the violation. Here, WorldCom's violation directly affected seven intervenors, a small number. To these intervenors, however, the 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, once WorldCom became aware of the violation, it took reasonable steps to rectify the violation, although it did not notify the Commission. The violation was brought to the Commission's attention by Complainant.

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. We have not, to date, imposed a fine for delay in making intervenor compensation payments.

The final factor is the totality of the circumstances in furtherance of the public interest. Timely compliance with Commission decisions is important, but we also realize that 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 problems 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 to impose a fine. Guided by our consideration of the factors discussed above, we find that a fine is not warranted under the circumstances of this case. We admonish WorldCom, however, to comply with Commission decisions in a timely manner, or to seek an extension through Rule 48(b) of the Commission's Rules of Practice and Procedure. Failure to comply with intervenor compensation orders in a timely manner may, in the future, result in sanctions.

Motion for Sanctions for Violation of Rule 1

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's statement that it had paid Sawaya twice was not clearly false, it 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 not misleading in order to avoid the imposition of sanctions under Rule 1.