# Petition — Sea Island Broadcasting Corp. v. Federal Communications Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 834

## Text

Gupreme Court, U. &
FILED

JUN 2 1980

IN THE HAEL RODAK, JR., CLERR

Supreme Court of the Anited States

OCTOBER TERM, 1979

¥9-1905

SEA ISLAND BROADCASTING CORPORATION OF S.C.,
| Petitioner,
| :

FEDERAL COMMUNICATIONS COMMISSION,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

JOHN H. MIDLEN, JR.
HARRY C. MARTIN
MATTHEW H. McCCorMICK

f 2033 M Street, N.W.
Washington, D.C. 20036

Attorneys for Petitioner

Of Counsel:

MIDLEN & REDDY
2033 M Street, N.W.
Washington, D.C. 20036

A ENS AREER NNER TNO TILT NRE | ADIN SIN
PRESS OF BYRON S. ADAMS PRINTING, INC., WASHINGTON, D.C.

,

TABLE OF CONTENTS

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EO EU's yok Caw a came Ubles whe ate een
CPUMSTOIN PINT ED oo ook Koko os in sc cc kineenesenbens
STATUTES AND RULES INVOLVED ...........0cccegeecees
OE GY FONU AOD is 8.8 pce ee vaca vos euwedaeees
REASONS FOR GRANTING THE WRIT ..........000e ee eee

I. The Court Below Decided an Important Federal
Question, Regarding the Scope of Review of
Administrative Adjudications, in a Manner Con-
trary to the Administrative Procedure Act and
Established Principles of Administrative Law ...

Il. This Case and Steadman, for which Certiorari
Has Been Granted, Involve Two Aspects of a
Larger Administrative Law Issue: Tandem
Review Would Be Appropriate................

CA be nae aOR oda wha e ee ae kavoenks

Appendix A—Judgment and Opinion of the Court of
Appeals for the District of Columbia Circuit in Sea
Island Broadcasting Corporation of S.C. v. Federal
Communications Commission, No. 76-1735 (Jan.
DG, TOE s WeRa as svc viddbes CaeeEe Vac ul OenReeee

Appendix B—Report of the Federal Communications
Commission or limited remand, 69 F.C.C. 2d 1796
Cee cas vitewewe bss Pee men Per arrg ye) nae eer

Appendix C—Decision of the Federal Communications
Commission, 60 F.C.C. 2d 146 (1976).............

Aprendix D—Memorandum Opinion and Order of the
Federal Communications Commission denying
reconsideration, 64 F.C.C. 2d 721 (1977) ..........

Appendix E—lInitial Decision of Administrative ‘Law
Judge Chester F. Naumowicz, Jr., 61 F.C.C. 2d 937
5 SS ee rN ERE y ret ope Ree oe et a eg

Appendix F—Orders of the Court of Appeals for the
District of Columbia Circuit denying rehearing and
sehearing en banc (Mar. 5, 1980) ...............4.

18

13a

19a

3la

37a

ii
Table of Contents Continued

PAGE

Appendix G—Order of the Court of Appeals for the
District of Columbia Circuit remanding the case to
Commemennes CFme 23, 197) occ ccc ccccccccccocce 49a

Appendix H—Memorandum Opinion and Order of the
Federal Communications Commission denying Sea
Island’s ‘‘Request for Oral Argument, or for Other
Relief,’’ and dismissing Sea Island’s ‘‘Notice of
Election of Distress Sale and Request for Waiver,’’
i a os che wa sce ce bascgesece’s Sla

Appendix I—Pertinent Provisions of the Administrative
Procedure Act, as amended; the Communications
Act of 1934, as amended; and the Rules of the
Federal Communications Commission............. S5la

TABLE OF AUTHORITIES

CASES: PAGE

Aetna Insurance Co. v. Paddock, 301 F.2d 807 (Sth Cir.
es oe ee ew sbcnteeese 16

American Iron & Steel Institute v. Environmental Pro-
tection Agency, 568 F.2d 284 (3d Cir. 1977) ....... 11

American Petroleum Institute v. Occupational Safety
and Health Administration, 581 F.2d 493 (Sth Cir.

1978), cert. granted, 440 U.S. 906 (1979)........... 11
Burlington Truck Lines, Inc. v. United States, 371 U.S.

EE STIS TS IRE pe ee OS a 11
Camp v. Pim, 411 0,5. 136 (1973) .........006.00.. 10, 12

Central Florida Enterprises, Inc. v. Federal Communica-
tions Commission, 194 U.S. App. D.C. 118, 598

te SEAL a Pl skye ca Mali o's cele 9, 15
Charlton v. Federal Trade Commission, 177 U.S. App.
D.C. 418, $43 F.2d 903 (1976) ............... 9, 14, 15

Citizens to Preserve Overton Park v. Volpe, 401 U.S.
Ns irs. So 'o's biawin sib o spa ck Re be cuess 11, 12

iii
Table of Authorities Continued

CASES: PAGE

Collins Securities Corp. v. Securities and Exchange
Commission, 183 U.S. App. D.C. 301, 562 F.2d 820

CROTON, bis cco bn Kano wie sp ROM caw: oaks passim
Consolo v. Federal Maritime Commission, 383 U.S. 607

SEES Had Kine vb u pe kina 244s hae ache het )
Dry Color Manufacturers’ Association, Inc. v. Depart-

ment of Labor, 486 F.2d 98 (3d Cir. 1973)......... 11

E.I. DuPont de Nemours & Co. v. Train, 541 F.2d 1018
(4th Cir. 1976), modified on other grounds, 430

LPs, BUR OTE canis ah des ein eh pialbe ee awe Caen 11
Federal Communications Commission v. Pottsville
Broadcasting Co., 309 U.S. 134 (1940) ............ 8
Federal Power Commission v. Idaho Power Co., 344
Sees FT MEE GV EAS Si oil eee Reh ew te ale ww ee 8
Federal Power Commission v. Texaco, Inc., 417 U.S.
NTE bry Cea CA GH OK bus Kh da eR Ls 11
Interstate Commerce Commission v. Clyde Steamship
Co Se Mey MOREE Ne cba bk ce daenaccvensba 13
KIRO, Inc. v. Federal Communications Commission,
178 U.S. App.D.C. 126, 545 F.2d 204 (1976)...... 9, 15
National Labor Relations Board v. Enterprise Associa-
SG; ae a Ps 6 ence abo Rh me nia 9, 13
National Labor Relations Board v. Metropolitan Life In-
surance Co., 380 U.S. 438 (19GS). oc ccociic ccicivine 9
Ralston Purina Co. v. Louisville & Nashville Railroad
Cg SN Ges TED REVUE fi ob. 5.d bbs ba Nikd Seb ana be 9
Scripts-Howard Radio, Inc. v. Federal Communications
COMeeenads, "Stas Uk. © CED ove ce ve cae cubes 8
Securities and Exchange Commission v. Chenery Corp.,
BE ee ETE carte ence ve Eee heed She cos 9, 13

Securities and Exchange Commission v. Chenery Corp,
RR OR] +) See ae AP toa Phy ot 9, 14

iV

Table of Authorities Continued

CASES: PAGE

Steadman vy. Securities and Exchange Commission, 603
F.2d 1126 (5th Cir. 1979), cert. granted, 48

U.S.L.W. 3698 (1980) (No. 79-1266) ............. 7, 18
Sunray Mid-Continent Oil Co. v. Federal Power Com-
a BA ST, eee 8, 17

United States Lines, Inc. v. Federal Maritime Commis-
sion, 189 U.S. App. D.C. 361, 584 F.2d 519

iain eter st ed ak koa 660 ka 6 cn i View’ as ae
Vance v. Terrazas, 62 L.Ed 2d 461 (1980) ............. 16
Whitney v. Securities and Exchange Commission, 196
U.S. App. D.C. 12, 604 F.2d 676 (1979)........... 7
Woodby v. Immigration and Naturalization Service, 385
Se EE ioc 6 0s ete ek bc ke bcGw ee ke 4, 16, 17
STATUTES:
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Oy MM OD lt cca a c's cak ca SRN ee Lea wed obs ope
ge bE RRR SR SER, Siete teary Ora EC 3
ADMINISTRATIVE DECISION:
Pass Word, tnc., ._._... F.C.C. 20 , 47 R.R. 2d
I ea. PoP ul Pe eas) be we sew e ay een 10
ADMINISTRATIVE REGULATION:
0 ey ae PE I oe a cea who's ch aod banunsed 2

OTHER MATERIALS:
VIII A. WiGMore, EVIDENCE (1940) ...............0005 16

IN THE
Supreme Court of the Anited States

OCTOBER TERM, 1979

No.

SEA ISLAND BROADCASTING CORPORATION OF S.C.,
Petitioner,

Vv.

FEDERAL COMMUNICATIONS COMMISSION,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

Sea Island Broadcasting Corporation of S.C.
respectfully petitions for a writ of certiorari to review
the judgment and opinion of the United States Court of
Appeals for the District of Columbia Circuit entered in
this case on January 14, 1980.

OPINIONS BELOW

The judgment and opinion of the court of appeals,
not yet officially reported, appear as Appendix A of
this petition. The Report of the Federal Communica-
tions Commission on limited remand from the court of
appeals, reported at 69 F.C.C. 2d 1796 (1978), appears
as Appendix B. The Decision of the Federal Com-

#*>

2

munications Commission, reported at 60 F.C.C. 2d 146
(1976), and its Memorandum Opinion and Order deny-
ing reconsideration, reported at 64 F.C.C. 2d 721
(1977), appear as Appendices C and D respectively. The
Initial Decision of Administrative Law Judge Chester F.
Naumowicz, Jr., reported at 61 F.C.C. 2d 937 (1975),
appears as Appendix E.

JURISDICTION

The judgment of the court of appeals was entered
on January 14, 1980. A timely petition for rehearing
and suggestion for rehearing en banc was denied on
March 5, 1980. This petition for certiorari is filed within
90 days of that date. The jurisdiction of this Court is in-
voked under 28 U.S.C. § 1254(1)(1976).

QUESTION PRESENTED

Upon holding, for the first time, that the Federal
Communications Commission was required to apply a
clear and convincing standard of proof in broadcast
license revocation proceedings, whether the court of ap-
peals exceeded its powers of review in affirming a Com-
mission revocation order reached under a_ mere
preponderance of the evidence standard of proof.

STATUTES AND RULES INVOLVED

This case involves Sections 7 and 10(e) of the Ad-
ministrative Procedure Act, as amended, 5 U.S.C.
§§ 556 and 706 (1976); Section 312 of the Communica-
tions Act of 1934, as amended, 47 U.S.C. § 312 (1976);
and 47 C.F.R. § 73.1205 (1975) (amended 1976). These
provisions are set forth in Appendix I.

3

STATEMENT OF THE CASE

This case concerns the Decision of the Federal
Communications Commission (Commission or FCC) to
revoke the license of Sea Island Broadcasting Corpora-
tion of S.C. (Sea Island) to operate AM radio station
WSIB, Beaufort, South Carolina. Pursuant to Section
402(b) of the Communications Act of 1934, as amended,
47 U.S.C. § 402(b), Sea Island appealed the Commis-
sion’s Decision to the Court of Appeals for the District
of Columbia Circuit. On appeal, Sea Island argued and
the court held that the Commission must find clear and
convincing evidence of wrongdoing in order to revoke a
broadcast station license. A mere preponderence of the
evidence would not be enough. However, even though
the Commission admittedly did not apply the higher
standard in reaching its Decision (App. 14a), and in fact
resisted its imposition (App. 14a-18a), the court affirm-
ed the Commission’s order revoking the WSIB license.
The only basis for such affirmance was the
Commission’s post hoc representation on limited re-
mand that the same finding of wrongdoing would have
been made had the Commission used the clear and con-
vincing standard. (App. 14a n.3).

In its Petition for Rehearing and Suggestion for
Rehearing En Banc, Sea Island urged the court to re-
mand the case for a second time, and to require the
FCC to reconsider it fairly under the higher standard of
proof the court had imposed. Rehearing and rehearing
en banc were denied without comment. (App. 47a-48a).

Before the Commission, Sea Island urged that a
higher standard of proof than a mere preponderance of
the evidence must be applied in an administrative ad-
judication where the potential consequences are as
serious as the revocation of a broadcast station license.
Sea Island relied upon this Court’s decision in Woodby

4

v. Immigration and Naturalization Service, 385 U.S. 276
(1966), a deportation case. The Commission rejected the
argument, stating in its Decision that Sea Island’s
reliance on Woodby was misplaced:

In Woodby the Supreme Court adopted the stricter
standard of ‘‘clear, unequivocal and convincing’’
proof because the statute was silent as to the degree
of proof required at the administrative level... .
Unlike a deportation case, the Administrative Pro-
cedure Act is applicable here and specifies the
degree of proof required at the administrative level
for imposition of a sanction. The pertinent provi-
sions of Section 556(d) of the APA clearly require
only that a Commission decision be ‘‘supported by
and in accordance with the reliable, probative, and
substantial evidence’’ of record. (App. 28a)(foot-
note omitted).

This statement was the source of two of the issues
on appeal: First, whether the Commission had determin-
ed that the standard of proof required was merely
‘freliable, probative and substantial evidence,’’ thereby
confusing the standard for judicial review with the stan-
dard of proof governing the agency’s determinations.
Second, whether the degree of proof necessary at the
agency level to make adverse findings in a _ license
revocation case should be ‘‘clear and convincing’’
proof.'

