Appendix — Contemporary Media, Inc. v. Federal Communications Commission

la

APPENDIX A

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 18, 2000 Decided June 16, 2000

No. 99-1198

CONTEMPORARY MEDIA, INC., ET AL.,

APPELLANTS

V.

FEDERAL COMMUNICATIONS COMMISSION

APPELLEE

Appeal of an Order of the

Federal Communications Commission

NS RRR:

ESTE SO SE eR A ARE SOAR BE

2a

Before: SILBERMAN, HENDERSON, and GARLAND,

Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: Three radio licensees appeal

the Federal Communications Commission’s (FCC’S)

revocation of their licenses and construction permits, as well

as its denial of their application for a new station. The FCC

took those actions after the licensees’ sole owner and

president was convicted of sexually abusing children, and

after the licensees made misrepresentations to the

Commission about the owner’s continued involvement in

station affairs. In the end, the case is no more difficult than

this recitation of the facts suggests, and we therefore affirm

the FCC in all respects.

I

The appellant licensees own and operate five radio

stations in Missouri and Indiana, hold two construction

permits for radio stations in Missouri, and have an

application pending for another Missouri station. Michael

Rice is the sole shareholder, president, and treasurer of all

three licensees and serves on each licensee’s board of

directors. In November 1990, Rice was arrested for criminal

conduct involving sexual acts with a teenager. In April of

the following year, he was formally charged with three

felony counts of sexual assault on an individual between

fourteen and sixteen years of age. The prosecutor

subsequently amended the charges to include eight felony

counts of sexual assault on individuals between fourteen and

sixteen years of age, and four felony counts of forcible

sodomy of individuals under fourteen years of age. The

sexual abuse involved five children and occurred between

December 1985 and October 1990. Two days after the

charges were filed, Rice checked himself into a St. Louis

hospital for in-patient psychiatric treatment.

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In June 1991, two of the licensees filed reports notifying

the FCC of the charges against Rice. The reports were filed

pursuant to 47 C.F.R. § 165(a), which requires FCC license

applicants to maintain “the continuing accuracy and

completeness of information furnished” in pending

applications. Each report stated that:

Since Mr. Rice’s hospitalization on April 3, 1991, he has

had absolutely no managerial, policy, or consultative

role in the affairs of the three broadcast corporations in

which he has ownership interests and officer positions.

In other words, pending a resolution of the referenced

criminal charges, Mr. Rice is being completely insulated

and excluded from any involvement in the managerial,

policy, and day-to-day decisions involving any of the

four licensed stations and three construction permits

held by the three corporations.

J.A. at 15-16, 120 (citation omitted). In October 1991, Rice

was discharged from the hospital. On May 14, 1992, one of

the licensees filed another report with the FCC, stating:

There has been no change in Mr. Rice’s status with [the

reporting licensee] or in the status of the proceedings

against him Mr. Rice is no longer hospitalized, but

he continues to be treated by his physicians as an

outpatient, and he continues to have no managerial or

policy role in the affairs of the three broadcast

corporations ... in which he has ownership interests and

corporate positions.

Id. at 126-27 (citation omitted).

On August 31, 1994, Rice was convicted of all twelve

felony counts against him: four counts of forcible sodomy,

six counts of deviate sexual assault in the first degree, and

two counts of deviate sexual assault in the second degree.

The court sentenced him to a total of eighty-four years in

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prison. Because the sentences were set to run concurrently,

his maximum term of confinement amounted to cight years.

Rice began his incarceration on September 30, 1994, and is

currently eligible for release.

On October 10, 1995, the FCC ordered an evidentiary

hearing at which the licensees were directed to show cause

why their licenses and construction permits should not be

revoked and their pending application denied. The central

issues at the hearing were: (1) the effect of Rice’s felony

convictions on the basic character qualifications of the

licensees, and (2) whether the licensees had misrepresented

to the FCC that, subsequent to his arrest, Rice had been

excluded from the management and operation of the stations.

After the hearing, the Administrative Law Judge (ALJ)

concluded that revocation of the licensees’ authorizations

was appropriate due to the egregious nature of Rice’s

misconduct and to the misrepresentations made by the

licensees in their reports to the Commission. The FCC

affirmed.

Il

The licensees’ appeal raises a number of challenges,

which we address in turn. First, they challenge the legality

of the character policy upon which the FCC’s decision was

based. We must sustain that policy unless we find it to be

“arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.” Administrative Procedure Act

(APA), 5 U.S.C. § 706(2)(A); see ACLU v. FCC, 823 F.2d

"1554, 1574 (D.C. Cir. 1987).

' The licensees rely on our decision in Bechtel v. FCC, 10 F.3d 875

(D.C. Cir. 1993), which stated that agencies must be prepared to defend

the underlying validity of policy statements because those statements

“are exempt from the Administrative Procedure Act’s notice-and-

(Continued...)

Sa

Section 308(b) of the Federal Communications Act

provides that “[aJll applications for station licenses, or

modifications or renewals thereof, shall set forth such facts

as the Commission by regulation may prescribe as to the

citizenship, character, ... and other qualifications of the

applicant to operate station” 47 U.S.C. § 308(b). For many

years, the FCC had no express policy concerning the

character qualifications of its applicants; the Commission

considered a wide range of factors in evaluating character,

and as a consequence its evaluations sometimes yielded

inconsistent results. See Policy Regarding Character

Qualifications in Broadcast Licensing, 87 F.C.C. 2d 836-37

(1981)(notice of inquiry). The Commission responded to

this problem in 1986 with the adoption of a comprehensive

character policy statement. See Policy Regarding Character

Qualifications in Broadcast Licensing, 102 F.C.C.2d 1179

(1986) [hereinafter 1986 Character Policy Statement]. The

statement announced that the FCC’s character analysis

would focus on “misconduct which violates the

Communications Act or a Commission rule or policy, and . .

.certain specified non-FCC misconduct which demonstrate[s]

the proclivity of an applicant to deal truthfully with the

Commission and to comply with [its] rules and policies.” Jd

at 1190-91. The relevant non-FCC misconduct was limited

to adjudicated cases involving: fraudulent representations to

government agencies, criminal false statements or

dishonesty, and broadcast-related violations of antitrust laws

or other laws concerning competition. See id. at 1195-1203.

The FCC noted, however, that “there may be circumstances

in which an applicant has engaged in nonbroadcast

(...Continued)

comment requirements and hence may take effect without the rigors-and

presumed advantages-of that process.” /d. at 878 (citation omitted).

Because we conclude that the FCC did adequately justify its policies in

the decision under review, Bechtel does not affect our analysis.

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misconduct so egregious as to shock the conscience and

evoke almost universal disapprobation.” Jd. at 1205 n.60.

“Such misconduct,” the Commission stated, “might, of its

own nature, constitute prima facie evidence that the

applicant lacks the traits of reliability and/or truthfulness

necessary to be a licensee, and might be a matter of

Commission concern even prior to adjudication by another

body."” Jd? The 1986 statement also listed mitigating

factors that the Commission would consider in evaluating

specific acts of misconduct. See id. at 1227-28.

In 1990, the FCC determined that its 1986 policy had

taken “an overly narrow view of the range of misconduct

that should be relevant in licensing decisions.” Policy

Regarding Character Qualifications in Broadcast Licensing,

5 F.C.C.R. 3252, 3252 (1990) [hereinafter 1990 Character

Policy Statement}. It therefore amended that policy with a

new statement, which explained:

[U]pon further reflection, we believe a propensity to

comply with the law generally is relevant to the

Commission’s public interest analysis, and that an

applicant’s or licensee’s willingness to violate other

laws, and, in particular, to commit felonies, also bears

on our confidence that an applicant or licensee will

conform to FCC rules and policies. ... Thus, evidence

of any conviction for misconduct constituting a felony

will be relevant to our analysis of an applicant’s or

licensee’s character.

? In addition, the FCC explicitly reserved the option of expanding the

range of relevant misconduct “[s]Jhould [its] future experience indicate

that [it had] erred ... in narrowing the range of non-FCC misconduct to be

considered for character purposes.” 1986 Character Policy Statement,

102 F.C.C.2d at 1208 n.75.

Ta

Id. The FCC further stated that although “not all convictions

for serious crimes are equally probative” of propensity to

obey the law, it would not “establish a ‘hierarchy’ of felonies

that may arise in individual cases.” Jd Rather, the

Commission would analyze misconduct on a case-by-case

basis through the examination of mitigating factors. As in

1986, the Commission stated that for non-FCC conduct it

generally would consider only adjudicated cases. However,

it “continue[d] to believe that, where an applicant has

allegedly engaged in nonbroadcast misconduct ‘so egregious

as to shock the conscience and evoke almost universal

disapprobation,’ such conduct ‘might be a matter of

Commission concern even prior to adjudication by another

body.”” Jd. at 3252 n.5 (quoting 1986 Character Policy

Statement, 102 F.C.C.2d at 1205 n.60).

The licensees’ challenge to the legitimacy of the current

character policy is threefold. First, they contend that there is

“no justification for license revocation based on non-FCC-

related criminal misconduct of a licensee’s principal, even if

such misconduct was ‘egregious.’” Br. of Appellants at 17.

According to the licensees, such revocation is particularly

inappropriate in this case because “there was no nexus

between Mr. Rice’s sexual misconduct and the Licensees’

broadcast activities.” Jd. at 16 (emphasis in original).

We disagree, both as a general matter and with regard to

the specifics of this case. As to the former, it should be

noted that the FCC’s policy is not automatically to disqualify

a license holder or applicant who commits a felony, but

rather to consider the felony as a relevant factor in evaluating

propensity to obey the law. See 1990 Character Policy

Statement, SF.C.C.R. at-3252. We see nothing irrational in

the conclusion that the violation of the criminal laws is

relevant to that evaluation and to the issue of character in

general. See generally DiCola v. FDA, 77 F.3d 504, 507-08

(D.C. Cir. 1996). The FCC relies heavily on the honesty and

)

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probity of its licensees in a regulatory system that is largely

self-policing. See Leflore Broad. Co. v. FCC, 636 F.2d 454,

461 (D.C. Cir. 1980) (“[E]ffective regulation is premised

upon the agency’s ability to depend upon the representation

made to it by its licensees... .”). Under such a regime, a

felony conviction--any felony conviction—is certainly a

factor to be considered. It may not necessarily be a

dispositive factor, and all such convictions may not be

equally probative—as the FCC recognizes. See 1990

character Policy Statement, 5 F.C.C.R. at 3252. But it is

hard to see the argument that a felony conviction is not

relevant at all.

In this case, moreover, the argument is particularly weak.

It is hardly irrational to conclude that if an individual is

unwilling to obey the law with respect to such patently

criminal behavior as sexual assault on children, he will be

equally unwilling to obey FCC rules that require openness

and honesty with the Commission. Indeed, as discussed

below, that connection was borne out in this case. Because

the policy of considering felonious misconduct was clearly

permissible as applied to the licensees, they cannot succeed

in their attempt to challenge it on its face. Cf Romer v.

Evans, 517 U.S. 620, 643 (1996); Steffan v. Perry, 41 F.3d

677, 693 (D.C. Cir. 1994) (en banc).

Second, the licensees argue that the FCC’s character

policy is arbitrary and capricious because it does not provide

any criteria for determining which non-FCC-related

misconduct is sufficiently serious to affect a licensee’s

propensity for reliability in its dealings with the agency.

Given the myriad forms of criminal misconduct, the FCC’s

decision is not unreasonable. The Commission cannot be

required to foresee the variety of criminal behavior in which

licensees or their owners may partake. And once again,

whatever the issue with respect to crimes that might be

regarded as being on the boundary of “egregiousness,” the

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reasonableness of the FCC’s decision in the instant case is

clear. There is no question but that the crimes at issue here

are, as the FCC found, “characterized by moral turpitude” to

such an extent that they “fall[ ] in the category of those that

‘shock the conscience’ and summon almost universal

disapproval,” Contemporary Media, Inc. 13 F.C.C.R. 14,437,

14,444 (1998)—a category that the FCC expressly warned

weuld be the subject of special agency concern. See 1990

character Policy Statement, 5 F.C.C.R. at 3252. n.5.

The licensees’ third contention is that the FCC’s character

policy is inconsistent with the precedent of both this circuit

and the Commission itself. The licensees cite Wilkett v. ICC,

in which this court reversed a license revocation based on the

sole proprietor’s convictions for second-degree murder and

conspiracy to distribute a controlled substance. See 710 F.2d

861 (D.C. Cir. 1983). That case, however, is readily

distinguishable. In Wilkett, the court’s analysis focused on

the fact that the Interstate Commerce Commission had

“disregarded its own standards for evaluating [licensee]

fitness.” Jd. at 864. The court found that the Commission

had failed to “carefully scrutinize[ ] the past violations and

consider[ ] mitigating circumstances,” as it had in “numerous

cases” in the past. Jd. Here, by contrast, the FCC not only

gave careful consideration to Rice’s crimes, but it did so

pursuant to and in accordance with its published character

policy. After scrutinizing the misconduct at issue, the FCC

concluded that it was “extremely serious” and involved

“numerous acts.” Contemporary Media, 13 F.C.C.R. at

14,444. Then, as discussed below, the Commission closely

evaluated the licensees’ claims of mitigation and reasonably

rejected them. Moreover, the convictions were not the sole

ground for the revocation decision as they were in Wilkett;

here the licensees were also found to have violated the

Commission’s candor requirements in connection with the

very matter now before us.

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The licensees also cite Kravis Co., 11 F.C.C.R. 4740

(1996), in which the FCC renewed radio licenses despite the

fact that the company’s president and sole shareholder had

been charged with possession and exhibition of child

pornography. As the Commission explained in its decision

below, however, in that case neither a conviction nor a

judgment of guilt had been entered against the defendant;

instead, the court had placed him on probation pursuant to

the state’s deferred judgment procedure, which permitted the

expungement of the charges after successful completion of

the probation period. See Contemporary Media, 13 F.C.C.R.

at 14,442-43. As noted above, the FCC’s character policy

states that the Commission generally will consider only

instances of adjudicated misconduct. See 1990 Character

Policy Statement, 5 F.C.C.R. at 3252. Regardiess of whether

it would be reasonable to erase that line, it is not

unreasonable to draw it.’

lil

Having found no merit to the licensees’ challenges to the

FCC’s character policy itself, we now consider their

challenges to the application of that policy in this case. The

licensees argue that even if the character policy is legitimate,

the Commission erred both in failing to consider numerous

mitigating factors that are relevant under the policy, and in

3

The licensees seek further support from Alessandro Broadcasting

Co., in which the FCC determined that no demerit was warranted for an

applicant whose majority shareholder had been convicted of second-

degree murder. See 99 F.C.C.2d 1} (1984). That decision, however, was

rendered before the Commission’s 1990 character policy statement gave

import to felonies unrelated to dishonesty or broadcast-industry conduct.

