127,000 More Reasons to File Proper FCC Applications When Your Company Goes Through Bankruptcy

Recently, we published an article regarding a Federal Communications Commission (FCC") Consent Decree where a company agreed to pay a $240,000 penalty for violating the FCC's rules by engaging in transactions where FCC wireless licenses were transferred without filing for and obtaining the prior consent of the FCC.

Well, it's happened again, so don't say that we didn't warn you. In another recent action, the FCC entered into a $127,000 Consent Decree with Caesars Entertainment Corporation, the company that runs the gambling casinos. Caesars apparently bet that they could get away with going in and out of bankruptcy, and then engaging in post-bankruptcy transactions involving corporate entities that hold FCC licenses, without seeking prior FCC consent to transfer control of those licenses. Caesars lost that bet.

As part of Caesar's bankruptcy process, its assets were transferred to debtors-in-possession (DIP") by operation of law. This process is common, but in doing so, the debtor must apply to the FCC for consent to transfer its wireless license assets to the DIP. Then as part of the process, Caesar's assets were put into two companies, including a newly formed, publicly-traded real estate investment trust. From the FCC's perspective, an additional transfer of control occurred, but Caesar's again did not seek prior FCC consent.

So the lesson here is, if your company has FCC licenses and is going through the bankruptcy process, consult with your telecommunications attorney, and prepare to file FCC transfer of control applications at the same time that bankruptcy filings are being prepared. Similarly, when your company comes out of bankruptcy, wireless licenses are being transferred, so you must file for FCC consent again.

Or, you could ante up and place the bet the Caesar's made. Just be prepared to lose big.