' The Commission’s decision was adopted about one year before
Collins Securities Corp. v. Securities and Exchange Commission, 183
U.S. App. D.C. 301, 562 F.2d 820 (1977), in which the court of ap-
peals drew a distinction between ‘‘clear, unequivocal and convincing’’
and ‘‘clear and convincing’’ proof. As indicated to the court below,
either standard is acceptable to Sea Island. Under the clear and con-
vincing standard, the SEC was required ‘‘to reach a degree of persua-
sion much higher than ‘mere preponderance of the evidence,’ but still
somewhat less than ‘clear, unequivocal and convincing’ or ‘beyond a
reasonable doubt.’ ”’ /d. at 305, 562 F.2d at 824.

5

Following oral argument, on its own motion, the
court remanded the case to the Commission in order
that two questions might be answered: ‘‘(1) What stan-
dard of proof was applied in the disposition of this mat-
ter by the Commission? (2) What would be the effect on
the public interest if the Commission were to apply a
‘clear and convincing’ standard of proof to issues of
fact in license revocation proceedings?’’ (App. 50a). The
court did not ask the Commission what would have
been the effect on the Commission’s disposition of this
case if the ‘‘clear and convincing’’ standard of proof
had been applied.

The Commission replied to the court in a Report
released December 11, 1978. Therein the Commission
stated (a) it had used the preponderence of the evidence
test in its review of the Initial Decision and (b) it oppos-
ed imposition of the higher standard urged by Sea
Island. (App. 14a-18a). In addition the Commission
alleged in a footnote:

Thus, although the evidence supporting the conclu-
sions in our Decision, supra, which were adverse to
Sea Island was sufficient to satisfy the ‘‘clear and
convincing[’’] test referred to by the Court of Ap-
peals in Collins Security [sic] Corp. v. SEC, supra,
we did not believe it necessary to state that the
evidence was of the kind that could meet a higher
standard than the customary preponderance of the
evidence test. (App. 14a n.3).

There is no indication, however, that this statement was
anything more than bootstrapping. The Commission did
not recanvass the record in light of the higher standard
of proof being urged upon the court by Sea Island. The
issue with respect to which Sea Island seeks Supreme
Court review was created when the court of appeals re-
jected the Commission’s use of the preponderance of the

6

evidence test in favor of the clear and convincing stan-
dard, but failed to require the Commission to reconsider
the case in light of the higher standard.

The Commission’s reconsideration of the ad-
ministrative record in this case would not be a mean-
ingless exercise, particularly in light of the nature of the
charges involved. The Commission’s revocation decision
relied heavily on the administrative law judge’s conclu-
sion that Sea Island’s president and sole stockholder,
Charles E. Bell, made deliberate misrepresentations to
the Commission regarding improper billing practices at
station WSIB. The record shows Bell admitted that,
without his knowledge or consent, illegal rebates had
been given to two advertisers between June and
December, 1972.’ He testified that he did not learn what
had occured until after October 3, 1973, about five
months after the Commission investigation of these mat-
ters began, and that a short time later he informed the
Commission via letter of what he had learned. He con-
sistently has denied ever lying to the Commission. The
administrative law judge simply disbelieved Bell and Sea
Island’s other witnesses. (App. 45a). With minor
modifications, the Commission adopted the judge’s fin-
dings, which were based on a preponderance of the
evidence. In essence, the Commission rested its revoca-
tion order on findings—including those on the essential
question of truthfulnmess—reached under a lower stan-
dard of proof than subsequently required by the court
of appeals. Yet, despite the fact the findings were based

? Bell’s son, Charles E. Bell Jr., as sales and station manager, had
participated in the rebate arrangement. During the period when the
rebates were made, Bell Sr. was absent from Beaufort for substantial
periods of time. Rebate checks were issued by Bell Sr.’s wife on the in-
struction of Bell Jr. At the time, Mrs. Bell and Bell Jr. were officers
and directors of Sea Island, but owned no stock.

7

on the wrong evidentiary standard, the court below af-
firmed the Commission’s order.

REASONS FOR GRANTING THE WRIT

I. The Court Below Decided an Important
Federal Question, Regarding the Scope of
Review of Administrative Adjudications, in a
Manner Contrary to the Administrative Pro-
cedure Act and Established Principles of Ad-
ministrative Law.

The court of appeals decision below marks the first
time the obligation of using a clear and convincing stan-
dard of proof in weighing the evidence in a broadcast
license revocation proceeding has been imposed on the
FCC. The court, in so doing, relied heavily on its earlier
decision in Collins Securities Corp. v. Securities and Ex-
change Commission,’ the reasoning of which was re-
jected by the Fifth Circuit in Steadman v. Securities and
Exchange Commission.‘ This Court recently granted a
petition for certiorari in Steadman.’

Having reached its holding regarding the standard
of proof—a holding strongly urged by Petitioner—the
court below nonetheless did not remand the case for
Commission reconsideration under the more stringent
standard. Instead, relying on a post hoc representation

> 183 U.S. App. D.C. 301, 562 F.2d. 820 (1977). In Collins, the
court held that the clear and convincing standard of proof must be
used in SEC proceedings looking toward possible revocation of a
broker’s license. Accord, Whitney v. Securities and Exchange Com-
mission, 196 U.S. App. D.C. 12, 604 F.2d 676 (1979).

* 603 F.2d 1126 (1979).

* Certiorari was granted on April 28, 1980. 48 U.S.L.W. 3698
(1980)(No. 79-1266).

by the FCC as to what would have happened had the
higher standard of proof been applied, the court affirm-
ed the agency’s order revoking Sea Island’s license. In
an attempt to bolster its misplaced reliance on the Com-
mission’s representation, the court below stated,
**Because the Commission did not expressly set forth
[the clear and convincing] standard in the first instance,
and indeed resisted it on remand, we have been par-
ticularly careful.’ (App. lla-12a.) But it is unclear, at
best, what the court was ‘‘particuarly careful’’ in doing.
Had the proper standard of proof been applied at the
agency level, the judicial function would have been
limited to determination of whether substantial evidence
supported the Commission’s order. But here the Com-
mission never adjudicated the case under the proper
evidentiary standard; that failure completely undermines
the Commission’s factual determination, leaving no
lawful basis for the revocation order. A _ gratuitous
representation during the process of judicial review is
not a substitute for an agency adjudication. By being
**particularly careful’’ in its review, the court of appeals
cannot create a lawful Commission determination. In
fact, what the court did was to take upon itself the task
of measuring the evidence in the administrative
record—or rather a part of the record—against the
newly-imposed standard of proof.

The court’s action is contrary to the Administrative
Procedure Act and a significant deviation from
established principles of administrative law. Having laid
bare the Commission’s error of law, the court below ex-
hausted its judicial power.* All that remained for the

* E.g., Sunray Mid-Continent Oil Co. v. FPC, 353 U.S. 944 (1957)
(per curiam); FPC v. Idaho Power Co., 344 U.S. 17, 20 (1952);
Scripts-Howard Radio, Inc. v. FCC, 316 U.S. 4, 10 (1942); FCC v.
Pottsville Broadcasting Co., 309 U.S. 134, 145 (1940).

9

court to do was to remand the matter to the Commis-
sion for further proceedings in conformity with the ap-
plicable law. The Administrative Procedure Act
specifically directs the reviewing court to ‘‘hold unlawful
and set aside agency action, findings and conclusions
found to be .. . not in accordance with law.’’ 5 U.S.C.
§ 706(2)(A)(1976)(emphasis added). The proper path for
the Court—remand to the Commission—was clearly lit
by the precedents of this Court,’ and the Court of Ap-
peals for the District of Columbia Circuit itself.*

In affirming the Commission’s order, the court
below stated:

In this case, the Commission has reported to
the court that it would have made the same finding
in using the ‘‘clear and convincing’’ standard. We
have confidence in the accuracy of this representa-
tion. (App. Ila).

But that Commission representation was not the product
of de novo review of the evidence in the administrative
record. It is nothing more than speculation on the part

’ E.g., NLRB v. Enterprise Assoc., 429 U.S. 507, 522 n.9 (1977);
NLRB vy. Metropolitan Life Insurance Co., 380 U.S. 438, 444 (1965);
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947) (Chenery Il); S&C v.
Chenery Corp., 318 U.S. 80, 88 (1943) (Chenery I); accord, Consolo
v. Federal Maritime Commission, 383 U.S. 607, 620-21 (1966); see
Ralston Purina Co. v. Louisville & Nashville R. Co., 426 U.S. 476,
477-78 (1976) (per curiam).

* E.g., Central Florida Enterprises, Inc. vy. FCC, 194 U.S. App.
D.C. 118, 141, 598 F.2d 37, 60 (1978); United States Lines, Inc. v.
Federal Maritime Commission, 189 U.S. App. D.C. 361, 374, 584
F.2d 519, 532 (1978); Collins Securities Corp. v. SEC, 183 U.S. App.
D.C. 301, 307, 562 F.2d 820, 826 (1977); Charlton v. FTC, 177 U.S.
App. D.C. 418, 423, 543 F.2d 903, 908 (1976); see KIRO, Inc. v. FCC,
178 U.S. App. D.C. 126, 130, 545 F.2d 204, 208 (1976).

**

10

of the Commission as to what might have been decided.’
An administrative order must stand or fall on the
grounds invoked by the agency itself at the time of its
Decision. ‘‘If that finding is not sustainable on the ad-
ministrative record made, then the [agency’s] decision
must be vacated and the matter remanded .. . for fur-
ther consideration.’’ Camp v. Pitts, 411 U.S. 138, 143
(1973). At the time of its Decision, the Commission did
not apply the clear and convincing standard. The court
of appeals should not have pretended that the Commis-
sion did.

The post hoc nature of the statement in the Report
characterizing the evidence is illuminated further by the
fact that only one of the Commissioners who issued the
Report also participated in the Commission’s 1976 Deci-
sion.'® Thus, in effect, one panel of officials was trying

* Had the Commission recanvassed the record, it clearly could have
said so. Compare the Commission’s Order in Pass Word, Inc.
F.C.C, 2d , 47 R.R. 2d 67 (1980):

STANDARD OF PROOF

. This matter first came before the Commission on
December 19, 1979. On that date, we voted to revoke all licenses
and deny all applications of Pass Word and Rodney Bacon
d/b/aCoeur d’Alene Answering Service .... At that time, the
standard of proof used by the Commision in a revocation pro-
ceeding was the ‘‘preponderance of the evidence’”’ test. Sea Island
Broadcasting Corp., 69 F.C.C. 2d 1796 (1978). On January 14,
1980, before this decision was released, the U.S. Court of Ap-
peals for the District of Columbia Circuit held, on appeal of Sea
Island, that ‘‘revocation of an FCC license is governed, at the
agency level, by the ‘clear and convincing’ standard of proof set
forth in the Collins decision for an SEC revocation of a broker’s
license.’’ Sea Island Broadcasting Corp. v. FCC, F.2d
., No. 76-1735 (D.C. Cir., Jan. 14, 1980). Accordingly, we
have recanvassed the record to determine whether the evidence
satisfies the standard announced by the Court of Appeals. 47
Rad. Reg. 2d at 103. (footnotes omitted) (emphasis added).

'° Only Commissioners Lee, Quello, and Washburn were serving on
the Commission at both times. But Commissioner Quello did not par-
ticipate and Commissioner L, ¢as absent when the 1976 Decision
was adopted.

1]

to convince the court below what an almost completely
different panel of officials would have done if it had
used the proper legal standard. The courts may review
only what the agency did, not what it might have done.

It is well established that courts nay not accept
‘*appellate counsel’s post hoc rationalizations for agency
action.’’ Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 168 (1962); accord, Federal Power Com-
mission v. Texaco, Inc., 417 U.S. 380, 397 (1974).
Similarly the courts should not accept post hoc ra-
tionalizations by the agency itself. The Third Circuit has
recognized this principle on at least two occasions where
agencies sought, on appeal, to buttress an inadequate
administrative record with further reasoning. American
Iron and Steel Institute vy. Environmental Protection
Agency, 568 F.2d 284, 296-97 (3d Cir. 1977); Dry Color
Manufacturers’ Association, Inc. v. Department of
Labor, 486 F.2d 98, 104 n.8 (3d Cir. 1973). In addition,
both the Fourth and Fifth Circuits have enunciated the
principle and followed the practice of disregarding after-
the-fact rationalizations by the agency. E./. DuPont de
Nemours & Co. v. Train, 541 F.2d 1018, 1026 (4th Cir.
1976), modified on other grounds, 430 U.S. 112 (1977);
American Petroleum Institute v. Occupational Safety
and Health Administration, 581 F.2d 493, 506 (Sth Cir.
1978), cert. granted, 440 U.S. 906 (1979).

The Commission’s Report is analogous to the litiga-
tion affidavits that this Court has held to be an inade-
quate basis for judicial review of administrative action.
Citizens to Preserve Overton Park v. Volpe, 401 U.S.
402, 419 (1977). In Citizens, the decision of the
Secretary of Transportation approving the construction
of a highway through a park was challenged in federal
district court as contrary to Section 4(f) of the Depart-

7%

12

ment of Transportation Act of 1966 and Section 138 of
the Federal-Aid Highway Act of 1968. In district court,
the defendants introduced affidavits, prepared specifical-
ly for the litigation, which indicated that the Secretary’s
decision was supportable. This Court, characterizing the
affidavits as post hoc rationalizations, held that judicial
review based solely on the affidavits was inadequate.
401 U.S. at 419.

Similarly here, the Commission relies upon its
Report, prepared specifically for appellate review, to
sustain its Decision. The Report is not the product of
detached adjudicatory decision-making, but is rather the
product of a litigant seeking to justify its previous ac-
tio’ In this context, it was error for the court below to
accept the Commission’s representation contained in
footnote 3 of the Report. In applying the standard for
judicial review enunciated in 5 U.S.C. § 706(2)(A), the
focal point ‘‘should be the administrative record already
in existence, not some new record made initially in the
reviewing court.’’ Camp v. Pitts, 411 U.S. at 142.