Moreover, in Alessandro, the agency noted that “the crime was an

isolated event that occurred in the remote past and the state authorities

connected with [the] conviction . . . [had] determined officially that [the

shareholder was] rehabilitated and [had] restored his civil rights.” /d at

11 n.13. None of those factors is present in this case.

lla

concluding that the licensees misrepresented Rice’s

continued involvement in station affairs. We address each

argument below. Once again, we are mindful that we must

sustain the FCC’s order unless the challenged action is

“arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law,” 5 U.S.C. § 706(2)(A), and that

we must uphold its findings of fact if they are supported by

substantial evidence, see id. § 706(2)(E); Damsky v. FCC,

199 F.3d 527, 533 (D.C. Cir. 2000).

A

The FCC’s character policy sets forth a number of

mitigating factors to be considered in evaluating misconduct:

“the willfulness of the misconduct, the frequency of the

misconduct, the currentness of the misconduct, the

seriousness of the misconduct, the nature of the participation

(if any) of managers or owners, efforts made to remedy the-

wrong, overall record of compliance with FCC rules and

policies, and rehabilitation.” 1990 Character Policy

Statement, 5 F.C.C.R. at 3252. Although the FCC credited

the licensees’ record of regulatory compliance, it rejected all

of the other potential bases for mitigation. We agree with

the FCC’s judgment; indeed, it is hard to regard most of the

licensees’ contrary arguments as anything but insubstantial.

First, the licensees note that although Rice could have

been sentenced to eighty-four years in prison, he was instead

sentenced to concurrent terms of “only” eight years. Br. of

Appellants at 21. We do not understand the argument. We

have no idea, and the licensees have offered none, as to why

the state court showed such mercy. Indeed, we have no idea

whether it did show mercy—that is, whether the court had

sentencing discretion, or whether Rice’s crimes were subject

to state sentencing laws or guidelines that dictated the

sentence he received. Furthermore, we do not regard a

sentence of “only” eight years as indicating that Rice’s

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felonies were somehow “less serious,” or that the sentencing

court found them so. And finally, we do not understand how

the repeated sexual assault of five children could be regarded

as anything less than egregious; perhaps wisely, licensees do

not suggest what misconduct they would regard as more

serious than that described in this record.

Second, the licensee argue that they were entitled to

benefit from the “participation of management or owners”

mitigation factor. Again, we do not understand the

argument. Although it is true that no other “owner”

participated in Rice’s misconduct, it is only true because

there is no other owner: Rice owns all of the equity in each

of the licensees. Nor was Rice a minor player in

management; he was the president of all of the licensees and

sat on the board of directors of each. And while the other

corporate managers did not participate in the sexual assaults

for which Rice was_ convicted, they did—as we discuss

below—participate in other serious misconduct: namely,

intentional misrepresentations to the FCC regarding Rice’s

continued role.

Third, the licensees appeal to the “rehabilitation” factor,

observing that the record contains no evidence of criminal

activity subsequent to October 1990, and claiming that

Rice’s sexual misconduct ceased on that date. The lack of

further misconduct after October, however, is hardly

coincidental. In November, Rice was arrested on the assault

charges. His forbearance from criminal activity during the

period in which he awaited trial and was subject to the

conditions of pretrial release is hardly indicative of

rehabilitation. Moreover, again as discussed below, the

evidence shows that he participated in _ intentional

* — It goes without saying that Rice’s forbearance while in prison is not

indicative of rehabilitation at all.

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misrepresentations to the FCC during this supposed

rehabilitation period.

Fourth, the licensees point to Rice’s “reputation in the

community,” noting that “four individuals who have known

Mr. Rice personally and/or professionally for many years”

submitted statements attesting to his good character and

reputation. Br. of Appellants at 22. The ALJ properly

refused to credit these statements, however, since only one

mentioned Rice’s felony conviction and none expressed any

familiarity with its details. We cannot fault the FCC for

concluding that those who vouched for Rice’s character

while evidencing little if any knowledge of his egregious acts

cannot be regarded as credible on the subject.

Finally, the licensees complain that the FCC failed to

award mitigation credit for the measurers they took to

prevent Rice from engaging in future misconduct, while

simultaneously allowing him to “rehabilitate” himself

through gainful employment. The licensees emphasize that

they adopted resolutions prohibiting Rice from having any

“managerial, policy, or consultative role” in their affairs, but

that they also permitted him some “limited participation” in

accordance with his physician’s recommendations. /d. at 23-

24. The problem with this argument is that the FCC

concluded it was factually untrue, finding that Rice

participated extensively in station affairs even after the

resolutions were passed and that the licensees intentionally

misrepresented that participation. As discussed in Part III.B

below, we find substantial evidence to support the FCC’s

findings in this regard. The actions taken by the licensees,

therefore, become elements of aggravation rather than

mitigation.

In sum, we find no error in the FCC’s evaluation of

possible mitigating factors. The FCC considered each of the

relevant factors set forth in its character policy, and it

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reasonably rejected all save one—the licensees’ “overall

record of compliance with FCC rules and policies.” We

agree with the Commission’s conclusion that “[t]he fact that

the Licensees have had a good overall record of FCC rule

compliance is not alone sufficient to mitigate the

overwhelming negative weight of all the other evidence” in

this case. Contemporary Media, 13 F.C.C.R. at 14,445.

At oral argument, the licensees conceded that if we were

to sustain the FCC’s finding of intentional misrepresentation

that alone would be sufficient ground for the revocation of

their licenses. That concession was plainly correct, as “it is

well recognized that the Commission may disqualify an

applicant who deliberately makes misrepresentations or lacks

candor in dealing with the agency.” Schoenbohm v. FCC,

204 F.3d 243, 247 (D.C. Cir. 2000); see also FCC v. WOKO,

Inc. 329 US. 223, 225-27 (1946); Swan Creek

Communications, Inc. v. FCC, 39 F.3d 1217, 1221-24 (D.C.

Cir. 1994); Garden State Broad. Ltd. v. FCC, 996 F.2d 386,

393-94 (D.C. Cir. 1993). We now turn to an examination of

that issue

The ALJ found, and the FCC affirmed, that the licensees

“misrepresented and lacked candor in reporting to the

Commission that, subsequent to his arrest, Rice was

completely excluded from any further involvement in the

management and operation of the Licensees’ radio stations.”

Contemporary Media, 13 F.C.C.R. at 14,454; see

Contemporary Media, Inc., 12 F.C.C.R. 14,254, 14,295

(1997) (initial decision of ALJ). The licensees counter by

claiming that they never promised “to completely exclude

Mr. Rice from having any involvement in their stations’

activities, only to exclude him from having any involvement

in the management, policy, and day-to-day decisions

involving the stations.” Br. of Appellants at 25 (emphasis in

original). They admit that this distinction is “subtle.” Jd.

That is an understatement.

15a

As previously recounted, in June 1991 the licensees

reported to the FCC that:

Since Mr. Rice’s hospitalization on April 3, 1991, he has

had absolutely no managerial, policy, or consultative

role in the affairs of the three broadcast corporations in

which he has ownership interests and officer positions.

In other words, pending a resolution of the referenced

criminal charges, Mr. Rice is being completely insulated

and excluded from any involvement in the managerial,

policy, and day-to-day decisions involving any of the

four licensed station and three construction permits held

by the three corporations.

J.A. at 15-16, 120 (citation omitted) (emphasis added).

There is no dispute that from April until October 1991, the

period of his hospitalization, Rice had no involvement with

the stations. The licensees concede, however, that several

weeks after Rice’s release from the hospital, their vice-

president permitted him to undertake a number of station-

related tasks, which they describe as “occasional and isolated

technical projects.” Br. of Appellants at 26. Nonetheless,

the next report to the FCC, filed on May 14, 1992, stated:

There has been no change in Mr. Rice’s status with [the

reporting licensee] or in the status of the proceedings

against him. ... Mr. Rice is no longer hospitalized, but

he continues to be treated by his physicians as an

outpatient, and he continues to have no managerial or

policy role in the affairs of the three broadcast

corporations . . . in which he has ownership interests

and corporate positions.

J.A. at 126-27 (citation omitted) emphasis added).

According to the licensees, Rice’s conceded involvement

in “technical projects” is consistent with this representation

because that involvement did not comprise managerial or

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decision-making activities but rather “mere opining and

musings.” Br. of Appellants at 28. The key point that the

“hypertechnical” FCC overlooked, they claim, is that the

May 1992 report deleted the word “consultative” from the

list of roles from which the June 1991 report had said Rice

was being excluded. Jd. at 26. In their eyes, this “critical

distinction” between the two reports should have put the

Commission on notice that Rice had moved from having no

role to having an “opining and musing” role. Jd. at 27.

Indeed, the licensees maintain that this distinction rendered

their representations “fully forthcoming” and candid. /d. at

26.

By this time, it should be quite clear who is being

“hypertechnical” only a side-by-side line comparison of the

two filings—conducted with some skepticism of the

licensees’ candor—would have detected the subtle different

in language upon which the licensees now rely. In 1992,

however the FCC had no reason to conduct such a forensic

comparison of the two representations, particularly in light of

the May report’s opening declaration that “[t]here has been

no change in Mr. Rice’s status.” That declaration, alone,

was plainly false.°

Moreover, even if we were to accept that the licensees

effectively advised the Commission that Rice was involved

in consultation but had no role in management, there is

substantial evidence in the record that Rice was involved in

management as well. Cf WBER, Inc. v. FCC, 420 F.2d 158,

164 (D.C. Cir. 1969) (holding that questions regarding

misrepresentations are factual questions subject to

substantial evidence review). As the ALJ stated:

* At oral argument, the licensees argued that their intention was only

to indicate that there had been no change in Rice’s “ownership or

managerial” status. The quoted words, however, do not appear in the

declaration, which was completely unqualified.

17a

Apart from Rice’s consultative role, the evidence

establishes that, after his release from the hospital in

October 1991, Rice was also involved in at least some of

the programming matters and personnel decisions of the

Licensees, rejected offers to purchase one of the

Licensee’s construction permits, invited an offer to

purchase a station once it went on the air, suggested the

trade of specific broadcast properties, and directed the

group program director and two of the general managers

of the Licensee’s stations to perform certain tasks.

Contemporary Media, 12 F.C.C.R. at 14,298.

The licensees contend that there was only “conflicting”

evidence on these matters, pointing out that their witnesses

disputed much of the testimony upon which the ALJ’s

conclusions were based. As a consequence, they argue,

“[w]itness credibility findings played a predominant role in

the ALJ’s and the FCC’s adverse ruling under the

misrepresentation issue.” Br. of Appellants at 30. It is true,

of course, that when witnesses present conflicting testimony

an agency’s decision must be based on an evaluation of their

credibility. Under our precedents, however, we defer to

credibility findings affirmed by the Commission unless they

are “patently unsupportable.” E.g., SL Communications, Inc.

v. FCC, 168 F.3d 1354, 1357 (D.C. Cir. 1999). That is not

the case here.

Finally, the licensees contend that “intent to deceive” is a

necessary element of proving misrepresentation nor lack of

candor in FCC _ proceedings, see Swan Creek

Communications, 39 F.3d at 1222; Fox River Broad. Inc. 93

F.C.C.2d 127, 129 (1983), and that there is no credible

record evidence of any intent on their part to mislead or

deceive the agency. The evidence discussed above,

however, is more than sufficient to support Commission’s

finding that there was an intent to deceive. As we have

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stated before, “the fact of misrepresentation coupled with

proof that the party making it had knowledge of its falsity

[is] enough to justify a conclusion that there was fraudulent

intent.” Leflore Broad. Co., 636 F.2d at 462. The licensees

concede that they intentionally deleted the word

“consultative” from the 1992 filing, and we cannot credit the

claim that they did not realize the resulting report would

affirmatively mislead the agency as to Rice’s resumption of

such activities. Moreover, as noted above, there is

substantial evidence that the licensees’ representations

concerning Rice’s exclusion from non-consultative (1.e.,

managerial and policy) activities were themselves false.

There is also substantial evidence that the licensees’

management knew the representations were false, since

management was on the receiving end of Rice’s directives.°

Accordingly, we uphold the FCC’s finding of intent to

deceive, and with it the Commission’s determination that the

licensees’ misrepresentations warranted revocation.

IV

Finally, we turn to the licensees’ contention that the

revocation of their licenses and construction permits violates

To take just a few examples:

Rice informed [vice president] Cox that he wanted Rhea [the general

manager of two of his radio stations] fired, and Cox told Rhea that

he was being fired because of Rice’s displeasure . . .; Cox told Rhea

that Rice wanted [radio announcer] Steel fired after Steel changed

[his station’s] reporting status in a trade publication; after Rice asked

Rhea for information about the cost of the Satellite Music Network,

Cox told Rhea that Rice thought [one of the stations] could be

programmed for less money by bringing in Rice’s own music; and

Leatherman [the general manager of another licensee station]

responded to Cox after Rice asked him about the need for sound

effect CDs.

Contemporary Media, 13 F.C.C.R. at 14,458

19a

the Excessive Fines Clause of the Eighth Amendment.’ In

support of this contention, the licensees cite Austin v. United

States, which held that the Excessive Fines Clause applies to

forfeiture under 21 U.S.C. § 881(a)(4) and (a)(7) of property

used to facilitate drug transactions. See 509 U.S. 602, 604

(1993). Austin has no application here.

In Austin, the Court held that the central question under

the Excessive Fines Clause is whether the government action

at issue is “punishment for some offense.” Jd. at 609-10; see

United States v. Bajakajian, 524 U.S. 321, 327-28 (1998). In

concluding that the forfeitures in that case constitute

punishment, the Court focused on _ the historical

understanding of forfeiture as a penal measure, an

understanding reflected in prior Supreme Court precedents

and in the legislative history of the forfeiture statute. See

Austin, 509 U.S. at 614-20.

These considerations do not apply to the case at bar. First,

the Court’s precedents do not reflect an understanding that

FCC license revocations or nonrenewals based on character

considerations constitute punishment. To the contrary, in

FCC v. WOKO, the Court rejected just such a claim. See 329

U.S. at 228. There, an FCC licensee who had made

misrepresentations to the agency contended that the resulting

nonrenewal order “inflict[ed] a penalty, that the motive [was]

punishment.” Jd The Court disagreed, stating: “A denial of

an application for a license because of the insufficiency or

deliberate falsity of information lawfully required to be

furnished is not a penal measure.” Jd Nor have the

licensees cited anything in the legislative history of the

Federal Communications Act to suggest that Congress had a

punitive purpose.

7 See U.S. CONST. amend. VIII (“Excessive bail shall not be

required, nor excessive fines imposed. . . . ”).

20a

The FCC revokes a license not to punish a licensee for its

conduct, but because that conduct indicates to the

Commission that the licensee is no longer qualified to hold

‘it. See 47 U.S.C. §§ 303(), 308, 312; Contemporary Media,

13 F.C.C.R. at 14,459-60. Revocation comes when the

Commission concludes that the licensee can no longer be

trusted to deal with it honestly, to follow its regulations, and

to operate in the public interest. See, e.g., Syracuse Peace

Council v. FCC, 867 F.2d 654, 659 n.2 (D.C. Cir. 1989);

Leflore Broad. Co., 636 F.2d at 461-62. While the

revocation of FCC license privileges “may hurt and... .

may cause loss,” WOKO, 329 U.S. at 228, the does not

implicate the Excessive Fines Clause of the Eighth

Amendment.

