April 15, 1999

# STATEMENT OF COMMISSIONERS HAROLD W. FURCHTGOTT-ROTH

**AND MICHAEL K. POWELL, DISSENTING IN PART**

**In re: Trinity Broadcasting of Florida, Inc., Miami, Florida, MM
Docket No. 93-75**

We respectfully dissent from the Commission's finding that Trinity
Broadcasting of Florida, Inc. (\"TBF\"), is \"unqualified\" to hold the
license to operate television station WHFT. We are not persuaded that
the finding of abuse of process that underlies this disqualification is
warranted. Specifically, we take issue with two key conclusions in this
*Order*. First, assuming that TBF\'s parent company, Trinity
Broadcasting Network (\"TBN\") actually exercised *de facto* control of
National Minority TV, Inc. (\"NMTV\"), we do not think that the legal
definition of \"minority-controlled\" under the multiple ownership
exception unambiguously included a *de facto* element applicable to
NMTV. Second, we are not persuaded that the evidentiary record in this
proceeding shows that TBN and its principals specifically intended in
these full power television applications to deceive the Commission about
control of NMTV.

As this *Order* acknowledges, our precedent clearly requires proof of a
\"specific intent to deceive\" the Commission in order to make a finding
of abuse of process.[^1] Our precedent teaches that this \"is not an
easy matter to prove.\"[^2] Today\'s decision finds an abuse of process
on the basis of a record that shows, at most, legal uncertainty on the
part of TBN\'s principals concerning the company's disclosure obligation
and NMTV\'s status as a minority-controlled company. Such uncertainty,
however, is quite a different thing from a particularized intent to
deceive the Commission about the \"true\" facts of NMTV\'s situation and
thereby willfully abuse its process.[^3]

I.

Today\'s Order asserts "that Commission rules and precedent have always
given fair notice that *de facto* control is required to take advantage
of the special provision concerning minority ownership in the multiple
ownership rules."[^4] Close examination of the relevant legal

sources, however, reveals that this assertion is unsustainable. There
was at least some ambiguity on this score in the multiple ownership
rules. [^5] In similar circumstances, the Commission has given the
benefit of the doubt to the licensee. *See Fox Television Stations,
Inc.*, 10 FCC Rcd 8452 (1995) (exonerating party of allegations of
misrepresentation and lack of candor on grounds of party\'s reliance
upon advice of counsel and unclear state of relevant law). We would
follow that precedent here.

Much like the situation in *Fox Television*, counsel for TBN advised its
client that, for purposes of the television applications, NMTV was
"minority-controlled" within the meaning of the rule. This position was
based on the fact that two-thirds of the members of NMTV\'s board of
directors were minorities. Counsel could well have based this advice on
a strict reading of the definition of "minority-controlled" in Section
73.3555(e)(3)(iii). That section provided that: "*Minority-controlled*
means more than 50 percent owned by one or more members of a minority
group." One could rationally interpret that definition to adopt an
exclusively *de jure* test for minority-controlled: the existence of
\"control\" would be determined by an objective percentage formula.
Indeed, given that nothing in the text of the language mentions any *de
facto* element of the definition, that would be a natural reading of the
rule.

Moreover, language in the *Multiple Ownership Order* adopting the rule
supports this reading of section 73.3555(e)(3)(iii). In that Order, the
Commission explained that it was "adopting rules today which permit
group owners of television and radio stations to utilize a maximum
numerical cap of 14 stations provided that at least two of the stations
in which they hold cognizable interests are minority controlled."[^6]
The Commission continued:

A question arises as to the proper definition of a minority owned
station for the purposes of our multiple ownership rules. In this
regard, we note that the Commission has adopted different standards of
minority control depending on the mechanism used to foster its minority
policies. In the context of multiple ownership policies, *we believe
that a greater than 50 percent minority ownership interest is an
appropriate and meaningful standard* for permitting increases to the
rules adopted herein.[^7]

