Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )

) File No. EB-01-IH-0339

SBC Communications, Inc. )

) NAL/Acct. No. 200132080059

Apparent Liability for Forfeiture )

**NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER**

**Adopted: October 12, 2001 Released: October 16, 2001**

By the Commission:

Paragraph

**I. INTRODUCTION** 1

**II. FACTS** 4

A. SBC Applies for Section 271 Authority in Kansas and Oklahoma 4

B. The Operation And Oversight Of SBC's Loop Qualification System At The
Time The Reply Affidavits Were Filed 11

C. The Preparation And Submission Of The Inaccurate Reply Affidavits 15

D. Questions Arise About The Accuracy Of The Reply Affidavits 31

E. SBC Notifies The Commission Of The Inaccurate Affidavits 37

**III. DISCUSSION** 41

A. The Evidence Does Not Warrant A Finding Of Apparent Liability For
Intentional Misrepresentation Regarding The Three Reply Affidavits 43

B. SBC Apparently Violated Its Duty To Disclose The Inaccurate
Statements In A Timely Manner To The Commission 47

C. SBC Apparently Misrepresented Facts To The Commission During The
Enforcement Bureau's Investigation 65

D. SBC Apparently Violated The *SBC/SNET Consent Decree* 81

E. SBC Did Not Violate Section 271 Of The Act 90

**IV. CONCLUSION** 91

**V. ORDERING CLAUSES** 92

# INTRODUCTION

1.  This Notice of Apparent Liability and Order ("NAL") relates to a
    matter at the heart of the Commission's processes \-- the
    completeness and accuracy of information submitted by regulated
    companies to the agency. Since April 2001, the Commission's
    Enforcement Bureau has conducted an informal investigation into
    potential misconduct by SBC Communications, Inc. ("SBC") relating to
    inaccurate statements in three affidavits filed by the company in
    the proceeding in which the Commission granted SBC the authority to
    provide long-distance service in Kansas and Oklahoma.[^1]

2.  Based on our evaluation of the information that SBC has supplied to
    the Commission during the course of this investigation, we find that
    SBC is apparently liable for a forfeiture for: (1) apparently
    failing to notify the Commission within 30 days that information
    contained in its section 271 application for Kansas and Oklahoma was
    no longer substantially accurate or complete in all significant
    respects, in apparent violation of section 1.65 of the Commission's
    rules, 47 C.F.R. § 1.65; (2) apparently making a misrepresentation
    or a willful material omission bearing on a matter within the
    jurisdiction of the Commission in a written statement submitted by
    SBC in connection with the investigation into the filing of the
    incorrect affidavits in the Kansas/Oklahoma section 271 proceeding,
    in apparent violation of section 1.17 of the Commission's Rules, 47
    C.F.R. § 1.17; and (3) apparently failing to comply with the terms
    of a consent decree that resolved an earlier investigation of SBC
    involving analogous issues and required SBC to train certain
    employees on Commission rules relating to contacts with the
    agency.[^2]

3.  Based on these findings, we find SBC apparently liable for a
    forfeiture in the amount of two million, five hundred twenty
    thousand dollars (\$2,520,000), which is the statutory maximum for
    these apparent violations. In addition to these specific apparent
    violations, we also note our more general concern that SBC has not
    exercised the degree of care we expect from our regulatees in
    dealing with the Commission. Finally, we also order SBC to file
    certain reports regarding future compliance with section 1.65 and
    the *SBC/SNET Consent Decree*.

# facts

## SBC Applies for Section 271 Authority in Kansas and Oklahoma

4.  On October 26, 2000, SBC filed an application with the Commission
    seeking authorization to provide in-region, interLATA services in
    Kansas and Oklahoma in accordance with section 271 of the
    Communications Act of 1934, as amended.[^3] Under section 271, SBC
    had to demonstrate that it provided competitors with
    nondiscriminatory access to unbundled network elements, pursuant to
    section 251(c) and 252(d) of the Act.[^4] As part of its obligation
    to provide access to these network elements, SBC also had to show
    that it provided competing carriers with nondiscriminatory access to
    its operations support systems (OSS), which are used by carriers for
    pre-ordering, ordering, provisioning, maintenance and repair, and
    billing services.[^5]

5.  The Kansas/Oklahoma section 271 proceeding marked the first time
    that an applicant, as part of its section 271 showing, had to
    demonstrate compliance with the terms of the Commission's *UNE
    Remand Order*.[^6] The *UNE Remand Order* required, among other
    things, that an incumbent local exchange carrier such as SBC make
    loop qualification information available to competitors as part of
    the pre-ordering functionality of its OSS.[^7] SBC thus had to show,
    as part of the section 271 proceeding, that it provided competitors
    with the same level of access to loop information as that available
    to itself, so that a competitor could determine during the
    pre-ordering stage whether a requested loop was capable of
    supporting advanced services equipment.[^8]

6.  In its application, SBC maintained that it provided access to loop
    qualification information in accordance with the *UNE Remand
    Order*.[^9] On November 15, 2000, however, IP Communications Corp.
    ("IP") filed comments alleging that SBC "filtered" its loop
    qualification information for requesting carriers in violation of
    the *UNE Remand Order*.[^10] IP contended that SBC did not provide
    access to all of the information contained in its own electronic
    databases, but rather provided information on only the "best loop,"
    as determined by SBC, to the particular end user. According to IP,
    this withholding of information amounted to improper "filtering" in
    contravention of Commission rules.

7.  Two weeks later, IP made a second, but related, allegation. IP
    claimed that SBC's loop qualification system failed to return
    information on available copper loops to requesting carriers when an
    end user was served by both copper and fiber.[^11] IP asserted that,
    where an end user had both copper and fiber loops to its premises,
    requesting carriers would not receive loop qualification information
    on the copper loop because SBC's loop qualification system only
    returned fiber as the "best loop." As IP noted, competing carriers
    that were capable of providing service only over copper loops would
    effectively be precluded from offering service because such carriers
    would not know that the copper loops existed.[^12] IP asserted that
    this practice also violated the requirements of the *UNE Remand
    Order*.

8.  On December 11, 2000, SBC filed its reply brief and supporting
    affidavits in the Kansas/Oklahoma section 271 proceeding. In
    response to IP's allegations, SBC denied that it unlawfully filtered
    information in its loop qualification system. SBC first argued that
    it had no obligation to return information on more than one loop to
    a requested address and that therefore IP's first allegation was
    irrelevant. Additionally, SBC contended that the method by which its
    loop qualification system retrieved and returned information to
    requesting carriers was without regard to the "best loop."[^13]
    Relying on three supporting affidavits, SBC claimed that its loop
    qualification process utilized the same logic as its provisioning
    system. Thus, according to the affiants, in returning loop
    information, SBC's system would behave as if it were actually
    provisioning the service requested to a particular address,
    including, where necessary, piecing together previously unassociated
    parts of a loop. Since the system could provision digital subscriber
    line (xDSL) service only over a copper loop, the loop qualification
    system would provide information about such loops in response to
    queries from competitors.[^14]

9.  The Commission accepted this explanation. In the *Order* granting
    the application, the Commission found that SBC had demonstrated that
    it provided competing carriers with nondiscriminatory access to the
    same detailed information about the loop, in the same time frame, as
    the company made available to itself.[^15] In so finding, the
    Commission referred to the representations made by the SBC personnel
    in their reply affidavits, including representations that the loop
    qualification process used the same logic as the provisioning
    process.[^16] In addressing the IP "filtering" allegations, the
    Commission determined, with respect to IP's first allegation, that
    it was "not self-evident from the *UNE Remand Order*" that SBC had
    to return information on *all* loops to a given address.[^17] As a
    result, the Commission declined to find that SBC had violated the
    *UNE Remand Order* on those grounds. The Commission also rejected
    IP's allegations that SBC did not return loop information on copper
    loops at an address also served by fiber. Although the Commission
    stated that, if IP's second allegation was true, this practice would
    "appear to violate the *UNE Remand Order*," it concluded that SBC
    had satisfactorily refuted the IP allegations.[^18]

10. The three affidavits supporting the reply brief that addressed the
    loop qualification issue were signed by SBC employees Carol Chapman,
    Mark Welch, and Angela Cullen (collectively, "the reply affiants").
    As noted above, each of the reply affiants claimed in his or her
    affidavit that SBC's loop qualification system searched for
    information about loops as if it were provisioning the particular
    service requested. Therefore, if a carrier requested xDSL service
    over a copper loop, SBC's loop qualification system would return
    information as if it were actually provisioning xDSL service over
    the copper loop. In reality, however, SBC's system provided
    information only about the "first" loop in SBC's records, regardless
    of whether that loop was a xDSL-capable copper loop or a fiber loop.
    Thus, where an address was served by both copper and fiber loops,
    unless the copper loop was also the "first loop" in SBC's systems,
    SBC's loop qualification system would not disclose that loop to a
    requesting CLEC.

## The Operation And Oversight Of SBC's Loop Qualification System At The Time The Reply Affidavits Were Filed

11. Generally, xDSL service may only be provided via loops using copper
    wire, as opposed to loops composed of fiber optic cable. Thus,
    before a carrier undertakes to provide xDSL service to a given
    customer, the carrier first determines whether that customer is
    connected to the wider telephone network via a copper loop. Without
    a copper loop, that customer cannot receive xDSL service. Until
    April 2001, SBC's loop qualification system identified only the
    "first" loop loaded in SBC's Loop Facilities Assignment and Control
    System (LFACS).[^19] Thus, when a carrier sought to learn whether it
    could provide xDSL service to a potential customer, SBC's loop
    qualification system would tell the carrier about a copper loop only
    if it was the "first" loop on SBC's system. Otherwise, SBC would
    only inform the carrier that the potential customer was served only
    by a non-copper loop.[^20]

12. Beginning about June 2000, John Mileham was the loop qualification
    project manager for SBC. In that position, Mr. Mileham was
    responsible for the day-to-day management of SBC's loop
    qualification system and was therefore one of the most knowledgeable
    people at the company on the system.[^21] In August 2000, Mr.
    Mileham prepared an overview describing the process by which SBC's
    loop qualification system searched for information on behalf of
    requesting carriers. Mr. Mileham's overview discussed the process of
    returning information to a carrier that requested actual loop
    information.[^22] Mr. Mileham wrote that the loop qualification
    process would first query a back-end database, LFACS. LFACS would
    then return a list of circuit identifiers for the requested end user
    address, and the loop qualification system would search LFACS for
    the specific loop make-up information on the "first circuit" from
    that list (as opposed to the first *copper* circuit).[^23] Mr.
    Mileham forwarded his overview to numerous persons within SBC,
    including SBC's legal department and at least one of the SBC reply
    affiants, Carol Chapman.

13. In addition, as part of his duties as loop qualification project
    manager, Mr. Mileham hosted technical meetings and conference calls
    with competing carriers designed to provide a forum for questions
    and answers concerning technical aspects of the loop qualification
    system. During these sessions, which began in June 2000, competing
    carriers complained to him that they were receiving insufficient
    information on available copper loops. After making inquiries, he
    determined that the system could be programmed to return information
    on copper loops. Mr. Mileham told Enforcement Bureau staff that,
    beginning in or around September 2000, he began the pre-work on a
    copper loop availability change request. At some point between
    mid-December 2000 and January 10, 2001, Mr. Mileham submitted a
    change request to effectuate this modification.[^24]

14. Mr. Mileham was unquestionably aware that SBC's loop qualification
    system did not use provisioning logic, and that the system sometimes
    did not return loop make-up information about available copper loops
    serving particular end users. As events unfolded, however, Mr.
    Mileham's knowledge of the SBC loop qualification system was not
    reflected in the reply affidavits. Instead, each of those affiants
    submitted an affidavit asserting that SBC's system worked in a
    manner contrary to the facts.

## The Preparation And Submission Of The Inaccurate Reply Affidavits

### The Angela Cullen Affidavit

15. Angela Cullen was one of the reply affiants. At the time the
    affidavits were filed, Ms. Cullen was a Director in SBC's
    information technology organization. As part of her duties in that
    position, she measured the performance of SBC's loop qualification
    system and stated she was familiar with the loop qualification
    process. Earlier in the Kansas/Oklahoma section 271 proceeding, Ms.
    Cullen had filed an affidavit addressing the technical method by
    which competing carriers interacted with SBC's OSS for pre-ordering
    and ordering xDSL capable loops.[^25] After IP made its "filtering"
    allegations, SBC chose Ms. Cullen to submit another affidavit to
    accompany the reply brief refuting IP's claims.

16. Before Ms. Cullen began preparing her affidavit, however, she
    received an e-mail from an SBC attorney stating that SBC's loop
    qualification system returned information on the loop that the
    system would actually provision, if the requesting carrier had
    requested xDSL or line sharing service.[^26] According to Ms.
    Cullen, she was asked to "verify" that the loop qualification system
    worked as described in the attorney's e-mail. Ms. Cullen told the
    Enforcement Bureau that she copied the attorney's description (with
    minor non-substantive changes) into an e-mail she sent to two other
    SBC employees whom she believed to be subject matter experts on the
    SBC system. In her e-mail message, Ms. Cullen stated that "\[w\]e
    need to present rebuttal testimony that says from a technical
    perspective LoopQual provides" and then inserted the attorney's
    description.

17. Over the next few days, Ms. Cullen's e-mail message was forwarded to
    several other SBC employees, including Mr. Mileham and Dennis
    Schuessler, who was an area manager at SBC and responsible for SBC's
    pre-ordering OSS electronic interface.[^27] Although she did not
    originally direct her e-mail to Messrs. Mileham and Schuessler, Ms.
    Cullen told the Enforcement Bureau that she considered both men to
    be subject-matter experts regarding loop qualification.

18. The day after receiving Ms. Cullen's message, Mr. Schuessler
    responded that the e-mail's description of the loop qualification
    system was "basically accurate."[^28] Mr. Schuessler said that
    requesting carriers sent requests for loop qualification information
    to SBC's LFACS, which behaved as if it were actually provisioning
    the loop requested, and that when the system "requests actual
    information from LFACS, LFACS uses the same algorithms that it would
    to provision the order."[^29] Mr. Schuessler noted that he would
    "leave the technical details to John Mileham to answer," and copied
    Mr. Mileham on his response.[^30]

19. Mr. Schuessler has stated that, at the time he responded to Ms.
    Cullen's e-mail, he did not consider himself to be an expert on
    SBC's loop qualification system. Mr. Schuessler has also stated that
    he did not perform any research into the company's system following
    his receipt of the Cullen e-mail. Rather, he gave an answer that was
    his best understanding of the system at the time. In an interview
    with the Enforcement Bureau, Mr. Schuessler admitted that he should
    not have responded substantively to Ms. Cullen's e-mail, but that he
    simply wanted to help her in light of the failure by other persons
    to respond to her request for assistance. According to Mr.
    Schuessler, Mr. Mileham was the actual expert on the subject at
    issue, and he assumed that Mr. Mileham would correct his statement
    if he were wrong. Although he and Mr. Mileham had several
    conversations regarding SBC's loop qualification system between
    December 2000 and April 2001, the two claim that they never
    discussed Ms. Cullen's e-mail or her subsequent affidavit.