V

For the foregoing reasons, we affirm the decision and order

of the Federal Communications Commission.

2la

APPENDIX B

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of ) MM Docket No. 95-154

)

CONTEMPORARY MEDIA.)

INC.

Licensee of Stations

WBOW(AM), WBFX(AM),

and WZZQ(FM), Terre

Haute, Indiana

)

)

)

)

)

)

)

Order to Show Cause Why _)

the Licenses for Stations )

WBOW(AM), WBFX(AM), )

and WZZQ(FM), Terre )

Haute, Indiana, Should Not)

be Revoked )

)

)

)

)

)

)

)

)

)

CONTEMPORARY

BROADCASTING, INC.

Licensee of Station

KFMZ(FM), Columbia,

Missouri, and Permittee of

Station KAAM-FM,

Huntsville, Missouri (unbuilt)

Order to Show Cause Why __)

the Authorizations for

Stations KFMZ(FM),

Columbia, Missouri and

KAAM-FM, Huntsville,

Missouri, Should Not be

Revoked

LAKE BROADCASTING,

INC. File No. BPH-921112MH

Licensee of Station

KBMX(FM), Eldon, Missoun,

and Permittee of Station

KFXE(FM), Cuba, Missouri

Order to Show Cause Why

the Authorizations for

Stations KBMX(FM),

Eldon, Missouri, and

KFXE(FM), Cuba, Missouri,

Should Not be Revoked

LAKE BROADCASTING,

INC.

For a Construction Permit for

a New FM Station on

Channel 244A at Bourbon,

Missouri

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

Appearances

Howard J. Braun, Jerold L. Jacobs, Shelley

Sadowsky and Michael D. Gaffney on behalf of

Contemporary Media, Inc., Contemporary Broadcasting,

Inc., and Lake Broadcasting, Inc.; and James W. Shook,

23a

Jamila Bess Johnson and Roy W. Boyce on behalf of the

Mass Media Bureau.

DECISION

Adopted: June 22, 1998; Released: June 25, 1998

By the Commission:

I. INTRODUCTION

1. this Decision affirms the Initial Decision, 12 FCC

Red 14254 (ALJ 1997 (“I.D.”), of Administrative Law Judge

Arthur I. Steinberg (ALJ). The LD. revoked the licenses and

construction permits held by Contemporary Media, Inc.

(“CMI”), Contemporary Broadcasting, Inc. (“CBI”), and

Lake Broadcasting, Inc. (“Lake”) (collectively, “Licensees”’),

and denied Lake’s application for a new Station, because of

violations of law relating to repeated sexual abuse of

children by the stations’ sole owner and misrepresentations

by the Licensees.

2. By Order to Show Cause and Notice of A arent

Liability (“OSC”), 10 FCC Red 13685 (1995), the

Commission specified the following issues for hearing:

(1) To determine the effect of Michael

Rice’s convictions on the basic qualifications

of CMI, CBI, and Lake.

(2) To determine whether CMI, CBI, and

Lake misrepresented to the Commission that,

subsequent to his arrest, Michael Rice has

been excluded from the management and

operation of the CMI, CBI, and Lake radio

stations.

24a

(3) To determine, pursuant-to Section 310(d)

of the Communications Act of 1934, as

amended, and Section 73.3540 of the

Commission’s Rules, whether Michael Rice

has engaged in the unauthorized transfer of

control of CMI, CBI, and Lake.

(4) To determine, in light of the evidence

adduced under the foregoing issues, whether

CMI, CBI, and/or Lake, possess the requisite

qualifications to be or remain licensees of

their respective radio stations.

The OSC further stated that, if the hearing record did not

warrant revocation of the Licensees’ authorizations, it would

be determined whether an order of forfeiture should be

issued pursuant to Section 503(b) of the Act.

3. The LD. concluded that, although there was no

unauthorized transfer of control, Michael Rice’s felony

convictions and the Licensees’ misrepresentations and lack

of candor regarding his role at the stations constituted

separate and independent grounds for disqualification of the

Licensees. In view oi this conclusion, the ALJ determined

that all of the Licensees’ authorizations should be revoked,

and that issuance of a forfeiture was therefore unwarranted.

The Licensees except to the ALJ’s adverse conclusions

under the violations of law and misrepresentation issues and

to the revecation of its licenses and construction permits; at

most, the Licensees argue that a monetary forfeiture under

the misrepresentation issue would have been adequate. The

Mass Media Bureau supports the LD. in all respects. The

Licensees also seek oral argument. This request is denied

because we do not believe such argument would materially

assist our resolution of this proceeding.

25a

I]. VIOLATIONS OF LAW ISSUE

Background

4. Michael Rice is the sole shareholder of CMI,

which is the licensee of Stations WBOW(AM), WZZQ(AM)

(formerly WBFX(AM)), and WZZQ(FM), Terre Haute,

Indiana. CBI, which is a wholly-owned subsidiary of CMI,

is the licensee of Station KFMZ(FM), Columbia, Missouri,

and the permittee of Station KAAM-FM, Huntsville,

Missouri. Rice also owns all the issued shares of stock in

Lake, other than treasury shares; Lake is the license of

Station KBMX(FM), Eldon, Missouri, the permittee of

unbuilt Station KFXE(AM), Cuba, Missouri, and an

applicant for a new FM station in Bourbon, Missouri. Rice

is also a member of the Board of Directors and President and

Treasurer of all three corporate licensees. The CMI and CBI

Boards consist of three persons. The Lake Board consisted

of two persons until March 13, 1997, when the second Board

member resigned from his position, leaving Rice as the only

Board member. LD., .{§ 4-9; Licensees Exh. 1; Order, 97M-

49, released April 4, 1997.

5. In November 1990, Rice was arrested in St.

Charles County, Missouri for criminal conduct involving

sexual acts with a teenager. He was formally charged in an

Information issued April 1, 1991, and the Information was

subsequently amended on January 6, 1993 and July 5, 1994.

In the Second Amended Information, Rice was charged with

eight counts of deviate sexual assault of individuals who

were between fourteen and sixteen years of age, and four

counts of sodomy of individuals who were under fourteen

years of age. The alleged activities took place between

December 1985 and October 1990. On August 11, 1994,

Rice was convicted of four counts of sodomy, six counts of

deviate sexual assault in the first degree, and two counts of

deviate sexual assault in the second degree, all of which are

26a

felonies. The misconduct for which Rice was convicted

involved five children. Rice was sentenced to a total to

eighty-four years in prison, but, because the sentences were

to run concurrently, his maximum imprisonment was to be

eight years. He was incarcerated on September 30, 1994.

LD., ff 10-11, 13-14; Bureau Exh. 1, Attachments 1-3.

6. In an effort to mitigate the impact of Rice’s

criminal convictions, the Licensees introduced other

evidence, as follows. No other principal of the Licensees,

nor any of the Licensees’ stations, were involved in Rice’s

misconduct. L.D., 22; Licensees Exh. 1. With the exception

of minor forfeitures involving a logging violation and an

improperly prepared quarterly issues/programs list involving

CMI’s WBOW(AM) and WZZQ(FM), the Licensees have

no prior record of Commission rule violations. LD., 416;

Licensees Exh. 1. In addition, four individuals who knew

Rice submitted statements attesting to Rice’s character and

reputation in the broadcast industry. None of the statements

indicated specific familiarity with Rice’s felony convictions.

LD., ¥§ 18-21; Licensees Exh. 5. On April 3, 1991, two days

after Rice was formally charged in the criminal case, he was

voluntarily hospitalized at the Barnes Hospital, Si. Louis,

Missouri, for in-patient psychiatric treatment, where he

remained for approximately six month. In view of the

criminal charges, the respective Boards of Directors of the

Licensees adopted resolutions in 1991 providing that Rice

would have “no managerial, policy, or consultative role in

the affairs” of the stations. I1.D., $29; Licensees Exh. 1.

7. In the LD., the ALJ reviewed the Commission’s

policy on character qualifications in broadcast licensing, as

set forth in Polic ardin ificati i

Broadcast Licensing, 102 FCC 2d 1179 (1986), recon.

denied, 1 FCC Red 421 (1986), appeal dismissed sub nom.

NABB v. FCC, No. 86-1179 (D.C. Cir. June 11, 1987)

(“1986 cter Policy Statement”), modified, 5 FCC Red

27a

3252 (1990) (subsequent history omitted) (“1990 Character

Policy Statement”), and concluded that all but one of the

factors the Commission deems relevant in determining the

weight to be accorded Rice’s felony convictions militate

against the Licensees. The ALJ found that Rice’s

misconduct was extremely serious, intentional, repeated, and

took place with the time frame the Commission deems

relevant to character inquiries. Moreover, the ALJ found

that the Licensees’ attempt to isolate Rice from any role in

stations affairs was not successful because Rice engaged in

management-level activities after his release from the

hospital in October 1991. The LD. also concluded that the

statements of Rice’s character witnesses were not entitled to

great weight because they did not address the impact of his

criminal convictions on his reputation. Although the

Licensees had a good record of compliance with the

Commission’s rules, the ALJ found that this factor alone did

not outweigh the other factors he considered. In addition,

the ALJ found that, whereas Rice’s criminal activities did

not appear to affect the operation of the Licensees’ broadcast

stations, nevertheless, there was a nexus between Rice’s

criminal behavior and the Licensees’ truthfulness because

the record established, under the misrepresentation issue, that

the Licensees misrepresented facts to the Commission

regarding the extent of Rice’s role in managing the stations

during the time the criminal proceedings were pending. In

the ALJ’s view, the Licensees’ deception was a direct result

of Rice’s criminal activities because there would have been

no need to submit false reports to the Commission had the

misconduct not occurred. The ALJ concluded that the

Licensees lacked the paramount character traits of

truthfulness and reliability, and, in consequence, were not

qualified to retain their authorizations.

8. In their exceptions, the Licensees argue that the

Commission’s character policy is arbitrary and capricious as

applied in this case. Specifically, the Licensees maintain that

28a

the Commission’s policy of examining the impact of any

felony conviction on an applicant’s qualifications is unlawful

here because there is no connection between Rice’s sexual

misconduct and the operation of the broadcast stations, or

any relationship between the misconduct and the Licensees’

propensity to be truthful and comply with the Commission’s

rules. In this regard, the Licensees contend that the 1986

Character __ Policy Statement improperly attributes

wrongdoing by a controlling stockholder to the corporate

licensee, contrary to precedent requiring that a licensee’s

qualifications be determined on the basis of its record, not

misconduct in its principal’s private life. Also, the Licensees

challenge the ALJ’s conclusion linking Rice’s criminal

behavior to misrepresentation because the Commission’s

character policy contemplates that any such connection be

related to the nature of the misconduct itself. Even if the

Commission’s character policy is lawfully applied here, the

Licensees argue that the ALJ erroneously evaluated the

mitigation evidence, and should have found that the non-

seriousness of the crimes, the absence of involvement in

Rice’s misconduct by other corporate principals, the

Licensees’ record of FCC compliance, Rice’s rehabilitation

and his reputation in the broadcast community, and the

Licensees’ remedial efforts sufficed to overcome the impact

of Rice’s criminal misconduct.

Discussion

9. The purpose of the Commission’s character

inquiry is to determine whether the public interest would be

served by grant of continued operations of the Licensees

before us. See 47 U.S.C. §§308(b), 309(a); 1986 Character

Policy Statement, 102 FCC 2d at 1180. In the 1986

Character Policy Statement, we expressed our concern with

non-FCC “misconduct which demonstrates the proclivity of

an applicant or licensee to deal truthfully with the

Commission and to comply with our rules and policies.” Id.

29a

at 1190-91. In determining whether a licensee possess the

character traits of truthfulness and reliability that we

consider relevant to is ability to operate a broadcast station in

accordance with our rules and policies, we indicated that

specific consideration would be given to adjudicated fraud,

criminal misconduct involving false statements or

dishonesty, and broadcast-related antitrust violations. Id, at

1195. We also stated that “there maybe circumstances in

which an applicant has engaged in nonbroadcast misconduct

SO egregious as to chock the conscience and evoke almost

universal disapprobation. . . . Such misconduct might, of its

own nature, constitute prima facie evidence that the applicant

lacks the traits of reliability and/or truthfulness necessary to

be a licensee... .” Id. at 1205 n.60.

10. In the 1 t > FCC

Red at 3252, we significantly expanded our earlier policy

regarding the range of non-FCC misconduct we would

consider by stating that a licensee’s propensity to comply

with the law generally is relevant to the Commission’s public

interest analysis and that evidence of any felony conviction,

not just those that involve fraud or untruthfulness, is

pertinent to our evaluation of a licensee’s character. We

Stated that a licensee’s willingness to commit felonies, which

are serious crimes, bears on our confidence that it will

conform to our rules and policies. We also recognized that

not all convictions for serious crimes are equally probative.

Thus, in weighing the impact of a felony conviction on a

licensee’s requisite propensity to obey the law, we said we

would consider traditional mitigating factors, including the

willfulness, frequency, currentness, and seriousness of the

misconduct, the participation of managers or owners, the

licensee’s remedial efforts, the overall record of compliance

with the FCC rules and policies, and evidence of

rehabilitation. Id

30a

11. We do not agree with the Licensees that our

character policies are arbitrary and capricious as applied in

this case. As explained above, we now consider all felony

convictions to be relevant to our determination of whether

grant or an application will serve the public interest under 47

U.S.C. § 309(a) because any felony conviction reflects on an

applicant’s propensity to obey the law generally, a trait

which is predictive of its reliability as a licensee and

willingness to adhere to our rules and policies. 1990

Character Policy Statement, 5 FCC Red at 3252. In addition,

even before we broadened the scope of our policy to include

all serious crimes, we made plain our view that egregious

misconduct would, by its very nature, be prima facie

evidence that an applicant lacked the requisite character traits

of reliability or truthfulness. 1986 Character Policy

Statement, 102 FCC 2d at 1205 n. 60. Thus, contrary to the

Licensees’ contention, where it is determined that the

misconduct in question involves either a felony conviction or

egregious wrongdoing, the Commission may lawfully apply

it character policies and find a lack of character

qualifications without specifically finding a connection

between the non-FCC criminal misconduct and the

applicant’s broadcast activities, and where the criminal

behavior is egregious, as it is here, it is also not necessary to

find a specific relationship to the applicant’s truthfulness.

See South Carolina Radio Fellowship, 6 FCC Red 4823

(1991) (controlling principal’s drug conviction “is itself

sufficient basis” for license revocation); Williamsburg

County Broadcasting Corp., 5 FCC Red 3034, 3035 & n. 4

(1990) (same case) (where criminal misconduct is egregious,

we need not find a nexus between behavior and proclivity to

be truthful or comply with rules); accord, Richard Richards.