This passage represents the *Multiple Ownership Order's* entire
discussion of the definitional issue. Nothing in its language suggests
that the Commission intended to apply a *de facto* control test in
addition to the 50 percent test. Notably, the dissenting statement of
Commissioner Dennis Patrick asserted \-- without provoking any rebuttal
\-- that "\[n\]o concern is given as to whether the 51% majority owners
will exert any influence on the station's programming or will have any
control at all."[^8] Thus, the *Multiple Ownership Order* and the
definition of minority control that it adopted could reasonably be read
to indicate that applicants need only demonstrate *de jure* control,
*i.e.,* greater than 50 percent minority ownership.

In deciding to disqualify NMTV, this Order does not admit of any
ambiguity with respect to the applicability of the element of *de facto*
control to TBN\'s application. Instead, the *Order* asserts that a note
appended to the multiple ownership rule makes clear that NMTV was
required to prove actual control in addition to 51% percent minority
ownership.[^9] We are unconvinced that the presence of this note in
section 73.3555 is sufficient to overcome the language of either the
actual rule on "minority-controlled" or the *Multiple Ownership Order*
regarding the existence of a *de facto* control test.

First, it is not clear that Note 1 applies to the definition of
"minority-controlled" at all. Note 1 is appended to all of section
73.3555, not subsection 73.3555(e)(3)(iii) in particular. One thus could
reasonably assume that the administrative gloss in Note 1 applies to
those instances in section 73.3555 in which "control" is not otherwise
defined, such as the TV duopoly rule.[^10] It is, in fact, awkward to
layer Note 1\'s explanation of \"control\" on top of the separate
definition of "minority-controlled" in subsection 73.3555(e)(3)(iii);
indeed, the definitional part of that regulation never uses the term
"control." Moreover, the statements in subsection 73.355(e)(3)(iii) and
the *Multiple Ownership Order* regarding the definition of minority
control might colorably be thought to outweigh this addendum on the
scale of legal authority.[^11]

Even if Note 1 governed the meaning of "minority-controlled," the text
of the note can not bear the weight with which the majority saddles it.
Note 1 states that \"the word \'control\' as used herein is not
*limited* to majority stock ownership, but *includes* actual working
control.\" (emphasis added). This language does not necessarily reflect
an intent to \"prevent licensees from circumventing the limitations
imposed by the multiple ownership rules by exercising actual control
over stations over which they did not have legal control.\"[^12] Rather,
it could well be understood to manifest an attempt to explain that
\"control\" *can* mean majority stock ownership, but that it can *also*
mean actual working control, as determined on a case-by-case basis. That
is, the Note could plausibly be interpreted to mean that if an entity
fails the 51% ownership test, but can nevertheless show that minorities
exercise actual working control over the entity, that entity would still
qualify as minority-controlled. A 51% equity interest was thus a proxy
for control, but control could also be demonstrated on a fact-specific,
case-by-case basis where that test was not met. That is not the same
thing, however, as requiring the application of a fact-specific, *de
facto* control analysis in all cases.[^13]

Next, the Commission argues that agency precedent \"has always required
minorities to exercise de facto control over \'minority-controlled\'
stations\" and suggests that the Commission meant to follow this
precedent in the *Multiple Ownership Order* by \"mak\[ing\] specific
reference\" to the 1982 Policy Statement on *Minority Ownership in
Broadcasting*.[^14] Neither claim is borne out by the relevant
documents.