20. Both Ms. Cullen's e-mail and Mr. Schuessler's response were
    forwarded to Mr. Mileham while he was on vacation. According to Mr.
    Mileham, when he returned home on December 3, 2000, he opened his
    e-mail from home and read some of approximately three hundred e-mail
    messages before shutting down his computer. The next day at the
    office, he claims, he discovered that the e-mails he had downloaded
    the day before were missing. As Mr. Mileham told the Enforcement
    Bureau, when he returned home to retrieve the "missing" e-mails, his
    computer crashed for some reason and he was forced to reload his
    operating system onto his home computer, apparently deleting the
    "missing" e-mails forever.

21. Mr. Mileham represents that, although his previous job involved
    desktop computer support, he did not attempt to recover the three
    hundred lost e-mails. As he told the Enforcement Bureau, he assumed
    that they were lost when he re-loaded his operating system. Nor did
    Mr. Mileham solicit anyone's help in recovering the lost e-mails or
    tell any other SBC employees, including his supervisors, about his
    computer crash. According to Mr. Mileham, he was the only SBC
    employee who had experienced this problem. Finally, Mr. Mileham did
    not disclose the deletion of his e-mails to any of the competing
    carriers who communicated with him via e-mail to resolve questions
    about SBC's loop qualification system. Mr. Mileham stated that
    because of this system crash, he did not review Ms. Cullen's e-mail
    or Mr. Schuessler's response until March 2001. According to Mr.
    Mileham, had he reviewed either message at the time they were sent,
    he would have explained that the loop qualification system found the
    first loop to the given address, but would not necessarily identify
    a copper loop if one was present.

22. Angela Cullen knew Mr. Mileham was responsible for loop
    qualification. Even though she had received no response from him,
    however, Ms. Cullen never tried to contact him after receiving Mr.
    Schuessler's response. Instead, Ms. Cullen proceeded to draft an
    affidavit based upon her own research and the feedback she received
    from Mr. Schuessler and another SBC affiant, Carol Chapman. In the
    affidavit accompanying SBC's reply comments, Ms. Cullen asserted
    that SBC's loop qualification system returned information to
    requesting carriers by querying the LFACS provisioning system. Ms.
    Cullen stated, consistent with Mr. Schuessler's e-mail, that when a
    carrier requested information from SBC's loop qualification system,
    LFACS presented the requesting carrier with information on the loop
    that the system would use to provision the requested service.[^31]
    More precisely, Ms. Cullen said that LFACS "simply provides the
    information on the loop that would be assigned to fulfill a request
    for DSL service to the address."[^32]

### The Mark Welch Affidavit

23. Mark Welch, a General Manager in SBC's Network Regulatory
    organization, also submitted a reply affidavit responding to IP
    Communications' allegations. Mr. Welch was responsible for
    developing SBC's network policies, primarily with respect to the
    outside network.[^33] Prior to his reply affidavit, Mr. Welch had
    never testified or submitted an affidavit on the topic of SBC's loop
    qualification system. Rather, Mr. Welch said his participation in
    regulatory proceedings had focused on other topics, such as
    provisioning, maintenance and repair testing, and general wholesale
    products functionality matters.

24. In a five-page affidavit attached to SBC's reply comments, Mr. Welch
    explained that SBC would perform a line and station transfer ("LST")
    when provisioning a competitor's order in the event that the
    competitor requested DSL or line sharing service to an end user that
    was being served by facility already in use. In such situations,
    LFACS would identify or create from existing pieces of the network a
    spare circuit over which SBC could provision the service requested
    by the competitor. In a single sentence, Mr. Welch's affidavit then
    claimed SBC would provide loop qualification information on a
    xDSL-capable facility, if available, and would perform the LST to
    provision the requested xDSL capable loop, rather than return
    information to the requesting carrier on an existing fiber
    loop.[^34] This assertion was wrong.

25. Mr. Welch said that when he drafted his affidavit, he relied upon
    his understanding of the loop qualification system, which developed
    during his attendance at State collaborative DSL proceedings. At
    these proceedings, he primarily discussed physical provisioning of
    DSL and line sharing. Mr. Welch said he gained his loop
    qualification knowledge not from his official duties but simply from
    being "present" when others discussed the loop qualification system.
    Mr. Welch told the Enforcement Bureau, however, that he did not
    write the language in his affidavit regarding loop qualification and
    that it was not his idea to include the subject in his affidavit.
    Mr. Welch stated that when he initially drafted his reply affidavit,
    he did not include anything about the loop qualification system. Mr.
    Welch could not recall how the sentence got into his affidavit, who
    wrote it, or whose idea it was to add it to his affidavit. But in a
    separate interview with the Enforcement Bureau, Carol Chapman
    indicated that she had suggested to Mr. Welch that he include
    language regarding SBC's loop qualification system in his affidavit,
    although she did not recall drafting any specific language.

26. On December 6, 2000, Mr. Welch sent a draft of his five-page
    affidavit \-- which by then contained the loop qualification
    sentence \-- by e-mail to a number of SBC employees, including Mr.
    Mileham, Mr. Schuessler, and Ms. Chapman.[^35] In the e-mail, Mr.
    Welch briefly summarized the main points in his affidavit, attached
    it, and asked for comments. The only person who responded to his
    request was John Mileham, who (now back from vacation) sent his
    response the next day. Mr. Mileham made only minor edits and failed
    to correct the one sentence in Mr. Welch's affidavit that described
    matters within Mr. Mileham's job responsibilities.[^36] Mr. Mileham
    admits that the Welch affidavit was incorrect and that he understood
    at that time how the system actually worked. Mr. Mileham claimed in
    an affidavit filed with the Commission during the Enforcement Bureau
    investigation that he reviewed Mr. Welch's affidavit "late at night"
    and that he "must have 'skipped' this important sentence."[^37] As
    discussed below, however, the evidence demonstrates that Mr. Mileham
    actually reviewed Mr. Welch's affidavit around noon.[^38]

### The Carol Chapman Affidavit

27. Carol Chapman submitted the third SBC reply affidavit addressing the
    IP allegations. At the time SBC filed the reply affidavits, Ms.
    Chapman was an associate director in SBC's wholesale marketing group
    and, like Ms. Cullen, had drafted a previous affidavit accompanying
    SBC's application. In late November 2000, she was approached to
    draft a reply affidavit addressing a number of issues raised by
    competing carriers, including the IP allegations concerning loop
    qualification. Ms. Chapman told the Enforcement Bureau that, in
    writing her reply affidavit, she relied on draft versions of the
    Welch and Cullen affidavits, specifically using their explanations
    of how the loop qualification system worked. But Ms. Chapman also
    stated that she was the person who suggested to Mark Welch that he
    discuss loop qualification in his affidavit, although she did not
    recall drafting any language for use in the Welch affidavit. Ms.
    Chapman did not attempt to contact Mr. Mileham about the issue even
    though she knew he oversaw SBC's loop qualification system.

28. Like those of Ms. Cullen and Mr. Welch, Ms. Chapman's affidavit
    incorrectly described how the loop qualification system functioned.
    Specifically, Ms. Chapman represented that LFACS, upon receipt of a
    loop qualification request, would perform the same type of query as
    if it were provisioning the service requested and that the "the loop
    qualification process follows the same process as the assignment
    process."[^39]

29. In addition to allegedly relying on Mr. Welch and Ms. Cullen in her
    reply affidavit, Ms. Chapman used her own understanding of the loop
    qualification process. Specifically, she had worked on SBC's team
    that developed the loop qualification offering between January and
    May 2000. According to Ms. Chapman, because of a series of changes
    in the loop qualification system during this period, it was not
    unusual for team members to have different understandings of how the
    system worked. Ms. Chapman stated that at one point, she believed
    that the loop qualification system looked only for the first
    available loop to an end-user, but was informed otherwise by another
    SBC employee.

30. But well before she submitted her reply affidavit, Ms. Chapman had
    received and read the loop qualification overview drafted by John
    Mileham. As described above, the Mileham overview accurately stated
    that SBC's loop qualification system would provide information only
    about the "first" loop on SBC's system. Thus, carriers requesting a
    copper loop to a given address would be told of such a loop only if
    that loop was also the "first" loop. Ms. Chapman stated in an
    interview with the Enforcement Bureau that she misread the overview
    at that time and mistakenly thought that the description referred to
    the LFACS search for copper loops during provisioning. Ms. Chapman
    stated that Mr. Mileham's overview accurately describes the loop
    qualification as it actually worked at that time, that is, by
    looking for the "first" loop. Ms. Chapman stated that she did not
    consult the loop qualification overview during the preparation of
    her reply affidavit.

## Questions Arise Regarding The Accuracy Of The Reply Affidavits

31. On December 11, 2000, SBC submitted its reply brief to the
    Commission and included the affidavits from Ms. Cullen, Mr. Welch
    and Ms. Chapman. The Commission granted SBC's application and, in
    the *Order* released on January 22, 2001, referred to SBC's
    representations concerning the operation of the loop qualification
    system and how LFACS would return information to a requesting
    carrier as if it were provisioning the service requested.[^40]

32. In early February 2001, a few weeks after the Commission released
    the *Order*, Dennis Schuessler read the *Order's* loop qualification
    discussion. During his review, Mr. Schuessler discovered what he
    believed was an apparent inconsistency between the Commission's
    description of how SBC's loop qualification system worked and what
    he had learned about the system in a state loop qualification
    proceeding in Illinois.[^41]

33. Within the next few days, Mr. Schuessler met with Angela Cullen
    regarding this issue.[^42] In that meeting, he expressed concern
    that the Commission had incorrectly described SBC's loop
    qualification system, and had done so in reliance on the reply
    affidavits. But rather than investigating the matter further, Ms.
    Cullen simply reminded Mr. Schuessler that he had reviewed her
    affidavit before it was submitted. According to Mr. Schuessler, she
    suggested that he raise the issue with Ms. Chapman. Despite the
    concerns Mr. Schuessler raised about her affidavit, Ms. Cullen
    stated in an interview with the Enforcement Bureau that she made no
    attempt to verify whether her statements had been accurate or to
    make other SBC employees aware of Mr. Schuessler's concerns. And
    although Mr. Schuessler now concedes that Mr. Mileham would have
    been the best person with whom to confer regarding the loop
    qualification system's functionality, Mr. Schuessler states he never
    did so after reviewing the *Order*.

34. Mr. Schuessler did relay his concerns to Mark Welch. According to
    Mr. Welch, around the time that the Commission released the *Order*,
    Mr. Schuessler approached him after a meeting. Mr. Welch told the
    Enforcement Bureau that Mr. Schuessler said he was concerned that
    the loop qualification system did not work as described in the reply
    affidavits. In response, Mr. Welch said he told Mr. Schuessler that
    the system "had to work" that way. Mr. Welch stated in the
    Enforcement Bureau interview that he felt that Mr. Schuessler was
    wrong and told him to check the *Order* and confer with "the
    experts." Despite this conversation, Mr. Welch claims that he did
    not review his affidavit to determine if he had included any
    potentially incorrect information or attempt to verify that the
    other affidavits containing loop qualification system information
    were correct. Mr. Welch also states that he did not contact or
    inform anyone else about his conversation with Mr. Schuessler.

35. On March 6, 2001, approximately one month after he relayed his
    concerns to Ms. Cullen and Mr. Welch, Mr. Schuessler spoke with
    Carol Chapman. In the interim, he had exchanged calls with Ms.
    Chapman and left a message explaining that he and Ms. Cullen had
    spoken and that they had questions about the Commission's order.
    According to Ms. Chapman, Mr. Schuessler told her that his reading
    of the Commission's discussion of SBC's loop qualification system
    did not match his understanding of how the system actually worked.
    Specifically, Mr. Schuessler told Ms. Chapman that he believed the
    Commission's statement that the system followed provisioning logic
    was incorrect. He then asked if her affidavit and the Commission's
    description of the system in the *Order* were consistent. She told
    him they were, and that it would be a "problem" if the system did
    not work as described in the affidavits.

36. Almost immediately after her conversation with Mr. Schuessler, Ms.
    Chapman called John Mileham and described the problem. Mr. Mileham
    told her that the description in the SBC affidavits was wrong and
    that the reply affiants should have checked with him (apparently
    failing to recall his involvement with the Welch affidavit). Ms.
    Chapman, believing that the affidavits might well contain incorrect
    statements, called SBC's legal department. She did not attempt to
    contact Ms. Cullen or Mr. Welch to discuss the matter. Soon after
    that, Ms. Cullen and Mr. Welch were informed that their affidavits
    were inaccurate.

## SBC Notifies The Commission Of The Inaccurate Affidavits

37. In mid-to-late March 2001, SBC was preparing to file its application
    for section 271 authority for Missouri. At the same time, the
    company was also investigating the inaccuracies in its
    Kansas/Oklahoma affidavits. While SBC was attempting to determine
    why it had filed inaccurate affidavits in the Kansas/Oklahoma
    proceeding, it also had to ascertain how its loop qualification
    system actually functioned before it filed its Missouri application.
    In the Kansas/Oklahoma proceeding, SBC had asserted in numerous
    places that its OSS (of which the loop qualification system was a
    part) was identical throughout its five-state SWBT region (*i.e.*,
    Kansas, Oklahoma, Missouri, Texas, and Arkansas). SBC contended that
    it used the same systems in the same locations to provide access to
    its OSS throughout the SWBT region and a competitor accessing the
    system in Texas would follow the same procedures and use the same
    functionalities of the OSS when it accessed the system in Kansas,
    Oklahoma, or Missouri.[^43] Thus, before SBC could file its Missouri
    application, it had to conclude its internal inquiry into the
    Kansas/Oklahoma affidavits and determine how the system worked
    because any uncertainty about the loop qualification functionality
    in Kansas and Oklahoma also applied to the system in Missouri. Once
    it determined how its system actually worked, SBC was faced with the
    prospect of representing to the Commission and interested parties in
    the Missouri 271 application that the loop qualification system
    functioned differently than as represented in the Kansas/Oklahoma
    proceeding.