On remand, the question of the disposition of the
case under the higher standard was not even before the
Commission. The Commission itself recognized the
limited scope of the remand when it dismissed Sea
Island’s request for treatment under the newly-adopted
‘*distress sale’’ policy. Grant of that request would have
allowed the sale of WSIB to a Black-controlled partner-
ship at a price below market value. In a Memorandum
Opinion and Order, adopted the same day as its Report,
the Commission stated:

Although the Court of Appeals has remanded this
case proceeding to us, it is clear that it has done so
only for the purpose of obtaining answers to
specific questions posed by the Court .... Under
these circumstances, the remand order of the Court

13

must be construed as a very narrow and limited
one, which does not relinquish the Court’s statutory
jurisdiction over this case .... (App. 52a n. 1).

Stripping away the facade of the Commission’$ post
hoc representation, it becomes obvious that the court
below usurped the Commission’s task of weighing
evidence of wrongdoing against the clear and convincing
standard. Clearly it should not have done so. One of the
most deeply rooted tenets of administrative law is that
the reviewing court’s power is limited to correcting the
agency’s errors of law.

When an administrative agency has made an error
of law, the duty of the Court is to ‘‘correct the er-
ror of law committed by that body, and after doing
so to remand the case to the [agency] so as to af-
ford it the opportunity of examining the evidence
and finding the facts as required by law.’’ National
Labor Relations Board v. Enterprise Association,
429 U.S. 507, 522 n.9 (1977) (quoting J/nterstate
Commerce Commission v. Clyde Steamship Co.,
181 U.S. 29, 32-33 (1901)).

Here, the court of appeals properly held that the Com-
mission committed an error of law by not applying a
clear and convincing standard of proof to this license
revocation proceeding. The Commission must now ex-
amine the evidence and find the facts under the proper
standard of proof. The court of appeals may not assume
the task Congress has assigned to the Commission.

The seminal case of Securities and Exchange Com-
mision v. Chenery Corp., 318 U.S. 80 (1943) (Chenery
I), further supports Petitioner’s contention that the
court of appeals has exceeded its proper role as a
reviewing court.

If an order is valid only as a determination of
policy or judgment which the agency alone is
authorized to make and which it has not made, a

*%

14

judicial judgment cannot be made to do service for
an administrative judgment. For purposes of affir-
ming no less than reversing its orders, an appellate
court cannot intrude upon the domain which Con-
gress has exclusively entrusted to an administrative
agency. /d. at 88 (emphasis added).

The court of appeals lacks the authority to declare
the evidence in the administrative record to be clear and
convincing. It can only affirm or vacate a Commission
determination in that regard. Since the Commission has
not reached such a determination in a proper ad-
judicatory setting, the court of appeals is powerless to
affirm the Commission’s order in this case. As this
Court held in Chenery II:

[A] reviewing court, in dealing with a determination
or judgment which an administrative agency alone
is authorized to make, must judge the propriety of
such action solely by the grounds invoked by the
agency. If those grounds are inadequate or im-
proper, the court is powerless to affirm the ad-
ministrative action by substituting what it considers
to be a more adequate or proper basis. To do so
would propel the court into the domain which Con-
gress has set aside exclusively for the administrative
agency. Securities and Exchange Commission v.
Chenery Corp., 332 U.S. 194, 196 (1947).

Furthermore, the disposition of this case by the
court below is in direct conflict with two decisions in the
same circuit which clearly indicate that remand is re-
quired when an agency has used an incorrect standard
of proof in reaching an adjudicatory decision. Collins
Securities Corp. v. Securities and Exchange Commis-
sion, 183 U.S. App. D.C. 301, 302-03, 562 F.2d 820,
821-22 (1977); Charlton v. Federal Trade Commission,
177 U.S. App. D.C. 418, 423, 543 F.2d 903, 908 (1976).
In Charlton, the court of appeals held that the agency
had applied the wrong standard of proof; there,

15

however, the court of appeals correctly remanded the
case.

We perceive one error which, all else aside,
necessitates administrative reconsideration of the
evidence. The crux of the difficulty is the Commis-
sion’s use of a totally incorrect standard of proof in
passing on Charlton’s blameworthiness. It follows
that, however Charlton might fare on his other con-
tentions, the Commission’s present disciplinary
order could not be left standing. 177 U.S. App.
D.C. at 421, 543 F.2d at 906.

Similarly in Collins, after holding that a clear and con-
vincing standard of proof rather than a _ mere
preponderance of the evidence was to be used by the
agency, the court of appeals stated:

Any review of the evidence in this opinion would
necessarily be selective in some degree, and we do
not wish to convey the impression that the Commis-
sion may likewise be selective in its reconsideration.
On remand, the entire evidentiary record must be
reconsidered by the Commission. 183 U.S. App.
D.C. at 307, 562 F.2d at 826.

The circuit previously has followed consistently the
established principle that the reviewing court’s function
is limited to correcting the agency’s error of law; it may
not uphold an agency order on grounds other than those
enunciated by the agency at the time of its decision.''

The Administrative Procedure Act provides ‘‘[a]
sanction may not be imposed or rule or order issued ex-
cept on consideration of the whole record or those parts

'' E.g., Central Florida Enterprises, Inc. v. FCC, 194 U.S. App.
D.C. 118, 141, 598 F.2d 37, 60 (1978); United States Lines, Inc. v.
Federal Maritime Commission, 189 U.S. App. D.C. 361, 374, 584
F.2d 519, 532 (1978); KIRO, Inc. v. FCC, 178 U.S. App. D.C. 126,
130, 545 F.2d 204, 208 (1976).

16

cited by a party... .’’ 5 U.S.C. § 556(d)(1976). When
an agency is ‘‘consider[ing]’’ the record it is axiomatic
that at the time it does so it must concurrently be using
the proper standard. The standards of clear and convin-
cing proof and preponderance of the evidence are so dif-
ferent that the court and the Commission must not be
allowed merely to pay lip service to the higher
standard.'?

The necessity that the administrative agency itself
weigh the evidence is emphasized by the situation
presented to this Court in Woodby v. Immigration and
Naturalization Service, 385 U.S. 276 (1966).'’ There the
Court held that in the absence of an expression of Con-
gressional intent to the contrary,'* the judiciary may
determine the degree of proof required in deportation
proceedings. The Court further held that in such pro-
ceedings, the Government must establish its allegations
by clear, unequivocal and convincing evidence. /d. at

'? The importance of the Commission’s obligation as trier of fact is
emphasized by the formulations that have been given to the clear and
convincing standard of proof. For instance:

**[T]he witnesses to a fact must be found to be credible and that
the facts to which they have testified are distinctly remembered
and the details thereof narrated exactly and in due order and that
the testimony be clear, direct and weighty and convincing so as to
enable [the trier of fact] to come to a clear conviction without
hesitancy of the truth of the precise facts in issue.’’ Aetna In-
surance Co. v. Paddock, 301 F.2d 807, 811 (Sth Cir. 1962)
(quoting the trial court with approval). See generally VIII A.
Wicmore, Evipence § 2398 (1940),

'' In Woodby, this Court construed Sections 106(a)(4), and
242(b)(4) of the Immigration and Naturalization Act, 8 U.S.C.
§§ 1105a(a)(4), 1252(b)(4). The pertinent provisions of those sections
are substantially similar to Sections 7 and 10(e) of the Administrative
Procedure Act at issue here, 5 U.S.C, §§ 556, 706.

'* See Vance v. Terrazas, 62 L.Ed. 2d 461, 473-74 (1980).

17

286. In one of the two cases before the Court in Wood-
by,'* the agency’s special inquiry officer concluded that
the Government had established its contentions to sup-
port a deportation order ‘‘ ‘with a solidarity far greater
than required,’ but did not further elucidate what was
‘required.’ ’’'® The Board of Immigration Appeals
stated that it was ‘‘ ‘established beyond any reasonable
doubt’ ’’ that the petitioner had obtained a passport
under a false name and that it was a ‘‘ ‘most unlikely
hypothesis’ ’’ that someone other than the petitioner
had obtained and used the passport.'’ Despite these fin-
dings at the agency level, this Court, upon holding that
a clear, unequivocal and convincing standard of proof
must be applied, set aside the judgment of the court of
appeals, and remanded the case with directions to re-
mand to the agency for further proceedings.

Similarly here upon holding that a higher standard
of proof than previously used is required in FCC license
revocation proceedings, the court of appeals should have
remanded the case to the Commission. In failing to do
so, the court exceeded the scope of review established in
the Administrative Procedure Act. If allowed to stand,
the decision below will mark a significant expansion of
the role of reviewing courts in weighing the evidence in
administrative actions.'*

'’ Sherman v. Immigration and Naturalization Service, 350 F.2d
894 (2d Cir. 1965), remanded, 385 U.S. 276 (1966).

‘© 385 U.S, at 279.
'" Id,

'" The Court, in its discretion, may deem this matter suitable for
summary disposition, such as was employed in a similar case, Sunray
Mid-Continent Oil Co. v. FPC, 353 U.S. 944 (1957) (per curiam). In
Sunray, the Federal Power Commission had determined that it lacked
the power under § 7(c) and (e) of the Natural Gas Act, 15 U.S.C.
§ 717f(c)(e) to issue certificates of public convenience and necessity of
limited duration. The Court of Appeals for the Tenth Circuit held that
the Commission did have authority to issue such certificates, but went

Il. This Case and Steadman, for which Certiorari
Has Been Granted, Involve Two Aspects of a
Larger Administrative Law Issue: Tandem
Review Would Be Appropriate

This Court recently granted a petition for a writ of
certiorari to review Steadman v. Securities and Exchange
Commission, 603 F.2d 1126 (Sth Cir. 1979), cert.
granted, 48 U.S.L.W. 3698 (1980)(No. 79-1266). The
issue presented in that case is whether, in SEC
disciplinary proceedings, violations of the anti-fraud
provisions of federal securities laws must be proved by
clear and convincing evidence. The Fifth Circuit affirm-
ed the SEC as to the standard of proof, holding that
only a preponderance of the evidence is required. Peti-
tioner Steadman asserts that the Fifth Circuit’s opinion
is irreconcilably in conflict with Collins Securities Corp.
v. Securities and Exchange Commission, supra. In Sea
Island, as noted previously, the court below heavily
relied upon Collins in imposing the clear and convincing
standard of proof in FCC license revocation pro-
ceedings. See note 3 supra.

By considering this case and Steadman in tandem,
the Court will have the opportunity to give clear
guidance to the courts below regarding (1) the standard
of proof to be applied in agency proceedings looking
toward the imposition of serious sanctions, and (b) the
proper disposition by the reviewing courts of cases in
which the agency used a lower standard than required.

on to affirm the order on the ground that it would have been ap-
propriate for the Commission to deny issuance of the certificate. This
Court granted certioriari, and summarily reversed and remanded the
case to the court of appeals for remand to the Commission. The Court
held that the reviewing court’s power was exhausted when it held that
the Commission had the authority to issue the certificate. /d. at 945.

19

While the two cases obviously do not present the same
question, they do present two aspects Of a larger ad-
ministrative law issue regarding the importance of the
standard of proof used in agency adjudications. Both
aspects of the issue should be addressed by the court.

CONCLUSION
For these reasons, this petition for a writ of cer-
tiorari should be granted.
Respectfully submitted,

JOHN H. MIDLEN, JR.
HARRY C. MARTIN
MATTHEW H. MCCorRMICK

2033 M Street, N.W.
Washington, D.C. 20036

Attorneys for Petitioner
Of Counsel:

MIDLEN & REDDY
2033 M Street, N.W.
Washington, D.C. 20036

June 3, 1980

APPENDIX

la

APPENDIX A

UNITED STATES COURT OF APPEALS FOR
THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1979

No. 76-1735
SEA ISLAND BROADCASTING CORPORATION OF S.C.,
Appellant
Ve

FEDERAL COMMUNICATION COMMISSION, Appellee

APPEAL FROM AN ORDER OF THE FEDERAL
COMMUNICATIONS COMMISSION

BEFORE: LEVENTHAL* and ROBINSON, Circuit Judges, and
RicHey**, United States District Judge for the
District of Columbia

Judgment
Filed Jan 23, 1980

This cause came on to be heard on the record on appeal
from the Federal Communications Commission, and was
argued by counsel. On consideration thereof, it is ORDERED
AND ADJUDGED, by this Court, that the order of the Federal
Communications Commission under review herein is hereby
affirmed, in accordance with the Opinion of this Court filed
herein this date.

Per Curiam

For the Court

/s/GEORGE A. FISHER
GeorGE A. FISHER
Clerk

Dated: January 14, 1980
Opinion for the Court filed by Circuit Judge Leventhal.

* This opinion was written by Circuit Judge Leventhal and con-
currences were received from the other Judges prior to his death.

** Sitting by designation pursuant to 28 U.S.C. § 292(a).

2a

Notice: This opinion is subject to formal revision before publication
in the Federal Reporter or U.S.App.D.C. Reports. Users are
to notify the Clerk of any formal errors in order that cory ctions may be
made before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1735
SEA ISLAND BROADCASTING CORPORATION OF S.C.,
APPELLANT
Vv.
FEDERAL COMMUNICATIONS COMMISSION, APPELLEE

Appeal From An Order Of The
Federal Communications Commission

Argued June 2, 1978
Decided January 14, 1980

John H. Midlen, Jr. with whom John H. Midlen was
on the brief, for appellant.

Thomas R. King, Jr., counsel, Federal Communications
Commission, with whom Robert R. Bruce, General Coun-
sel and Daniel M. Armstrong, Associate General Coun-
sel were on the brief, for appellee.

Bills of costs must be filed within 14 days after entry of judgment. The
court looks with disfavor upon motions to file bills of costs out of time.