10 FCC Red 3950, 3955 (Rev. Bd. 1995). We continue to

believe these policies are appropriate and are appropriate

specifically as applied in this case. The violations here are

extremely serious and do, we believe, give us reason to be

concerned about the propensity of the Licensees to comply

3la

with the Communications Act and FCC tules and policies,

and to be truthful in their dealings with us.

12. We also disagree with the Licensees that the

arbitrariness of the Commission’s policy is demonstrated by

its inconsistent holdings in other cases involving sexual

misconduct. In Hara broadcasting, Inc., 8 FCC Red 3177

(Rev. Bd. 1993), cited by the Licensees, the Review Board

did not add an issue to explore a felony conviction for sexual

misconduct where the arrest and conviction preceded the

Commission’s expansion of its character policy to cover all

felonies and there was no showing whatever with respect to

any of the factors the Commission deems relevant in

examining an applicant’s past behavior. Significantly, as

well, Hara did not involve the repeated and long-term sexual

abuse of children at issue here. The Licensees also cite The

Kravis _Co., 11 FCC Red 4740 (1996), where the

Commission renewed the station licenses without discussion

of any character questions. The ALJ in the instant case took

official notice (1.D., (157 & n. 21) of a 1991 letter from

counsel in Kravis advising the Commission that its principal

had been charged with sex crimes, but that no conviction or

judgment of guilt had been entered against him because he

was placed on probation for four years pursuant to the state‘s

deferred judgment procedure. According to the letter, the

charges would be expunged upon successfui completion of

the probation. The Licensees have made no showing that

this did not occur or that there was any adjudication or

conviction for the Commission to consider.

13. The Licensees also erroneously contend that our

policies are arbitrarily applied here because they result in

“automatically” attributing Rice’s misconduct to them,

contrary to The Petroleum v. Nasby Corp., 11 FCC Red 3494

(1996), and Wilkett v. ICC, 710 F.2d 861 (D.C. Cir. 1983).

The distinction the Licensees seek to draw between the

individual and themselves is illusory, however, because Rice

32a

is the sole owner of the Licensees as well as an officer and

director of all three corporations, and has never given up

these roles. By contrast, in Nasby, the wrongdoer, a

minority stockholder, divested his ownership and resigned

his corporate positions. Moreover, to make certain that the

connection was completely severed, the Commission there

remanded the proceeding for a specific determination of

whether he could potentially influence the licensee’s affairs

if the license were renewed.' See also Faulkner Radio, Inc.,

88 F.C.C. 2d 612, 618 (1981) (renewal conditioned on total

exclusion of wrongdoer from station operations). Wilkett

involved reversal of an ICC denial of a trucking company’s

application for expanded authority where the applicant’s

owner had engaged in criminal activity, including conspiracy

to distribute a controlled substance. The court found that

there was no record of company misdeeds and that the ICC

had disregarded its own standards in past cases for

evaluating carrier fitness. In this case, however, as described

below, we have carefully weighed each of the factors

traditionally considered in evaluating an applicant’s

' As the Review Board stated in the same proceeding:

Were Nasby an individual applicant owned and

controlled exclusively by [the wrongdoer], there would

be little doubt that this criminal activities catalogued in

the record before us would require the denial of its

applications.

10 FCC Red 6029, 6031 (Rev. Bd. 1995). See also 1986 Character

Policy Statement, 102 FCC 2d at 1218 (Commission will treat

wrongdoing by corporate managers who are controlling stockholders as

though they were sole proprietors or partners). Our policy is not

arbitrary, but is intended to treat applicants consistently with respect to

character qualifications without regard to the legal form in which they do

business. Id. at 1217.

ee eee

33a

character in order to assess the proper impact of Rice’s

criminality. Furthermore, we have previously stated that we

do not view Wilkett as meaning that a conviction for drug

trafficking is irrelevant to a broadcaster’s qualifications,

particularly since this crime falls into the category of

egregious misconduct. See Willi

Broadcasting Com. 5 FCC Red at 3035; see also

Participation in Drug Trafficking (Public Notice), 4 FCC

Red 7533 (1989) (Commission regards drug trafficking as a

matter of the gravest concern and notes that that the Anti-

Drug Abuse Act of 1988, 21 U.S.C. § 853a, permits judicial

denial of federal benefits to persons convicted of drug

offenses). Although each case must be decided on its own

facts, it is well established that, where appropriate, the

misconduct of one individual may result in the

disqualification of the applicant. See FCC v. WOKO, 329

U.S. 223 (1946); Center for Applicati f Black

Development, 11 FCC Red 1144 (1996), aff'd by judgment

sub nom. Iowa Aco casting Corp. v. FCC, No. 96-

1066 (D.C. Cir. October 22, 1997).

14. Furthermore, we disagree with the Licensees that

the evidence of mitigation in this case overcomes the impact

of the felonious criminal activity disclosed in the record. As

the ALJ concluded, all but one of the factors we traditionally

consider weigh against the Licensees. First and foremost,

Rice’s misconduct was extremely serous, involving

numerous acts of sexual abuse and sexual assault on children

ranging from under fourteen to sixteen years of age.

Specifically, Rice was convicted of twelve felonies involving

the abuse of five children over a five year period. By any

standard, these were heinous crimes characterized by moral

turpitude. Indeed, we believe they may fairly be described

as egregious crimes falling in the Category of those that

“shock the conscience” and summon almost universal

disapproval. As the United States Court of Appeals for the

34a

Second Circuit recently explained in a case involving New

York’s “Megan’s Law”:

The seriousness of the harm that sex

offenders’ actions cause to society and the

perception, supported by some data, that such

Offenders have a greater probability of

recidivism than other offenders have recently

combined to prompt the enactment of

numerous laws across the country directed

specifically toward persons_ convicted of

crimes involving sexual conduct. Studies

have shown that sex crimes are widespread . .

. and that their impact on both the victim and

society as a whole is devastating, see, e.g.,

[Brief of Amicus Curiae United States] at 5-6

(citing John Briere & Marsha Runtz,

Childhood Sexual Abuse: Long-Term

Sequelae and Implications for Psychological

Assessment, 8 J. Interpersonal violence 312,

324 (Sept. 1993) (noting that molested

children are likely to develop severe

psychosocial problems) and Alpine Kohn,

Shattered Innocence, Psychology Today, Feb.

1987, at 54, 58 (noting that sexually abused

boys are more likely than non-abused boys to

become sex offenders themselves, and that

sexually abused girls are more likely than

non-abused girls to have children who are

abused)).

Doe v. Pataki, 120 F.3d 1263, 1266 (2™ Cir. 1997).

15. We reject completely the Licensees’ claim that

the seriousness of the crimes is somehow lessened by the

fact that Rice was not sentenced to the maximum term; there

is no evidence that the sentencing judge agreed with this

35a

assessment in ordering Rice to serve concurrent sentences or

that an eight year sentence is itself an insignificant prison

term. In addition to their seriousness, the crimes were

willful, repeated over an extended period of time, as recent

as five years prior to designation for hearing,? and

committed by the individual who continues to be the sole

Owner, president, treasurer, and a member of the Boards of

the Licensees. Furthermore, as will be discussed in Detail

under the misrepresentation issue, infra, the Licensees did

not remedy the situation, as they claimed, by separating Rice

from participation in station affairs after the charges were

relinquished any portion of his Ownership control or

resigned, and he has not been removed from his officer and

director positions with the Licensees. Moreover, he was

active in personnel and programming matters and performed

consultative work for the stations following his

hospitalization. The Licensees’ evidence of rehabilitation is

also insufficient. Three of the character statements

submitted on Rice’s behalf make no mention of his felony

convictions, and the fourth indicates unfamiliarity with the

criminal proceeding. The Statements address only his

competence as a broadcaster. Although the Licensees point

out that Rice did not commit further criminal acts after his

arrest in November 1990, this does not in itself prove

rehabilitation because he has been hospitalized or in prison

for approximately half the time since then.’ The fact that the

The crimes were well within the ten year limitation applied by the

Commission. See 1986 Character Policy Statement, 102 FCC 2d at

1229. Also, Rice’s convictions were one year prior to designation. The

Commission generally awaits a local court adjudication before it assesses

the impact of the criminality on the licensee’s character. See 1990

Character Policy Statement, 5 FCC Red at 3252.

In this regard, we reject the Licensees’ exception to the ALJ’s failure

to find that Rice has undergone treatment and to admit evidence that Rice

(Continued...)

36a

Licensees have had a good overall record of FCC rule

compliance is not alone sufficient to mitigate the

overwhelming negative weight of all the other evidence. For

the same reason, we disagree with the Licensees that the ALJ

erred in disallowing evidence of the stations’ good standing

and reputation in the community. See Cosmopolitan

Broadcasting Corp., 75 FCC 2d 423, 425 n. 3 (1980)

(meritorious programming cannot mitigate serious

misconduct); KOED, Inc., 3 FCC Red at 2827 (Commission

will not consider meritorious programming evidence in cases

involving intentional wrongdoing or moral turpitude).

Contrary to the Licensees’ claim, the 1986 Character Policy

Statement does not state that misrepresentation is the only

area in which past program performance is not considered as

mitigating evidence. Id. at 1211 n. 79.

16. In sum, we conclude that our character policies

are validly applied to the Licensees, and that the

preponderance of record evidence warrants the conclusion

that Rice’s convictions involving the repeated sexual abuse

of children adversely affect their qualifications to remain

Commission licensees. As we also concluded with respect to

a broadcaster’s recent conviction for drug trafficking, we

believe that these felony convictions are “egregious crimes

against society” that demonstrate a “callous disregard for the

(...Continued)

is required by law to participate in a special rehabilitation program in

prison before his release. We agree with the ALJ that this evidence does

not establish current rehabilitation. The Licensees’ reliance on

Alessandro Broadcasting Co., 99 FCC 2d 1, 11 n. 13 (Rev. Bd. 1984)

(subsequent history omitted) is inapposite. There, unlike this case, the

applicant’s crime was an isolated event that was remote in time; the

applicant was completely rehabilitated under local law, as evidenced,

among other things, by the issuance of a certificate of rehabilitation by

the state court; his civil liberties were restored; he had character

references from people familiar with his crime; and no predictive nexus

was found between his crime and his fitness to be a licensee.

37a

welfare of fellow citizens.” See Wiliiamsburg County

Broadcasting Corp., 5 FCC Red at 3035. As such, the record

below destroys our confidence that the Licensees “would

well serve the public through exercise of the wide and

important discretion that this agency entrusts to licensed

broadcasters.” See i i ip, 6 FCC

Red at 4823-24. Rice is the sole owner of the Licensees as

well as a corporate officer and director, and the Licensees

were unable to make any significant Showing of mitigation.

We affirm the ALJ’s conclusion that the convictions

constitute an independent basis for disqualification.‘

III. MISREPRESENTATION ISSUE

Background

17. This issue concerns whether the Licensees’

Statements that, subsequent to his arrest, Rice was

completely excluded from any involvement in the

management and operation of the radio stations were

misrepresentations. The issue was based on filings by the

Licensees, beginning in 1991, relating to the criminal

charges and the Licensees’ asserted efforts to insulate Rice

from station affairs. Specifically, in a “Statement Pursuant

to Section 1.65 of the Commission’s Rules” filed June 14,

* Because of the egregious nature of Rice’s crimes and the absence of

significant mitigation, it is unnecessary to consider whether there is other

evidence implicating the Licensees’ Propensity for truthfulness in order

to resolve the violations of law issue adversely to them. See South

Carolina Radio Fellowship, 6 FCC Red at 4824 (conviction for drug

trafficking is “itself sufficient” for revocation; however, evidence of

misrepresentation to the court and other misconduct reinforces adverse

implication of conviction. ).

38a

1991, Lake made the following statement, which CBI

repeated in another Section 1.65 filing on June 21, 1991: 5

Since Mr. Rice’s hospitalization on April 3,

1991, he has had absolutely no managerial,

policy, or consultative role in the affairs of the

[Licensees] in which he has ownership

interests and officer positions. . . . In other

words, pending a resolution of the referenced

criminal charges, Mr. Rice is _ being

completely insulated and excluded from any

involvement in the managerial, policy, and

day-to-day decisions involving any of the...

stations and . . . construction permits held by

the [Licensees].

LD., {§ 32-33; Bureau Exh. 1. The June 14, 1991 statement

also made reference to the 1990 Character Policy Statement.

Id. Similarly, on August 1, 1991, in connection with an

extension of construction permit application for its

Huntsville, Missouri station, CBI informed the Commission

that “Mr. Rice continues to be hospitalized and to have

absolutely no managerial, policy, or consultative role in the

affairs of [CBI].” On December 3, 1991, CBI repeated that

“Rice continues to have no managerial, policy, or

consultative role in the affairs of [the Huntsville station]. . .

.”” LD., F9 34-35; Bureau Exh. 1.

18. On May 14, 1992, in order to “update the

Commission on the status of Mr. Rice’s criminal

proceedings,” CBI stated:

* Section 1.65, 47 C.F.R. §1.65, requires that applicants report substantial

and significant changes in their applications within thirty days.

39a

There has been no change in Mr. Rice’s

status with [CBI] or in the status of the

proceedings against him... . Mr. Rice is no

longer hospitalized, but he continues to be

treated by his physician as an outpatient, and

he continues to have no managerial or policy

role in the affairs of the [Licensees] in which

he has ownership interests and corporate

positions. ...

LD. 936; Bureau Exh. 1.

19. On September 30, 1994, the Licensees informed

the Commission of Rice’s conviction and sentencing. They

also stated:

(CBI/Lake] has previously reported to the

Commission that since Mr. Rice’s pre-trial

hospitalization on April 3, 1991, he has been

excluded from involvement in the customary

managerial, policy, and day-to-day decisions

and operations of [CBI/Lake’s] licensed

Stations and construction permits. . . .

[CBI/Lake] wishes to advise the Commission

that the exclusion policy will continue

throughout Mr. Rice’s period of

incarceration.

LD., 438; Bureau Exh. 1. The Licensees additionally stated

that they were aware the Commission could commence a

revocation proceeding against a licensee because of a

principal’s felony conviction, but requested ninety days to

file a brief arguing that a revocation proceeding should not

be instituted as a result of Rice’s conviction. Id.

20. After formal charges were brought against Rice

in early 1991, the Licensees adopted corporate resolutions

providing that Rice should have: no managerial, policy, or

40a

consultative role in the affairs” and daily operations of the

Licensees’ stations. The corporate resolutions also made

Janet "Cok, “4 manhagernenc~ empioyee) chief “Exéclinve*”

Officer, and gave her authority to supervise management

and day-to-day operation of the stations. Cox also visited

the stations to inform the staffs that she had assumed her

new position, that Rice was hospitalized, and that he would

not be involved in the operation of the stations. She did not

tell the staffs of the corporate resolutions or that Rice was to

be excluded from station activities after he left the hospital.