38. Faced with these parallel, yet inextricably linked, matters, SBC
    informed the Commission of the concerns with the loop qualification
    system. In a preliminary meeting with the Commission's Common
    Carrier Bureau on or about March 26th, when SBC was on the verge of
    submitting its Missouri application, SBC indicated that something
    had arisen that might affect its Missouri application. SBC explained
    to CCB staff that it had filed affidavits in the Kansas/Oklahoma
    proceeding that may have contained inaccurate statements concerning
    the operation of its loop qualification system. Moreover, SBC
    indicated that the loop qualification system in Kansas, Oklahoma,
    and Missouri did not work as described in the Commission's
    *Kansas/Oklahoma Order*. The Common Carrier Bureau advised that SBC
    should not submit its section 271 application for Missouri until it
    had remedied this matter and that the company should inform the
    Commission's Enforcement Bureau of this development. SBC
    agreed.[^44]

39. On or about March 30, 2001, SBC then met with the Enforcement Bureau
    to give its preliminary understanding of the problem. At the
    conclusion of the meeting, Bureau staff requested that SBC file a
    report describing its understanding of the circumstances surrounding
    the filing of the inaccurate affidavits. On April 6, 2001, SBC filed
    a report signed by a Senior Vice President in which it admitted that
    the reply affidavits contained inaccuracies. SBC attached to this
    report a new round of affidavits from each of the reply affiants
    (Mr. Welch, Ms. Chapman and Ms. Cullen) and from Messrs. Mileham and
    Schuessler. The affidavits attached to the report described
    generally the process by which the reply affiants collected and
    included the inaccurate information in their reply affidavits, how
    Messrs. Mileham and Schuessler and other SBC employees responded or,
    in some cases, failed to respond to inquiries concerning the
    functionality of the loop qualification system, and the information
    upon which the reply affidavits were based.

40. Shortly thereafter, on or about April 9, 2001, Enforcement Bureau
    staff contacted SBC and inquired as to whether the company intended
    to file a section 1.65 notice in the Kansas/Oklahoma proceeding.
    Under section 1.65 of the Commission's rules, absent good cause,
    applicants are required to disclose inaccuracies in their pending
    applications as promptly as possible, and in any event within 30
    days, whenever information furnished in the application "is no
    longer substantially accurate or complete in all significant
    respects" or there has been a "substantial change as to any other
    matter which may be of decisional significance."[^45] On April 13,
    2001, SBC filed a letter pursuant to section 1.65 of the
    Commission's rules in which it advised that certain reply affidavits
    filed in the Kansas/Oklahoma proceeding contained inaccurate
    information on a loop qualification issue.[^46]

# discussion

41. Under section 503 of the Act, any person who is determined by the
    Commission to have willfully or repeatedly failed to comply with any
    of the provisions of the Act, or any rule or order issued by the
    Commission under the Act, shall be liable for a forfeiture
    penalty.[^47] In order to impose such a forfeiture penalty, the
    Commission must issue a notice of apparent liability, the notice
    must be received, and the person against whom the notice has been
    issued must have an opportunity to show, in writing, why no such
    forfeiture penalty should be imposed.[^48] The Commission will then
    issue a forfeiture if it finds by a preponderance of the evidence
    that the person has violated the Act or a Commission rule.[^49] As
    set forth in more detail below, we conclude under this standard that
    SBC is apparently liable for a forfeiture for its apparent
    violations of Commission rules and a Commission Order.

42. The duty of absolute truth and candor is a fundamental requirement
    for those appearing before the Commission. Our decisions rely
    heavily on the completeness and accuracy of applicants' submissions
    because we do not have the resources to verify independently each
    and every representation made in the thousands of pages submitted to
    us each day. For that reason, we are disturbed by SBC's apparent
    actions here. SBC did not exercise reasonable care in verifying the
    information regarding the operation of its loop qualification system
    before submitting the three affidavits at issue. Moreover, although
    our rules require companies promptly to correct inaccurate or
    incomplete information submitted to the Commission, SBC took over
    two months after the company first focused on the fact that the
    affidavits were (or may have been) incorrect to notify the
    Commission that the reply affidavits were wrong. Furthermore, when
    the Commission began to investigate those inaccuracies, an SBC
    employee apparently intentionally misrepresented facts to the
    Commission in an affidavit attached to a report signed by an SBC
    Senior Vice President. Finally, SBC apparently violated the terms of
    the June 1999 *SBC/SNET Consent Decree*, in which SBC promised to
    train its employees who have regular contact with the Commission as
    part of their assigned duties in our rules governing contacts with,
    and representations to, the Commission.

## The Evidence Does Not Warrant a Finding of Apparent Liability for Intentional Misrepresentation Regarding the Three Reply Affidavits

43. The Commission initiated this investigation primarily to determine
    whether SBC intentionally misrepresented the functionality of its
    loop qualification system in order to obtain a grant of its section
    271 application. We have determined that the evidence, although
    deeply troubling, does not support a finding that SBC apparently
    engaged in making intentional misrepresentations in violation of
    section 1.17 of the Commission's Rules in connection with the three
    reply affidavits.[^50] With that said, we do conclude that SBC was
    negligent in collecting the information it relied upon in its reply
    affidavits and in making its showing under section 271. While such
    negligence does not violate the Communications Act or any Commission
    rule,[^51] we expect a higher degree of care from our regulatees
    than that exhibited here by SBC.

44. SBC's negligence in collecting the information submitted to the
    Commission is easily summarized. First, SBC began the process when
    an SBC attorney, apparently without consulting anyone with
    specialized knowledge of the loop qualification system, wrote a
    description of the functionality of the system and sent it to Angela
    Cullen.[^52] The description incorrectly indicated that the system
    returned loop information as if it were actually provisioning the
    service requested. Ms. Cullen copied and pasted the description into
    an e-mail she sent to various persons within the company with
    responsibility for loop qualification matters. Her e-mail message
    was then forwarded to Dennis Schuessler, whose responsibilities
    included OSS interfaces (but not the back office systems operations)
    and John Mileham, who was SBC's principal loop qualification expert.
    Without doing any independent research, Mr. Schuessler told Ms.
    Cullen that her description of the system was "basically accurate"
    and said that he would "leave the technical details to John Mileham
    to answer." Mr. Schuessler copied Mr. Mileham on his e-mail. Mr.
    Mileham, however, never responded to this message or Ms. Cullen's
    initial e-mail. Then, despite never hearing from the company's
    foremost loop qualification expert, and despite Mr. Schuessler's
    advice that Mr. Mileham should give her the technical details, Ms.
    Cullen drafted and SBC submitted an affidavit that included an
    incorrect description of the loop qualification system.

45. SBC also submitted inaccurate affidavits signed by Mark Welch and
    Carol Chapman. Mr. Welch, an SBC employee with little loop
    qualification experience, included one sentence in his affidavit
    that incorrectly described the functionality of the loop
    qualification system. While Mr. Welch claims that it was not his
    idea to include this sentence in his affidavit, he could not recall
    how the sentence made its way into his affidavit or who suggested
    that he include it. Ms. Chapman, for her part, claims that she
    relied on the draft affidavits of Ms. Cullen and Mr. Welch when
    writing the section of her own affidavit pertaining to the loop
    qualification system. However, despite this stated reliance on Mr.
    Welch's affidavit, Ms. Chapman claims that she was the one who
    suggested to Mr. Welch that he include something in his affidavit
    concerning the operation of the loop qualification system. Before
    submitting his affidavit, Mr. Welch sent a copy to Mr. Mileham and
    Mr. Schuessler, among others, for their review and comment. While
    Mr. Schuessler failed to respond, Mr. Mileham did review it.
    However, Mr. Mileham did not correct Ms. Welch's inaccurate
    description, claiming that he must have "skipped" the relevant
    sentence relating to system because he read it "late at night."[^53]
    Ms. Chapman, on the other hand, never consulted with Mr. Mileham for
    assistance in writing her affidavit even though she understood that
    he was the company's loop qualification expert.

46. The confluence of errors committed by SBC during this process is, as
    noted above, troubling. But after close consideration of the
    available evidence, we conclude that the company did not apparently
    violate section 1.17 of our rules when it submitted the three reply
    affidavits. Though the company's lack of care could hardly be more
    evident, we find that it is not reasonable to infer that the company
    *intentionally* submitted false affidavits to the Commission during
    the 271 proceeding.[^54] As we discuss in more detail below, it is
    certainly permissible, as a general matter, to infer an intention to
    mislead from the circumstances surrounding the making of a false
    statement.[^55] However, we believe the evidence here is more
    indicative of sloppiness on SBC\'s part in submitting the three
    affidavits in question than any plan to mislead the Commission about
    the true workings of the loop qualification system.

## SBC Apparently Violated Its Duty To Disclose The Inaccurate Statements In A Timely Manner To The Commission

47. We conclude that SBC apparently violated section 1.65 of the
    Commission's rules, 47 C.F.R. § 1.65. Under section 1.65(a),
    applicants generally must disclose inaccuracies in their pending
    applications within 30 days: (1) whenever information furnished in
    the pending application "is no longer substantially accurate or
    complete in all significant respects"; and (2) whenever "there has
    been a substantial change as to any other matter which may be of
    decisional significance in a Commission proceeding involving the
    pending application."[^56] The purpose of section 1.65 is to inform
    the Commission, the public, and concerned parties of material
    changes in the application.[^57] Moreover, section 1.65 imposes an
    affirmative obligation on regulated entities to inform the
    Commission of the facts needed to fulfill its duties. As one court
    has stated, "\[t\]he Commission is not expected to 'play procedural
    games with those who come before it in order to ascertain the
    truth.'"[^58]

48. There is no question that SBC's principal loop qualification expert,
    John Mileham, knew throughout the time period relevant to this
    investigation that the system did not routinely provide loop make-up
    information regarding copper loops when both copper loops and fiber
    loops were present. Mr. Mileham stated as much in an interview with
    the Enforcement Bureau, and his August 2000 memorandum documents his
    knowledge in this regard. There is also no question that Mr. Mileham
    reviewed at least one of the three reply affidavits before they were
    submitted. He received and edited the five-page Welch affidavit, but
    claims to have "skipped" the sentence that erroneously described
    SBC's loop qualification system \-- the only sentence in the
    affidavit dealing with his area of responsibility. Given Mr.
    Mileham's admitted knowledge of the true workings of SBC's loop
    qualification system, and his participation in the drafting of at
    least one of the three affidavits at issue, a strong argument can be
    made that the clock under section 1.65 began running as early as
    December 11, 2000 \-- the date SBC filed the reply affidavits with
    the Commission.

49. Nevertheless, under the facts here presented, we hold that the
    section 1.65 clock did not begin to run until the time that a
    relevant SBC manager, Dennis Schuessler, first reviewed the
    *Kansas/Oklahoma Order* and recognized the reply affidavits were or
    may have been inaccurate.[^59] While we do not know the precise date
    this occurred, the available evidence indicates that it occurred in
    early February, more than two months before SBC filed its section
    1.65 statement in the Kansas/Oklahoma proceeding.[^60]

50. In early February 2001, shortly after the Commission released the
    *Order* on January 22, Mr. Schuessler recognized an inconsistency
    between the loop qualification system as described in the *Order*
    and his then-current understanding of the actual operation of the
    system. At that time, Mr. Schuessler was a manager at SBC with
    substantial responsibilities concerning SBC's OSS. Mr. Schuessler's
    concerns upon reviewing the *Order* led him to initiate separate
    conversations in the first week of February with reply affiants
    Welch and Cullen. However, neither Ms. Cullen nor Mr. Welch, also
    SBC managers, made any effort to verify the accuracy of their
    statements or to investigate Mr. Schuessler's concerns. And, like
    Mr. Schuessler, they made no efforts to bring the matter to the
    Commission's attention or to urge others to do so. Despite his
    concerns, Mr. Schuessler waited an entire month before finally
    speaking to Ms. Chapman. By his own admission, he attempted to call
    her only two or three times during that month, and left a single
    message on her voicemail in which he told her only that he had a
    question for her about the *Order*. He did not attempt to explain
    his specific concern to her either in a voicemail or an e-mail.
    Furthermore, he made no attempt to ascertain whether his concerns
    were well-founded by researching the functionality of the system.
    Although Ms. Chapman, soon after her discussion with Mr. Schuessler,
    brought the matter to the attention of SBC's legal department on or
    about March 6, 2001, the company did not file its section 1.65
    statement until April 13, 2001.[^61]

51. Section 1.65 requires applicants to disclose additional or corrected
    information whenever prior filings are "no longer substantially
    accurate or complete in all significant respects" or "there has been
    a substantial change as to any other matter which may be of
    decisional significance ...."[^62] We find that the inaccuracies in
    the reply affidavits were of such significance that SBC should have
    notified the Commission no later than 30 days of the discovery by
    Mr. Schuessler that the affidavits were or may have been inaccurate.
    The significance of the inaccuracies to the proceeding is
    demonstrated by the Commission's express reliance on the reply
    affidavits in the text of the *Order.* Due to its reliance on the
    reply affidavits, the Commission did not reach the question about
    whether SBC's loop qualification system, as it actually operated,
    complied with the *UNE Remand Order*.[^63]

52. Moreover, SBC's delay in filing the section 1.65 notice had
    potentially important impacts on the Commission's processes. SBC's
    delay in submitting the 1.65 statement effectively deprived the
    Commission and interested parties of the opportunity for
    reconsideration of the *Order* under the procedures set forth in
    sections 1.106 and 1.108 of the Commission's rules. We thus find
    that SBC's delay in filing the 1.65 statement materially affected
    the Commission's processes.

53. Neither SBC's meetings with Commission staff in late March 2001, nor
    its April 6^th^ report to the Enforcement Bureau alleviate our
    concerns about the late section 1.65 filing. More specifically, we
    do not find that SBC constructively discharged its section 1.65
    obligations prior to its actual notice filed on April 13. Section
    1.65 requires a written filing in the docket of the relevant
    proceeding so that all interested parties may become aware of the
    new changed information. Oral representations to Commission staff do
    not suffice for this purpose. Nor could SBC's April 6^th^ report
    serve as a section 1.65 notification. That report was not served on
    interested parties nor was it placed in the record of the 271
    proceeding. Indeed, SBC initially requested confidential treatment
    of the report, which, under Commission rules, required the
    Enforcement Bureau to keep it confidential for the time being.[^64]
    Indeed, as noted below, the appeal of our *Order* was and remains
    pending before the D.C. Circuit. Without a section 1.65 filing from
    SBC, the parties to that appeal had no knowledge of this
    development. SBC's contacts with the Commission staff prior to April
    13, 2001 thus did not serve the purposes behind section 1.65.[^65]

54. We also note that SBC's Kansas and Oklahoma 271 application was
    "pending," as that term is defined in section 1.65, during the
    relevant time period. Under section 1.65, an application is pending
    from the time that the Commission accepts the application's filing
    until the Commission's decision granting or denying the application
    is no longer subject to reconsideration by the Commission or review
    by the courts.[^66] Since the D.C. Circuit still is considering the
    appeal of the Commission's *Order*, SBC's section 271 application
    for Kansas and Oklahoma was and remains pending for the purposes of
    section 1.65.

