Respondents Violated Rule 1 in Answering Question 8

Question 8 asks the applicant to state that neither applicant nor an officer, director or owner of applicant has been sanctioned by a state regulatory agency for failure to comply with that agency's rules or orders. Respondents answered "true" in response to Question 8.⁶ We find that Respondents violated Rule 1 in answering Question 8, because Bucci was sanctioned by a state regulatory agency.

At the time the Titan application was filed (July 1999), the Michigan Public Service Commission had fined ACI for its failure to comply with the Commission's procedures for changing telecommunications service providers, ACI had failed to pay the fine or file an appeal, and Bucci was prohibited from engaging in the telecommunications business in Michigan. The Michigan Commission had issued a show cause order on February 26, 1999 that required ACI to respond within 21 days. Because ACI did not respond to the order and Michigan staff found that contact phone numbers had been changed and then disconnected, the Michigan Commission concluded in an order issued April 30, 1999, that ACI was out of business and had violated the show cause order and the Commission's procedures for changing telecommunications service providers. The Michigan Commission fined ACI $940,000 and prohibited ACI and ACI's directors, officers, principals, and agents from engaging in the telecommunications business in Michigan until the fine was paid.⁷ Both the order to show cause and the order fining ACI were publicly noticed.

The record establishes that the Michigan Commission initially sanctioned ACI and prospectively sanctioned Bucci should the fine remain unpaid. ACI never paid the fine. Respondents misled the Commission in responding "true" to Question 8 in this instance, because the Michigan Commission had sanctioned Bucci. The record is not clear on whether ACI or Bucci received the show cause order or the April 30, 1999 order. However, for purposes of our registration process and disclosure of regulatory sanctions, we find that applicants have constructive knowledge of publicly noticed orders, such as the show cause order and the April 30,1999 order, that are mailed to the address provided for service of process.

In Texas, the Office of Consumer Protection (OCP) of the Public Utility Commission sent a letter on June 23, 1998 that constituted a notice of intent to assess an administrative penalty on ACI for switching long distance services without proper verification. If the violations were not cured within 30 days, the OCP would recommend a fine of $120,000. A signed receipt indicated the notice was received on June 29, 1998. On April 27, 1999, ACI's receiver and the OCP entered into a settlement agreement in which ACI agreed to pay the fine but did not admit wrongdoing. The settlement agreement states:

The parties expressly acknowledge and agree that remedial actions on the part of ACI do not constitute and shall not be deemed as constituting, any admission by ACI of wrongdoing, violation of the PUC's Substantive Rules or Texas statutes or liability for any administrative penalties in the circumstances referenced in Paragraph (1) [violations of PUC Substantive Rules § 26.106] above.

Because the settlement agreement expressly excludes admission that ACI failed to comply with the Texas Commission's regulations, that Commission did not "sanction" ACI. That Commission also did not sanction Bucci. In this instance, we find that Respondents misled the Commission in responding "true" to Question 8.