240,000 Reasons to File Proper FCC Applications When You Buy a Business That Holds Wireless Licenses

The FCC recently released a Consent Decree in which the Archer Daniel Midlands Company (ADM") agreed to pay a $240,000 penalty for violating the FCC's rules by engaging in transactions where five FCC wireless licenses were transferred without filing for and obtaining the prior consent of the FCC, and by failing to reveal in numerous other applications that it had been convicted of a felony. It is important for wireless licensees to comply with these requirements if they wish to avoid a similar or worse result.

Companies often purchase other companies that hold FCC licenses or purchase the licenses alone. But prior to closing on such transactions, the parties must file an application at the FCC, seeking permission to transfer of control of the company being sold or to assign the licenses, and obtain the FCC's consent prior to closing on the transaction. In the present case, ADM and Cargill completed two separate transfers of control, involving five wireless radio licenses, without going through this process. The FCC is never happy to discover this.

The other mistake that ADM made here resulted from the fact that in 1996, ADM was convicted of the felony of price-fixing. The FCC assignment and transfer of control forms down deep in the fine print specifically ask whether the applicant or any party controlling the applicant has ever been convicted of a felony. The FCC may consider that fact in choosing whether to consent to the proposed transfer or assignment. However, it is our experience that if the applicant discloses the prior conviction, and provides information showing that the conviction was years ago and that the people involved in the felonious behavior are no longer with the company, then the prior conviction usually does not prevent the FCC from granting the application. But if the applicant fails to disclose the prior conviction, the FCC considers that failure to be lack of candor", which the FCC really does not like. A finding of lack of candor can be the basis for the FCC's denial of the application and/or prohibiting that party from holding other FCC licenses.

So, the lesson here is (a) to obtain FCC consent before closing on the purchase of FCC licenses, or companies that hold FCC licenses; (b) if your company was previously convicted of a felony, disclose that fact; and (c) read the fine print! There are several certifications in FCC applications that you are making under the legal equivalent of an oath so you need to know what you are signing. Please contact us if you have any questions about this.