55. In light of SBC\'s apparent willful and/or repeated failure to
    comply with section 1.65 of the rules, we find that a forfeiture
    appears to be warranted. Section 503(b)(1) of the Act states that
    any person who willfully or repeatedly fails to comply with any
    provision of the Act or any rule, regulation, or order issued by the
    Commission, shall be liable to the United States for a forfeiture
    penalty.[^67] For the time period relevant to this proceeding,
    section 503(b)(2)(B) of the Act authorizes the Commission to assess
    a forfeiture of up to \$120,000 for each violation, or each day of a
    continuing violation, up to a statutory maximum of \$1,200,000 for a
    single act or failure to act.[^68] In determining the appropriate
    proposed forfeiture amount, we consider the factors enumerated in
    section 503(b)(2)(D) of the Act, including "the nature,
    circumstances, extent and gravity of the violation, and, with
    respect to the violator, the degree of culpability, any history of
    prior offenses, ability to pay, and such other matters as justice
    may require."[^69]

56. Section 1.80 of the Commission's Rules and the Commission's
    *Forfeiture Policy Statement* establish a base forfeiture of \$3,000
    for violations of section 1.65.[^70] The circumstances of this case,
    however, appear to justify a substantial increase in this base
    amount under certain upward adjustment criteria contained in the
    Rules and the *Forfeiture Policy Statement*: the egregiousness of
    the misconduct and SBC's ability to pay considered with the
    deterrent effect of the forfeiture amount.[^71] We also consider
    whether SBC voluntarily disclosed the inaccuracies to the Commission
    in determining whether a downward adjustment to the forfeiture
    amount is appropriate.

57. *Egregiousness*. SBC's conduct here appears particularly egregious
    because just two years ago, in June 1999, the company and the
    Commission entered into the *SBC/SNET Consent Decree*, which
    resolved a similar investigation. Like here, that investigation
    related to statements made by SBC employees before and shortly after
    the Commission granted an application. Both investigations involved
    a potential violation of section 1.65, a potential violation of
    section 271 of the Act (and section 272 in the case of the *SBC/SNET
    Consent Decree*), and whether SBC employees made intentionally
    inaccurate statements to the Commission.

58. In the *SBC/SNET Consent Decree*, SBC agreed to implement a
    compliance plan that involved training certain categories of SBC
    employees regarding Commission rules relating to "contacts with, and
    representations to, the FCC ...."[^72] Section 1.65 was one of these
    key rules, and indeed was a subject of the underlying investigation.
    So, in addition to the general notice provided by section 1.65
    itself, SBC had actual notice of the importance of that section
    (including in the post-grant context) and had made commitments
    specifically designed to ensure future compliance. Nevertheless,
    less than two years after entering into this consent decree, SBC
    appears to have violated section 1.65(a) in a context remarkably
    similar to the one at issue in the *SBC/SNET Consent Decree*.

59. Moreover, the violation occurred on a material issue in a major
    Commission proceeding against a backdrop of repeated Commission
    references to the importance of section 1.65 in section 271
    proceedings like the one here.[^73] Section 271 proceedings are at
    the center of Congress' efforts to promote competition in the
    Telecommunications Act of 1996. They are the subject of significant
    litigation. For SBC to keep the parties and the Commission
    uninformed of material inaccuracies relating to its section 271
    application is extremely serious.

60. *Ability to pay/deterrent effect*. In the *Forfeiture Policy
    Statement*, the Commission made it clear that companies with higher
    revenues, such as SBC,[^74] could expect higher forfeitures than
    those reflected in the base amounts:

> \[O\]n the other end of the spectrum of potential violations, we
> recognize that for large or highly profitable communication entities,
> the base forfeiture amounts . . . are generally low. In this regard,
> we are mindful that, as Congress has stated, for a forfeiture to be an
> effective deterrent against these entities, the forfeiture must be
> issued at a high level .... For this reason, we caution all entities
> and individuals that, independent from the uniform base forfeiture
> amounts ..., we intend to take into account the subsequent violator's
> ability to pay in determining the amount of a forfeiture to guarantee
> that forfeitures issued against large or highly profitable entities
> are not considered merely an affordable cost of doing business. Such
> large or highly profitable entities should expect in this regard that
> the forfeiture amount set out in a Notice of Apparent Liability
> against them may in many cases be above, or even well above, the
> relevant base amount.[^75]

The statutory maximum for a continuing violation of section 1.65 is
\$1.2 million. While it is unclear whether such a forfeiture will act as
a sufficient deterrent to SBC against future violations of section
1.65,[^76] we believe that anything less is unlikely to do so. This is
particularly the case in light of the fact that the \$1.3 million
payment made by SBC as part of the *SBC/SNET Consent Decree* apparently
did not act as a sufficient deterrent with respect to the situation now
before us.

61. *Voluntary disclosure*. In the *Forfeiture Policy Statement*, the
    Commission stated that forfeiture amounts may be reduced where a
    person voluntarily brings a matter to the Commission's
    attention.[^77] We find, however, that a downward adjustment, for
    this reason, in the proposed forfeiture is not warranted in this
    case. Specifically, we find that SBC did not voluntarily disclose
    this problem to the Commission within the meaning of the *Forfeiture
    Policy Statement*. SBC's requisite disclosure of this problem did
    not actually occur until it filed its section 1.65 notice on April
    13, 2001, after the Enforcement Bureau brought the requirement to
    the company's attention. This was more than two months after its
    section 1.65 obligation was triggered, and more than a month after
    SBC's attorneys knew the reply affidavits were (or apparently were)
    inaccurate.

62. Moreover, SBC knew that it would be required to demonstrate in its
    Missouri 271 application that its loop qualification system complied
    with the *UNE Remand Order* and to describe how this system
    functioned. However, because it had claimed that its OSS was
    identical throughout the SWBT region in the Kansas/Oklahoma
    proceeding, any problem with the system functionality in Kansas and
    Oklahoma also applied to Missouri. Any change in SBC's description
    of the system operation from the Kansas/Oklahoma 271 application to
    the Missouri application would attract attention both from
    interested parties and the Commission. SBC thus had every incentive
    to let the Commission know of this change *before* it filed the
    Missouri application. We do not believe that bringing the matter to
    the attention of the Commission under these circumstances
    constitutes voluntariness within the meaning of the *Forfeiture
    Policy Statement* and we decline to reduce the proposed forfeiture
    amount on this basis.

63. Considering all of the enumerated factors and the particular
    circumstances of this case, as discussed above, we find that SBC is
    apparently liable for the statutory maximum \$1.2 million forfeiture
    for its apparent violation of section 1.65. As discussed above, the
    seriousness of this matter demands that SBC be held apparently
    liable for the statutory maximum forfeiture. For a full two months
    before it filed the 1.65 notice in the Kansas/Oklahoma docket, SBC
    knew that the reply affidavits were or may have been inaccurate.
    Under these circumstances, SBC's apparent failure to comply with its
    affirmative obligations under section 1.65 was of a continuing
    nature in that it failed to inform the Commission of these matters
    over a significant period of time. Thus, in consideration of the
    facts of this case and in accordance with section 503(b)(2)(b) of
    the Commission's Rules, we find that SBC is apparently liable for a
    \$1.2 million forfeiture for its apparent continuing violation of
    section 1.65.

64. In addition to any forfeiture we may impose, we believe it is
    important for SBC to inform the Commission regarding the steps it is
    taking to ensure compliance with section 1.65. Accordingly, we order
    SBC to file a report, within 30 days of the release date of this
    NAL, supported by affidavits of persons with personal knowledge,
    discussing steps it has taken to ensure future compliance with
    section 1.65. In addition, we order SBC to report, within nine
    months of the release date of this NAL, through an independent
    audit, on the success of its efforts to comply with section 1.65 for
    the period beginning 30 days from the release date of this NAL and
    concluding six months thereafter.

## SBC Apparently Misrepresented Facts To The Commission During The Enforcement Bureau's Investigation

65. We conclude that SBC is apparently liable for willful and/or
    repeated misrepresentations committed in SBC's April 6, 2001 report
    to the Commission's Enforcement Bureau. That report was signed by an
    officer of SBC and was supported by John Mileham's affidavit, among
    others. We find that Mr. Mileham's affidavit, upon which SBC
    explicitly relied in its report, contains apparent
    misrepresentations about his involvement in the review of the
    incorrect reply affidavits, in violation of section 1.17 of our
    rules.

66. Under section 1.17 of our rules, "\[n\]o applicant ... shall in ...
    any ... written statement submitted to the Commission ... make any
    misrepresentation or willful material omission bearing on any matter
    within the jurisdiction of the Commission."[^78] The Commission
    defines misrepresentation as an "intentional misrepresentation of
    fact intended to deceive"[^79] and has concluded that an intent to
    deceive is an essential element of a misrepresentation finding.[^80]
    The Commission has also stated that intent is a "factual question
    that may be inferred if other evidence shows that a motive or
    logical desire to deceive exists . . ."[^81] The ultimate facts are
    often proved through circumstantial evidence, as such evidence may
    be the only way of proving knowledge or intent.[^82] We consider
    misrepresentation to be a serious violation,[^83] as our entire
    regulatory scheme "rests upon the assumption that applicants will
    supply \[the Commission\] with accurate information."[^84] For this
    reason, applicants before the Commission are held to a high standard
    of candor and forthrightness.[^85] Therefore, we will assess a
    forfeiture if we find by a preponderance of the evidence that SBC
    has violated section 1.17.

67. Mr. Mileham's explanation for his failure to correct the
    inaccuracies in the Cullen and Welch affidavits, submitted by SBC as
    part of its report to the Enforcement Bureau, appears to constitute
    misrepresentation. First, with respect to the draft affidavit from
    Mark Welch, Mr. Mileham reviewed the Welch affidavit prior to the
    time it was filed; and despite his knowledge of the actual workings
    of SBC's loop qualification system, he failed to correct the
    inaccuracy in the affidavit. In SBC's April 6, 2001 report and Mr.
    Mileham's supporting affidavit, the company explained that Mr.
    Mileham "must have 'skipped' this important sentence" because he
    reviewed Mr. Welch's affidavit "late at night."[^86]

68. Mr. Mileham apparently has committed misrepresentation or a willful
    material omission in this regard. The e-mails between Messrs. Welch
    and Mileham, together with Mr. Mileham's statements during an
    interview with the Enforcement Bureau, show that Mr. Mileham did not
    review the Welch affidavit "late at night," as he claimed, but
    rather around noon. SBC provided the Enforcement Bureau with copies
    of the e-mail from Mr. Welch to Mr. Mileham and Mr. Mileham's return
    e-mail.[^87] According to the face of the e-mail, Mr. Welch sent his
    affidavit to Mr. Mileham at 3:57 p.m. on December 6, 2000. In his
    interview, Mr. Mileham told Commission staff that he usually left
    his office by 6:00 p.m. each day. He also stated that he did not
    recall staying late to review Mr. Welch's affidavit. Mr. Mileham did
    state, however, that he reviewed and responded to Mr. Welch's e-mail
    as soon as he saw it and that, immediately after he made his
    corrections to the document, he sent the red-lined version back to
    Mr. Welch. According to the face of this e-mail, Mr. Mileham sent
    this version by e-mail to Mr. Welch at 12:08 p.m. on December 7,
    2000.[^88] Thus, it is apparent from the evidence that Mr. Mileham
    did not review Mr. Welch's affidavit late at night, as he claimed in
    his affidavit to the Commission. Based on the totality of the
    circumstances surrounding Mr. Mileham\'s inclusion of this incorrect
    statement in his affidavit, we conclude that he made the statement
    with the specific intention to mislead the Commission, not merely
    through inadvertence or mistake.

69. There is another ground supporting our finding of an apparent
    misrepresentation in the Mileham affidavit --in a sworn affidavit
    filed with the Commission, Mr. Mileham stated that the Cullen e-mail
    outlining her understanding of the loop qualification system was
    deleted accidentally and that he never reviewed it. Specifically,
    Mr. Mileham claimed that he downloaded approximately 300 e-mails
    from home after returning from vacation. He reviewed a few of these
    e-mails, then shut off his home computer. When he went into the
    office, the e-mails he had previously downloaded were not on his
    work computer. When he returned home, his home computer "crashed"
    and he was forced to reload his operating system, deleting all of
    his files, including the previously downloaded e-mails. Thus,
    according to Mr. Mileham's affidavit, he never saw the Cullen e-mail
    and never had an opportunity to correct the erroneous description of
    SBC's loop qualification system.

70. In an interview with the Enforcement Bureau, Mr. Mileham stated that
    he did not attempt to recover the lost e-mails from his work or home
    computer. Mr. Mileham also stated that he did not disclose the loss
    of these e-mails to anyone at SBC \-- including his supervisors \--
    or the competing carriers who regularly contacted him about loop
    qualification issues.[^89]

71. We find that Mr. Mileham apparently misrepresented the facts or made
    a willful material omission in his affidavit when describing his
    lost e-mail problem, and that SBC therefore apparently violated
    section 1.17 of our rules when it submitted his affidavit
    accompanying its April 6, 2001 report to the Enforcement Bureau. As
    an initial matter, neither Mr. Mileham nor SBC has explained how Mr.
    Mileham's e-mails could disappear from his work computer simply
    because he downloaded them from home. But even if this were the
    case, we do not find it credible that Mr. Mileham \-- whose previous
    job involved desktop computer support \-- not only lost
    approximately three hundred e-mails in the first place, but failed
    to make the slightest effort to recover them, and failed to notify a
    single SBC employee \-- including his supervisors \-- about this
    important event. By his own account, Mr. Mileham uses e-mail
    extensively, referring questions and complaints from competing
    carriers to knowledgeable SBC employees, and relaying answers from
    those employees back to the competing carriers. Nevertheless, SBC
    contends that Mr. Mileham apparently took no corrective measures
    upon losing approximately three hundred unopened e-mails from people
    inside the company or competing carriers.