Following Rice’s release from the hospital in October 1991,

Cox authorized him to provide consulting and engineering

assistance to the Licensees. To reflect this change, she

stated that the Licensees modified their reports to the

Commission beginning with the May 14, 1992 report by

deleting the statement that Rice would have no

“consultative” role. She did not know why a direct

statement alerting the Commission to the Rice’s changed

status was not made. The Licensees did not adopt any

corporate resolutions authorizing Rice to do consultative

work. LD., #9 30-31, 43-44, 46, 54.

21. $A number of management-level station

employees testified as to whether, apart from his

consultative role, Rice was also involved in management or

operation of the stations following his release from the

hospital. Leon Paul Hanks, an employee of KFMZ(FM),

Columbia, Missouri, since August 1985, was made program

director of the station in February 1989 and group program

director of the CMI/CBI (Terre Haute, Indiana and

Columbia, Missouri) stations in late 1991 or early 1992,

after Rice was released form the hospital He was

terminated on August 5, 1994. Hanks testified that Rice was

involved in programming and personnel decisions at the 3

Terre Haute stations. It was Hanks’ belief that he was a

compelled to follow Rice’s suggestions or directions about E

programming and personnel because Rice was the station

Owner and his boss. Hanks Stated that his

responsibility as group program director was to keep the

formats_of KFMZ. WLI Whsastenr with What ‘Rice

discussed the format of WZZQ, problems involving the

Station’s program director, the playlists of KFMZ and

22. Moreover, Hanks testified that Rice was

involved in the hiring and firing of station employees, as

follows. Hanks stated that, in May or June 1992, Rice

directed him to “get rid of” Janice Pratt, an announcer,

because her on-air voice was hurting ratings; that Hanks did

not feel it was appropriate to tell Pratt she was being fired

for that reason; and that Hanks eventually fired her for

down Saturday night ratings, but Hanks did not fire

Kinneson because the latter resigned to work for another

quit to take another job before Hanks could fire him. In

August 1993, Rice told Hanks to “get a replacement” for

Jeff Davis, who worked evenings at KFMZ, and Hanks

carried out the instruction. Rice approved Hanks’

Suggestion that Ben Jacobs be moved from KFMZ to WZZQ

as program director; but after Jacobs made personne]

changes at WZZQ which Rice did not approve of, Rice told

Hanks that Jacobs “has got to go”; and Jacobs was fired a

week or two later, although Hanks did not do it or know

who did. Rice discussed with Hanks hiring Mike Steel, an

42a

announcer Rice had spoken to and was impressed with, to be

program director of WZZQ in early 1992; Rice offered the

job to Steel and said Cox would take care of the hiring; but,

after Steel took the job and changed WZZQ’s reporting

status in a trade publication from Album Oriented Rock to

Top 40, Rice became “furious” and told Hanks he wanted

Steel “gone immediately.” Rice complained to Hanks that

Mark Savage, WZZQ program director from April to

November 1992, was not maintaining the station’s format

and decided to get rid of him; and rice, Cox , and Hanks

drove to Terre Haute for the express purpose of firing

Savage. After Savage was fired, on the drive back to

company headquarters, Rice told Cox he was displeased

with the job perforinance of John Rhea, who was then the

general manager of WBOW(AM) and WZZQ(FM), and told

Cox that Rhea “has got to go.” LD., Ff 89-91, 94, 96, 98-

99, 118-120, 123-24, 129.

23. John Rhea, the general manager of

WBOW(AM) and WZZQ(FM) from December 30, 1991

until he was terminated on December 16, 1992, also testified

that Rice was involved in programming and personnel

decisions at the Terre Haute stations. He further stated that

Rice, as the owner of the building in which the stations were

located, also directed Rhea to show it to prospective tenants

and to keep it clean. Rhea assume that Rice, as the stations’

owner, “was the boss.” Although he understood from Cox

. that Rice was an “absentee owner,” he said Cox did not tell

him Rice was to be excluded from management. With

respect to programming, Rhea stated that, six weeks after he

became general manager, Rice told him he was unhappy

with the musical sound of WBOW, and they had a further

discussion about the programming of WBOW a month later.

Sometime thereafter, Rice asked Rhea to obtain information

about the cost of the Satellite Music Network. Rhea did so

and sent the information to Cox, who told Rhea that Rice

thought the station could be programmed “cheaper” by

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bringing in Rice’s own music. Rhea also spoke to Rice

about the matter. L.D., {7 103, 107, 111-112.

24. Rhea testified that Rice was also involved in

specific hiring and firing decisions, as follows. He staid

Rice told him he did not like Chip Ramsey, WBOW’s

program director; that Rice “wanted him out of there”; that

his firing was delayed only because the station had a

contract with Indiana State University for Ramsey to

broadcast their baseball games; and that Rhea carried out

Cox’s instruction to fire Ramsey. Rhea hired Steve Holler

as an announcer for WBOW; after Rice heard Holler on his

first day on the air he told Rhea, “I want him off the radio”;

Rice repeated this direction after Rhea protested; and Rhea

fired Holler after Cox told him later that day to “[g]et rid of”

Holler. Rice told Rhea he was interested in Mike Steel for

the program director position at WZZQ; after Steel was

hired, Rice became “livid” and “went ballistic” because

Steel changed the station’s reporting status to Top 40; Cox

told Rhea that Rice wanted Steel “out of there immediately”;

and Rhea fired Steel at the instruction of Cox and Rice.

Rhea stated that Rice and Cox came to Terre Haute to fire

Mark Savage; that Rice said to Rhea, “You and Janet go

down there and get him out of here”; and that Rhea and Cox

then fired Savage. Rhea stated that Cox and Rice returned

to Terre Haute in December 1992 and entered Rhea’s office;

Rice told Rhea he was being fired because of a “change in

direction”; and, after Rice left the room, Cox said Rhea’s

firing was because Rice was displeased with WBOW’s

financial figures. L.D., {§ 113, 1115-16, 119-120, 126, 130.

25. Cox testified that Rice was not involved in

personnel and programming decisions at the stations, did not

fire any announcer, program director, or general manager,

and does not make policy or managerial decisions

concerning day-to-day operations of the _ stations.

Specifically, Cox said it was Hanks, not Rice, who criticized

44a

Sean Madden’s performance and wanted him fired; Rice did

not tell her that Ben Jacobs should be fired, but she did not

know what Rice may have said to anyone else; she decided

to hire Mike Steel and did not get Rice’s approval to do so,

but did not know what Rice said to others at WZZQ about

hiring Steel; she did not tell Rhea to fire Steel after the

reporting change in the trade publication, and Steel was not

fired but resigned; she believed it was either Rhea or Hanks

who wanted Mark Savage fired, she alone went to Terre

Haute to terminate Savage, and Rice did not direct her to fire

Savage; she directed the firing of Chip Ramsey but not

because she knew Rice disliked him, and Rice did not tell

her to fire Ramsey; it was Rhea who decided to fire Steve

Holler, but she did not know if Rice had instructed Rhea to

do so; she decided to fire John Rhea, and Rice accompanied

her to Terre Haute only to serve as a witness. LD., J] 64-66,

68, 95, 100, 114, 117, 121-22, 127-28, 131.

26. Daniel Leatherman, the general manager of

KBMX(FM) from September 1990 to March 1996, testified

that KBMX personnel did not report to Rice and that Rice

was not involved in hiring or firing station employees. LD.,

{7 69, 74. Kenneth Brown, the general manager of

WZZQ(AM) (formerly WBFX(AM)), WZZQ(FM), and

WBOW(AM) sincs April 1993, testified that he has received

no written or oral communications from Rice concerning the

stations’ programming, personnel, or operations. I.D., ¥ 78.

Similarly, Richard Hauschild, who has been an employee of

KFMZ since October 1988, and the general manager and

sales manager since June 1991, testified that he has received

no correspondence or telephone calls from Rice regarding

any aspect of station policy, management, or daily

operations since becoming general manager. [.D., f] 75-76.

Hauschild also testified with regard to the firing of specific

station employees. He stated that, six months before Janice

Pratt was dismissed, he told Hanks she should either correct

her problems or be dismissed; that Rice never told him to

45a

get rid of Pratt and Hanks never told him that rice directed

him to fire Pratt; but that he was not privy to all the

conversations between Rice and Hanks and did not know

whether Rice told Hanks to do something. He stated that

Hanks fired Bob Kinneson at Hauschild’s suggestion; that

Hanks did not tell him Rice wanted Kinneson fired; that, so

far as he knew, Rice was not involved in Kinneson’s firing,

but that he did not know if Rice spoke to Hanks about it. He

stated that Rice did not make critical comments to him about

Sean Madden’s performance, and Hanks did not tell him

that Rice did not like Madden. He said that Hanks never

told him that Rice wanted Jeff Davis fired, but he did not

know whether Rice directed Hanks to fire Davis. LD.,

92-93, 95, 97.

27. In addition to the witness testimony summarized

above, there is documentary evidence pertinent to the

misrepresentation issue. In 1993, Rice faxed six memoranda

to Leatherman. The first five dealt with the purchase of an

outdoor sign for KBMX, the construction of a storage

building, the purchase of a water cooler, the repair of the

newsroom telephone, pressure washing the air conditioner

condenser units, and construction of a storage room in the

studio building. Leatherman took care of the projects that

were the subjects of the memos. He stated that the memos

did not relate to broadcast operations, but had to do with

Rice’s interest as owner and landlord of the KBMX facilities

in the station’s physical plant. I.D., § 70; Bureau Exh. 8. In

the sixth memo, Rice asked Leatherman if KBMX needed

some sound effects CDs. Leatherman responded to the

memo by talking to Cox, who told him they did not need any

more music. Leatherman stated that Rice’s memo was a

follow-up to Rice being told by Dennis Klautzer, then a 20%

shareholder in Lake and its corporate secretary, that KBMX

needed more sound effects CDs. L.D., 71; Bureau Exh. 11.

46a

28. The record also contains four letters written by

Rice pertaining to the Licensees. The first, written on

“Contemporary Media Broadcasting Group” stationary, and

dated April 29, 1993, is addressed to Dale A. Palmer, KZZT

Radio, Moberly, Missouri. It states:

Following up on your telephone calls to

Janet Cox, we do not want to sell the bare

CP for the Huntsville, MO station. .. . We

| have had three other bona fide inquiries to

| purchase the station after it is built... .

| However, with the quickly changing

industry, we are always interested in

business arrangements that are mutually

beneficial to all concerned. Soon, we will

begin our plans to construct KTDI and

locate our main studio location in Moberly,

and a second studio at Macon, MO. If you

or your associates would be interested in

purchasing the station once it is built and on

the air, or have some other arrangements in

mind, feel free to contact us. If you have

any further thoughts or ideas, please let me

or Janet know.

TUNG PIE. 0k

LD., ¥ 132; Bureau Exh. 1, p.24.

29. Similarly, in another letter dated April 29, 1993

on “Contemporary Media Broadcasting Group” stationary,

Rice wrote to Jerrell A. Shepherd, KRES Radio, Moberly,

Missouri, as follows:

Following up on your telephone call to me

this week, we do not want to sell the CP for

the Huntsville, MO station. Contemporary

Broadcasting, Inc. does not have the CP for

sale, as was told to you by broker/equipment

salesman Chris Kreger. . . . We have had

47a

three other bona fide inquiries to purchase

the station after it is built... . However, with

the quickly changing industry, we are

always interested in business arrangements

that are mutually beneficial to all concerned.

This is why I suggested you consider a swap

of the Lebanon, MO property for the

Huntsville, MO property. . . . If you have

any further thoughts or ideas, please let me

know.

LD., 133; Bureau Exh. 1, p. 26.

30. In response to a July 20, 1994 letter from

Shepherd to Rice stating “I would like to repeat my offer to

buy the Huntsville, Missouri CP,” Rice wrote to Shepherd on

August 3, 1994 on a “Contemporary Media Broadcasting

Group” Fax Line Transmittal Sheet as follows:

I do not recall you ever making an offer to

buy KAAM(FM), Huntsville, MO. You did

inquire several times, and I wrote you a letter

Stating that Contemporary Media does not

sell CPs, but we would be open to a

discussion with you over trading KAAM...

for KIRK and KJEL, Lebanon that your

company has been attempting to “unload” for

years. . . . We fully intend to build KAAM,

Huntsville, and operate the Station, and at this

time none of our stations are for sale.

LD., ¥ 134; Bureau Exh. 1, p. 30.

31. On November 13, 1995, Rice wrote a letter to

Cox as follows:

It seems that we should install a concrete pad

as Cloyd suggested to set the new building on

48a

top of . . . we need to be sure that Tom

Holmes installs grounding material that will

tie the building into the tower ground, and the

other buildings at the time the building is

placed on the pad. The grading should be

done so water and snow does not come inside

the door. I think that you need to have a

stern talk with Ken and Dennis. It is time for

them to stay away from KBMX, and let the

manager manage. . . . If this does not happen,

and you get more reports of incidents, we

will have to change the locks and keep them

out of the station. . .. One way we can keep

morale up is to keep purchasing new

equipment such as remote gear, promotional

items, vans, etc., so that we give an image of

progress, not a dead-end station... . You

need to make sure that Mary and Selina do

almost all of the bookkeeping and office

work, so that you can be free to do what you

do best, managing the corporation.

LD., 4135; Bureau Exh. 9. Cox testified that she did not

regard Rice’s letter as a direction to her to do the things

mentioned, but thought of it as a letter written by someone in

prison “whose whole life is the radio .. . and. . . with

nothing to do but idle time.” Tr. 311, 313-314.

32. The ALJ concluded that the Licensees both

misrepresented facts and lacked candor in their reports to the

Commission. First, the ALJ found that the Licensees never

directly disclosed Rice’s consultative activities, but, in fact,

represented in their May 14, 1992 pleading that “[tJhere has

been no change in Mr. Rice’s status.” In this regard, the ALJ

rejected as lacking in candor Cox’s testimony that the

deletion of the word “consultative” from this and subsequent

pleadings was intended to inform the Commission of Rice’s

ee eer Eerernerenar een or veocoonmeen

49a

new role. In addition, the ALJ found that Rice was involved

in at least some of the programming matters and personnel

decisions of the Licensees, that he engaged in determinations

as to whether or not to sell or trade a Station or construction

permit, and that he directed the group program director and

two of the general managers of the Licensees’ stations to

perform certain tasks. The Licensees did not inform the

Commission of these activities, the ALJ found, but

misrepresented in their September 30, 1994 letter that Rice

had been “excluded from involvement” in the management

and operation of the stations and construction permits since

April 1991. The ALJ specifically found that Rice was

involved in Programming matters at WFMZ, WZZQ, and

KBMX(FM), directed hanks and Rhea in personnel decisions

involving the firing of certain employees at their stations,

and assigned projects to Leatherman at his station. In

reaching these conclusions, the ALJ credited the testimony

of Hanks and Rhea over that of Cox, Hauschild, Brown, and

Leatherman. The ALJ rejected the Licensees’ claim that

Hanks and Rhea were “disgruntled” employees out to “get”

them, and that their testimony was therefore not credible.

