The number and scope of the violations: A single violation is less severe than multiple offenses. A widespread violation that affects a large number of consumers is a more severe offense than one that is limited in scope.
WTC did not report any physical or economic harm to others as a result of its violation of § 854(a). In addition, there is no record evidence that WTC significantly benefited from its unlawful conduct or that its actions affected any consumers. However, this scarcity of criticism may well result from the shortened time allowed to develop and file protest on the application presented to this Commission and the transaction in the bankruptcy proceeding.
2. Conduct of the Utility
In D.98-12-075, the Commission held that the size of a fine should reflect the conduct of the utility. When assessing the conduct of the utility, the Commission stated that it would consider the following factors:11
The Utility's Action to Prevent a Violation: Utilities are expected to take reasonable steps to ensure compliance with applicable laws and regulations. The utility's past record of compliance may be considered in assessing any penalty.
The Utility's Actions to Detect a Violation: Utilities are expected to diligently monitor their activities. Deliberate, as opposed to inadvertent wrongdoing, will be considered an aggravating factor. The level and extent of management's involvement in, or tolerance of, the offense will be considered in determining the amount of any penalty.
The Utility's Actions to Disclose and Rectify a Violation: Utilities are expected to promptly bring a violation to the Commission's attention. What constitutes "prompt" will depend on circumstances. Steps taken by a utility to promptly and cooperatively report and correct violations may be considered in assessing any penalty.
WTC did not take reasonable steps to comply with §854(a). Although WTC and old WCG were required to implement the POR, WTC did not file A.03-10-032 before it took effect. WTC states that it did not file earlier because it did not believe, at the time, that it was required to comply with the requirements of §854 since the bankruptcy court approved the transaction. In effect, WTC asserts that the Bankruptcy Court's approval of the transaction preempts P.U. Code §854(a). WTC assertion in this regard is contrary to law and without foundation.12
We find that WTC could have given the Commission prior notice by filing the application prior to implementation of the POR. This would have allowed the Commission to consider the POR on an expedited basis prior to its execution.
3. Financial Resources Available to WTC
In D.98-12-075, the Commission held that the size of a fine should reflect the financial resources of the utility. When assessing the financial resources of the utility, the Commission stated that it would consider the following factors:13
Need for Deterrence: Fines should be set at a level that deters future violations. Effective deterrence requires that the Commission recognize the financial resources of the utility in setting a fine.
Constitutional limitations on excessive fines: The Commission will adjust the size of fines to achieve the objective of deterrence, without becoming excessive, based on each utility's financial resources.
WTC provided new WCG's most recent SEC Form 10-Q that shows new WCG's current assets of approximately $500 million dollars, and revenues of over $600 million for the first six months of 2003. The financial statements also indicate that new WCG has incurred a net loss for the same reporting period. From this information, we conclude that WTC, through its parent new WCG, has the financial resources to pay a fine imposed by the Commission for violations of Section 854(a). We will weigh this information accordingly when setting the amount of the fine.
4. Totality of the Circumstances
In D.98-12-075, the Commission held that a fine should be tailored to the unique facts of each case. When assessing the unique facts of each case, the Commission stated that it would consider the following factors:14
The degree of wrongdoing: The Commission will review facts that tend to mitigate the degree of wrongdoing as well as facts that exacerbate the wrongdoing.
The public interest: In all cases, the harm will be evaluated from the perspective of the public interest.
WTC was required to implement the POR, but should have exercised better judgment and filed A.03-10-032 in a timely manner to allow the Commission adequate time to review the POR before it took effect. No one was harmed by WTC's failure to comply with § 854(a) and WTC does not appear to have materially benefited from its unlawful conduct. These facts indicate that the public interest was not significantly harmed by WTC's violation of § 854(a). In setting the fine, we will consider the relatively small harm to the public interest from this violation.
5. The Role of Precedent
In D.98-12-075, the Commission held that any decision which imposes a fine should (1) address previous decisions that involve reasonably comparable factual circumstances, and (2) explain any substantial differences in outcome.15
In D.00-09-035, we held that our precedent of meting out lenient treatment to those who violate § 854(a) had failed to deter additional violations; and we indicated that henceforth we would impose fines in order to deter future violations of § 854(a). In both D.00-12-053 and D.03-05-033, the Commission fined telecommunications carriers $5,000 for failure to obtain advance approval under §854(a) for transfers of control. The facts of this case are similar to those addressed in D.03-09-069, which involved implementation of an order of a bankruptcy court and the applicant's failure to make a timely application to the Commission. In that instance, the requirement to implement a bankruptcy court's order mitigated against the seriousness of the violation. As a result, we imposed a fine of $2,500. Here too there is a requirement to implement a bankruptcy court's order. However, the bankruptcy court order at issue here was approved almost two years before the instant application was filed.16 Ultimately WTC's only explanation for its failure to file is that it believes Commission approval of the indirect transfer of control described herein is not required pursuant to current bankruptcy law.17 This unfounded assertion does not mitigate the seriousness of the violation.
Conclusion:
With regard to WilTel's First Transaction we conclude based on the facts of this case that WTC should be fined $10,000 for violating § 854(a). The fine is meant to deter future violations of § 854(a) by WTC and others.
11 1998 Cal. PUC LEXIS 1016, *73 - *75. 12 See the November 19, 2003 decision of the Ninth Circuit Court of Appeals in PG&E v People of the State of California, No. 02-116990, D.C. No. CV-02-01550-VRW. 13 1998 Cal. PUC LEXIS 1016, *75 - *76. 14 1998 Cal. PUC LEXIS 1016, *76. 15 1998 Cal. PUC LEXIS 1016, *77. 16 Application of Wiltel Local Network LLC For Approval Of An Indirect Transfer of Control And Request For Expedited Ex Parte Relief, p.5. 17 Id.