3a

Before: LEVENTHAL * and ROBINSON, Circuit Judges,
and RICHEY **, United States District Judge
for the District of Columbia

Opinion for the Court filed by Circuit Judge LEVENTHAL.

LEVENTHAL, Circuit Judge: This case is before the
court on appeal by Sea Isiand Broadcasting Corporation
(Sea Island) from a decision of the Federal Communica-
tions Commission which revoked its license to operate
WSIB, an AM radio station in Beaufort, South Carolina.’
The Commission’s revocation was based primarily on
grounds that the owner and officers of Sea Island made
deliberate misrepresentations and other misleading and
deceptive statements to the Commission in order to con-
ceal improper billing practices. The Commission con-
cluded that Sea Island has shown “a classic pattern” of
such misrepresentations and misleading statements “when
it believed it could effectively conceal suspected wrong-
doing.” * It further ruled that the kinds of fraudulent
billing used by Sea Island “were serious and reinforced
our conclusion to revoke Sea Island’s license.” The Com-
mission concluded:

In short, the effective regulation of the communica-
tions industries under our jurisdiction is premised
on our ability to depend on the accuracy and truth-
fulness of our licensee’s representation to us. Once
we find that we cannot rely on a licensee's represen-

* This opinion was written by Circuit Judge Leventhal and
concurrences were received from the other Judges prior to
his death.

** Sitting by designation pursuant to 28 U.S.C. § 292(a).

'The Commission’s Decision is reported at 60 FCC 2d 146
(1976) (J.A. 19). The Memorandum Opinion and Order
denying reconsideration is reported at 64 FCC 2d 721 (1977)
(J.A. 86).

260 FCC 2d at 30.

4a

tations to us, the only suitable penalty is revocation
of the license.

In denying reconsideration, the Commission pointed out
that it had given Sea Island a fair opportunity to present
its arguments and that it had had oral argument before
the Commission upon the exceptions to the initial decision
of the presiding administrative law judge. The Com-
mission stated:

Hearing oral argument in a proceeding such as this
provides the Commissioners with the opportunity to
ask the parties probing questions on any matters of
record, including the evidence and the findings and
conclusions of the presiding judge as well as the sig-
nificant arguments raised in the written pleadings
of the various parties.

The case arises out of an investigation by the FCC’s
Broadcasting Bureau in 1973 into the station’s advertis-
ing sales and billing practices. The Commission’s rules
provide that no licensee shall knowingly issue any docu-
ments which misrepresent the amounts charged for ad-
vertising, the nature, content or quality of the advertis-
ing, or the date or time of broadcast.’

The record discloses that Sea Island admitted the facts
forming the basis for the Commission’s finding that it
violated the rule. It suffices here to mention the viola-
tion that occurred when Charles Bell, Jr., sales and
station manager, and a vice president, treasurer and
director, entered into an agreement with one Smith,
manager of a TV store (Palmetto). Smith agreed to

$47 C.F.R. § 73.1205 (1976) (Addendum) is known as the
“fraudulent billing rule.” This rule was amended in 1976, but
the amendment was minor and not pertinent to this case. 41
Fed. Reg. 23675-78 (1976). The term “fraudulent billing’
has become an abbreviated manner of referring to various
billing practices prohibited by Section 73.1205. Decision, 60
FCC 2d at 147 n.2 (J.A. 20 n.2).

Sa

purchase cooperative advertising on WSIB, and in return
Bell agreed to rebate to Palmetto its share of the cost
of the cooperative advertising. The mother of Charles
Bell, who was secretary of the corporation, and business
manager, issued rebate checks of approximately $2500,
which caused a national cooperative advertiser, Philco-
Ford, to pay twice what it should have paid for the
advertising run on WSIB. Eventually Charles Bell, Sr.
wrote to the Bureau on November 16, 1973 admitting
to the rebates by WSIB of one-half of the amount of
monthly billings to Palmetto. However, when the field
investigators interviewed both Charles Bell, Sr. and
Charles Bell, Jr. in April 1973, they denied knowledge
of fraudulent billing. At the hearing Charles Bell, Jr.
admitted that his statement was false. His position was
that he did not believe the rebates violated the rule
though he thought the arrangement was shady. As to
Charles Bell, Sr. he had previously written a letter to
the Commission on October 3, 1977, in response to letters
from the Complaints Division of the Broadcast Bureau
on August 29, requesting information, and on September
18, indicating that comparison of ledger sheets gave in-
dication that WSIB may have been involved in fraudulent
billing.

In the October 3 letter Charles Bell, Sr. stated that
the billing procedures had been “carefully reviewed,”
stated that he had been unable to find an explanation
from the employee who made the bookkeeping entries
(“not a trained bookkeeper”) of the matter and advised
that it was not the handwritten ledger sheets but the
typewritten ledger sheets that were used for billing. Bell’s
subsequent testimony revealed that before sending the
October 3 letter he had not questioned his wife (the
bookkeeper), his son, or Palmetto’s proprietor about the
matter and had not inspected the typewritten ledger
sheets which had been used. He later wrote the Bureau

6a

that it was not until after his October 3 letter and his
examining the typewritten ledger sheets as instructed,
that he discussed the matter with his wife and son and
learned that his son had agreed to the rebate.

The Administrative Law Judge reached the following
conclusion as te the credibility of Bell, Sr.:

It has been found that time after time Bell, Sr.
denied knowledge of the fraudulent billing under cir-
cumstances which render those denials impossible of
belief. He apparently believed that if he could paint
himself as the credulous victim of a wife and son
who permitted him to destroy himself through their
silence he could escape accountability. The record
warrants no such conclusion.

The Commission agreed with the ALJ’s findings and
conclusions:

We cannot believe that Bell, Sr. did not question
his wife or son about possible fraudulent billing for
over five months following the April 1973 visit to
WSIB by Commission investigators.

* * * a

Upon receipt of the Commission’s September 18, 1973
letter he must have known that WSIB billing prac-
tices concerning the Palmetto account, were being
questioned by the Commission. Further, Bell knew
that his wife kept the station’s records and thus
would have to know about any fraudulent billing
practices and that his son was the salesman for the
Palmetto account. Bell’s explanation that he did not
question his wife and son because he trusted them
does not make sense. If he trusted them he would
have no natural reason for not questioning them.

The Commission stated: “The crux of our decision to
revoke Sea Island’s license is our conclusion that the
owner and officers of Sea Island made deliberate misrep-
resentations to the Commission... .” It is abundantly

7a

clear from the foregoing that there was substantial evi-
dence to support the Commission’s order of revocation.

Appellant further argued that the Commission as-
sumed that its only task was to determine whether there
was “substantial evidence” to support a finding of mis-
representation and fraudulent billing. Had it governed
itself by such a standard, it would clearly have been in
error,‘ would have confused the standard for judicial
review (“substantial evidence”) with the standard of
proof governing the agency. While the Commission re-
port does use the term “substantial” it is in a context
which showed that it was requiring that the evidence be
“reliable, probative and substantial.” We reject appel-
lant’s contention.

Appellant separately argued that the standard of proof
necessary to the Commission in order to justify such an
order must be “clear and convincing.” The appellant con-
sidered the case governed by Collins Security Corp. v.
SEC, 183 U.S.App.D.C. 301, 562 F.2d 823 (1977). And
it argued that the Commission had applied a ‘“‘preponder-
ance of evidence” standard, and did not require “clear
and convincing evidence.”’

After oral argument, the court remanded the record
to the Commission in order that it might have the views
of the Commission concerning the following matters:

(1) What standard of proof was applied in the dis-
position of this matter by the Commission?

(2) What would be the effect on the public interest
if the Commission were to apply a “clear and convincing”’
standard of proof to issues of fact in license revocation
proceedings?

*Charlton v. FTC, 177 U.S.App.D.C. 418, 548 F.2d 908
(1976).

8a

In its report to the court, adopted November 30, 1978 °
the Commission stated:

that when it reviewed the Initial Decision and the
record in this proceeding, de novo, it applied the
customary standard of proof in an administrative
proceeding, i.e., the preponderance of the evidence
test. 69 FCC 2d at 1797.

The use of the “preponderance of evidence” standard
is the traditional standard in civil and administrative
proceedings. It is the one contemplated by the APA, 5
U.S.C. § 556(d).*

In its report the Commission stated that the evidence
supporting its action of revocation “was sufficient to
meet the “clear and convincing test,” but further sub-
mitted that the Collins test is not applicable to this case
and actions by the FCC.

In support of its view that Collins is not applicable,
the Commission submitted: Broadcasters have a special
“public trust” status, as public trustees of a scarce re-
source. In view of the scarcity of broadcast frequencies
“the grant of a license to one person precludes another
from obtaining such a privilege.” Since the licensees
“receive very significant benefits by virtue of their status
as Commission licensees, they owe the public a very high
standard of stewardship in return for their privileged
positions.” It is not appropriate to require a higher
standard of proof than traditional preponderance, where
the licensee has abused its “special fiduciary duty to the
public.” The loss of a broadcast license does not amount

5In re Sea Island Broadcasting Corp. of S.C. (WSIB), 69
FCC 2d 1796 (1978).

*H.R. Rep. No. 1980, 79th Cong., 2d Sess. 37 (1946) re-
printed in S. Doc. No. 248, 79th Cong., 2d Sess., Administra-
tive Procedure Act—Legislative History 271 (1946).

9a

to potential deprivation of a livelihood as in Collins since
the former licensee may still obtain a job in the broad-
casting industry and the revocation of one license “would
not necessarily result in the loss of any other broadcast-
ing station’s license held by such a licensee.” The analysis
in FCC revocation proceedings does not usually rely on
the sophisticated type of inferential proof that is in-
volved in SEC proceedings. “Our revocation proceedings
usually involve relatively simple factual questions such
as whether a particular licensee violated our rules by
performing or failing to perform certain acts.”

While the Commission has some persuasive points, it
has not satisfied us that the difference in consequence
is notable in terms of distinguishing an SEC revocation
from an FCC rvvocation. The broadcaster who loses his
license may get other jobs in the industry, but he cer-
tainly has lost a business. The holder of multiple licensees
may continue to hold one although another is revoked,
but the fact of revocation of one license would not be
ignored in case of a challenge to other licenses.

That the revocation grounds may be simply proved
is no reason for requiring less evidence of the violation.
True, there is less danger of misapprehension of issues,
but correspondingly there should be little burden involved
in making clear proof of the fraud.

The Commission is concerned lest a higher standard
of proof either weaken its regulation authority or en-
courage or sanction shady tactics by licensees. There is
a difference between the duty imposed on a licensee (the
higher standard pertinent to a trustee) and the degree
of proof required to convince the decision maker that
there has been a violation of that duty. The fiduciary
duty is good reason for holding that when there has been
a misrepresentation even on a relatively minor matter,
the very fact of misrepresentation is more important tl an
the item involved, since the Commission must proceed on

10a

the basis of absolute trust and confidence in the rep-
resentations made to it by its licensees. FCC v. WOKO,
Inc., 829 U.S. 228 (1946); Lorain Journal Co. v. FCC,
122 U.S.App.D.C. 127, 351 F.2d 824.

What is perhaps a more important distinction between
FCC and other licenses is this: A broker has expecta-
tion of business for a lifetime. An FCC broadcast license
is for a three-year period. It may even be removed from
a person who is law-abiding if another is distinctly su-
perior, as shown in a subsequent comparative proceed-
ing. In such a proceeding it would suffice that distinctly
superior capability, under the various criteria used by
the FCC in comparative proceedings, be shown by a pre-
ponderance of evidence.

However, there is a “security” of interest during a
license term even assuming there is none at the end of
a term. CAB v, Delta Air Lines, 367 U.S. 316 (1961).
And in the case of FCC licenses there is some expectancy
of renewal, for a wide range of situations, at least in
terms of a preference over others who are only equally
qualified. Fidelity Television v. FCC, 169 U.S.App.D.C.
225, 248, 515 F.2d 684, 702 (1975).

There is also the consideration that when the FCC
proceeds against a licensee for civil liability, because of
violation of FCC rules, the appropriate standard would
be preponderance of the evidence. True that would be
the standard applied by the court in a de novo proceed-
ing, but the liability would be assessed initially by FCC
under a preponderance standard; see 5 U.S.C. § 554, as
governing agency forfeiture proceedings.

After all the analysis, we stand with the view that
revocation of an FCC license is governed, at the agency
level, by the “clear and convincing” standard of proof
set, forth in the Collins decision for an SEC revocation
of a broker’s license. We do not believe that this stand-

lla

ard will, as the Commission fears, “significantly burden”
its efforts to regulate licensees in furtherance of the
public interest.

We do not suggest that the FCC should be required
to apply a “clear and convincing” standard as to all
matters which come before it. We certainly agree that
there are many license revocation proceedings where
nothing resembling a loss of livelihood is involved, as in
the case of Amateur Band (“HAM?’’) and Citizen Band
(“CB”) licensees. The same consideration would likely
apply to licenses in such services as the Industrial Radio
Service (business, manufacturing, forest products, pe-
troleum, power—see 47 C.F.R. Part 91) and Land Trans-
portation Radio Service (railroads, buses, trucks, taxi-
cabs, automobile emergency—see 47 C.F.R. Part 98),
where radio frequencies are used merely as a means
- of increasing the efficiency of certain occupations or
activities.

In this case the Commission has reported to the court
that it would have made the same finding in using the
“clear and convincing” standard. We have confidence
in the accuracy of this representation. We set forth
some pertinent facts in the preceding portion of this
opinion. There is much more to the same effect. The
Commission heard oral argument, and gave appellant an
effective opportunity to do what it could to undercut the
case mounted against it. Where the Commission ex-
pressly applies the “clear and convincing” standard, the
judicial function is only to see whether there is “sub-
stantial evidence” to support the Commission’s deter-
mination.’ Because the Commission did not expressly

7In an even more extreme case, where the jury is in-
structed to find a person guilty of a crime only if satisfied
of guilt “beyond a reasonable doubt,” its verdict is supported
by the court so long as it is supported by substantial evidence.