72. Nor do we find credible Mr. Mileham's claim that he thought he had
    no obligation to try to recover the lost e-mails since anyone who
    "really" wanted to contact him would simply continue trying to reach
    him upon receiving no response or an "out of office" reply. Indeed,
    SBC has informed us that neither Mr. Schuessler nor John Williamson
    \-- the SBC employee who forwarded Ms. Cullen's e-mail to Mr.
    Mileham and Mr. Schuessler\-- has any record of receiving such an
    "out of office" message from Mr. Mileham in response to their
    e-mails.[^90] We are not aware of any plausible explanation for Mr.
    Mileham's statements other than that they apparently constitute
    misrepresentation or willful material omissions in violation of
    section 1.17. Thus, we conclude it is reasonable to infer that Mr.
    Mileham apparently intentionally engaged in misrepresentation.

73. Mr. Mileham's apparent misrepresentations were material to the
    Commission's investigation into the circumstances surrounding the
    filing of the inaccurate reply affidavits because they served to
    excuse both Mr. Mileham and SBC from responsibility for submitting
    the incorrect affidavits in the Kansas/Oklahoma proceeding. At the
    time SBC filed the reply affidavits, Mr. Mileham was the project
    manager for its loop qualification offering. Mr. Mileham prepared a
    loop qualification overview that was widely circulated within SBC
    and that accurately described SBC's "first loop" methodology. He
    also consulted widely within SBC regarding loop qualification issues
    raised by competing carriers. Furthermore, each of the reply
    affiants considered him to be a subject-matter expert on SBC's loop
    qualification system. Thus, his review of the Cullen e-mail and the
    Welch affidavit was essential to their accuracy. Nevertheless, when
    Mr. Mileham was contacted by Ms. Cullen and Mr. Welch, he failed to
    correct their inaccurate descriptions of the SBC loop qualification
    system. As a result, by claiming that Mr. Mileham never had an
    opportunity to review the Cullen e-mail because of his computer
    crash, and that he only reviewed Mr. Welch's affidavit "late at
    night" and must have missed the "important sentence," both Mr.
    Mileham and SBC provided a reason why the only SBC employee who
    admitted to understanding the actual operation of the system failed
    to correct the inaccurate affidavits. Thus, Mr. Mileham's
    explanations were consistent with and supported SBC's explanation
    that it did not intentionally submit incorrect affidavits to the
    Commission. His apparent misrepresentations directly benefited SBC
    in its efforts to convince the Commission that the filing of the
    incorrect affidavits was not intentional.[^91]

74. SBC has argued to the Enforcement Bureau that it has no
    responsibility for misrepresentations or willful material omissions
    by its employees within the scope of their employment during a
    Commission investigation.[^92] This claim is wholly without support
    under the Act or Commission precedent, and SBC has provided no
    authority for its assertion. Section 217 of the Act explicitly
    states, "\[i\]n construing and enforcing the provisions of this Act,
    the act, omission, or failure of any officer, agent, or other person
    acting for or employed by any common carrier ... acting within the
    scope of his employment, shall in every case be also deemed to be
    the act, omission, or failure of such carrier ... as well as that of
    the person."[^93]

75. Moreover, we have a long history of holding regulated entities
    responsible for the representations of employees or other agents
    acting within the scope of their employment,[^94] including
    misrepresentation.[^95] We have consistently found that, regardless
    of mitigating factors, an employer is responsible for the statements
    or actions of its employees[^96] and "those who control the
    corporation must be held accountable for the conduct of those who
    have been delegated the authority to act in its name."[^97] This is
    particularly true where, as here, the company relies on an
    employee's factual representations in a sworn report to the
    Commission, presumably following due diligence by the company to
    verify those representations.

76. We reject the argument that, in order for an employee's actions to
    be imputed to the company, the employee must be a partner,
    shareholder, officer or director of the licensee.[^98] Such a result
    would encourage a corporation to delegate as much authority as
    possible to the lowest level employee possible in order to insulate
    itself from responsibility for misconduct.[^99] As the Commission
    has cautioned, "\[m\]erely standing back and waiting for disaster to
    strike or for the Commission to become aware of it will not insulate
    corporate owners from the consequences of misconduct."[^100] Where
    the transgressions of an employee are serious, we have held the
    employing licensees responsible and imposed sanctions regardless of
    the employer's lack of knowledge.[^101] Indeed, the employee
    training efforts that SBC promised to undertake in the *SBC/SNET
    Consent Decree* were directed at avoiding precisely this type of
    situation.

77. SBC volunteered Mr. Mileham as an employee with knowledge of the
    facts and explicitly relied on Mr. Mileham's affidavit. For
    instance, SBC's April 6, 2001 report, which was signed by a SBC
    Senior Vice President, states that Mr. Mileham's affidavit
    "help\[s\] to explain how it came about that \[the\] reply
    affidavits contained inaccurate statements."[^102] SBC's report
    specifically cites Mr. Mileham's apparently untruthful statements
    that he did not review the Cullen e-mail because it was
    "accidentally deleted" and that he reviewed the Welch affidavit
    "late at night" and "must have skipped" the relevant sentence.[^103]

78. For these reasons, we hold that SBC is responsible for Mr. Mileham's
    apparent misrepresentations in the affidavit attached to SBC's April
    6, 2001 submission to the Enforcement Bureau.[^104]

79. In light of SBC\'s apparent willful and/or repeated failure to
    comply with section 1.17 of the Commission's rules, we find that a
    substantial proposed forfeiture is warranted. Section 503(b)(1) of
    the Act states that any person who willfully or repeatedly fails to
    comply with any provision of the Act or any rule, regulation, or
    order issued by the Commission, shall be liable to the United States
    for a forfeiture penalty.[^105] For the time period relevant to this
    proceeding, section 503(b)(2)(B) of the Act authorizes the
    Commission to assess a forfeiture of up to \$120,000 for each
    violation, or each day of a continuing violation, up to a statutory
    maximum of \$1,200,000 for a single act or failure to act.[^106] In
    determining the appropriate proposed forfeiture amount, we consider
    the factors enumerated in section 503(b)(2)(D) of the Act, including
    "the nature, circumstances, extent and gravity of the violation,
    and, with respect to the violator, the degree of culpability, any
    history of prior offenses, ability to pay, and such other matters as
    justice may require."[^107]

80. Considering all of the enumerated factors and the particular
    circumstances of this case, we find that SBC is apparently liable
    for the maximum \$120,000 forfeiture for its apparent violation of
    section 1.17. First, we note that the base forfeiture for
    misrepresentation is the statutory maximum.[^108] In this regard, as
    noted above, the Commission has indicated that misrepresentation
    "always is an egregious violation."[^109] We have further stated
    that "\[a\]ny entity or individual that engages in this type of
    behavior should expect to pay the highest forfeiture applicable to
    the service at issue."[^110] Moreover, the apparent
    misrepresentation is particularly egregious here because it occurred
    in the context of an investigation into possible misrepresentation,
    *i.e.*, in a context where the company and its employees should have
    had a heightened awareness of the importance of not submitting
    misrepresentations to the Commission. As with the proposed finding
    regarding section 1.65, the relationship to the *SBC/SNET Consent
    Decree* and the need for a sufficient deterrent also support a
    substantial proposed forfeiture here.

## SBC Apparently Violated The *SBC/SNET Consent Decree*

81. We also conclude that SBC apparently willfully or repeatedly
    violated the terms of the June 1999 Consent Decree arising out of
    the merger between SBC and Southern New England Telephone
    Corporation. The *SBC/SNET Consent Decree* resolved an informal
    investigation by the Commission into allegations (similar to the
    ones at issue here) that SBC violated sections 271 and 272 of the
    Act, that SBC violated section 1.65 of the Commission's Rules, and
    that SBC employees made inaccurate statements to the Commission. The
    Commission agreed to resolve the matter by Consent Decree following
    SBC's promise to, among other things, institute a training program
    for employees dealing with the Commission.[^111] We conclude that
    SBC apparently willfully or repeatedly violated the terms of the
    *SBC/SNET Consent Decree* by ignoring its obligation to train one of
    its affiants in the section 271 proceeding in the Commission's rules
    regarding contacts with and representations to the agency.

82. Under the terms of the Compliance Plan incorporated by reference
    into the *SBC/SNET* *Consent Decree*, SBC employees who engage in
    regular contacts with the Commission as part of their assigned
    duties must be informed of the Plan and the Commission's rules and
    regulations regarding contacts with, and representations to, the
    Commission through a Compliance Primer.[^112] The covered employees
    subject to this requirement include, among others, those employees
    assigned to SBC's Washington, D.C. office, subject matter experts,
    attorneys, and other employees who meet with the Commission on a
    regular basis.[^113] These employees also must certify that they
    have reviewed and understand SBC and Commission requirements for
    interaction with the agency.[^114] Finally, these employees must
    ensure that other employees participating in Commission contacts are
    informed of the Compliance Plan and the applicable Commission rules
    and regulations.[^115]

83. In an inquiry letter, the Enforcement Bureau directed SBC to explain
    whether certain of its employees, including Carol Chapman, Angela
    Cullen, Mark Welch, Dennis Schuessler, and John Mileham, were
    informed of the Compliance Plan and to describe any training these
    persons received regarding SBC's ethical standards and the
    Commission's rules and policies with respect to contacts and
    representations to the Commission.[^116] SBC's response was silent
    about whether any of these persons received any information about
    the Compliance Plan or received training on the Commission's rules
    regarding contacts with and representations to the agency.[^117]
    Rather, SBC represented that the named employees "were advised of
    their obligation to provide truthful information to the Commission
    at all times ... and each understood that obligation."[^118] These
    individuals also "were advised or were aware that they should advise
    legal counsel and/or their superior if they discovered that
    information they provided to the Commission was inaccurate." SBC
    added that each of the individuals also reviewed and acknowledged
    understanding of SBC's Code of Business Conduct, which states that
    SBC employees "should comply not only with the letter, but the
    intent of the law" and proscribes "deliberate misrepresentations of
    facts, assets or records in order to deceive someone who relies on
    the representation."[^119] Additionally, SBC represented that Ms.
    Cullen, Ms. Chapman and Mr. Welch knew that they should contact "271
    legal counsel" in the event that there was a change in the
    information they submitted to the Commission.[^120] Ms. Chapman and
    Ms. Cullen also received witness training emphasizing the obligation
    to be truthful in testimony.[^121]

84. We first conclude that SBC was required to inform Ms. Chapman of the
    requirements set out in the Compliance Plan. Specifically, the
    *SBC/SNET Consent Decree* required that SBC employees who "make
    regular contacts with the FCC ... as part of their assigned duties
    ... will be informed" of the Compliance Plan and the Commission's
    rules and regulations "regarding contacts with, and representations
    to, the FCC through the Compliance Primer \...."[^122] Ms. Chapman's
    responsibilities demonstrate that she should have received the
    required training and instruction. Specifically, in affidavits
    submitted to the Commission, including the affidavit supporting the
    SBC Report in this investigation, Ms. Chapman describes her
    responsibilities at SBC as representing SBC's positions to
    regulatory bodies and monitoring state and federal regulatory
    proceedings affecting SBC's wholesale marketing.[^123] Moreover, Ms.
    Chapman's actual interaction with the Commission supports this
    conclusion, as she was heavily involved with SBC's section 271
    applications for Texas and Kansas/Oklahoma. In those proceedings,
    she submitted sworn direct and reply affidavits and met with CCB
    staff at least three times to discuss the company's showing.[^124]
    In giving examples of employees having regular contacts with the
    Commission, the *SBC/SNET Consent Decree* made clear that not only
    did the requirements cover "employees assigned to SBC's Washington,
    D.C. office," but also "subject matter experts ... who meet with the
    FCC on a regular basis." Thus, based on her own description of her
    job responsibilities and her regular contacts with the Commission,
    Ms. Chapman should have received a Compliance Primer informing her
    of the Compliance Plan and the Commission's rules concerning
    contacts with and representations to the Commission.

85. We also conclude that SBC's other efforts to train Ms. Chapman do
    not demonstrate compliance with the *SBC/SNET Consent Decree*. In
    response to a specific Bureau inquiry, SBC has provided no
    information indicating that it educated Ms. Chapman about the
    Compliance Plan or about the Commission's rules, as required by the
    *SBC/SNET Consent Decree*.[^125] Under the Consent Decree, Ms.
    Chapman also had to certify that she had reviewed the SBC Compliance
    Primer and understood the Commission's standards for interaction
    with the agency.[^126] But in response to the Bureau's inquiry, SBC
    has offered no evidence that it fulfilled any of these requirements
    with respect to Ms. Chapman. SBC has asserted, however, that it had
    a Code of Conduct in place for many years prior to and after the
    Consent Decree. Although we acknowledge the existence and importance
    of this Code of Conduct, we also note its apparent ineffectiveness
    in preventing company employees from making inaccurate statements to
    the Commission, and its apparent failure to ensure timely
    notification of inaccuracies in pending applications. We also note
    that this Code of Conduct was in effect during the relevant time
    when the Commission was investigating SBC's conduct that led to the
    more specific requirements in the *SBC/SNET Consent Decree*. That is
    precisely why the more specific requirements were included in the
    *SBC/SNET Consent Decree*.