The ALJ further found that the documentary evidence

Supported the testimony of Hanks and Rhea. In addition, the

ALJ found that Cox had actual knowledge of Rice’s

consultative activities as well as his involvement in at least

some programming and personnel matters and management-

level activities. Moreover, the ALJ stated, Rice himself

knew of his participation in the Licensees’ affairs, but made

no attempt to disclose it, even though he was the stations’

sole owner. The ALJ concluded that the Licensees were

motivated to deceive the Commission because they wanted

to forestall a Commission inquiry into the criminal

allegations against Rice and their impact on the Licensees’

character qualifications. Had the Licensees disclosed Rice’s

specific consultative and management activities, the ALJ

held, the Commission would have known that he was not

“completely insulated and excluded,” or that he had no role

50a

in station affairs, as the Licensees had reported on numerous

occasions.

33. In their exceptions, the Licensees deny that they

inadequately reported Rice’s activities to the Commission or

that their reports contained false information. with respect to

Rice’s consultative work, the Licensees argue that their

Section 1.65 reports were made in good faith and that Rice’s

activities were not so significant as to render the reports

untruthful since there was no meaningful change in Rice’s

status. The Licensees also except to the conclusion that Rice

was involved in some programming, personnel, and

management-level activities after April 1991 and that the

Licensees were aware of such involvement. They maintain

that Rice did not partake in normal management functions

after his release from the hospital, such as station budget and

sales activities. Although Rice may have made unsolicited

comments to Cox, Hanks and Rhea, the Licensees state, Cox

made management decisions independent of what rice may

have said. In this regard, the Licensees state there is no

evidence that Hanks or Rhea communicated their purported

conversations with Rice to Cox. The Licensees also contend

that the ALJ improperly gave more weight to the testimony

of Hanks and Rhea than to that of the other witnesses, even

though both were disgruntled former employees and there

was no reason to discredit the others. Specifically, the

Licensees state that Hanks filed a discrimination suit against

CMI and was heard by Hauschild to say he wanted to “get”

the Licensees, and Rhea admitted to some animosity toward

both Rice and Cox because of his termination. The

Licensees also dispute the ALJ’s reliance on corroborating

evidence such as the fax messages Rice sent to Leatherman,

and argue that these memoranda mainly reflect Rice’s role as

landlord Likewise, the Licensees state that Rice’s actions,

as a shareholder, in rejecting preliminary inquiries about sale

of a construction permit do not rise to the level of day-to-day

policy or management of the stations. The Licensees also

misleading. We agree with the ALJ’

the hearing testimony, which is Supported by his evaluation

of witness credibility based upon his demeanor observations,

and by corroborating documentary evidence.

Preponderance of record ev;

conclusion that the Licensees

candor requires applicants to

facts and information that may be decisionally Significant to

their applications.

must be “scrupulous

information” to the

52a

heavily on the completeness and accuracy of the submissions

made to it by applicants who, in turn, have an obligation to

provide the Commission with the facts needed to carry out

its statutory mandate. Intentional deceit with regard to

matters of decisional significance may be disqualifying. See

Swan Creek Communications v. FCC, 39 F.3d at 1222; RKO

General, Inc. v. FCC, 670 F.2d at 232; Sea Island

Broadcasting Corp. v. FCC, 627 F.2d 240, 243 (D.C. Cir.),

cert. denied, 449 U.S. 834 (1980).

35. First, with regard to Rice’s consultative activities

after his release from the hospital, totally apart from his

involvement in numerous programming and personnel

matters at the stations discussed below, the Licensees were

not fully forthcoming in disclosing Rice’s consultative role

to the Commission. Cox’s testimonial claim that the

Licensees informed the Commission of Rice’s new role by

removing the word “consultative” from their May 14, 1992

report is belied by the Licensees’ contrary assertion in the

same report that “there has been no change in Mr. Rice’s

status.” Despite this obviously misleading characterization,

the Licensees did not attempt to further clarify the matter in

any future report to the Commission, or modify its corporate

resolutions to formally authorize Rice’s admitted

consultative role. We agree with the ALJ that Cox’s

testimony that the Licensees were trying to be “as truthful as

possible” (tr. 292) in this regard was itself lacking in candor

since they never directly informed the Commission of Rice’s

consultative activities in any of their reports. We also reject

the Licensees’ exception that their May 1992 report was

truthful because 47 C.F.R. §1.65 requires that only

significant changes be disclosed. In view of the Licensees’

previous reports that Rice would have absolutely no role or

involvement in the affairs of the stations, we do not agree

that a change resulting in Rice being invoived in any manner

in the operations of the stations could be considered so

insignificant as not to reflect on the continuing accuracy and

53a

completeness of the information furnished by the Licensees.

Finally, in this regard, although the Licensees urge that

Rice’s consultative work at the Stations was recommended

by his psychiatrist for his rehabilitation, even if so, this fact

has no bearing whatsoever on the impact of the Licensees’

failure to be candid in disclosing these activities.

36. Turning to Rice’s involvement in programming

matters, there is testimony from two former management

Officials who were in knowledgeable positions detailing

Rice’s activities. Both believed that Rice, as the stations’

sole owner, was their boss. Hanks, the group program

director of the CMI/CBI Stations from late 1991 or early

1992 to August 1994 reported directly to Rice about the

stations’ programming, visited WZZQ and reviewed its

music at Rice's request, regularly discussed with Rice

Specific programming problems at WZZQ and WFMZ, as

well as Rice’s complaints about the stations’ formats and

song lists, and sent Rice memos that Hanks addressed to the

Stations’ program directors. In addition, Rhea, the general

manager of WZZQ and WBOW from December 1991 to

December 1992, discussed WBOW’s programming with

Rice, and complied with Rice’s specific request that he

obtain information about the cost of the Satellite Music

Network. Although Cox denied that Rice was involved in

programming matters after 1991, and Brown and Hauschild

said they had no communications from Rice regarding

Programming at their stations, they did not testify with

respect to the specific instances recalled by Hanks and Rhea,

and there is no evidence to contradict the latters’ accounts.

Indeed, Brown’s tenure as general manager of the CMI

Stations post-dated the particular incidents described above.

Moreover, there is also undisputed documentary evidence of

Rice’s involvement in

manager, asking to

ore sound effects CDs. Rice

54a

acted on the basis of information given him by Klautzer, a

Lake shareholder and corporate officer, that such CDs were

needed, and Leatherman complied with Rice's request by

responding to Cox. Clearly, in this regard, if Rice were

completely excluded form involvement in day-to-day station

affairs, as the Licensees represented, there would have been

no reason for a Lake corporate principal to inform him of a

problem affecting daily operations of one of the stations or

for the station's general manager to follow up on Rice’s

instructions. We conclude that the record amply supports the

ALJ’s finding that Rice was involved in programming

activities at the Licensees’ radio stations.

37. Hanks and Rhea also testified regarding Rice’s

involvement in numerous decisions to hire and fire station

personnel. Specifically, Rice instructed Hanks to fire Pratt,

Kinneson, Madden, and Davis; told Hanks that Jacobs,

Steel, and Savage should be fired; and Hanks heard Rice tell

Cox that Rhea should be fired, and Rhea was told by Cox

that Rice wanted Steel fired. Rhea also testified that he was

fired by Rice and Cox. Rice also approved Hanks’

suggestion to move Jacobs to WZZQ as program director,

and Hanks and Rhea both stated that Rice was involved in

the hiring of Steel. Although Cox and Hauschild disputed

the accounts given by Hanks and Rhea of these personnel

actions and stated that Rice did not tell them he wanted the

individuals in question hired or fired, both admitted that

they were not privy to conversations Rice may have had

with Hanks and Rhea about these employees and did not

know what instructions he may have given the. Most of the

employees about whom Rice gave directions to Hanks and

Rhea in fact were let go. That Cox or Hauschild may have

independently ordered the dismissal of some of these

employees, or that some ultimately were not fired but

resigned, does not undermine the significance of the

evidence of Rice’s involvement in these matters. In other

words, Rice’s involvement was inconsistent with the

finds are “entitled to great weight,”

Colorado, 104 FCC 24 16, 19 (1986), and his credibility

determinations will be upheld unless the findings patently

conflict with other record evidence. i 1

credibility findings may not be upset unless reversal is

Supported by substantial evidence). In this regard, we

to the ALJ’s witness observations. See la M.

FCC Red 3135 (1993), recon. denied, 9 FCC Red 56, recon.

dismissed, 10 FCC Red 142 (1995), aff'd by judgment, 98

F.3d 646 (D.C. Cir. 1996) (Table) (affirming ALJ credibility

56a

conclusion that witnesses were not biased or seeking to “get

back” at applicant). Similarly, the Licensees argue that

Hanks admitted to a tendency to exaggerate, but a careful

review of his testimony reveals that he adiitted

exaggerating only when he said that Rice “never” changed

his mind once it was made up, and clarified his testimony to

say that Rice “occasionally” changed his mind and that he

did not exaggerate in any of his other statements. LD., at 7

102. Rhea admitted to some animosity toward Cox “at the

time” he was fired because he viewed his termination as a

career setback, but, as the ALJ found, there was no evidence

that he continued to harbor such feelings when he testified

three and a half years later. With regard to his alleged

animosity to Rice, Rhea stated only that he was told he was

fired because WBOW’s numbers were not what they should

be, that he felt the negative publicity surrounding Rice’s

situation contributed to the numbers going down, and that,

therefore, “if [he] wanted to blame someone,” he would

blame Rice “a little bit.” Tr. 521-22. We agree with the ALJ

that Rhea’s hypothetical response does not establish bias.

LD. at § 188. Finally, in weighing witness credibility, we

also agree with the ALJ that Cox, Hauschild, and Brown

have “more to lose” from an adverse resolution of this

proceeding because they are currently employed by the

Licensees, whereas Hanks, Rhea, and Leatherman have no

pecuniary interest in the outcome. Id. at JJ 183-85. See The

Prattville Broadcasting Co., 5 F.C.C. 2d 601, 602 (1966)

(interest of witnesses in proceeding is relevant to

credibility).°

6 — Although the Licensees point to Cox’s testimony that she has other

sources of income and could maintain her current lifestyle, the ALJ

found that she receives a salary of approximately $60,000 from the

Licensees, has numerous perquisites including cost of living adjustments,

bonuses, health insurance, and use of a car, that both her son and

daughter are employed in managerial positions at the stations, and that

(Continued...)

57a

opment, Inc., 86 FCC 2d 808,

815 (1981) (e corroborative evidence is factor to

be considered in weighing the truth of witness testimony);

TeleSTAR, Inc., 2 FCC Red 5, 13 (Rev. Bd. 1987)

(subsequent history omitted) (credibility involves the manner

in which testimony “hangs together with other evidence”).

Specifically, Rice sent six fax messages to Leatherman in

1993 directing him to take certain actions at KBMX.

Although the Licensees contend that all but one of these

memoranda related to Rice’s role as landlord, the pattern is

the same as that with respect to the other activities of Rice

giving instructions to management officials which are then

carried out. Similarly, Rice instructed Cox to take certain

actions regarding personnel and other station matters in a

1995 letter. And perhaps most corroborative of Rice’s

involvement in station management are the three letters he

wrote in 1993 and 1994 to officials of two radio stations in

Moberly, Missouri, rejecting offers to purchase one of the

Licensees’ construction permits, inviting an offer to purchase

a station once it is on the air, and suggesting an exchange of

existing stations. In his letter to Dale Palmer of KZZT, Rice

Stated that he was following up on Palmer’s calls to Cox,

(...Continued)

her husband does business with the Licensees. 1D. 4 184. Thus, the ALJ

reasonably concluded that she and her family would be seriously

impacted by an adverse result. The Licensees also State that Leatherman

is no longer employed by the, but the ALJ made this finding, as noted in

the text. In any event, as to Rice’s involvement in specific personnel

matters, Leatherman’s testimony does not directly conflict with that of

Hanks and Rhea because they testified to Rice’s activities at the Terre

Haute and Columbia stations, whereas he was employed at the Eldon

station.

58a

which clearly implies that Cox apprised Rice of Palmer’s

purchase offer even though the Licensees had informed the

Commission that Rice was “being completely insulated and

excluded” from management activities. In this regard, we

reject completely the Licensees’ argument that the letters are

unimportant because they do not relate to day-to-day station

management; as the ALJ concluded, the decision as to

whether or not to sell a broadcast property “is the ultimate

management-level decision.” I.D., § 178.

40. Finally, we reject the Licensees’ contention that

there is no evidence of any intent to deceive the Commission

because they lacked knowledge of Rice’s involvement in

station affairs and updated their Section 1.65 reports to

insure their accuracy. In fact, the Licensees’ reports, in

addition to failing specifically to inform the Commission of

Rice’s consultative role, also did not tell the Commission of

Rice’s other activities of which the Licensees were aware.

Specifically, with regard to Cox’s knowledge of Rice’s

activities, the record shows that: Rice followed up on

Palmer’s phone calls to Cox when he responded to Palmer’s

interest in purchasing one of the construction permits; Rice

informed Cox that he wanted Rhea fired, and Cox told Rhea

that he was being fired because of Rice’s displeasure over

the station’s financial figures; Cox told Rhea that Rice

wanted Steel fired after Steel changed WZZQ’s reporting

status in a trade publication; after Rice asked Rhea for

information about the cost of the Satellite Music Network,

Cox told Rhea that Rice thought WBOW could be

programmed for less money by bringing in Rice’s own

music; and Leatherman responded to Cox after Rice asked

him about the need for sound effect CDs. Other station

officials also knew of Rice’s activities. Thus, Leatherman

knew of the six faxes Rice sent him pertaining to various

assignments at KBMX; Klautzer communicated to Rice the

need for sound effects CDs at one of the stations; and Hanks

and Rhea knew of Rice’s specific involvement in

59a

programming and personnel matters at their Stations. In

short, although numerous high-level management officials

were aware of Rice’s activities, the Licensees never modified

their reports to the Commission that Rice was “completely

insulated and excluded” from involvement in management

and operation of the stations and had “no managerial or

policy role in the affairs” of the Licensees. We conclude that

the Licensees, who were well aware of the Commission’s

character policies, intended to mislead the Commission in

these reports because they wished either to avoid

Commission inquiry into Rice’s criminal activities or to

minimize the impact of those activities on the Licensees’

qualifications by representing that he was no longer involved

in the affairs of the stations. See Leflore Broadcasting Co..

Inc. v. FCC, 636 F.2d 454, 462 (D.C. Cir. 1980) (deceptive

intent may be found where there is a false Statement together

with knowledge of its falsity); Black Television Workshop, 8

FCC Red 4192, 4198 n. 41 (1993), recon. denied, 8 FCC Red

8719 (1993), rev. denied, 9 FCC Red 4477 (1994), aff'd sub

nom. Woodfork v. FCC, 70 F.3d 639 (D.C. Cir. 1995)

(Table) (“Intent is a factual question that can be inferred if

other evidence shows that a motive or logical desire to

deceive exists, as is the case here.”’)