12a

set forth that standard in the first instance, and in-
deed resisted it on remand, we have been particularly
careful. We are ourselves convinced that the Commis-
sion at all times considered the proof of appellant’s
derelictions to be clear and convincing.

Affirmed.

13a

APPENDIX B

FCC 78-840
BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION
Wasninoton, D.C. 20554

In the Matter of
Revocation of the License of

Sea ISLAND BROADCASTING CORPORATION OF | Docket No. 19886
S.C. (WSIB)

Beaufort, South Carolina

REPORT
(Adopted: November 30, 1978; Released: December 11, 1978)
By THE ComMISSION:

1. Ina Decision, 60 FCC 2d 146 (1976), reconsideration denied, 64
FCC 2d 721 (1977), the Commission revoked the license of Sea Island
Broadcasting Corporation of S.C. (Sea Island) for Station WSIB,
Beaufort, South Carolina. Our decision was based primarily on the fact
that Sea Island had shown a classic pattern of making deliberate
misrepresentations and other misleading and deceptive statements to
us in order to conceal billing practices which violated Section 73.1205 of
our Rules. We also determined that the kinds of improper billing
practices engaged in by Sea Island were serious and reinforced our
conclusion to revoke Sea Island’s license. Sea Island appealed the
Commission's decision to the United States Court of Appeals for the
District of Columbia Circuit, which has remanded the case to us in
order to ascertain what standard of proof was applied in this
proceeding and to obtain our views concerning the relevant public
interest considerations inherent in applying a “clear and convincing”

69 F.C.C. 2d

l4a

Sea Island B/cing Corp. of S.C. 1797

standard of proof to license revocation proceedings held before this
agency.

2. The Commission reviewed the Initial Decision and the record in
this processing, de novo, pursuant to authority granted by 5 U.S.C.
§557(b).! In conducting our review, we assumed that the customary
standard of proof in an administrative proceeding, namely the
preponderance of the evidence test,? applied in this case. Since, after
completing our analysis, we concluded that the evidence against Sea
Island was overwhelming and clearly met this normal administrative
standard, we did not feel it necessary to discuss the matter in our
opinion. 3 In answering the argument made by Sea Island that the

“clear, unequivocal and convincing” standard articulated in Woodby v.
Immigration and Naturalization Service, 385 U.S. 276 (1966), should
apply in this proceeding, we did indicate that “the pertinent provisions
of Section 556(d) of the APA clearly require only that a Commission
decision be ‘supported by and in accordance with the reliable,
probative, and substantial evidence’ of record,” since we believed that
Congress’s use of the term “substantial” in 5 U.S.C. 556(d) necessarily
assumed a finding that the evidence met the normal preponderance of
the evidence test, but did not impose a higher standard.‘ Similarly, by
use of the term “substantial” in footnote 8 of our Decision, 60 FCC 2d
at 150, we meant that the Broadcast Bureau had not presented a
sufficient amount of evidence to satisfy the customary preponderance
of the evidence standard.

8. We do not believe that the rationale of the Court of Appeals’
decision in Collins Securities Corporation v. SEC (Collins), 562 F.2d 820
(1977), is applicable to this case or to revocation proceedings at this
agency in general. In Collins, the Court stated that, because of the

1 The third sentence of 5 U.S.C. §557(b) states: “On appeal from or review of the initial
decision, the agency has all the powers which it would have in making the initial
decision except as it may limit the issues on notice or by rule.”

29 Wigmore, Evidence §2498 (3d ed., 1940); McCormick Handbook of the Law of
Evidence, §'s 339 and 355 (2d ed. Cleary, 1972); and Collins Security Corp. v. SEC, 562
F.2d 820, 823 (1977).

3 Thus, although the evidence supporting the conclusions in our Decision, supra, which
were adverse to Sea Island was sufficient to satisfy the “clear and convincing test
referred to by the Court of Appeals in Collins Security Corp. v. SEC, supra, we did
not believe it necessary to state that the evidence was of the kind that could meet a
higher standard than the customary preponderance of the evidence test.

‘In this regard, the legislative history of 5 U.S.C. §556(d) indicates that Congress
assumed the standard of proof in administrative proceedings was the preponderance
of the evidence test. H.R. Rep. No. 1980, 79th Cong., 2d Sess. 37 (1946), reprinted in S.
Doc. No. 248, 79th Cong., 2d Sess. Administrative Procedure Act—Legislative History
(1946) contains the following language at page 271:

“{ W ] here a party having the burden of proceeding has come forward with a
prima facie and substantial case, he will prevail unless his evidence is discredited
or rebutted. In any case the agency must decide ‘in accordance with the evidence.’
Where there is evidence pro and con, the agency must weigh it and decide in
accordance with the preponderance.” (Emphasis added.)

69 F.C.C. 2d

15a

1798 Federal Communications Commission Reports

type of case involved (fraud), and the heavy sanction imposed by the
Securities and Exchange Commission (deprivation of livelihood), as
well as the type of circumstantial proof on which the SEC must often
rely, the proper standard of proof was “clear and convincing” evidence,
as opposed to a preponderance of the evidence. 562 F.2d at 824.
However, a comparison of the regulatory framework in Collins,
supra,’ with the regulation of broadcasters, like Sea Island in this
proceeding, discloses significant differences which do not justify
imposing a “clear and convincing” standard on this Commission in
revocation proceedings.

4. Thus, it has long been recognized that broadcasters have a
special status as public trustees of a scarce resource, namely, the
broadeast frequencies. The Supreme Court has noted that, because
broadcast frequencies are limited, “they have been necessarily
considered a public trust,” Red Lion Broadcasting Cu. v. FCC, 395 U.S.
367, 383 (1969), and that broadcast licenses are a privilege, in these
words:

“Licenses to broadcast do not confer ownership of designated frequencies, but only
the temporary privilege of using them. 47 U.S.C. §301.” Red Lion, supra, at 394.

If the Government had not decided to create a special regulatory
system to insure that broadcasters would not receive interference in
their licensed service areas, broadcasters would not have the special
type of privileges they now enjoy. Thus, the scarcity of broadcast
frequencies necessitated the creation of a regulated industry, by which
the grant of a license to one person precludes another from obtaining
such a privilege, and in which the licensed members were given a
specially protected economic status not available in the market place in
return for responsibility to perform as trustees of special public
resources. Since broadcast and common carrier® licensees receive very
significant benefits by virtue of their status as Commission licensees,
they owe the public a very high standard of stewardship in return for
their privileged positions. Given the special standing of licensees as
recipients of valued privileges, it is not appropriate to require the
Commission to meet a higher standard of proof in revocation
proceedings than the traditional preponderance of the evidence test
where the licensee has abused its special fiduciary duty to the public.?

5. In addition, although revocation of a broadcast license can result

5 Securities dealers and brokers who register with the SEC, rather than receiving a
numerically limited, special privilege from the government are merely allowed to
participate in whichever facets of the securities industry they may choose.

®The Commission bestows similar advantages upon various radio common carrier
licensees which receive authority to use certain radio frequencies to provide services
for hire, such as licensees in the Domestic Public Land Mobile Radio Services (See 47
CFR Part 21).

TIn this regard, Section 307(d) of the Communications Act provides that broadcast
licensees shall be for no more than three years whereas other licenses can be granted
for periods of up to five years. This shorter license period for broadcast stations is,

69 F.C.C. 2d

16a

Sea Island B/cing Corp. of S.C. 1799

in the loss of a business enterprise by a licensee, this Commission's
station revocation proceedings do not usually involve the potential
deprivation of a licensee’s livelihood as was the case in Collins, supra.
For example, a broadcaster who loses a license for a broadcast station
is not barred by the Commission from the broadcast industry and is not
in the same position as a doctor or lawyer who loses his life-long license
to practice his profession. The loss of a broadcast license would not
preclude the former licensee from obtaining a job in the broadcast
industry, would not deprive him of any of the various operators’
licenses described in Part 13 »>f our Rules (47 CFR Part 13) which are
required to be held by those who operate stations licensed by the
Commission, and would not necessarily result in the loss of any other
broadcast station licenses held by such a licensee. Thus, even when
license revocation proceedings result in the loss of a broadcast license,
the sanction which the Commission imposes in such cases is limited to
the specific license which is the subject matter of the proceeding.*

6. Moreover, although our revocation proceedings may rely, in
part, on circumstantial evidence, and although circumstantial evidence
can, in some instances, be very significant in the resolution of disputed
issues of fact, we do not believe that the inferences we make in
ordinary cases involve the same kind of reliance upon elaborate and
indirect showings which the Court of Appeals in Collins, supra,
attributes to the SEC.° In Collins, supra, 562 F.2d at 822-823, the
Court of Appeals articulated its concern about the inferential mode of
reasoning exercised by the SEC to support allegations of security law
violations in market fraud cases, as follows:

“The legitimate need to rely on inferential evidence does, however, illuminate the
ambiguity and lack of precision in the definition of many security law violations.”

In contrast, even when our revocation proceedings involve the analysis
of facts and circumstances concerning possible misrepresentations to
the Commission, which is always a painstaking task, such an analysis
ordinarily involves traditional considerations of direct as well as
circumstantial evidence and does not usually rely on the sophisticated
type of inferential proof which the Court of Appeals noted in
discussing SEC proceedings. Thus, as stated above, our revocation
proceedings usually involve relatively simple factual questions, such as

further evidence of the temporary quality of broadcast licenses as well as the
legislative desire to have the licensee's public interest performance examined on a
rather frequent basis.

SIn Donald W. Reynolds, FCC 77-497, 41 R.R.2d 16 (1977), the Commission granted
license renewal applications for several broadcast stations even though it had refused
to renew the license of commonly owned station KORK-TV, Las Vegas, Nevada, due
to serious misconduct at that station.

® As we explained in our Decision, the Broadcast Bureau did not have to prove common
law fraud in order to prove that Sea Island violated Section 78.1205 of our Rules. 60
FCC 2d 146, 149.

6 F.C.C. 2d

‘7a

1800 Federal Communications Commission Reports

whether a particular licensee violated our rules by performing or
failing to perform certain acts.

7. Furthermore, the FCC has many licensees other than broadcast-
ers who are subject to revocation proceedings. Many of our licensees
receive authority to use radio as a hobby or convenience for five-year
periods in the Amateur Radio and Citizens Band Radio Services. The
Commission has more than 350,000 Arnateur Band (“ham”) licensees
and more than 13.8 million Citizens Band (CB) licensees. Clearly,
revocation of a CB or an Amateur Band station license would not
deprive the licensee of his livelihood. Further, many licensees in such
services as the Industrial Radio Service (business, manufacturing,
forest products, petroleum, power—See 47 CFR Part 91) and Land
Transportation Radio Service (railroads, buses, trucks, taxicabs,
automobile. emergency—See 47 CFR Part 93) use radio frequencies
merely as a means of increasing the efficiency of certain occupations or
activities. Thus, revocation of such licensees would not deprive
licensees of their livelihood.

8. We also believe that a “clear and convincing” standard of proof
for issues/ of fact in our license revocation proceedings would
significantly burden the Commission in its efforts to regulate the
licensees under its jurisdiction. The necessity of compiling sufficient
evidence in order to insure compliance with a “clear and convincing”
standard would likely require increased agency funds and staffing for
more investigators, attorneys, and support personnel, to maintain the
Commission’s performance of its supervisory responsibilities over all of
its licensees, including the 13.8 million Citizens Band operators.

9. Thus, we do not believe that the Court of Appeals’ determina-
tion in Collins, supra, that a “clear and convincing” evidence standard
is appropriate in certain SEC proceedings concerning allegations of
market fraud should be extended to any of this Commission’s
revocation cases. As we have explained in this Report, broadcasters
and radio common carriers subject to revocation proceedings receive a
certain protected economic status not available in the market place and
should thus remain subject to very high public interest standards of
compliance insofar as the performance of their fiduciary duties as
trustees of special public resources are concerned. Furthermore, many
of our other licensees, such as Citizens Band and Amateur licensees,
use their stations primarily for pleasure or as a matter of convenience
and thus have very slight private interests at stake in revocation
proceedings, compared to the public interest in having responsible
licensees. For the reasons we have outlined, we are convinced that the
public interest would be best served by use of the usual standard of
proof for administrative agencies, namely the preponderance of the
evidence test, and that no other factor in this particular case or other

69 F.C.C. 2d

18a

Sea Island B/cing Corp. of S.C. 1801

Commission proceedings would warrant the imposition of any higher
standard of proof.

FEDERAL COMMUNICATIONS COMMISSION,
WiLuiaM J. Tricarico, Secretary.

69 F.CC. 2d

19a
APPENDIX C

F.C.C. 76-582
BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554

In the Matter of
Revocation of the License of Docket No. 19886

SEA ISLAND BROADCASTING CORPORATION
oF S.C. (WSIB), BEAUFORT, SOUTH
CAROLINA

APPEARANCES

John H. Midlen, John H. Midlen, Jr., Stanley B. Cohen, and Howard
M. Liberman on behalf of Sea Island Broadcasting Corporation of S.C.;
and Joseph Chachkin, W. Kennedy Keane and P. W. Valicenti on be-
half of the Chief, Broadcast Bureau.

DECISION
(Adopted: June 24, 1976; Released: July 14, 1976)

By THE CHAIRMAN FOR THE COMMISSION: COMMISSIONER LEE AB-
SENT; COMMISSIONER HOOKS CONCURRING IN THE RESULT. COM-
MISSIONER QUELLO NOT PARTICIPATING.