86. Moreover, under the terms of the *SBC/SNET Consent Decree*, Ms.
    Chapman (as an SBC employee "who make\[s\] regular contacts with the
    FCC" and as a "subject matter expert ... who meet\[s\] with the FCC
    on a regular basis") should have informed Mr. Welch, Ms. Cullen, Mr.
    Schuessler, and Mr. Mileham about the Compliance Plan and the
    applicable FCC rules and regulations.[^127] Once again, SBC has
    offered no evidence on this point in response to the Bureau's
    inquiry.[^128]

87. In light of SBC\'s apparent willful and/or repeated failure to
    comply with the terms of the *SBC/SNET Consent Decree*, we find that
    a proposed forfeiture is apparently warranted. As noted above,
    section 503(b)(1) of the Act states that any person who willfully
    and/or repeatedly fails to comply with any provision of the Act or
    any rule, regulation, or order issued by the Commission, shall be
    liable to the United States for a forfeiture penalty.[^129] For the
    time period relevant to this proceeding, section 503(b)(2)(B) of the
    Act authorizes the Commission to assess a forfeiture of up to
    \$120,000 for each violation, or each day of a continuing violation,
    up to a statutory maximum of \$1,200,000 for a single act or failure
    to act.[^130] In determining the appropriate forfeiture amount, we
    consider the factors enumerated in section 503(b)(2)(D) of the Act,
    including "the nature, circumstances, extent and gravity of the
    violation, and, with respect to the violator, the degree of
    culpability, any history of prior offenses, ability to pay, and such
    other matters as justice may require."[^131]

88. We note that there is no base amount for violations of consent
    decrees in the *Forfeiture Policy Statement* and section 1.80 of the
    Commission's Rules. The Commission has made clear, however, that
    such an omission "should not signal that the Commission considers
    any unlisted violation as nonexistent or unimportant."[^132] We
    believe that a consent decree violation, like misrepresentation, is
    particularly serious. The whole premise of a consent decree is that
    enforcement action is unnecessary due, in substantial part, to a
    promise by the subject of the consent decree to take the enumerated
    steps to ensure future compliance.[^133] Where, as here, it appears
    that a regulated entity violated a consent decree, we believe a
    substantial proposed forfeiture is warranted. This is particularly
    true where, as here, it appears that the consent decree violation
    may have caused the precise type of violations it was designed to
    avoid. Although we can only speculate, had SBC properly carried out
    the compliance provisions of the *SBC/SNET Consent Decree* regarding
    contacts with the Commission, these troubling events, or at least
    significant parts of them, might never have occurred.

89. As with the section 1.65 proposed forfeiture, in addition to the
    seriousness of the violation, we believe considerations of ability
    to pay/deterrent effect and the repeated/continuing nature of the
    violation also counsel in favor of a substantial proposed
    forfeiture. Accordingly, considering all of the enumerated factors
    and the particular circumstances of this case, we find that SBC is
    apparently liable for a \$1.2 million forfeiture, the statutory
    maximum, for its apparent willful or repeated violation of the terms
    of the Consent Decree. As with the section 1.65 issue, in addition
    to any forfeiture we may impose, we believe it is important for SBC
    to inform the Commission about the steps it is taking to ensure
    future compliance with the portions of the *SBC/SNET Consent Decree*
    dealing with Commission contacts. Accordingly, we order SBC to file
    a report, within 30 days of the release date of this NAL, supported
    by affidavits of persons with personal knowledge, discussing steps
    it has taken to ensure future compliance with the relevant portions
    of the *SBC/SNET Consent Decree*. In addition, we order SBC to
    report, within nine months of the release date of this NAL, through
    an independent audit, on the success of its efforts to comply with
    the relevant portions of the *SBC/SNET Consent Decree* for the
    period beginning 30 days from the release date of this NAL and
    concluding six months thereafter.

## SBC Did Not Violate Section 271 of the Act

90. Finally, we hold that the evidence before us does not demonstrate
    that SBC ceased to meet a condition of the Commission's approval of
    its 271 application.[^134] During the Kansas/Oklahoma proceeding, IP
    suggested that, where both fiber and copper loops served an end user
    address, SBC returned information on only the fiber loop, thereby
    failing to inform the carrier that a copper loop was available. IP
    asserted that this practice violated the *UNE Remand Order*.[^135]
    In the *Order* granting SBC's application, the Commission found
    that, *if true*, this practice would "appear to violate the *UNE
    Remand Order*."[^136] Based on the evidence generated during this
    investigation, we conclude that SBC\'s provision of loop
    qualification information between October 26, 2000 and April 3, 2001
    met the requirements of section 271. Although the evidence indicates
    that SBC\'s loop qualification system in some instances provided
    detailed information on a fiber loop even when a copper loop was
    available for a particular address, we find this was not
    competitively significant under the circumstances in this
    case.[^137]

# conclusion

91. We find SBC apparently liable for a total forfeiture of \$2,520,000.
    SBC has apparently willfully or repeatedly violated section 1.65 of
    the Commission's rules concerning the disclosure of information that
    is of "decisional significance" or that renders prior filings "no
    longer substantially accurate or complete in all significant
    respects." Additionally, we conclude that SBC apparently willfully
    or repeatedly violated section 1.17 of the Commission's rules by
    submitting an affidavit with misrepresentations or willful material
    omissions to the Commission during its investigation into SBC's
    inaccurate reply affidavits in the Kansas/Oklahoma proceeding. We
    also find that SBC apparently willfully or repeatedly violated the
    terms of the *SBC/SNET Consent Decree* by failing to inform its
    employees who made regular contacts with the Commission about the
    Compliance Plan and about the Commission's regulations regarding
    contacts with, and representations to, the Commission and by those
    persons failing to relay that information to other relevant
    employees. Finally, we order SBC to file certain reports regarding
    future compliance with section 1.65 of the Rules and the *SBC/SNET
    Consent Decree*.

# ordering clauses

92. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section 503(b) of the
    Act,[^138] and section 1.80 of the Commission's Rules,[^139] SBC
    Communications, Inc. is HEREBY NOTIFIED of its APPARENT LIABILITY
    FOR FORFEITURE in the amount of two million, five hundred twenty
    thousand dollars (\$2,520,000.00) for willfully or repeatedly
    violating sections 1.17 and 1.65 of the Commission's Rules and the
    terms of the *SBC/SNET Consent Decree*.

93. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
    Commission\'s Rules, within thirty (30) days of the release date of
    this NOTICE OF APPARENT LIABILITY AND ORDER, SBC Communications,
    Inc. SHALL PAY to the United States the full amount of the proposed
    forfeiture OR SHALL FILE a written statement showing why the
    proposed forfeiture should not be imposed or should be reduced.

94. Payment of the forfeiture amount may be made by mailing a check or
    similar instrument payable to the order of the Federal
    Communications Commission, to the Forfeiture Collection Section,
    Finance Branch, Federal Communications Commission, P.O. Box 73482,
    Chicago, Illinois 60673-7482. The payment should note the "NAL/
    Acct. No." referenced above.

95. The response, if any, must be mailed to Charles W. Kelley, Chief,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission, 445 12th Street S.W., Room 3-B443,
    Washington, D.C., 20554, and must include the "NAL/Acct. No."
    referenced above.

96. IT IS FURTHER ORDERED that a copy of this Notice of Apparent
    Liability shall be sent by Certified Mail/Return Receipt Requested
    to SBC Communications, Inc. c/o Sandra L. Wagner, Vice
    President-Federal Regulatory, 1401 I Street, N.W., Suite 1100,
    Washington, D.C. 20005.

97. IT IS FURTHER ORDERED that, pursuant to sections 4(i), 218 and 403
    of the Act,[^140] SBC Communications, Inc. SHALL FILE a report
    within thirty (30) days of the release date of this NOTICE OF
    APPARENT LIABILITY AND ORDER, supported by affidavits of persons
    with personal knowledge, discussing steps it has taken to ensure
    future compliance with section 1.65. IT IS FURTHER ORDERED that SBC
    Communications, Inc. SHALL REPORT within nine (9) months of the
    release date of this NOTICE OF APPARENT LIABILITY AND ORDER, through
    an independent audit, on the success of its efforts to comply with
    section 1.65 for the period beginning thirty (30) days from the
    release date of this NOTICE OF APPARENT LIABILITY AND ORDER and
    concluding six months thereafter.

98. IT IS FURTHER ORDERED that, pursuant to sections 4(i), 218 and 403
    of the Act, SBC Communications, Inc. SHALL FILE a report within
    thirty (30) days of the release date of this NOTICE OF APPARENT
    LIABILITY AND ORDER, supported by affidavits of persons with
    personal knowledge, discussing steps it has taken to ensure future
    compliance with the portions of the *SBC/SNET Consent Decree*
    concerning training of relevant employees regarding contacts with
    the Commission. IT IS FURTHER ORDERED that SBC Communications, Inc.
    SHALL REPORT within nine (9) months of the release date of this
    NOTICE OF APPARENT LIABILITY AND ORDER, through an independent
    audit, on the success of its efforts to comply with portions of the
    *SBC/SNET Consent Decree* concerning training of relevant SBC
    Communications, Inc. employees regarding contacts with the
    Commission for the period beginning 30 days from the release date of
    this NOTICE OF APPARENT LIABILITY AND ORDER and concluding six
    months thereafter.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: *Joint Application by SBC Communications, Inc., Southwestern Bell
    Tel. Co., and Southwestern Bell Commun. Serv., Inc. d/b/a
    Southwestern Bell Long Distance for Provision of In-Region,
    InterLATA Services in Kansas and Oklahoma*, Memorandum Opinion and
    Order, FCC 01-29 (rel. Jan. 22, 2001) (*"Kansas/Oklahoma Order"* or
    *"Order"*), *appeal pending sub nom. Sprint Communications Co. L.P.
    et al. v. FCC,* No. 01-1076 (D.C. Cir. 2001). The Enforcement Bureau
    also is separately investigating additional inaccurate affidavits
    filed by SBC in the Kansas/Oklahoma section 271 proceeding relating
    to the company's Loop Maintenance Operating System ("LMOS"). SBC, on
    June 8, 2001, notified the Commission pursuant to section 1.65 of
    our rules that information filed concerning LMOS was inaccurate.
    Letter from Geoffrey M. Klineberg, Esq., Kellogg, Huber, Hansen,
    Todd & Evans, P.L.L.C. to Magalie Roman Salas, Secretary, Federal
    Communications Commission at 1 (June 8, 2001).

[^2]: *SBC Communications, Inc.,* Order, 14 FCC Rcd 12741 (1999) (
    "*SBC/SNET Consent Decree*") (resolving investigation into potential
    violations by SBC of sections 271 and 272 of the Communications Act
    and section 1.65 of the Commission's rules, and potentially
    inaccurate statements made by SBC employees, all in relation to
    SBC's application for transfer of various authorizations from
    Southern New England Telephone Company ("SNET") to SBC).

[^3]: 47 U.S.C. § 271. Although our decision granting SBC's section 271
    application refers to the SBC affiliates that applied for section
    271 approval as "SWBT" (the acronym for the SBC affiliate
    Southwestern Bell Telephone Co.) throughout this Notice of Apparent
    Liability and Order we will refer to SBC and its affiliates simply
    as "SBC."

[^4]: *See* 47 U.S.C. § 271(c)(2)(B)(ii).

[^5]: *Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996*, First Report and Order, 11 FCC Rcd
    15499, 15752, paras. 516-18 (1996) (subsequent history omitted);
    *see also Application by Ameritech Michigan Pursuant to Section 271
    of the Communications Act of 1934, as amended, to Provide In-Region,
    InterLATA Services in Michigan*, Memorandum Opinion and Order, 12
    FCC Rcd 20,543, 20,614, paras. 131-32 (1997).

[^6]: *Kansas/Oklahoma Order*, para. 121.

[^7]: *See Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996,* Third Report and Order, 15 FCC Rcd
    3696, 3885, paras. 427-31 ("*UNE Remand Order*").

[^8]: *Kansas/Oklahoma Order*, para. 121 n.325 (citing *UNE Remand
    Order,* 15 FCC Rcd at 18426, para. 148).

[^9]: *See* Affidavit of Carol Chapman, para. 105-08, attached to *Brief
    in Support of Joint Application by Southwestern Bell for Provision
    of In-Region, InterLATA Services in Kansas and Oklahoma*, CC Docket
    No. 00-217 (filed Oct. 26, 2000) ("SBC Brief").

[^10]: Comments of IP Communications Corp. on SBC's Applications for 271
    Relief in Kansas and Oklahoma, CC Docket No. 00-217, at 12-14 (filed
    Nov. 15, 2000) ("IP Comments").

[^11]: Letter from Howard J. Siegel, Vice President of Regulatory
    Policy, IP Communications Corp. to Magalie Roman Salas, Secretary,
    Federal Communications Commission, CC Docket No. 00-217 (filed Nov.
    30, 2000) ("IP *Ex Parte* Letter").

[^12]: *Id.* at 2.

[^13]: *See Reply Brief of Southwestern Bell In Support of InterLATA
    Relief in Kansas and Oklahoma*, CC Docket No. 00-217, at 69-70
    (filed December 11, 2000) ("SBC Reply Brief").

[^14]: *See* Affidavit of Mark Welch paras. 5-6, Affidavit of Angela
    Cullen paras. 2-7, and Affidavit of Carol Chapman paras. 5-12,
    attached to SBC Reply Brief.

[^15]: *Kansas/Oklahoma Order* para. 124.

[^16]: *See, e.g.*, *id.* para. 126 n.342, para. 128 n.352, para. 129
    nn.355-56.

[^17]: *Id.* para. 128.

[^18]: *Id.* para. 129.

[^19]: Letter from Priscilla Hill-Ardoin, Senior Vice President, SBC
    Communications, Inc. to David H. Solomon, Chief, Enforcement Bureau,
    Federal Communications Commission at 4 (Apr. 6, 2001) ("SBC
    Report").

[^20]: SBC estimates that this scenario could have happened no more than
    five percent of the time. *See* Letter from Edwardo Rodriguez, Jr.,
    Director, Federal Regulatory, SBC Communications, Inc. to Magalie
    Roman Salas, Secretary, Federal Communications Commission at 5 (Apr.
    13, 2001) ("SBC 1.65 Report").

[^21]: After submitting its April 6 report, SBC produced additional
    information in response to a letter of inquiry from the Enforcement
    Bureau dated May 4, 2001. Letter from David H. Solomon, Chief,
    Enforcement Bureau, Federal Communications Commission to Sandra L.
    Wagner, Vice President-Federal Regulatory, SBC Telecommunications,
    Inc. (May 4, 2001) ("Letter of Inquiry"). Additionally, at the
    request of the Enforcement Bureau, SBC made available six employees
    for informal interviews: Carol Chapman, Angela Cullen, John Mileham,
    Edwardo Rodriguez, Jr., Dennis Schuessler, and Mark Welch. Unless
    otherwise indicated, references to statements by these employees
    refer to their statements in these interviews.

[^22]: SBC's loop qualification system allows competitors to request
    access to three different types of loop make-up information. Most
    relevant, competitors could request access to actual loop
    information that SBC may have in its electronic databases based on a
    particular address. The pre-ordering transactions at the heart of
    this NAL involve actual loop information requests. Competitors could
    also request design loop information, which is the theoretical
    make-up of a loop based on the standard loop design for the longest
    loop to the end-user's distribution area, or could request that SBC
    perform a manual search of its paper records to determine actual
    loop information. *Order*, para. 122 & n.329.