We take the last point \-- that the Commission intended to adhere to the
\"traditional\" definition of minority controlled when it adopted the
ownership preference \-- first. The 1982 Policy Statement, upon which
today\'s decision relies as proof of such adherence, was merely cited in
a footnote*.* The footnote followed this sentence: \"We note that the
Commission has adopted different standards of minority control depending
on the mechanism used to foster its minority policies.\"[^15] The
Commission reads too much into the fact of this citation. To be sure,
the *Multiple Ownership Order* specifically referred to the Policy
Statement, but only as an example of the varying definitions of
minority-controlled in FCC administrative law. *There is no indication
that this citation was meant to incorporate the Statement\'s definition
of minority-controlled into the ownership exemption rules*. That
citation thus provides no substantive pass-through to either the Policy
Statement or the 1978 Policy Statement quoted therein. In fact,
immediately after citing the 1982 Policy Statement, the *Multiple
Ownership* *Order* went on to adopt an apparently independent standard
based on the different \"mechanism\" at issue: \"In the context of the
multiple ownership policies, we believe that a greater than 50 percent
minority ownership interest is an appropriate and meaningful
standard.\"[^16] The citation to the 1982 Statement serves to establish
a contrast to the rule that the Commission actually adopted in the
*Multiple Ownership* item, not a corollary. The \"meaningful standard\"
that the *Multiple Ownership* Commission adopted was, in its own words,
a \"greater than 50 percent minority ownership interest\" standard, not
the standard of the 1982 Policy Statement.[^17]

In any event, close examination of the 1982 Policy Statement on
*Minority Ownership in Broadcasting*,[^18] which this Order cites as
evidence that "Commission precedent has always required minorities to
exercise de facto control over \'minority-controlled\' stations,"[^19]
leads one to doubt, not to embrace, that proposition. *Minority
Ownership in Broadcasting* presented the Commission's policy statement
on minority tax certificates. In paragraph 7 of that statement, the
Commission indicated that entities would be deemed qualified for tax
certificates "where the minority ownership interest in the entity
exceeded fifty percent *or* was controlling."[^20] The paragraph does
not state that minority interests must uniformly demonstrate actual
control \-- over and above satisfaction of the ownership percentage test
\-- in order to receive a preference. To read it that way is to ignore
the clear disjunctive nature of the sentence.

Nor does paragraph 16 make such a statement. Although that paragraph
indicates that control is a factor in issuing tax certificates, it does
not clearly require parties affirmatively to show *de facto* control in
all circumstances in order to claim a minority benefit.[^21] Notably,
the sentence in question refers to \"minority ownership of and control
in the entity below 51 percent.\"[^22] Reading \"control\" independently
of \"minority ownership\" \-- as the *Order* does by emphasizing the
word \"and\"[^23] \-- makes no grammatical sense; it produces the odd
phrase \"control in the entity below 51 percent.\" The less strained
reading of this language is that \"control in the entity\" refers back
to the proxy of a 51% ownership interest. In other words, minority
ownership of 51%*,* which in turn establishes control, should not be
diminished by the transaction.

Finally, *William M. Barnard*[^24] does not bolster the *Order*\'s
contention that *de facto* control has always been a general requirement
for a finding of \"minority-controlled.\" That case involved the
granting of a tax certificate notwithstanding the fact that the minority
ownership interest in the beneficiary entity was less than 51% \--
specifically, 45.5%. It thus does not support the proposition that
actual control is a general requirement for a finding of
\"minority-controlled.\" To the contrary, it indicates that, where the
ownership interest is less than 51%, the Commission under its
\"traditional\" approach will apply a *de facto* test in order to save
the entity from automatic disqualification for minority-controlled
status. More specifically, this case is about \"the unique nature of
limited partnerships,\" for that was the factor that caused the
Commission to find \"sufficient minority involvement\" to warrant
\"issuance of a tax certificate\" even though the percentage test was
not met.[^25] Even if the case applied to section
73.3555(e)(3)(iii),[^26] that still would not mean that a *de facto*
control test governed TBN\'s application, in which there was no question
of failure to meet the percentage test.

In short, we find unpersuasive the evidence marshaled in the Order to
show that Commission rules, notes, or precedent clearly required NMTV to
make an affirmative *de facto* showing in its application. A reasonable
attorney, as well as a reasonable layperson, might have read the
regulation without being on clear notice that the minority control test
included any such element in the context of the multiple ownership
exemption. It certainly did not make clear that a *de facto* control
showing was necessary when the percentage test was satisfied. In light
of the foregoing, we cannot find that TBN\'s failure to make an initial
and affirmative showing of *de facto* control constituted an abuse of
process.