1. The Commission has before it the captioned revocation proceed-
ing against Sea Island Broadcasting Corporation of S.C. (WSIB) (Sea
Island), licensee of standard broadcast station WSIB, Beaufort, South
Carolina. We designated this proceeding for hearing by an Order to
Show Cause and Notice of Apparent Liability (FCC 73-1258), released
November 30, 1973, to resolve the following issues: '

(a) Whether, and if so, the extent to which the licensee knowingly
engaged in fraudulent billing practices in the operation of Sta-

'We further provided that if the record did not warrant revocation of WSIB’s license, it should
also be determined whether an Order of Forfeiture in the amount of $10,000 or some lesser amount
shouid ~ — — to Section 503(b) of the Communications Act for violations of Section
73.1205 of the Rules.

60 F.C.C. 2d

20a

Sea Island Broadcasting Corporation of S.C. 147

ioe WSIB in violation of Section 73.1205 of the Commission’s
ules;
(b) Whether, in light of all the facts and circumstances pertaining
thereto, the licensee has made misrepresentations to the Com-
mission or was lacking in candor as to its billing and bookkeep-
ing practices, including its practice of giving rebates; and
ether, in light of the information giving rise to the preced-
ing questions, if found to be true, the licensee possesses the
requisite qualifications to remain a licensee of the Commis-
sion.

2. Conferences and hearings were convened on various dates be-
tween January 11, 1974 and January 10, 1975, and the record was
closed on the latter date. In his Initial Decision (FCC 75D-19) released
May 1, 1975, the Presiding Judge concluded that Sea Island’s license
should be revoked because the owner and officers of Sea Island had
made deliberate misrepresentations to the Commission in attempts to
conceal serious violations of the fraudulent billing rules. * He also found
that the violations of the fraudulent billing rules over a prolonged
period of time reinforced his conclusion that the license should be
revoked. The Broadcast Bureau filed a statement in support of the
Initial Decision on June 16, 1975, and Sea Island filed exceptions to the
Initial Decision and a separate brief in — of its exceptions on
June 24, 1975. Each party replied to the other’s pleadings. Oral argu-
ments in this seooneding were heard on March 30, 1976, and Sea Island
~¢ nt — to correct the transcript of the oral argument on April
16, 1976.

3. Except as modified herein and in the rulings on exceptions set
forth in the attached —— we adopt the findings and conclusions
in the Initial Decision. The crux of our decision to revoke Sea Island’s
license is our conclusion that the owner and officers of Sea Island
made deliberate misrepresentations to the Commission. Section 312 of
the Communications Act authorizes the Commission to revoke a sta-
tion license for deliberate misrepresentations attributable to that sta-
tion’s licensee. This explicit prerogative given to the Commission by
the Communications Act has been affirmed many times by the courts.
See, e.g., FCC v. WOKO, Inc., 329 U.S. 223 (1946); Immaculate Concep-
tion Church v. FCC, 320 F.2d 795, cert. denied, 375 U.S. 904 (1963);
Lorain Journal Company v. FCC, 351 F.2d 824 (1965), cert. denied, 383
U.S. 967 (1966); and Continental Broadcasting, Inc. v. FCC, 439 F.2d
580, cert. denied, 403 U.S. 905 (1971). The Commission insists on com-

lete candor from its licensees and where, as here, that candor has
boon found lacking in response to official Commission inquiries, the
Commission has terminated the license. See, e.g., Milton Broadcasti
Co., 34 FCC 2d 1036 (1972); WPRY Radio Broadcaste~s, Inc., 40 FC
1183 (1973); and Nick J. Chaconas, 28 FCC 2d 231 (1971).

2The term “fraudulent billing” has become an abbreviated manner of referring to the various
billing practices prohibited by Rule 73.1206. In general, Rule 73.1206 forbids a broadcast licensee
from issuing any bill, invoice, or other document which contains false information concerning the
amount actually charged for any of its broadcast advertising or which misrepresents the nature and
content of ak advertising, the quantity of advertising broadcast (i.e, the number or length of
advertising messages), or the time of day or the date of such broadcast advertising.

(c)

3Sea Island's motion is unopposed and the corrections it suggests would clarify the transcript.
Therefore we shall grant Sea Island's motion.

60 F.C.C. 2d

2la

148 Federal Communications Commission Reports

4. The record in this proceeding is replete with examples of deliber-
ate misrepresentations by the owner and officers of Sea Island.
Charles Bell, Sr., the sole owner, President, and a Director of Sea
Island since February 1972 and the general manager of Station WSIB
since 1965, has demonstrated a marked A pragie08 for misrepresenta-
tions and deceptions. Bell, Sr., displayed a willingness to deceive the
Commission in his April 26, 1973 statement to our investigators and
during his testimony in this proceeding; and made deliberate misrepre-
sentations in his October 3, 1973 letter to the Commission. Bell, Jr.,
Vice President, Treasurer, and a Director of Sea Island from March 1,
1972 to April 18, 1974, and a salesman for WSIB during the period of
fraudulent billing, lied to our investigators in his April 26, 1973 state-
ment concerning his participation in and knowledge of fraudulent bill-
ing practices at Station WSIB.

Fraudulent Billings

5. Sea Island does not dispute the existence and the mechanics of
the arrangements found by the Presiding Judge to be violations of our
fraudulent billing rules (Section 73.1205 of our Rules). Thus, Sea Island
admits that it gave rebates to Palmetto TV and Stereo Center (Pal-
metto) from April through December 1972 which amounted to half the
sums which Palmetto had paid Sea Island for advertising Palmetto’s
products on Station WSIB.‘ Further, Sea Island concedes that it is-
sued invoices to co-op advertisers of Palmetto, the Sutcliffe Furniture
Company and the Country Store which misrepresented the types of
advertising broadcast, in that certain commercials were “converted”
into a different number of conventional spot announcements in an
effort to “simplify” the bills sent to national advertisers. * Sea Island
also admits that it billed to Sutcliffe as co-op advertising broadcasts
which advertised non-co-op products. All of the foregoing billing prac-
tices are clear violations of Section 73.1205 of our Rules and amount to
what that Section of our Rules describes as fraudulent billing prac-
tices.

6. Sea Island’s main contention regarding the fraudulent billing is-
sue is that the designation order raised the question of whether “the
licensee knowingly engaged in fraudulent billing practices” (emphasis
added). According to Sea Island, the Broadcast Bureau was required to
prove that Sea Island commited technical fraud as defined by South
Carolina law; that is, that the defendant made a material misrepresen-

false since they djd not reveal that the compensation WSIB received was only half the amount shown
on the invoices because of the 50 percent rebate paid by WSIB to Palmetto. Further, since Palmetto’s
co-op advertiser had a practice of reimbursing Palmetto 50 percent of the amount invoiced, Palmetto
could receive its advertising free.

5 Sea Island excepts to the Judge's findings that WSIB broadcast Sound-Ads for Palmetto and then
billed Palmetto falsely for conventional spot announcements. The record shows tl.at Palmetto spon-
sored Tides Reports (not Sound-Ads). The error is harmless. The Judge also found that the invoice
showed the correct charge to Palmetto (when a rebate was not made), but was inaccurate as to the
amount and type of advertising that had been broadcast. The licensee violated Section 73.1205 of the
Rules when it converted Palmetto’s partial sponsorship of Tides Reports advertisements into conven-
tional spot announcements on its invoice. In addition, the correctness of the amount billed is uncertain
because both Sound-Ads and Tides Reports could be pre-empted and the licensee relied on start
orders, which would show the number of ads requested, and not on the programming logs, which
would have shown the number of ads broadcast. Moreover, none of these findings affect the fact that
Palmetto violated Rule 73.1205 by giving rebates to Palmetto.

60 F.C.C. 2d

4The invoices i Station WSIB which were submitted to co-op advertisers of Palmetto were

22a

Sea Island Broadcasting Corporation of S.C. 149

tation, that he knew it was false when he made it, that he made it with
the intention that it should be acted upon, that it was acted upon to the
detriment of the party so acting, and that the party acting upon the
misrepresentation was cures thereby. * Sea Island relies on Harvit
Broadcasting Corp., 37 FCC 2d 60, 6% (Review Board, 1972) as drawing
a distinction between a “fraudulent” billing issue and an overbilling
issue. In Harvit, the petitioner who requested a fraudulent billing issue
had not, in the Board’s opinion, made sufficient allegations of affirma-
tive fraud. The Review Board therefore added an overbilling issue.
The issue as framed by the Board did not include the terms “fraud” or
“knowingly,” but merely questioned whether the licensee had engaged
9 we practices “violative of Section 73.1205 of the Commission’s
ules.”

7. We categorically reject Sea Island’s argument that the Broadcast
Bureau had to prove fraud.’ The Commission has so held previously in
Blackstone Broadcasting Corp., 52 FCC 2d 1106 (1975). In that case we
plainly stated: “Whether fraud in the technical or affirmative sense is
established is not determinative of whether there has been a violation
of the rule.” Thus, the Commission’s 1975 decision defeats the argu-
ment of Sea Island that the inclusion of the phrase “knowingly en-
gaged in fraudulent billing practices” in the designation order required
the Broadcast Bureau to prove technical fraud. If there is conflict
between the Commission’s 1975 decision and the Review Board’s 1972
decision in Harvit, the Commission’s decision prevails. The Commission
is not bound by Review Board decisions and the Review Board is
required to follow Commission precedents.

Misrepresentations and Other Deceptive Statements
by the Owner and Officers of the Licensee

8. Although eventually admitting its participation in the rebate
scheme, Sea Island did so only after maken serious and deliberate
misrepresentations and other misleading and deceptive statements to
the Commission in attempts to conceal its fraudulent billing practices.
Sea Island’s deliberate misrepresentations and misleading statements
to the Commission occurred as the result of an investigation of Sea
Island’s billing practices.

9. Between April 25 and 27, 1973, two Commission staff members
conducted a field investigation at WSIB. Numerous station records

Sea Island claims that under the issue designated here, the Bureau has failed to establish fraud
in the technical sense because it did not show that any party acted upon any WSIB invoice to its
detriment, or filed any claim of damage, or even disapproved of WSIB's billing practices.

7 Although the Bureau did not have to prove fraud, the record indicates that co-operative adver-
tisers incurred damages as a result of the false invoices issued by Station WSIB. Thus, it is reason-
able to assume that Philco-Ford reimbursed Palmetto twice what it would otherwise have paid to
Palmetto (or about $1,200 more than Palmetto was due) during the period that Sea Island gave
rebates to Palmetto because the reimbursement to Palmetto was based on WSIB invoices sent to
Philco-Ford for twice the amount Palmetto had in fact paid to WSIB. As to the Sutcliffe account, the
record supports a finding that Sutcliffe’s co-op advertisers received invoices including amounts for
non-co-op advertising on some occasions. The precise amount is not clear, but the record supports a
range of $1,200 to $1,400. The fact that not all of the invoices prepared by Sea Island for Sutcliffe’s
co-op advertisers were sent to the advertisers diminishes the amount of damages incurred. Neverthe-
less, some damage was suffered by Sutcliffe's co-op advertisers, who presumably would not have
reimburse? Suteliffe or given it merchandise discounts for advertising expenses which were not
incurred on their behalf. Moreover, whether the co-operative advertisers “disapproved” of Sea Is-
land's billing practices is irrelevant to the issue of whether Sea Island violated the Commission's
fraudulent billing rule. See Wharton Communications, Inc., 44 FCC 2d 489, 493 (1973).

60 F.C.C. 2d

23a

150 Federal Communications Commission Reports

were collected and examined and various station employees were in-
terviewed, as were Bell, Sr. and Bell, Jr. The investigation centered on
possible fraudulent billing, improper trade-outs, and combination rates
with a weekly magazine partially owned by Bell, Sr. In their —
statements given to the investigators on April 26, 1973, both Bell, Sr.
and Jr. denied any knowledge of fraudulent billing by the station. *®

10. In a letter dated August 29, 1973, the Commission’s staff re-

uested certain accounts receivable records, start orders, and invoices
or Palmetto alone, thus focussing their investigation on the Palmetto
account. On September 18, 1973, the Commission again wrote Bell
about the Palmetto account and explained that a comparison of Station
WSIB’s accounts receivable ledger sheets for Palmetto with the in-
voices furnished by Bell to Philco-Ford, Palmetto’s co-op advertiser,
indicated that WSIB may have engaged in fraudulent billing. The
Commission asked for Sea Isiand’s comments on this possibility. By
letter of October 3, 1973, Bell, Sr. replied to the Commission’s letter of
September 18, 1973. In effect, Bell claimed that Sea Island had not
engaged in fraudulent billing.

11. When Bell, Sr. composed the October 3, 1973 letter to the Com-
mission, he was in Washington, D.C. After having been warned about
the possibility of rebates by his counsel during his visit to Washington,
D.C., Bell, upon his return to Beaufort, allegedly for the first time
asked ‘his wife and son about possible Palmetto rebates. After he was
allegedly first informed about the Palmetto rebates following his re-
turn to Beaufort, he received another letter dated October 12, 1973,
from our investigatory staff, — further questions and —
additional documents concerning the Palmetto account. By letter o
November 16, 1973, Bell acknowledged the Palmetto rebates.

The April 1973 Statements

12. Contrary to Sea Island’s contentions, the record shows that Bell,
Jr.’s statement of April 1973 contains deliberate misrepresentations.
Bell, Jr. testified that, at the time he agreed to the arrangement with
Sutcliffe, he knew the Sutcliffe arrangement violated the Commis-
sion’s Rules. Although Bell, Jr. testified that he did not believe the
Palmetto rebates were illegal, he clearly misrepresented facts to the
Commission investigators when he stated in April 1973 that he had
“not participated in double or fraudulent billing at WSIB” and he did
not know anyone who had so participated. Bell, Jr. testified that he
thought his April 26, 1973 statement was true at the time he made it
because the investigators had asked him about the Palmetto account
and he did not think the Palmetto scheme violated the Commission’s
Rules. Bell, Jr. does not explain why he did not mention the Sutcliffe
scheme, which he admitted! knew at the time he entered it was a
violation of the fraudulent billing rules. In brief, the evidence supports
a finding that he purposefully did not reveal the Sutcliffe arrange-
ment.