[^23]: As fully described in Mr. Mileham's loop qualification overview:

    > **Process**: Loop Qual performs a facility assignment query into
    > LFACS based on the service address. LFACS returns a list of
    > circuit id's associated with that address. The list order is not
    > in any predictable order but is repeatable for any given address.
    > *Loop Qual then performs a loop makeup query into LFACS using the
    > first circuit id from the facility assignment list*. LFACS builds
    > the loop makeup starting at the service address and working
    > backwards toward the central office gathering cable length, gauge
    > break, load coil, bridged tap, disturber and risk data. Added to
    > this is information based on the distribution area such as Pronto
    > RT capability and Loop Medium Type. The loop makeup (LMU) is then
    > presented to the requestor.

    John D. Mileham, SBC Loop Qual System Overview 2 (Aug. 22, 2000)
    (emphasis added).

[^24]: In his interview with the Enforcement Bureau, Mr. Mileham said
    that he submitted the change request in mid-December, following his
    review of Mr. Welch's Reply Affidavit in the Kansas/Oklahoma
    proceeding.

[^25]: Affidavit of Angela Cullen, para. 2, attached to SBC Brief.

[^26]: *See* Attachment G to SBC Report. Ms. Cullen's block quote, and
    the portion of her e-mail that originated from the SBC attorney's
    e-mail to her, states (emphasis in original):

    > . . .loop qual info on the loop that would be provisioned if the
    > customer requested an xDSL-capable loop or a HFPL UNE for the
    > customer (address searched). Our systems are *provisioning*
    > systems, which, when an order is placed, search for a specific
    > loop at that ... requested address on which we can provision an
    > xDSL capable loop. The systems aren't designed to merely provide
    > "information;" they design service and tell technicians what to
    > provision so that we can provide that service. If a specific
    > telephone number using a specific loop is requested for line
    > sharing (note that this doesn't or shouldn't matter with a new,
    > stand-alone xDSL-capable loop), and the loop provisioned isn't the
    > same as the existing loop used for voice service, we do a line
    > station transfer (LST) to ensure that the voice service is
    > transferred to the xDSL-capable loop.

[^27]: *See* Attachment G to SBC Report.

[^28]: *Id.*

[^29]: *Id.*

[^30]: *Id.*

[^31]: Reply Affidavit of Angela Cullen, para. 4, attached to SBC Reply
    Brief ("Cullen Reply Aff.").

[^32]: *Id.* para. 4.

[^33]: Reply Affidavit of Mark Welch para. 1, attached to SBC Reply
    Brief ("Welch Reply Aff.").

[^34]: Welch Reply Aff. para. 6. Mr. Welch wrote: "If there is an
    available DSL-capable facility to that address, SWBT will provide
    the loop qualification information for that DSL-capable facility and
    perform the LST versus providing loop qualification information for
    the line that is served by DLC and therefore is not DSL-capable."
    *Id.*

[^35]: *See* Letter from Sandra L. Wagner, Vice President-Federal
    Regulatory, SBC Telecommunications, Inc. to Brad Berry, Deputy
    Chief, Enforcement Bureau, Federal Communications Commission (May 3,
    2001) ("May 3, 2001 Letter").

[^36]: Mileham Aff. para. 7.

[^37]: *Id.*

[^38]: *See* May 3, 2001 Letter.

[^39]: Reply Affidavit of Carol Chapman para. 5, attached to SBC Reply
    Brief.

[^40]: *Kansas/Oklahoma Order*, para. 128 n.352.

[^41]: Affidavit of Dennis W. Schuessler ("Schuessler Aff.") para. 10,
    SBC Report, Attachment F.

[^42]: *Id.* para. 11.

[^43]: *See* SBC Brief at 19-20.

[^44]: On April 3, 2001, SBC implemented an enhancement to its loop
    qualification system that caused the system to return actual loop
    make-up information on a loop connected to the customer address
    requested by the competitive carrier, if such information exists in
    SBC's LFACS system and can be located, retrieved and returned within
    two minutes. The enhancement causes the system to search LFACS first
    for a non-loaded copper loop connected to the end user for which
    actual information exists. If the system finds such actual
    information, then it will return it to the requesting carrier. *See*
    Affidavit of Brian Horst, attached to *Brief in Support of
    Application by Southwestern Bell for Provision of In-Region,
    InterLATA Services in Missouri*, CC Docket No. 01-88 (filed April 4,
    2001). Moreover, in a footnote to an affidavit submitted with its
    271 application for Missouri, SBC stated that it "has learned that,
    contrary to its subject matter experts' early understanding of the
    interrelationship between LFACS and the loop qualification system
    software, the LFACS provisioning logic was not being used to search
    for loop makeup information. The recent enhancement to the loop
    qualification system, however, was designed to search for loop
    makeup information in a manner similar to how LFACS would attempt to
    provision an xDSL-capable loop if one were requested by a CLEC."
    *See* Affidavit of Derrick Hamilton at 4, n.3, Attachment J to SBC
    Report.

[^45]: Section 1.65 of the Commission's Rules, 47 C.F.R. § 1.65, states
    in relevant part:

    > **Section 1.65(a). Substantial and significant changes in
    > information furnished by applicants to the Commission.** Each
    > applicant is responsible for the continuing accuracy and
    > completeness of information furnished in a pending application or
    > in Commission proceedings involving a pending application.
    > Whenever the information furnished in the pending application is
    > no longer substantially accurate and complete in all significant
    > respects, the applicant shall as promptly as possible and in any
    > event within 30 days, unless good cause is shown, amend or request
    > the amendment of his application so as to furnish such additional
    > or corrected information as may be appropriate. Whenever there has
    > been a substantial change as to any other matter which may be of
    > decisional significance in a Commission proceeding involving the
    > pending application, the applicant shall as promptly as possible
    > and in any event within 30 days, unless good cause is shown,
    > submit a statement furnishing such additional or corrected
    > information as may be appropriate, which shall be served upon
    > parties of record in accordance with § 1.47. Where the matter is
    > before any court for review, statements and requests to amend
    > shall in addition be served upon the Commission\'s General
    > Counsel. For the purposes of this section, an application is
    > "pending" before the Commission from the time it is accepted for
    > filing by the Commission until a Commission grant or denial of the
    > application is no longer subject to reconsideration by the
    > Commission or to review by any court.

[^46]: SBC 1.65 Report at 1.

[^47]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(a).

[^48]: 47 U.S.C. § 503(b)(4); 47 C.F.R. § 1.80(f).

[^49]: *See, e.g.* *Tuscola Broadcasting Co.,* Memorandum Opinion and
    Order, 76 FCC 2d 367, 371 (1980) (applying preponderance of the
    evidence standard in reviewing Bureau level forfeiture order). *Cf.*
    47 U.S.C. § 312(d) (assigning burden of proof in hearings to
    Commission).

[^50]: Section 1.17 of the Commission's Rules, 47 C.F.R. § 1.17, states
    in relevant part:

    > **Section 1.17 Truthful written statements and responses to
    > Commission inquiries and correspondence**. . . .No applicant,
    > permittee or licensee shall in any response to Commission
    > correspondence or inquiry or in any application, pleading, report
    > or any other written statement submitted to the Commission, make
    > any misrepresentation or willful material omission bearing on any
    > matter within the jurisdiction of the Commission.

[^51]: Commission precedent makes clear that misrepresentation requires
    an intent to deceive on the part of the allegedly offending party.
    *See* *Swan Creek Communications v. FCC*, 39 F.3d 1217, 1222 (D.C.
    Cir. 1994); *Fox Television Stations, Inc.*, Memorandum Opinion and
    Order, 10 FCC Rcd 8452, 8478, para. 60 (1995). *Cf. Ass'n of
    American Physicians and Surgeons, Inc. v. Clinton*, 187 F.3d 655,
    661-662 (D.C. Cir. 1999) (reversing district court finding that
    party's declaration filed with court had been submitted in bad
    faith; holding that district court had not cited any evidence that
    at the time the declaration was drafted, declarant disbelieved what
    he was stating or that the declarant's statements were objectively
    unreasonable).

[^52]: Although SBC has declined to identify the attorney, the evidence
    shows that none of the persons from SBC's legal department who
    worked on the 271 application possessed any expertise on loop
    qualification matters.

[^53]: Mileham Aff., para. 7.

[^54]: As noted above, Commission precedent makes clear that
    misrepresentation requires an intent to deceive on the part of the
    allegedly offending party. *See* *Swan Creek Communications*, 39
    F.3d at 1222; *Fox Television Stations, Inc*., 10 FCC Rcd at 8478,
    para. 60.

[^55]: *See* para. 66, *infra*.

[^56]: 47 C.F.R. § 1.65(a).

[^57]: *See* *Pinelands, Inc. and BHC Communications, Inc.*, Memorandum
    Opinion and Order, 7 FCC Rcd 6058, 6064 n.25 (1992); *WPIX, Inc.*,
    Memorandum Opinion and Order, 33 FCC 2d 782, 783-84, para. 3 (1972).

[^58]: *RKO General, Inc. v. FCC*, 670 F.2d 215, 229 (D.C. Cir. 1981)
    (internal citations omitted).

[^59]: We note that under section 1.65, which requires applicants to
    notify the Commission of substantial changes "as promptly as
    possible and in any event within 30 days," the 30-day time limit is
    the *maximum* amount of time that an applicant is allowed before it
    must file its notification, absent "good cause." 47 C.F.R. §
    1.65(a).

[^60]: In his affidavit, Mr. Schuessler states that he received a copy
    of the *Order* on January 31, 2001 and reviewed it sometime between
    that date and February 5, 2001. Schuessler Aff. at 4-5, paras.
    10-11.

[^61]: Even assuming the 30-day clock did not begin until March 6, 2001,
    SBC still apparently violated the requirements of section 1.65 by
    failing to file its report until April 13, 2001. Even then, the
    Enforcement Bureau had to remind SBC of its obligations under
    section 1.65 before the company ultimately filed its notice.

[^62]: 47 C.F.R. § 1.65(a).

[^63]: *UNE Remand Order,* para. 129.

[^64]: After discussions with Bureau staff concerning its request for
    confidential treatment, SBC withdrew its request by letter on April
    18, 2001. *See* Letter from Sandra L. Wagner, Vice President-Federal
    Regulatory, SBC Telecommunications, Inc., to Brad Berry, Deputy
    Chief, Enforcement Bureau, Federal Communications Commission (April
    18, 2001).

[^65]: In any event, SBC's earliest conversations with Commission staff
    occurred more than thirty days after Mr. Schuessler became aware of
    the inaccuracies in the reply affidavits, which demonstrates that
    SBC apparently would have violated section 1.65 even if its oral
    representations in late March constituted adequate notice under that
    provision.

[^66]: 47 C.F.R. § 1.65(a).

[^67]: 47 U.S.C. § 503(b)(1)(B); *see also* 47 C.F.R. § 1.80(a)(2). We
    note that "willful" is defined in the statute as not requiring
    specific intent to violate the law. *See, e.g., Southern California
    Broad. Co.*, Memorandum Opinion and Order, 6 FCC Rcd 4387, 4387,
    para. 5 (1991) (quoting 47 U.S.C. § 312(f)) ("willful ... means the
    conscious and deliberate commission or omission of such act,
    irrespective of any intent to violate" the Act or Commission rules;
    "this definition applies to Section 503 as well as Section 312"). A
    violation is repeated if, among other things, it continues over more
    than one day. *Id.* 6 FCC Rcd at 4388.

[^68]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R § 1.80(b)(2).

[^69]: 47 U.S.C. § 503(b)(2)(D); *see also The Commission\'s Forfeiture
    Policy Statement and Amendment of Section 1.80 of the Rules to
    Incorporate the Forfeiture Guidelines*, 12 FCC Rcd 17087, 17100,
    para. 27 (1997) ("*Forfeiture Policy Statement*"); *recon. denied*
    15 FCC Rcd 303 (1999); 47 C.F.R. § 1.80(b)(4).

[^70]: 47 C.F.R. § 1.80; *Forfeiture Policy Statement*, 12 FCC Rcd at
    17114, Appendix A, Section I.

[^71]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17001, para. 27.

[^72]: *SBC/SNET Consent Decree*, 14 FCC Rcd at 12751.

[^73]: *See, e.g., Application by Ameritech Michigan Pursuant to Section
    271 of the Communications Act of 1934, as amended, to Provide
    In-Region, InterLATA Services in Michigan*, Order, 12 FCC Rcd 3309,
    3323, para. 23 (1997) (citing 47 C.F.R. § 1.65(a) and reminding
    applicants of their obligation under Commission rules to maintain
    "the continuing accuracy and completeness of information" furnished
    to the Commission); *Application by SBC Communications Inc.,
    Pursuant To Section 271 Of The Communications Act of 1934, as
    amended, To Provide In-Region, InterLATA Services In Oklahoma*,
    Memorandum Opinion and Order, 12 FCC Rcd 8685, 8720, para. 60 (1997)
    (citing *Ameritech Michigan Order*'s reference to section 1.65 and
    noting that "\[g\]iven the expedited time in which the Commission
    must review these applications, it is the responsibility of the ...
    \[applicant\] to submit to the Commission a full and complete record
    upon which to make determinations on its application.").

[^74]: In 2000, SBC had operating revenues of \$51.4 billion with
    operating income of \$10.7 billion. *See* SBC Telecomm., Inc., 2000
    Annual Report at 4 (2001).

[^75]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17099-100, para. 24.

[^76]: We note that Congressman Fred Upton, Chairman of the Subcommittee
    on Telecommunications and the Internet of the House Committee on
    Energy and Commerce, has introduced legislation to increase the
    statutory forfeiture caps. *See* H.R. 1765, 107^th^ Cong., 1^st^
    Sess. (2001).

[^77]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17101, para. 27;
    *see also* 47 U.S.C. § 503(b)(2)(D) and 47 C.F.R. § 1.80(b)(4).

[^78]: 47 C.F.R. § 1.17.

[^79]: *Silver Star Communications-Albany, Inc.* 3 FCC Rcd 6342, 6349
    (Rev. Bd. 1988).

[^80]: *See Swan Creek Communications v. FCC,* 39 F.3d 1217, 1222 (D.C.
    Cir. 1994).

[^81]: *Black Television Workshop*, 8 FCC Rcd 4192, 4198, n. 41 (1993),
    *recon. denied*, 8 FCC Rcd 8719 (1993), *rev. denied*, 9 FCC Rcd
    4477 (1994), *aff\'d sub nom*. *Woodfork v. FCC*, 70 F.3d 639 (D.C.
    Cir. 1995) (affirming ALJ's finding that the record encompasses
    documents containing misrepresentations).