II\.

The evidence cited in the *Order* to show that the principals of TBN may
have been \"aware that\" NMTV\'s compliance with section
73.3555(e)(3)(iii) was \"doubtful\"[^27] is insufficient to show that
they possessed the requisite intent to deceive. At best, such evidence
shows some amount of reservation about NMTV\'s technical status. But
that is often the case in the legal arena, especially where, as here, an
agency adopts different tests for different purposes. Notably, the only
direct testimony in this record on the question of intent is that the
principals believed that, notwithstanding TBN\'s interaction with NMTV,
the nature of that relationship would *not* raise legal problems
relating to *de facto* control so long as other practices to promote
NMTV\'s independence were followed.[^28]

In rejecting this direct testimony as to intent, today\'s decision
states that the opinion of TBN counsel that NMTV qualified as
minority-controlled \"does not reflect a reasonable interpretation of
Commission policy.\"[^29] Given our analysis in Part I of the
regulations in effect when the application was filed, we cannot say that
this belief was unreasonable or clearly erroneous under the
circumstances.

Moreover, the reasonableness of a party\'s belief is not the issue here.
For abuse of process determinations, the relevant question is whether
the party possessed a specific intent to deceive. Even if the definition
of \"minority-controlled\" under the multiple ownership rules was
unambiguous at the time of NMTV's filing (which, as explained above, it
was not), that does not establish that TBN specifically intended to
deceive the Commission about matters relating to control of NMTV. The
clarity of the law is not probative of the filers\' intent. From the
proposition that the Commission provided clear notice of a *de facto*
control test, one might deduce, as an *objective* matter, that TBN
*should have known* of the *de facto* control requirement. But that
proposition tells us nothing about the *subjective* state of mind of
TBN\'s principals (the essence of an intent standard) or what they
*actually knew*. What a reasonable person should have known is not
necessarily what a particular person knew. And abuse of process is not
an objective question but a subjective one.

The Order\'s conclusions about intent, however, are based on speculation
about what the majority feels the principals must have known, not on
proof of what the principals did know. As discussed above, the Order\'s
rejection of TBN counsel\'s direct testimony is based only on the
\"reasonableness\" of that view, not on any evidence that he actually
knew that NMTV did not meet the relevant tests and consciously
endeavored to hide that from the Commission. Similarly, the Order
asserts that TBN principal \"Crouch. . . *could not have been* unaware
that he dominated NMTV, that NMTV was not truly independent of TBN, and
that there was no basis to claim otherwise.\"[^30] Yet the Order points
to no proof that he *was* aware of those things, or that he
intentionally withheld those facts in order to perpetrate a fraud on the
Commission. Whether the Commission finds the principals\' belief that
they had complied with the relevant rules to be with or \"without
foundation,\"[^31] the point is what the parties actually and
specifically intended. On this score, the item adduces scant evidence.

In search of evidence on the intent question, the Order relies on a
provision in one of TBN\'s purchase contracts that conditioned the
contract on NMTV\'s compliance with the minority control rule.[^32] It
is commonplace, however, for commercial contracts to be conditioned on
regulatory compliance or approval; such conditions are no admission of a
subjective belief that the matters in question indeed fail to satisfy
the relevant regulatory requirements.[^33] Again, what this provision
reflects is, at most, some lack of certitude about NMTV\'s status as a
\"minority-controlled\" company within the meaning of the regulation.
And again, this is not at all surprising given the case-by-case,
fact-specific, multi-factored nature of the legal determination of *de
facto* control \-- if the parties even knew that was the test. Whatever
its probative force, this contractual language is certainly not enough,
in our view, to overcome the direct record testimony on intent given by
the principals.