IV. SANCTION

41. We conclude that the appropriate sanction for the

misconduct displayed on this record is revocation of the

Licensees’ existing authorizations and denial of its new

Station application. In agreement with the ALJ, we find that

Rice’s felony convictions and the Licensees’

misrepresentation and lack of condor with respect to Rice’s

role at the radio stations subsequent to his arrest constitute

Separate and independent grounds for disqualification of the

Licensees. The Commission has removed broadcast

authorizations because of serious misconduct, including

violations of law, see South Carolina Radio Fellowship, and

60a

misrepresentation or lack of candor, see Leflore

Broadcasting Co., Inc. v. FCC, 636 F.2d at 461 (“Ever since

the Supreme Court’s decision in WOKO (footnote omitted),

it has been clear that the Commission may refuse to renew a

license where there has been willful and knowing

misrepresentation or lack of candor in dealing with the

Commission.”) Moreover, the totality of the evidence in this

proceeding of Rice"’ criminal acts and the Licensees’ deceit

convinces us that the Licensees lack the requisite character

qualifications to deal truthfully with the Commission and to

comply with our rules and policies. See 1986 Character

Policy Statement, 102 F.C.C. 2d at 1190-91; 1990 Character

Policy Statement, 5 FCC Rcd at 3252; Star Stations of

Indiana, Inc., 51 F.C.C. 2d 95 (1975), aff'd sub nom. Star

Broadcasting, Inc. v. FCC, 527 F.2d 853 (D.C. Cir. 1975),

cert. denied, 425 U.S. 992 (1976).

42. The Licensees claim in their exceptions that

revocation of their authorizations would violate the

Excessive Fines Clause of the Eighth Amendment.’ Relying

on Austin v. United States, 509 U.S. 602 (1993), which held

that a civil forfeiture of property can be subject to the Eighth

Amendment if it is imposed as a monetary punishment, the

Licensees argue that license revocation would be unduly

punitive in this case and an improper exercise of the

Commission’s discretion. We disagree that revocation here

is constitutionally or otherwise inappropriate. Unlike a

Commission license revocation proceeding, Austin involved

an in rem forfeiture action against the mobile home and auto

body shop of the petitioner under 21 U.S.C. §§ 881(a)(4) and

(a)(7), which statues provide for the forfeiture of property

used to facilitate drug-related crimes, 509 U.S. at 604. By

contrast, 47 U.S.C. §312(a) provides for revocation of a

7 “Excessive bail shall not be required, nor excessive fines imposed,

nor cruel and unusual punishment inflicted.” U.S. Const., Amend. VIII.

6la

station license or construction permit, inter alia, because of

conditions which would warrant denial of a license or permit

on an original application, or for willful or repeated violation

of any provision of the Communications Act or Commission

rule. In other words, the Commission’s purpose is not to

impose punishment, but it may revoke an authorization

where, as here, it finds that the licensee or permittee has not

met its statutory obligation to operate its facility in the public

interest. See 47 U.S.C. §§307(a), 309(a). A licensed

broadcaster is “granted the free and exclusive use of a

limited and valuable part of the public domain; when he

accepts that franchise it is burdened by enforceable public

obligations.” Office of Communications of the United

Church of Christ v. FCC, 359 F.2d 994, 1003 (D.C. Cir.

1966). Thus, licensees do not own their authorizations but

have only the temporary privilege of holding their licenses to

operate their stations as public trustees, and a revocation

proceeding such as this one does not involve forfeiture or

seizure of the physical assets or facilities of the station. See

also 47 U.S.C. §§ 301, 304, 309(h).

43. The Commission has broad discretion in its

choice of remedies and sanctions. See RKO General, Inc. v.

FCC, 670 F.2d at 237; Leflore Broadcasting Co. v. FCC, 636

F.2d at 463; Lorain Journal Co. v. FCC, 351 F.2d at 831. As

previously explained, we believe the misconduct in this case

was extremely serious, involving egregious criminal acts by

the Licensees’ sole owner and repeated misrepresentations

by the Licensees designed to minimize the effect of Rice’s

criminal record on their qualifications. Cumulatively, the

evidence of misconduct warrants a conclusion that the

Licensees lack the requisite character traits of truthfulness

and reliability to retain their authorizations. Unlike United

Broadcasting Co., 100 F.C.C. 2d 1574, 1584 (1985), cited by

the Licensees as support for a lesser sanction where there

was significant evidence mitigating the impact of misconduct

at two of the licensee’s stations, including the institution of

62a

pervasive remedial measures to prevent recurrence, the

Licensees produced little evidence to mitigate the impact of

Rice’s misconduct, their remedial efforts to remove him

from day-to-day management and policy activities at the

stations were unsuccessful, and their representations in this

regard were untruthful. That case also involved the deterrent

impact of the Commission’s previous denial of license

renewal, which situation does not pertain here. See RKO

General, Inc., 5 FCC Red 642, 644 (1990) (and cases cited

therein) (deterrent impact of previous denial may provide

basis for conclusion that recurrence of misconduct is

unlikely). Moreover, unlike the cited cases, the misconduct

here was not isolated or restricted to the operations of any

particular station, but involved the criminal actions of the

controlling owner of the Licensees and the Licensees’

representations to the Commission on behalf of all their

stations. We conclude that revocation is appropriate in the

circumstances of this case.*

V. ORDERING CLAUSES

44. ACCORDINGLY, IT IS ORDERED, That the

licenses of Contemporary Media, Inc. for Stations

WBOW(AM), WZZQ(AM) (formerly WBFX(AM)), and

WZZQ(FM), Terre Haute, Indiana, the authorizations of .

8 In view of the seriousness of the misconduct and the Licensees’

failure to undertake adequate remedial steps, we do not believe forfeiture

is the more appropriate sanction. See PCS 2000, L.P., 12 FCC Red 1681,

1688-89 (1997) (forfeiture imposed for misrepresentation and lack of

candor where applicant took measures expeditiously to remove

wrongdoers from all positions of ownership and control). Insofar as the

Licensees argue that revocation would adversely affect their station

employees, we point out that our order permits the Licensees to keep

operating pending the completion of appellate review. See RKO

General, Inc., 89 F.C.C. 2d 361, 365 (1982) (Commission considers

equity and fairness with respect to station employees in allowing

continued operation by disqualified licensee pending appeal).

63a

Contemporary Broadcasting, Inc. for Stations KBMX(FM),

Eldon, Missouri, and KAAM-FM, Huntsville, Missouri, and

the authorizations of Lake Broadcasting, Inc. for Stations

KBMX(FM), Eldon, Missouri, and KFXE(FM), Cuba,

Missouri, ARE REVOKED, and the application of Lake

Broadcasting, Inc. (File No. BPH-921112MH) for a

construction permit for a new FM Station on Channel 244A

at Bourbon, Missouri, IS DENIED.

45. IT IS FURTHER ORDERED, That the

Licensees ARE AUTHORIZED to continue operation of

Stations WBOW(AM), WZZQ(AM), WZZQ(FM),

KFMZ(FM), and KBMX(FM) until 12:01 A.M. on the

ninety-first day following the release date of this Decision to

enable the Licensees to conclude the stations’ affairs;

PROVIDED, however, that if the Licensees seek

reconsideration or judicial review of our Decision, they are

authorized to continue to operate Stations WBOW(AM),

WZZQ(AM), WZZQ(FM), KFMZ(FM), and KBMX(FM)

until 12:01 A.M. on the ninety-first day following the

release date of any order on reconsideration or the

completion of judicial review, whichever is later. Judicial

review is completed when the forum which has jurisdiction

to review this proceeding issues its mandate: Provided,

however, that in a case when the mandate issues prior to the

expiration of the period for seeking Supreme Court review

and the permittee seeks Supreme Court review, judicial

review will not be completed until the Supreme Court denies

the petition for certiorari or issues a ruling on the merits

affirming the denial of the applications, whichever occurs

later. |

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

64a

APPENDIX C

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of ) MM Docket No. 95-154

CONTEMPORARY

MEDIA, INC.

Licensee of Stations

WBOW(AM), WBFX(AM),

and WZZQ(FM), Terre

Haute, Indiana

Order to Show Cause Why

the Licenses for Stations

WBOW(AM), WBFX(AM),

and WZZQ(FM), Terre

Haute, Indiana, Should Not

be Revoked

CONTEMPORARY

BROADCASTING, INC.

Licensee of Station

KFMZ(FM), Columbia,

Missouri, and Permittee of

Station KAAM-FM,

Huntsville, Missouri (unbuilt)

Ne Ne ee ee ee ee “ee” ee” Se” Se” ee” SO”

Order to Show Cause Why

the Authorizations for

Stations KFMZ(FM),

Nee Nee ee ee”

65a

Columbia, Missouri, and

KAAM-FM, Huntsville,

Missouri, Should Not be

Revoked

LAKE BROADCASTING,

INC.

KBMX(FM), Eldon,

Missouri, and Permittee

of Station KFXE(FM), Cuba,

Missouri

Order to Show Cause Why

the Authorizations for

Stations KBMX(F M), Eldon,

Missouri, and KFXE(FM),

Cuba, Missouri, Should Not

be Revoked

)

)

)

)

)

)

)

)

Licensee of Station )

)

)

)

)

)

)

)

)

)

)

)

LAKE BROADCASTING, )

INC. ) File No. BPH-921112MH

)

)

)

)

)

For a Construction Permit

for a New FM Station on

Channel 244A at Bourbon,

Missouri

ORDER

Adopted: April 22,1999 ; Released: April 28, 1999

By the Commission:

66a

1. This Order denies a Petition for Reconsideration

of a Commission Decision that affirmed an Initial Decision

revoking the licenses and construction permits held by

Contemporary Media, Inc., Contemporary Broadcasting,

Inc., and Lake Broadcasting, Inc. (collectively, “Licensees”),

and denying the Licensees’ application for a new station.

The Commission agreed with the ALJ that the Licensees

should be disqualified because of violations of law relating

to repeated sexual abuse of children by the stations’ sole

owner and _ =misrepresentations by the Licensees.

Contemporary Media, Inc., 13 FCC Red 14437 (1998).

2. Michael Rice, who is the Licensees’ sole

shareholder, the corporate president and treasurer, and

director, was convicted in 1994 of twelve felonies, including

eight counts of deviate sexual abuse and four counts of

sodomy. These crimes involved five children. As a

consequence of his criminal acts, Rice is _ currently

incarcerated serving a maximum prison term of eight years.

3. In our Decision, we addressed first the effect of

Rice’s convictions on the Licensees’ basic qualifications. In

response to the Licensees’ argument that the Commission’s

governing character policy is arbitrary and capricious as

applied in this case, we reviewed the Commission’s policy

on character qualifications in broadcast licensing, as set forth

in Policy Regarding Character ifications in Broadcast

Licensing, 102 FCC 2d 1179 (1986), recon. denied, 1 FCC

Rcd 421 (1986), appeal dismissed sub nom. NABB v. FCC,

No. 86-1179 (D.C. Cir. June 11, 1987) (“1986 Character

Policy Statement”), modified, 5 FCC Red 3252 (1990)

(subsequent history omitted)(“1990 Character Policy State-

ment”). We concluded that our character policies are validly

applied to the Licensees, and that Rice’s convictions

involving the repeated sexual abuse of children adversely

affected their qualifications to remain Commission licensees.

67a

We further found that the Licensees did not make any

significant showing of mitigation under this issue.

Contemporary Media, Inc., 13 FCC Red at 14439, 14441 9

4-5, 9. In addition to our findings regarding the impact of

Rice’s criminal behavior, we concluded that the Licensees

misrepresented and lacked candor in repeatedly reporting to

the Commission that, Subsequent to his arrest, Rice was

completely excluded from any involvement in the

management and operation of the Licensees’ radio stations.

We held that Rice’s criminal acts and the Licensees’ deceit

constituted separate and independent grounds for

disqualification of the Licensees, and that the Licensees

lacked the requisite character qualifications to deal truthfully

with the Commission and to comply with our rules and

policies. Id. at 14454-59 {9 34-41.

4. In their Petition for Reconsideration, the

Licensees renew their contention that the Commission’s

1986 and 1990 Character Policy Statement are arbitrary, both

in general and as specifically applied to the Licensees,

because there is no nexus between Rice’s sexual misconduct

and the Licensees’ broadcast activities or propensity for

truthfulness and reliability. The Licensees also argue that

the Commission has not explained how it weighs the

mitigation factors it applies in assessing the impact of

criminal behavior and that, in any case, the Licensees’

showing of mitigation was sufficient to warrant a conclusion

that they are qualified. In this regard, the Licensees submit a

July 23, 1998 letter from Donald L. Wolff, who is described

as “Rice’s parole counsel,” which states that Rice is

scheduled to be released from prison no later than December

29, 1999, and perhaps as early as April 30,1999. The

Licensees argue that this information indicates that the

Commission overstated the seriousness of Rice’s crimes

because he will “serve less than six years.” Petition at 10.

68a

5. With regard to the misrepresentation finding, the

Licensees contend that the Commission mischaracterized the

Licensees’ statements because they never claimed to remove

Rice from all station activities but only management, policy,

and day-to-day decisions. Insofar as Rice performed the

activities attributed to him in the record, the Licensees aver,

_this conduct was not decision-making and, accordingly, the

Licensees’ reports were not inaccurate. Although these

“distinctions are subtle” (Petition at 13), the Licensees argue

that they are supported by the record. The Licensees submit

that the evidence establishes only that Rice “made

unsolicited comments” to various station officials (Petition at

17), and engaged in “shmoozing, musings, and

intermeddling” (Petition at 19), but not decision-making

activities. Finally, the Licensees argue, as they did in their

exceptions, that revocation of their authorizations violates

the Excessive Fines Clause of the Eighth Amendment, and

they cite U.S. v. Bajakajian, 118 S. Ct. 2028 (1998), for the

proposition that revocation is a grossly disproportionate

penalty.

6. It is well established that the Commission does not

grant reconsideration simply for the purpose of debating

matters on which it has already deliberated and spoken. See

WWIZ, Inc., 37 FCC 685 (1964), aff'd sub nom. Lorain

Journal C. v. FCC, 351 F. 2d 824 (D.C. Cir. 1965), cert.

denied, 383 U.S. 967 (1966). To be successful, a petition for

reconsideration must rely on new facts, changed

circumstances, or material errors or omissions in the

underlying opinion. See Sandab Communications Limited

Partnership II], FCC 98-131, released June 24, 1998, ¥ 70;

Isis Broadcast Group, 8 FCC Red 24 (Rev. Bd. 1992), rev.

denied, 8 FCC Red 7040 (1993). Here we agree with the

Mass Media Bureau’s position in its opposition that the

Licensees’ Petition does not meet this test but largely

reiterates arguments that we previously considered and

rejected. Illustrative of the Licensees’ overall approach is

a ee

Ontemporary Media, Inc.,

11, 16.