SThe Bureau has not established by substantial evidence that Bell, Sr. knew of the fraudulent
billing at WSIB when he made his April 1973 statement to Commission investigators, and therefore
the Commission finds that Bell, Sr. did not misrepresent when he stated at that time he was unaware
of any fraudulent billing. The record does, however, support findings that Bell, Sr. made misleading
statements on other matters in his April 1973 statement. See para. 13, infra.

60 F.C.C. 2d

24a
Sea Island Broadcasting Corporation of S.C. 151

13. Bell, Sr.’s April 1973 statement to our investigators contains
several misleading and deceptive remarks concerning his management
of Station WSIB. Although Bell, Sr. claimed that he admonished sales
personnel to avoid fraudulent billing and called employees attention to
articles on the subject in the trade press, Bell, Jr.. who functioned
primarily as a salesman for the station, could recall only one brief
conversation on the subject prior to the April 1973 investigation. More-
over, although Bell, Sr., stated it was rare that he, Mrs. Bell, their son
and the vice-president for operations did not have lunch together,
where they had an opportunity to discuss “their business affairs,” Bell,
Jr. testified it was rare for all four of them to have lunch together and
both he and his mother testified that luncheon conversations did not
deal with business matters.

Bell Sr.’s October 3, 1973 Letter to the Commission

14. Bell, Sr.’s letter of October 3, 1973 to the Commission is replete
with deceptions. In that letter, Bell stated that the “billing procedure
for this account [the Palmetto account] has been carefully reviewed,”
that he was “simply unable to resolve certain discrepancies” between
the debit and credit figures in the 1972 ledger sheet for Palmetto with
the amount actually received from Palmetto,® and that the “station
employee” '° [i.e., his wife) who made the ledger entries was not a
trained bookkeeper and “is experiencing emotional problems and has
no explanation, and is in a transition period of replacement for these
duties.” Bell’s statements that the Palmetto billing procedure had been
carefully reviewed and that the person who kept WSIB’s books had no
explanation for the discrepancies between the ledger sheets and the
checks received from Palmetto were contradicted by his own testi-
mony that he did not question his wife or undertake any investigation
concerning the Palmetto account until after he had sent the October 3,
1973 letter. Even if he had assumed that his wife had no explanation
for the discrepancies, that would not excuse his making the unequivo-
cal statement in the October 3, 1973 letter that she “has no explana-
tion,” the clear import of which would mislead the Commission.

15. The Bell family claim that Mrs. Bell had complete control over
the billing of WSIB’s customers and that she and her son carried out
the fraudulent billing arrangements without telling Bell, Sr. about
them. Insofar as the Palmetto rebate scheme was concerned, Mrs. Bell
claimed that she issued the rebates pursuant to Bell, Jr.’s orders, even
though she did not approve of the practice, because she thought they
were necessary to retain the Palmetto account and because Bell, Jr.
told her to begin the rebate practice during one of Bell, Sr.’s absences
from the station when Bell, Jr. was in charge. The Bell family testified
that Bell, Sr. was never informed about the Palmetto scheme prior to

*The amounts shown in the Cash Journal as having been received from Palmetto matched the
amounts claimed on the invoices to Palmetto, whereas the ledger sheets showed only one-half those
amounts.

The “station employee,” otherwise unidentified by Bell, was his wife, Elaine E. Bell, the station's
office manager and records-keeper since 1965, when her husband acquired 49.33 percent of Sea Island
and became general manager. Mrs. Bell was elected Secretary and Director of Sea Island on March
1, 1972, and resigned those positions effective December 31, 1973, following commencement of the
current revocation proceeding. (The only other officer and director of Sea [sland during the period
of March 1972 through December 31, 1973, who was not a member of the Bell family was Wade H.
Harvey, who served as Vice-President (Operations) and Director of Sea Island.)

60 F.C.C. 2d

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152 Federal Communications Commission Reports

October 1973, when Bell, Sr. allegedly first asked about possible re-
bates to Palmetto. Bell, Sr. has asserted in effect that a three-day field
investigation of WSIB’s billing practices by members of the Commis-
sion’s staff plus two subsequent letters of August 29, 1973 and Sep-
tember 18, 1973, which requested additional documents and explana-
tions concerning the Palmetto account, did not arouse him to make any
kind of investigation or to question his wife or son. "'

16. We cannot believe that Bell, Sr. did not question his wife or son
about possible fraudulent billing for over five months following the
April 1973 visit to WSIB by Commission investigators. Bell, Sr. testi-
fied that he allowed his wife to rubber-stamp his signature on billing
invoices and she was in charge of billing during the relevant period of
irregular billing practices. Thus, even if Bell was unaware of any
fraudulent billing practices in April 1973, he must have known that
peng BY ome might have occurred without coming to his atten-
tion. Bell is an experienced broadcaster. Upon receipt of the Commis-
sion’s September 18, 1973 letter he must have known that WSIB’s
billing practices concerning the Palmetto account, one of Bell’s biggest
sources of revenue, were being questioned by the Commission. Fur-
ther, Bell knew that his wife kept the station’s records and thus would
have to know about any fraudulent billing practices and that his son
was the salesman for the Palmetto account. Bell’s explanation that he
did not question his wife and son because he trusted them does not
make sense. If he trusted them, he would have no natural reason for
not questioning them. Further, Bell’s claim that he did not question his
wife because of her ng ong and emotional problems is undermined by
his testimony that she was not much better when he questioned her in
October than she was in September when he allegedly did not question
her. Bell’s contention that he delayed questioning his wife about the
Palmetto matter because she was ill might have greater weight if she
had not continued to perform duties at the station for eight months
after the Commission’s field investigation of April 1973. If Bell did not
investigate after the three-day Commission investigation at WSIB and
after receiving two letters from the Commission, it can only be con-
cluded that he purposefully chose to remain ignorant in order to avoid
the truth. The Commission has stressed that a licensee has a duty to
ascertain the facts before submitting a formal response upon which the

"On February 24, 1975 Sea Island moved to reopen the record to admit certain statements made
by members of Station WSIB's sales staff to the Commission's investigators in April 1973, and a
February 1975 statement by Bell, Sr. on the question of Bell's knowledge of possible fraudulent
billing at Station WSIB at the time of his representations to the Commission and his state of mind
between his April 1973 statement to the investigators and his purported discovery of the Palmetto
rebates in October 1973. Bell claimed that after the Commission's investigators obtained statements
from WSIB's staff in April 1973, he read copies of those statements and relied on the assertions of
the staff that they had not bag og in fraudulent billing. Sea Island asserted that the statements
offered as evidence would fill a void in the record as to the efforts of Bell, Sr. to ascertain whether
any fraudulent billing had occurred. The Presiding Judge denied the motion to reopen the record in
a hesnorandom Opinion and Order, FCC 74M-420, released March 5, 1975. The Judge did not view
the statement as being “potentially decisive.” Sea Island's October 3, 1973, letter to the Commission,
signed by Bell, Sr., listed all the Station WSIB personnel interviewed by the Commission's investi-
gators and stated:

“In sum each employee interviewed categorically denied any knowledge of or participation in
fraudulent billing practices by Station WSIB.”

Thus, although the record does not include the statements, onoees for those of Bell, Sr. and Jr., the
record alrendy includes a statement explaining Bell, Sr.’s knowledge of the content of the statements
by Station WSIB personnel. Clearly, Bell, Sr.’s reading of these statements does not constitute an
independent investigation to ascertain whether any fraudulent billing occurred; and the Judge's
refusal to reopen the record was not error.

60 F.C.C. 2d

a

26a

Sea Island Broadcasting Corporation of S.C. . 153

Commission will rely as substantiated and accurate. See Milton Broad-
casting Co., 34 FCC 2d 1036, 1047 (1972); WPRY Radio Broadcasters,
ie 40 FCC 2d 1183 (1973); and Nick J. Chaconas, 28 FCC 2d 231
(1971).

17. In his October 3 letter Bell listed the billings for Palmetto for
advertising during the period of June through December 1972 with the
dates Palmetto paid its bills, and the dates the checks were deposited
in a local bank. Although the Commission had sent Sea Island a copy
of a document our staff characterized as WSIB’s record of Palmetto’s
accounts receivable, which showed that the amounts WSIB received
from Palmetto were 50 percent of those invoiced to Palmetto’s co-op
advertiser (Philco-Ford), Sea Island referred to this handwritten docu-
ment as a mere work sheet which did not appear to be pertinent since
it was not used in billing Palmetto. Bell asserted that typewritten
ledger sheets were used for billing. He thus implied that the debit
entries on the typewritten sheets (or ledger cards) conformed to the
amounts billed. This statement that the handwritten accounts receiv-
able did not seem pertinent was a flagrant subterfuge. Mrs. Bell testi-
fied that the handwritten ledger sheets were used for billing Palmetto,
not the typewritten ones. In fact, the amounts entered on both records
were identical. '*

18. Whether Bell had the typewritten records with him on October
3, 1973, when he was in Washington, D.C. to obtain legal advice in
answering the Commission’s September 18, 1973 letter is irrelevant.
He was aware of their existence at that time. Moreover, Bell had
adequate time between his receipt of the Commission’s September 18,
1973 letter and his October 3, 1973 response to check the typewritten
records to see if they agreed with the handwritten accounts receivable.
Had he failed to do that prior to his Washington trip, Bell, Sr. could
have telephoned Station WSIB and ascertained whether the typewrit-
ten Palmetto records agreed with the handwritten ones. Thus, whether
Bell had the typewritten records for Palmetto when he composed his
October 3, 1973 letter to the Commission is not decisive. He could have
ascertained whether they matched the handwritten ones before he
sent the letter and he had the affirmative duty to determine the facts
and to supply accurate information to the Commission in these circum-
stances. See Milton Broadcasting Co.,.WPRY Radio Broadcasters, Inc.
and Nick J. Chaconas, supra. In summary, Bell’s claim that he was
convinced on October 3, 1973, that the contents of the typewritten
records differed from the contents of the handwritten records for a

eriod spanning eight months in 1972 and would demonstrate that
Station SIB did not bill Palmetto for twice the amount the station
expected to receive during that eight-month period must be considered
sheer fabrication.

Bell’s Testimony Concerning His Wife's
Continued Involvement With WSIB After 1973

19. Bell, Sr. exhibited a willingness to deceive the Commission when
he gave false testimony in September, 1974 regarding his wife’s contin-
ued involvement with Station WSIB. At the hearing session of Sep-

'2 The licensee claims that the typewritten ledger cards were used for several accounts, including
Palmetto, during 1972; that some accounts were never converted to the card system because it was
unsuitable; and that Palmetto’s records were kept on handwritten as well as typewritten ledger
systems. These claims are irrelevant in light of the fact that both records for Palmetto were identical.

60 F.C.C. 2d

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154 Federal Communications Commission Reports

tember 23, 1974, Bell was asked four questions concerning the termina-
tion of Mrs. Bell’s general involvement with Station WSIB. He was
first asked whether Mrs. Bell was “still with WSIB,” to which he
answered in the negative. The second question was when did she cease
being employed with WSIB, to which Bell responded: “End of 1973 as
I recall.” The third question was whether she had terminated all of her
involvement with WSIB since the end of 1973, to which Bell answered
in the affirmative. The fourth question was whether she had relin-
— her positions of the officer and director of WSIB, to which
ell answered in the affirmative. The reasonable import of his answers
to those questions is that Bell was asserting his wife was not involved
with Station WSIB in any way. Jn contradiction of this testimony, Mrs.
Maureen McCracken, a former employee of WSIB, testified on Novem-
ber 6, 1974, that during the year 1974 Mrs. Bell was at the station
Tuesday through Saturday, that she shared the same office with Bell,
prepared wage statements and paychecks for employees, and trained
some new employees to be traffic managers. On January 10, 1975,
Bell’s own counsel recalled him to the stand. Bell conceded that he
should have given a different response in his earlier testimony re -
ing Mrs. Bell’s continued involvement with WSIB in 1974. bell ex-
plained that in addition to the duties described by Mrs. McCracken,
Mrs. Bell wrote 257 out of the 554 checks issued by Station WSIB and
maintained the accounts payable (a cash disbursement) ledger. Thus
the record establishes that the services rendered by Mrs. Bell in 1974
were, in large measure, * the same ones she performed in 1973.

20. During his testimony on January 10, 1975, Bell, Sr. first testified
that the services performed in 1974 by Mrs. Bell were merely an
accommodation to him because of an ae situation” caused by
a turnover in personnel who would norm perform check-writing
and payroll record-keeping services. Bell Sabanenantly testified that
the personnel turnover affected only the position of traffic manager,
i.e, the person who did the billing and logging and maintained the
accounts receivable, and that none of the persons was hired to write
checks, maintain the cash disbursement ledger, or prepare wage state-
ments—all duties performed by Mrs. Bell both before and after her
resignation. Bell, Sr. thereafter stated that he had hoped the traffic
manager would eventually assume:the additional functions of check-
writing and maintaining the cash disbursement ledger, and that origi-
nally he had planned to assume those functions himself but he got
“jammed up” with his other duties.

21. The record plainly shows, therefore, that Mrs. Bell continued
most of her late 1973 duties in 1974 and that none of the persons
working as WSIB’s traffic manager prior to October 1974, was hired to
perform the WSIB functions performed by Mrs. Bell in 1974. Bell, Sr.’s

3She performed few billing or accounts receivable functions for WSIB in 1974, but the record
contains evidence that she had ceased performing almost all of these functions prior to her resigna-
tion on December 31, 1973.