Finally, the Order suggests that the novelty of the question presented
(the meaning of section 73.3555(e)(3)(iii) as applied to a nonprofit
public charity) at the time of TBN\'s filing increased its burden of
initial disclosure. This sword of an argument is double-edged, however.
It could just as readily cut in favor of TBN on the intent
question.[^34] The fact that \"the Commission had never before applied
the provision to an arrangement\"[^35] such as NMTV\'s means that there
was no precedent to guide the applicants in their filing. Notice
therefore was less, not more, clear than the Commission argues it was.
In light of the novelty of the issue, any failure by TBN to disclose
certain information might seem less the product of an intent to deceive
than of lack of guidance on the meaning of \"minority-controlled\" under
the ownership exemption.

In short, the evidence adduced by the Commission does not persuade us
that TBN possessed a specific intent to deceive the Commission with
respect to control of NMTV, and we are aware of no other record evidence
that demonstrates such intent. While intent to deceive certainly can be
proven by circumstantial as opposed to direct evidence, the amount of
circumstantial evidence of intent to deceive here is not particularly
substantial. The only direct evidence on this issue is that the parties
did not mean to deceive the Commission. On such a record, a finding of
abuse of process is unwarranted.

\* \* \*

To conclude, we think this Order errs in asserting that TBN was on clear
notice of the applicability of a *de facto* control showing to its
applications. We further believe that the record evidence in this
proceeding is not sufficient to prove a specific intent to deceive the
Commission. In these circumstances, we find that imposition of the
"death penalty" of disqualification is both unfair and unwarranted.

[^1]: *^?^* See Order *at para*. *83* *(*citing *Evansville Skywave,
    Inc.*, *7 FCC Rcd 1699, 1702 n.10 (1992)).*

[^2]: *^?^* *WWOR-TV, Inc.*, *7 FCC Rcd 636, 638 (1992) (internal
    quotation omitted).*

[^3]: *^?^* *We emphasize that the finding of abuse of process is based
    on the assumption that TBF was affirmatively required to disclose
    the details of the relationship between NMTV and TBN in its initial
    application. There is no indication on this record that the parties
    failed to provide relevant information once the staff requested it;
    indeed, the record shows that TBN subsequently disclosed the
    additional facts regarding \"control\" upon which the Commission
    today relies*. See Order *at* *paras*. *94-95*. *In this regard,
    the* Order *imposes an unduly high burden of initial disclosure upon
    applicants*. See id*. at* *para*. *95 (rejecting subsequent
    disclosure as curative because TBN did not \"\[take\] the
    initiative\" to do so and because disclosure occurred as a response
    to questions asked by Commission staff). By making the validity of
    subsequent disclosures turn on the reason why disclosure was made,
    the* Order *distorts what ought to be the real issue,* i.e.*,
    whether disclosure was made.*

[^4]: *^?^* Order *at para.* *86.*

[^5]: *^?^* I*ndeed, the Mass Media Bureau Trial Staff initially came to
    the same conclusion*. See *Mass Media Bureau Proposed Findings of
    Fact & Conclusions of Law, at* *159.*

[^6]: *^?^* A*mendment to Section 73.3555 of the Commission's Rules
    Relating to Multiple Ownership of AM, FM, and Television Broadcast
    Stations,* *100 FCC 2d 74, 94 (1985) (*herein after "*Multiple
    Ownership Order*"*)*.

[^7]: ^ ^ *^?^* *100 FCC 2d at 95 (footnotes omitted) (emphasis added).*

[^8]: ^ ^ *^?^* Id*. at* *104.* *While Commissioner Patrick\'s
    interpretation of the* Order *is of course not binding in any legal
    sense, it is nonetheless probative of the meaning of the* Order*. At
    a minimum, it shows that reasonable people such as the Commissioner
    could have read the* Order *and related rule as adopting a straight
    percentage test for companies that met the 51% level.*

[^9]: *^?^* Order *at* *para. 86*.