8. In additio

evidence in the

Licensees’

traditionally

found that

70a

preponderance of record evidence in this case still would

warrant a resolution adverse to the Licensees.

9. The only new information submitted by the

Licensees with respect to mitigation is the Wolff letter. The

letter states that Rice’s “conditional release date” is

December 29, 1999; that following completion of a 12-

month Missouri Sexual Offender Program, he could be

released earlier “based on good behavior”; and that Wolff

“expect[s]” release will be no later than December 29. As

this letter indicates, the actual date of Rice’s release from

confinement has not yet been determined by prison

authorities and is far from certain. But even if his time

served ultimately is “less than six years,” instead of eight, we

do not see how this in itself reduces the seriousness of the

nature of Rice’s crimes or their negative impact on the

Licensees’ qualifications. Id. at 14444-46 4 15.'

10. With regard to our findings of misrepresentation

and lack of candor, we disagree with the Licensees that the

“subtle distinctions” they are drawing between evidence of

decision-making and other station activities warrant

reconsideration. First, these purported distinctions do not

undermine our conclusion that the Licensees lacked car.dor

because they never directly informed the Commission in

their reports that Rice was involved in consultative activities

at the stations, even though their initial reports represented to

the Commission that he had “no consultative role in the

We also disagree with the Licensees that we incorrectly

affirmed the ALJ’s refusal to credit the four “character statements”

submitted on Rice’s behalf. These statements do not carry great weight

for the intended purpose because they do not discuss Rice’s character in

light of his criminal activities, but only his business record and ability,

and one even disavows familiarity with Rice’s criminal prosecution. Id.

at 14444-46 | 15; Licensees Exh. 5. Hence the letters afford little or no

evidence of Rice’s good character or rehabilitation.

ee

7la

affairs” of the stations and a later report claimed that there

was “no change in Mr. Rice’s Status,” even after he had

taken on such a role. The Licensees did not attempt to

Clarify this matter in any of their reports, even though their

initial reports clearly purported to exclude Rice from more

than just decision-making. Id. at 14454-55 q 35.

“excluded from involvement” in “day-to-day decisions and

operations.” In spite of the Licensees’ overt claim in their

Station personnel. Id. at 14448-50, 1445] {7 21-24, 27.

Notwithstanding the Licensees’ characterization in their

Petition, these were undoubtedly decision-making activities.

Indeed Programming and personnel are two areas

traditionally associated with station control. See Bennett

Gilbert Gaines, 8 FCC Red 1405 (Rev. Bd. 1993), rev.

denied, 9 FCC Red 533 (1994)? Although other

other management decisions, as the Licensees’ maintain,

there is no question that Rice’s involvement in the important

The Licensees did not except to the ALJ’s conclusion that Rice

did not abandon or relinquish ultimate control over the Licensees because

72a

station affairs described in the record was inconsistent with

the Licensees’ report that he was completely excluded from

the “customary” management and operation of the stations

and had “no managerial or policy role in the affairs” of the

Licensees. Rice’s activities went well beyond the Licensees’

current assertion that he was merely making “unsolicited

comments” or “shmoozing.”” In fact, he gave various

instructions to station officials that were carried out, and

employees he wanted fired were let go. Contemporary

Media, Inc., 13 FCC Red at 14455-56, 14457-58 4¥ 36-37,

39. Moreover, the Licensees never amended their reports to

disclose the extent of Rice’s involvement at the stations.

12. We also reject the Licensees’ strained contention

(Petition at 18-19) that evidence of Rice’s involvement in

station management in the form of three letters he wrote to

officials of two radio stations rejecting offers to purchase one

of the Licensees’ construction permits, inviting an offer to

purchase a station once it is on the air, and suggesting an

exchange of existing stations, is insignificant because it

shows involvement in ownership, rather than management

and operation. We find that this distinction is not persuasive.

The only case support cited by the Licensees is the Policy

Statement on Comparative Broadcast Hearings, 1 FCC 2d

393, 395-96 (1995), which discusses the Commission’s

former ownership integration criterion. That comparative

licensing policy, however, has no bearing on the issue here

or the factual record of Rice’s involvement in significant

managerial decisions at the stations. We affirm our original

conclusion that the decision to sell a broadcast property is a

fundamental management-level activity. Id. at 14457-58

. According to Rosten, The Joys of Yiddish 300 (1986), “shmooz

means a friendly, gossipy, prolonged, heart-to-heart talk.” This hardly

describes Rice’s persistent and extensive involvement in important day-

to-day decisions and operations at the stations.

73a

739. But even if we were to disregard this aspect of Rice’s

involvement, the other corroborative evidence cited in q39

Supports our conclusions. F inaily, contrary to the Licensees’

contention (Petition at 19), it is clear from the record that a

member of high-level] management officials had personal

knowledge of Rice’s decision-making activities; yet the

Licensees never disclosed these activities by correcting or

clarifying the representations made in their report to the

Commission. Id. at 14458-59 { 40.

13. Finally, we continue to believe that the

revocation ordered in this proceeding does not violate the

Eight Amendment. USS. y. Bajakajian, relied on by the

Licensees, which involved a forfeiture of currency for

violating a federal statute requiring the reporting of the

transportation of more that $10,000 outside the country,

appears to have little bearing on the Commission’s

f revocation authority. The court held that a “punitive

3 forfeiture” violates the Excessive Fines Clause if it is

“grossly disproportional” to the gravity of the offense. Id. at

2036. Revocation, however, is intended to ensure that

Stations will be operated in the public interest and does not

involve seizure of the Licensees’ property. Moreover the

Licensees’ argument (Petition at 24) that Rice has already

been punished for his crimes by the state of Missouri misses

the point of the Commission’s character inquiry, and their

further contention that they did not engage in intentional

deceit that would warrant revocation is not supported by the

record. We reaffirm that revocation is appropriate in this

case.

BS EET OLIN CHEE ie eS Dy ihe Gx) $

14. ACCORDINGLY, IT IS ORDERED, That the

Petition for Reconsideration filed July 27, 1998 by

Contemporary Media, Inc., Contemporary Broadcasting,

Inc., and Lake Broadcasting, Inc. IS DENIED.

ssi liehouiipiaaie toa loains iia eee

° al

74a

FEDERAL COMMUNICATIONS COMMISSION

s/Magalie Roman Salas j

Magalie Roman Salas

Secretary

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APPENDIX D

UNITED STATES COURT OF APPEALS

For The District of Columbia Circuit

No. 99-1198 September Term, 2000

Filed On:

Contemporary Media, Inc., et al., | UNITED STATES

Appellants COURT OF APPEALS

FOR DISTRICT OF

COLUMBIA CIRCUIT

FILED SEP 14 2000

CLERK

Vv.

Federal Communications Commission,

Appellee

BEFORE: Silberman, Henderson and Garland,

Circuit Judges

ORDER

Upon consideration of appellants’ petition for

rehearing filed July 31, 2000, and of the supplement thereto,

it is

ORDERED that the petition be denied.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

s/Robert A. Bonner

Robert A. Bonner

Deputy Clerk

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APPENDIX E

UNITED STATES COURT OF APPEALS

For the District of Columbia Circuit

No. 99-1198 September Term, 2000

Filed On:

Contemporary Media, Inc., et al.. .UNITED STATES

Appellants COURT OF APPEALS

FOR DISTRICT OF

V. COLUMBIA CIRCUIT

FILED SEP. 14 2000

Federal Communications Commission CLERK

Appellee

BEFORE Edwards, Chief Judge; Silberman,

Williams, Ginsburg, Sentelle,

Henderson, Randolph, Rogers, Tatel

and Garland, Circuit Judges

ORDER

Upon consideration of appellants’ petition for

rehearing en banc, the supplement thereto, and the absence

of a request by any member of the court for a vote, it is

ORDERED that the petition be denied.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY: _ s/Robert A. Bonner

Robert A. Bonner

Deputy Clerk

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APPENDIX F

WAYNE A. STILLINGS, M.D.

KARE & THERAPY, INC.

CERTIFIED IN PSYCHIATRY

AMERICAN BOARD OF PSYCHIATRY

AND NEUROLOGY

1034 SO. BRENTWOOD, SUITE 516

ST. LOUIS, MO 63117

(314) 721-8242

July 29, 1994

The Honorable Jack Edwards

RE: Michael Rice

Your Honor:

IDENTIFYING DATA:

Mr. Michael Rice, is a fifty-three year old single white male

who has been under my care from March 28, 1991 through

the present. I have seen Mr. Rice for approximately 230

treatment sessions.

INFORMATION SOURCES:

Michael Rice, the patient’s parents, Shirley and Mall Rice,

the preliminary hearing records from the Circuit Court of St.

Charles County, Missouri from March 21, 1991, the

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deposition of Timothy Fiorini taken September 9, 1991, the

report of Dr. J. Rabun, M.D., written September 27, 1991,

Serial MMPI Testing, the Fifteen Items Test, the records of

Barnes Hospital, the records of Dr. Ann Duncan, Ph.D., and

Dr. W. Hively, Ph.D.

HISTORY:

For a clinical psychiatric history and general psychiatric

assessment please refer to my prior reports dated June 17,

1991 and July 22, 1991 addressed to the Honorable Fred

Rush (attached). :

PSYCHIATRIC DIAGNOSIS:

1. Bipolar Affective Disorder, Mixed 296.6 — in

remission

2. Dysthymia 300.40 — in remission

3. Dissociative Disorder NOS 300.15 — in remission

4. Alcohol Abuse 305.00 — in remission

PSYCHIATRIC TREATMENT:

Mr. Rice has undergone extensive inpatient psychiatric

treatment (six months) and extensive outpatient psychiatric

treatment that has consisted of multiple psychotherapeutic

approaches and the use of psychotropic medication. He has

received covert desensitization, which is a technique to

normalize deviant thoughts and behavior patterns, especially

with regard to the issue of sexual deviancy, cognitive

behavior therapy, relaxation training,’ alcohol rehabilitation

treatment strategies, insight oriented psychotherapy and

response prevention treatment. In addition, he has been

treated with psychotropic medications. Currently he is

taking Lithium 900mg per day and Prozac 40 mg per day.

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RESPONSE TO TREATMENT:

When Mr. Rice was initially seen he clearly had a chronic,

long-standing psychosis as diagnostically demonstrated on

the Minnesota Multiphasic Personality Inventory, which is

an objective psychiatric diagnostic test that is highly accurate

and highly reliable. At that time he was suffering from two

psychotic conditions, Bipolar Disorder and Dissociative

Disorder. The overall MMPI profile underscores a chronic

pattern of psychiatric maladjustment of long-standing

duration. Based on history, testing and mental status

examination Mr. Rice had the onset of a psychosis in his late

teens or early twenties associated with Bipolar Disorder and

Dissociative Disorder. This psychosis was chronically

present and went untreated until March 1991. The Fifteen

Items Test for malingering is negative, which means that Mr.

Rice is not malingering any type of mental illness

whatsoever. Mr. Rice has undergone extensive psychiatric

evaluation and psychiatric tréatment to which he has

responded quite well. He has been fully compliant with all

psychiatric treatment recommendations. He underwent an

extensive double crossover treatment protocol on Lithium to

ensure that his Bipolar Affective Disorder and Dissociative

Disorder are treatable and would respond to the point that

they would go into remission (not active disease processes).

This was performed in the following manner: Mr. Rice was

assessed and his symptoms, thoughts and behaviors in an

untreated state were characterized fully. Then treatment with

Lithium and Prozac was initiated. Full psychiatric

assessment was done on the medications, which revealed the

absence of symptoms of Bipolar Disorder and Dissociative

Disorder. Once the disorders abated the Lithium and Prozac

were withdrawn. Within one week the Bipolar Affective

Disorder and Dissociative Disorder returned in full force

with the same symptom profile as that prior to treatment. He

was then crossed over for a second time (double crossover)

back onto the Lithium and Prozac, and his symptoms of

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these disorders once again disappeared totally. His Lithium

and Prozac levels and compliance in taking the medications

can be monitored and will be monitored if appropriate on a

regular basis to ensure that Mr. Rice is taking his

psychotropic medications, which he has been doing

faithfully. The Dysthymia has fully abated as well with

psychotherapy and psychotropic medications. Also he has

been successfully rehabilitated with respect to the Alcohol

Abuse. In addition to individual treatment he has attended

AA and has been sober for several years. In summary, all of

Mr. Rice’s psychiatric disorders have been successfully and

completely treated.

MENTAL STATE AT THE TIME OF THE OFFENSE:

During the period of time covered by the allegations, Mr.

Rice was in the state of a chronic psychosis and was

suffering from the four above-mentioned psychiatric dis-

orders, which rendered him incapable of conforming his

conduct and behavior to the requirements of the law. He was

unable to distinguish right from wrong and Mens Rea was

absent. Simply stated, individuals with Bipolar Disorder

frequently engage in inappropriate, impulsive, uncontrollable

sexual behavior. The Bipolar Disorder in association with

the Dissociative Disorder and their attendant psychoses

caused Mr. Rice to dissociate and perceive himself as an

adolescent and not as an adult, and also caused him to act in

accordance with an adolescent perception of responsibilities

and not in the frame work of adult responsibilities.

Therefore, Mr. Rice’s sexual activities during his adult life in

an untreated psychiatric state were perceived by him as

normal and as occurring by mutual consent.

CASE ANALYSIS:

1. Mr. Rice does not suffer from pedophilia.

2. He has been successfully treated for:

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Bipolar Affective Disorder, Mixed

Dysthymia

Cc. Dissociative Disorder NOS

d.

Alcohol Abuse

All the above psychiatric disorders are in remission.

cS Mr. Rice’s psychiatric disorders are genetic/bio-

chemical disorders and therefore are quite amenable

to treatment. Certainly these disorders are not a

result of his own choice nor actions and are not

controllable by Mr. Rice without the assistance of

psychiatric treatment.

At the time of commission of the alleged offenses

Mr. Rice was suffering from the aforementioned

mental disorders and as a result he was unable to

conform his conduct and behavior to the

requirements of the law, was unable to perceive that

he was doing wrong nor could he distinguish right

from wrong and was incapable of Mens Rea.

3 All disorders have been successfully treated and will

remain in remission indefinitely with continued

psychiatric treatment.

Since Mr. Rice’s disorders are in remission and will]

remain so he will not be a recidivist.

Mr. Rice has demonstrated genuine remorse for his

actions and their effects on others with respect to the

current legal proceedings throughout treatment.

8. Mr. Rice can continue to be a productive citizen in

our society.

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9. It is my recommendation that Mr. Rice have

continued psychiatric treatment on a monthly basis

for the rest of his life. If he does so, he will be able

to conform his behavior to the requirements of the

law. Supervised probation would be the most

appropriate psychiatric course of action in

conjunction with continued indefinite psychiatric

treatment on a regular basis.

Very truly yours,

s/W. Stillings

Wayne A. Stillings, M.D.

Board Certified in Psychiatry by the

American Board of Psychiatry and Neurology

Assistant Professor of Clinical Psychiatry

Washington University School of Medicine

WAS/mf