[^82]: *Ned N. Butler and Claude M. Gray, D.B.A. The Prattville
    Broadcasting Co., Prattville, Ala.*, Memorandum Opinion and Order, 5
    FCC 2d 601, 603-604 (Rev. Bd. 1966) (internal citations omitted). In
    criminal cases, where the burden of proof is higher, the D.C.
    Circuit has recognized that "\[i\]ntent may, and generally must, be
    proved circumstantially . . .," *United States v. Jackson*, 513 F.2d
    456, 461 (D.C. Cir. 1975) (footnotes omitted), and has stated that
    it does not distinguish between "direct and circumstantial evidence
    in evaluating the sufficiency of the evidence." *United States v.
    Lam Kwong-Wah*, 924 F.2d 298, 303 (D.C. Cir. 1991), *cert. denied*,
    506 U.S. 901, 113 S.Ct. 287, 121 L.Ed.2d 213 (1992).

[^83]: *Fox Television Stations, Inc.,* Memorandum Opinion and Order, 10
    FCC Rcd 8452, 8478, para. 60 (1995).

[^84]: *Policy Regarding Character Qualifications in Broadcast
    Licensing*, 102 FCC 2d 1179, 1210, para. 58 (1986) (subsequent
    history omitted) ("*Character Policy Statement*"). "The integrity of
    the Commission's processes cannot be maintained without honest
    dealing by regulated companies." *See id.*, 102 FCC 2d at 1211,
    para. 61. "Regardless of the factual circumstances of each case,
    misrepresentation to the Commission is always an egregious
    violation." *Forfeiture Policy Statement,* 12 FCC Rcd at 17098,
    para. 21. The Commission may treat even the most insignificant
    misrepresentation as an event disqualifying a licensee from further
    consideration. *Character Policy Statement*, 102 FCC 2d at 1210,
    para. 60. *See also Forfeiture Policy Statement*, 12 FCC Rcd at
    17098, para. 21.

[^85]: *WHW Enterprises Inc., v. FCC*, 753 F.2d 1132, 1138 (D.C. Cir.
    1985) (upholding Commission sanctions against license applicant for
    misrepresentation); *Sea Island Broadcasting Corp. of S.C.*, 60 FCC
    2d 146, 147, para. 3 (1976) ("The Commission insists on complete
    candor from its licensees and where . . . that candor has been found
    lacking in response to official Commission inquiries, the Commission
    has terminated the license."), *aff'd*, *Sea Island Broadcasting
    Corp. of S.C. v. Federal Communications Commission*, 627 F.2d 240
    (D.C. Cir. 1980).

[^86]: *See* SBC Report at 5, nn. 5-6; Mileham Affidavit, ¶¶ 6-7.

[^87]: *See* May 3, 2001 Letter.

[^88]: In submissions to the Commission, SBC has not suggested that the
    times on the face of the e-mails were incorrect.

[^89]: Mr. Mileham claimed that he may have disclosed this information
    to contractors, but SBC never provided the Enforcement Bureau with
    access to these persons.

[^90]: *See* Sworn Statement of Vincenzo Leone, attached to Letter from
    Sandra L. Wagner, Vice President-Federal Regulatory, SBC
    Telecommunications, Inc., to Trent Harkrader, Enforcement Bureau,
    Federal Communications Commission (May 11, 2001) ("May 11, 2001
    Letter").

[^91]: In this regard, we note that SBC has not filed anything with the
    Enforcement Bureau distancing itself from Mr. Mileham's apparent
    misrepresentations. Thus, SBC continues to rely on Mr. Mileham's
    apparently intentionally false statements as a basis for its
    explanation of how it unintentionally submitted the incorrect reply
    affidavits and continues to gain potential benefit from such
    apparently intentionally false statements.

[^92]: *See* Letter from Reid M. Figel, Kellogg, Huber, Hansen, Todd &
    Evans, P.L.L.C., to David H. Solomon, Chief, Enforcement Bureau,
    Federal Communications Commission (June 20, 2001).

[^93]: 47 U.S.C. § 217. *See also Vista Services Corp.*, Order of
    Forfeiture, FCC 00-378, para. 9 (rel. Oct. 23, 2000) (rejecting
    argument that company not liable for conduct of telemarketing firms
    and third party verifiers); *Long Distance Direct, Inc.*, Order, 15
    FCC Rcd 3297, 3300, para. 8 n.8 (2000); *Amer-I-Net Services Corp*,
    Order of Forfeiture, 15 FCC Rcd 3118, 3120, para. 7 (2000);
    *Heartline Communications, Inc.*, Notice of Apparent Liability for
    Forfeiture, 11 FCC Rcd 18487, 18494, para. 13 (1996).

[^94]: *See, e.g., Russellville Educational Broadcast Foundation,*
    Letter, 14 FCC Rcd 11208, 11209 (Mass Media Bur. 1999)
    ("\[L\]icensees cannot be excused from responsibility for the acts
    of their employees."); *Hemmingford Media, Inc.*, Order of
    Forfeiture, 14 FCC Rcd 2940, 2941, para. 7 (Compl. and Info. Bur.
    1999) ("\[The Commission\] remind\[s\] respondent that the
    responsibility for compliance with the terms of ... \[the radio
    station's\] license rests solely and exclusively with the
    licensee."); *Zapis Communications Corp.*, Memorandum Opinion and
    Order, 7 FCC Rcd 7859, para. 5 (Mass Media Bur. 1992) ("\[I\]t is
    well established that an employer remains responsible for the
    actions of its employees.")

[^95]: *See, e.g., Rocket Radio, Inc.,* Memorandum Opinion and Order, 70
    FCC 2d 413, 424-425 (holding licensee responsible for an employee's
    false affidavit that was submitted to the Commission), *recon.
    denied,* 66 FCC 2d 193 (Rev. Bd. 1977); *Sea Island Broadcasting
    Corp.*, 61 FCC 2d at 944, para. 43 ("It is undisputed that the
    denial of knowledge of fraudulent billing contained in the ...
    statement ... constituted a knowing misrepresentation by an officer
    or director of the licensee corporation. Moreover, even if he had
    been a mere employee, the licensee could not escape responsibility
    for his misrepresentation."); *Ned N. Butler and Claude M. Gray,
    D.B.A. The Prattville Broadcasting Co., Prattville, Ala.,* Decision,
    4 FCC 2d 555, 563 (Rev. Bd. 1966) ("The Commission has repeatedly
    refused to absolve a licensee of responsibility for deceptions
    practiced by his employees, and in instances of serious
    transgressions has imposed sanctions upon the licensee
    notwithstanding his professed lack of knowledge.")

[^96]: *See, e.g., Zapis Communications Corp.*, 7 FCC Rcd at 7859, para.
    5 (licensee held responsible for employee's action when, in
    violation of station policy, employee broadcast telephone
    conversation without the other party's knowledge or consent); *Frank
    Battaglia*, Letter, 7 FCC Rcd 2345 (Mass Media Bur. 1992)
    (admonishing licensee for employee hoax broadcast even though
    station denounced broadcast, fired employees involved, and took
    other corrective measures).

[^97]: *See generally Northwestern Indiana Broadcasting Corp.*, Initial
    Decision, 65 FCC 2d 73 (ALJ 1976) (station's renewal license denied
    after discovery that general manager/vice president submitted false
    information to the Commission).

[^98]: *See, e.g., Sea Island Broadcasting Corp.*, 61 FCC 2d at 944,
    para. 43 (license revoked where management misrepresented station's
    billing practices to Commission and Commission noted that even if
    offending person had been "a mere employee" instead of an officer or
    director of the company, licensee would still be responsible).

[^99]: *Character Policy Statement*, 102 FCC 2d at 1218, para. 78 ("A
    corporation must be responsible for the FCC-related misconduct
    occasioned by the actions of its employees in the course of their
    broadcast employment. To hold otherwise would, *inter alia,*
    encourage corporate owners to improperly delegate authority over
    station operations in order to 'neutralize' any future
    misconduct.").

[^100]: *Id.*

[^101]: *KWK Radio, Inc.,* 34 FCC 1039 (1963) (revoking broadcast
    license due to fraud by station\'s general manager in conducting a
    "treasure hunt" contest), *aff'd*, *KWK Radio, Inc. v. FCC,* 337
    F.2d 540 (1964); *Eleven Ten Broadcasting Corp.,* Decision, 32 FCC
    706, 708-09, paras. 6-7 (1962) (denying renewal in part because of
    log alterations made by station employee), *aff'd sub nom.
    Immaculate Conception Church v. FCC*, 320 F.2d 795 (D.C. Cir. 1963);
    *Carol Music, Inc*., Decision, 37 FCC 379, 380, para. 3 (1964)
    (adopting in relevant part initial decision revoking license based
    in part on refusal by station manager to furnish information
    requested by the Commission).

[^102]: SBC Report at 4.

[^103]: SBC Report at 5, nn. 5-6.

[^104]: SBC's argument that it is not responsible for the statements of
    its employees in this context raises potentially troubling concerns
    in other contexts as well. Regardless of whether SBC continues to
    make this legal argument in any response to this NAL, we request
    that, as part of any such response, or separately if it does not
    file a response (*e.g.*, if it simply pays the proposed forfeiture),
    SBC identify any other situations where it believes the Commission
    should treat SBC employees acting within the scope of their
    employment as not speaking on behalf of SBC. This will assist us in
    considering the extent to which it is appropriate for us to rely (or
    not to rely) on written or oral statements by SBC employees in any
    such other contexts.

[^105]: 47 U.S.C. §503(b)(1)(B); *see also* 47 C.F.R. § 1.80(a)(2).

[^106]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R § 1.80(b)(2).

[^107]: 47 U.S.C. § 503(b)(2)(D); *see also* *Forfeiture Policy
    Statement*, 12 FCC Rcd 17087, 17100, para. 27; 47 C.F.R. §
    1.80(b)(4).

[^108]: 47 C.F.R. §1.80.

[^109]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17098, para. 21.

[^110]: *Id.*

[^111]: *Order*, para. 3.

[^112]: *See SBC/SNET Consent Decree*, 14 FCC Rcd at 12751 ("SBC
    employees who make regular contacts with the FCC ("SBC's FCC
    representatives") as part of their assigned duties (e.g. employees
    assigned to SBC's Washington D.C. office, subject matter experts,
    attorneys and other employees who meet with the FCC on a regular
    basis) will be informed of this Plan and the FCC's rules and
    regulations regarding contacts with, and representations to, the FCC
    through a Compliance Primer and will be required to ensure that
    other employees participating in FCC contacts are informed of the
    Plan and the applicable FCC rules and regulations.")

[^113]: *See SBC/SNET Consent Decree*, 14 FCC Rcd at 12751.

[^114]: *Id.*, 14 FCC Rcd at 12749.

[^115]: *Id.*, 14 FCC Rcd at 12751.

[^116]: *See* Letter of Inquiry at 4.

[^117]: *See* Affidavit of Sandra L. Wagner, Vice President\--Federal
    Regulatory, SBC, attached to May 11, 2001 Letter.

[^118]: *Id.* at 2-3.

[^119]: *Id.* at 3.

[^120]: *Id.*

[^121]: *See* *id*. SBC also described other company policies but, from
    its response, did not make clear that the individuals about whom the
    Enforcement Bureau inquired knew or were informed about these
    policies. Specifically, SBC represented that legal counsel
    repeatedly and routinely advised all witnesses that information
    presented in 271 proceedings must be accurate and complete.
    Additionally, SBC represented that its practice is "to advise all
    employees submitting sworn testimony or information to the
    Commission that they must provide true and correct information."
    *Id.*

[^122]: *SBC/SNET Consent Decree*, 14 FCC Rcd at 12751.

[^123]: *See e.g.*, Attachment B to SBC Report, para. 1; Affidavit of
    Carol Chapman, para. 1, attached to SBC Brief.

[^124]: We also note that, subsequent to the Kansas/Oklahoma proceeding,
    Ms. Chapman submitted affidavits in SBC's Missouri and
    Missouri/Arkansas 271 proceedings.

[^125]: *See* Letter of Inquiry at 4. Indeed, it appears from this and
    other information submitted to the Bureau that SBC failed to train
    any employees who regularly submitted affidavits to the Commission.

[^126]: *SBC/SNET Consent Decree*, 14 FCC Rcd at 12749.

[^127]: *Id*. at 12751 (SBC employees who make regular contacts with the
    Commission as part of their assigned duties "will be required to
    ensure that other employees participating in FCC contacts are
    informed of the Plan and the applicable FCC rules and regulations.")

[^128]: We are concerned by the lack of training provided to Ms. Cullen,
    Mr. Welch, Mr. Schuessler and Mr. Mileham but find that their
    contacts with the Commission were not sufficiently regular under the
    terms of the *SBC/SNET Consent Decree* to warrant their inclusion in
    the same group as Ms. Chapman.

[^129]: 47 U.S.C. §503(b)(1)(B); *see also* 47 C.F.R. § 1.80(a)(2).

[^130]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R § 1.80(b)(2).

[^131]: 47 U.S.C. § 503(b)(2)(D); *see also* *Forfeiture Policy
    Statement*, 12 FCC Rcd at 17100, para. 27; 47 C.F.R. § 1.80(b)(4).

[^132]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17099, para. 22.

[^133]: *See, e.g., SBC/SNET Consent Decree*, 14 FCC Rcd at 12741
    (citing SBC's promises regarding its compliance program and employee
    training efforts as factors supporting adoption of Consent Decree).

[^134]: *See* 47 U.S.C. § 271(c) and (d)(6).

[^135]: IP also claimed that SBC's failure to return information on all
    available loops to an address was a violation of the Commission's
    requirements in the *UNE Remand Order*. In the order granting SBC's
    Kansas and Oklahoma applications, the Commission found that, despite
    SBC's acknowledgement that it returned information on only one loop,
    it was not self-evident from the *UNE Remand Order* that SBC was
    required to provide information on all loops serving a particular
    address. Therefore, the Commission found that SBC was not in
    violation of the *UNE Remand Order*. *See* *Order*, para. 128.

[^136]: *Id.*, para. 129.

[^137]: Based on the record in this proceeding, (i) these circumstances
    occurred no more than five percent of the time, and (ii) even in
    those cases, the inquiring customer would be informed about copper
    loops in the distribution plant serving a customer\'s general area,
    at which point the customer could request detailed information on
    copper loops through a manual query at no additional charge. *See*
    SBC 1.65 Report.

[^138]: 47 U.S.C. § 503(b).

[^139]: 47 C.F.R. § 1.80.

[^140]: 47 U.S.C. §§ 154(i), 218 and 403.