‘4 Bell's attempt to explain Mrs. Bell's presence in the office by her work on Bell, Jr.'s weekly
magazine, and by his stopping there with her on Saturdays after the trip to Savannah, Georgia, for
her to visit her psychiatrist is ineffectual. The record contains no reliable evidence, only estimates by
Bell, Sr., as to the number of hours Mrs. Bell worked on the m , as op to the radio station,
and his explanation of her presence at the station on Saturday does not explain her presence on other
days of the week.

60 F.C.C. 2d

28a

Sea Island Broadcasting Corporation of S.C. 155

assertion that he originally planned to perform the services performed
by his wife in 1974 can be characterized as one more subterfuge de-
vised to cover up his former deceptions with respect to his wife’s
continued involvement with the station. Our conclusions with respect
to Bell's testimony on these points further demonstrate Bell’s propen-
sity to deceive the Commission and confirm our conclusions as to the
misrepresentations for which the license is being revoked.

Miscellaneous Matters

22. Sea Island excepts to the judge’s failure to consider the correc-
tive billing and aay ah ey | procedures adopted by Bell, Sr. to prevent
fraudulent billing in the future, the substantial service rendered by
Station WSIB to the community (especially the Black population), and
Bell, Sr.’s reputation for truth and veracity in the community as miti-
gating factors in assessing the appropriate penalty against Sea Island.
None of these exceptions has merit. Once the Commission has deter-
mined that revocation is warranted for deliberate misrepresentations,
the Commission need not consider evidence of remedial measures to
prevent fraudulent billing in the future. Further, the station’s past
meritorious programming becomes irrelevant upon a finding of misrep-
resentations. See e.g., immaculate Conception Church v. FCC, 320 F2d
795, cert. denied, 375 U.S. 904 (1963); KF PW Broadcasting Co., 40 FCC
2d 126 (1973). As to Bell, Sr.’s reputation for truth and veracity in the
community, the Judge made an explicit finding (paragraph 36 of the
Initial Decision) that Bell, Sr. “enjoys an excellent record for probity
with the leaders of the community in which he resides.” The Commis-
sion has made clear, however, that “No matter how unblemished the
reputation of the principal in the community, no one is allowed ‘one
bite’ at the apple of deceit.” Grenco, Inc., 39 FCC 2d 732, 737 (1973).
See also WMOZ, Inc., 35 FCC 202, 238 (1964).

23. Sea Island claims that the degree of proof required of the Bu-
reau in a revocation proceeding should be “clear, unequivocal and con-
vincing.” Sea Island relies for this proposition by analogy to language
in the Immigration and Naturalization Act as discussed in Woodby v.
Immigration and Naturalization Service, 325 US 276 (1966). The anal-
ogy to language in the Immigration and Naturalization case is inap
site and reliance on Woodby is wholly misplaced. In Woodby the Su-
preme Court adopted the stricter standard of “clear, unequivocal and
convincing” proof because the statute was silent as to the degree of
proof required at the administrative level; the question of proof in
deportation proceedings had traditionally been left to the Courts; and
the higher standard was appropriate because of the unusual hardship
of deportation. Unlike a deportation case, * the Administrative Proce-
dure Act is applicable here and specifies the degree of proof required
at the administrative level for imposition of a sanction. The pertinent
provisions of Section 556(d) of the APA clearly require only that a
Commission decision be “supported by and in accordance with the
reliable, probative, and substantial evidence” of record.

The APA does not apply to deportation proceedings. Couto v. Shaughnessy, 218 F2d 758 (2nd
Cir, 1955), cert. denied, 349 US 952.

60 F.C.C, 2d

29a

156 Federal Communications Commission Reports

24. Sea Island claims that the Commission cannot legally revoke the
license of Station WSIB, even upon a finding of deliberate misrepre-
sentation, because the Order to Show Cause and Notice of Apparent
Liability, FCC 73-1258, which initiated the hearing, created an uncon-
stitutional situation by providing for alternative sanctions of license
revocation and monetary forfeiture. Sea Island appears to be arguing
that the different modes of judicial recourse upon forfeiture or revoca-
tion tend to discriminate against the licensee by favoring revocation,
the sanction with the lesser degree of judicial scrutiny. '* The licensee’s
constitutional argument is baseless. Sea Island relies on the faulty
premise that the penalties of revocation and forfeiture are inter-
changeable. They are not. Whether an entity is fit to remain a licensee
must be determined a of whether misconduct warrants
forfeiture, and forfeiture is an available sanction only for those kinds
of misconduct set forth in Section 503(b) of the Act. Misrepresenta-
tions are not misconduct for which a mone forfeiture may be as-
sessed. Moreover forfeiture, if available, is easier to impose because it
requires no administrative hearing—hence the provision for a trial de
novo. "" Inclusion of a Notice of Apparent Liability for forfeiture in the
document which initiated this proceeding simply afforded the Commis-
sion oe flexibility to impose whatever sanction the record sup-
ported.

25. In its Proposed Findings of Facts and Conclusions of Law, the
licensee explained with a supporting statement and affidavit of his
family physician that Bell, Sr.’s health did not permit him to continue
to operate Station WSIB and that he would sell the station within six
months after termination of this case in a manner which would permit
him to sell it. Bell also submitted a sworn personal statement explain-
ing that he had been negotiating the possible sale of his 100 per cent
ownership interest in Station WSIB to his two former partners in that
station. Bell asserts that he still owes them about ,000 for the
purchase of their ownership interests in the station; and that since the
sales terms for the purchase of their interests did not include any

ersonal liability, for all practical purposes these two creditors would
ose nearly all of the amounts due them if Station WSIB’s license is
revoked. Bell also proposes to sell his 100 percent ownership interest
in Station WDOG, Allendale, South Carolina, if the Commission will
allow him to sell WSIB. Citing LaRose v. FCC, 494 F.2d 1145 (D.C.
Cir., 1974); Cathryn C. Murphy, 42 FCC 2d 346, (1973) and Second
Thursday Corp., 25 FCC 2d 112 (1970), Sea Island contends that Bell's
proposed sale of Station WSIB would serve the public interest and
protect two innocent creditors from losing substantial amounts of mon-
ey.
"26. To allow Bell, Sr., to sell his ownership interest in Station WSIB
after finding him guilty of making misrepresentations to the Commis-
sion would be to abandon our policy of refusing to permit salvs in non-
bankruptcy cases where a character qualification issue has been re-
solved against the assignor. The cases cited by Sea Island are inappo-

'8Section 504(a) of the Communication Act provides that recovery of monetary forfeiture requires
a trial de novo, while Section 402(bX5) provides that a licensee whose license has been revoked has
only a right of appeal.

Indeed, forfeiture may be imposed in addition to any other penalty under Chapter 6 of Title 47.

60 F.C.C. 2d

30a

Sea Island Broadcasting Corporation of S.C. 157

site. Specifically, LaRose v. FCC, supra, and Second Thursday Corp.,
supra, both involved licensees who were bankrupt. Although the Com-
mission allowed the licensee in Cathryn C. Murphy, supra, to sell the
station despite adverse character findings, we did so only when faced
with what we called “unusual circumstances.” In Cathryn C. Murphy,
the licensee who sold the station made no profit and the licensee’s
illness diminished her responsibility for her actions. Further, in Cath-
ryn C. Murphy, the licensee’s personal — offered the prognosis
that because of the physical and mental damage resulting from acute
alcoholism, Mrs. Murphy would never be able to accept the responsibil-
ities of conducting a business. 42 FCC 2d 346, 347 (1973). Thus, in
contrast to the Murphy case, Bell’s misrepresentations are not attrib-
uted to an illness and his contemplated sale of station WSIB would
return him a substantial profit.'* There are no unusual or extraor-
dinary circumstances in this case which would justify a retreat from
the Commission’s policy of refusing to “abdicate its responsibility to
protect the public interest because of sympathy.” Milton Broadcasting
Co., 34 FCC 2d 1036, 1043 (1972).

Conclusion

27. Our decision to revoke Sea Island’s license is based primarily on
the fact that Sea Island has shown a classic pattern of making deliber-
ate misrepresentations and other misleading and deceptive statements
to us when it believed it could effectively conceal suspected wrong-
doing. Further, the kinds of fraudulent billing engaged in by Sea Is-
land were serious and reinforce our conclusion to revoke Sea Island’s
license. In short, the effective regulation of the communications indus-
tries under our jurisdiction is premised on our ability to depend on the
accuracy and truthfulness of our licensee’s representations to us. Once
we find that we cannot rely on a licensee’s representations to us, the
only suitable penalty is revocation of the license.

28. Accordingly, IT IS ORDERED, That the transcript of the oral
argument in this proceeding held before the Commission on March 30,
1976 IS CORRECTED as set forth in Sea Island Broadcasting Co
ration of S.C.’s Motion to Correct Transcript of Oral Argument, filed
on April 16, 1976.

29. IT IS FURTHER ORDERED, That the license of Sea Island
Broadcasting Corporation of S.C. for Station WSIB, Beaufort, South
Carolina is REVOKED.

30. IT IS FURTHER ORDERED, That Sea Island Broadcasting
Corporation of S.C. IS AUTHORIZED to continue to operate Station
WSIB until 12:01 a.m., October 1, 1976, to enable the licensee to con-
clude the station’s affairs; PROVIDED, HOWEVER, That if the li-
censee seeks judicial review of our Decision, it is authorized to con-
tinue to operate Station WSIB until thirty (30) days after final
disposition of such appeal.

FEDERAL COMMUNICATIONS COMMISSION,
VINCENT J. MULLINS, Secretary.

‘* Bell states that he purchased his former partners’ 49.32 percent ownership interest in Sea Island
for $196,530 and that the fair market value of Station WSIB would be about $215,000.

60 F.C.C. 2d

3la

APPENDIX D

F.C.C. 77-330
BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554

In the Matter of
Revocation of the License of Docket No. 19886

SEA ISLAND BROADCASTING
CORPORATION, OF S.C. (WSIB) BEAUFORT,
SOUTH CAROLINA

MEMORANDUM OPINION AND ORDER
(Adopted: May 11, 1977; Released: May 20, 1977)

By THE COMMISSION: COMMISSIONERS HOOKS AND QUELLO CONCUR-
RING IN THE RESULT; COMMISSIONER LEE NOT PARTICIPATING.)

1. In a Decision, 60 FCC 2d 146, released July 14, 1976, the Commis-
sion revoked the license of Sea Island Broadcasting Corporation of
S.C. (Sea Island) for Station WSIB, Beaufort, South Carolina. Now the
Commission has before it: (a) a petition for partial reconsideration of
that decision filed August 13, 1976 and a supplement thereto filed
August 23, 1976 by Sea Island; (b) a “Petition For Permission To
Continue Broadcasting,” filed August 13, 1976 by a group identifying
itself as “The Black Citizens of Beaufort County;” ' (c) an opposition to
Sea Island’s petition for partial reconsideration filed August 26, 1976
by the Broadcast Bureau; and (d) a reply to the Broadcast Bureau’s
opposition filed September 14, 1976 by Sea Island.

2. Sea Island makes three major arguments for reconsideration: (1)
the Commission erred when it refused to permit Charles E. Bell, Sea
Island’s sole stockholder, to sell Station WSIB; (2) the Commission’s
Decision in this case was predetermined; and (3) news leaks of the
Commission’s Decision prejudiced Sea Island’s due process rights. * In-
sofar as Mr. Bell’s proposed sale of station WSIB is concerned, Sea

'The Black Citizens group is not a party to this proceeding and has not sought intervention.
Therefore, their petition will be dismissed. We will nevertheless consider the substance of their
petition as it relates to the appropriateness of revocation as a sanction in this case.

2Sea Island notes that its petition is narrowly drawn to avoid repetition of arguments already
made to the Commission and included in Sea Island’s Notice of Appeal (No. 76-1735) in this case,
)~ sae was filed August 12, 1976 in the United States Court of Appeals for the District of Columbia

ireuit.

64 F.C.C. 2d

32a

722 Federal Communications Commission Reports

Island has not raised any significant new arguments which were not
considered in our Decision.* It is well established that reconsideration
is not granted “merely for the purpose of again debating matters on
which (the Commission] has once deliberated and spoken.” WWIZ, Inc.,
37 FCC 685, 686, affirmed sub nom. Lorain Journal Company v. FCC,
351 F.2d 824, 5 RR 2d 2111 (D.C. Cir., 1965), cert. denied 383 U.S. 967
(1966).

3. We observe, however, that Sea Island has now changed its origi-
nal proposal to sell WSIB to the degree that it now promises to give
priority to Black community ownership in seeking out a buyer, and if
Black buyers cannot be found, to proposed owners who would maintain
the “present service to the less privileged.” Sea Island argues that the
public interest would be served by the continued operation of Station
WSIB without interruption as an outlet and voice for the less privi-
leged members of the community. A group identifying itself as “The
Black Citizens of Beaufort County” has filed a “Petition For Permis-
sion To Continue Broadcasting.” The group, six persons including one
Sea Island director, requests that WSIB be allowed to remain on the
air in light of its meritorious service to the community and its program
of providing equal employment and career opportunities for Black resi-
dents. Neither Sea Island nor the citizens group has presented any
compelling reasons for overturning our long standing policy of revok-
ing the license of an entity found to have made serious and deliberate
misrepresentations to us. See, e.g., FCC v. WOKO, Inc., 329 U.S. 223
(1946), Immaculate Conception Church v. FCC, 320 F.2d 795, cert.
denied, 375 U.S. 904 (1963) and Milton Broadcasting Co., 34 FCC 2d
1036 (1972). As

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_2476%3A1. Public record. Not legal advice.