[^10]: *^?^* See 47 C.F.R. *section 73.3555(e)(1).*

[^11]: *^?^* Cf*.* *Laurens Walker*, Writings on the Margin of American
    Law: Committee Notes, Comments, and Commentary*, 29 Ga. L. Rev. 993,
    994 (1995) (arguing that \"courts should assign little, if any,
    weight to these examples of gloss\").*

[^12]: *^?^* Order *at para. 86*.

[^13]: *^?^* *The* Order's *reliance on* *Southwest Texas Public
    Broadcasting Council*, *85 FCC 2d 713 (1981),* see Order *at*
    *para*. *86, is also misplaced. That decision sets forth a
    definition of \"control\" that is limited by its terms to the
    \"determin\[ation\] whether an unauthorized transfer of control has
    occurred\" under section 310(d) of the Communications Act. 85 FCC 2d
    at 715. As the quoted sentence states in full,* \"\[s\]ection 310(d)
    *contemplates every form of control, actual or legal, direct or
    indirect, negative or affirmative, over basic operating policies*.\"
    Id*. (emphasis added).* T*hat* statutory *provision is not at issue
    here. Moreover, it stands to reason that* in the context of
    unauthorized transfers *the test for control might be exclusively*
    de facto*. Unauthorized transfers of control are rarely effected by
    overt, recorded acts like the transfer of stock; they are, by
    definition,* sub rosa*, a fact that practically requires the
    Commission to look beyond legal ownership.*

[^14]: *^?^* Order *at para. 87.*

[^15]: *^?^* *100 FCC Rcd at para. 46.*

[^16]: *^?^* Id*.*

[^17]: *^?^* Cf*.* Order *at* para. 87 *n. 17* *(asserting that \"the
    Commission clearly intended to establish a \'meaningful standard\'
    of control to ensure that minorities had actual control over the
    stations benefiting* *from its minority ownership policies\").*

[^18]: ^ *?*^ *92 FCC 2d 849 (1982).*

[^19]: *^?^* Order *at para* *87.*

[^20]: ^    ^ *^?^* *92 FCC 2d at 853 (emphasis added).*

[^21]: *^?^* *For this reason, it is not surprising that the* Multiple
    Ownership Order *cited paragraph 16 only for the proposition that
    the Commission "has adopted different standards of minority control
    depending on the mechanism used to foster its minority policies,*
    *"as discussed above.*

[^22]: *^?^* Id*.* *at 857*.

[^23]: *^?^* Order *at* *para*. *90.*

[^24]: *^?^* *44 RR 2d 525 (1978) (*cited *in* *Order at par*a. *89).*

[^25]: *^?^* *92 FCC 2d at para*.*8.*

[^26]: *^?^* Barnard *involved the interpretation and application of the
    1978 Policy Statement on minority ownership. As explained above,*
    the Multiple Ownership Order *never incorporated the definitional
    rule of the 1982 Policy Statement, much less* that of *the 1978
    Policy Statement discussed in the 1982 Statement. The relevance of
    this case to the meaning of section 73.3555(e)(3)(iii) is thus
    difficult to see.*

[^27]: *^?^* Order *at para*.. *91*; see also id*. at* *para*. *94
    (faulting application for \"not acknowledg\[ing\] that there is
    even* a question *of whether NMTV should be deemed minority
    controlled\") (emphasis added);* id. *at para. 83 (concluding that
    the* "*claim of minority control was at best doubtful*").

[^28]: *^?^* *Transcript at 3206, 3226, 3228, 3399-401, 3604.*

[^29]: *^?^* Order *at para. 92.*

[^30]: *^?^* Id.

[^31]: *^?^* Id.

[^32]: *^?^* Id*. at para. 93 & n. 21.*

[^33]: *^?^* Id*. at para. 92.*

[^34]: *^?^* *The argument also contradicts the majority\'s earlier*
    *contention that the \"traditional\" definition of
    minority-controlled applied in the multiple ownership context.* *If
    that were true, then precedent on the meaning of* section 73.3555
    *as applied to this case* indeed *would have existed.*

[^35]: *^?^* Id. at para. 93.