According to the Consent Decree, the Canadian National Railway discovered that on several occasions it had acquired control of a number of wireless radio licenses without securing the FCC’s prior consent to the transactions. Following this discovery, the company initiated a comprehensive internal audit of its FCC authorizations, uncovering multiple unauthorized transactions and system modifications going back to 1995. Additionally, the company found it had deployed several hundred wireless radio stations without first obtaining licenses, with some violations dating back as early as 1990. The Consent Decree indicates that most of the affected radio stations remained in operation in 2013.

In February 2013, the company voluntarily disclosed its findings to the Commission in connection with multiple requests for Special Temporary Authority and remedial filings. What followed was a Bureau investigation into the full extent of the company’s noncompliance. The investigation confirmed that Canadian National Railway completed more than a dozen substantial and pro forma transactions and deployed, modified and/or operated hundreds of wireless facilities without FCC approval.

While the investigation did not uncover any evidence of interference complaints resulting from the unauthorized operations, the company nevertheless acknowledged its extensive noncompliance. The FCC described the “scope and duration of these unauthorized operations” as “unprecedented in the history of the Commission.” And the Commission’s response was equally as ground-breaking: Canadian’s civil penalty “represents the largest in FCC history” for a wireless operator’s unauthorized radio operations and unauthorized transfers of control. In addition to the payment of civil penalties, and an express admission of rule violations, the company also agreed to implement a three-year compliance plan and to maintain the internal compliance plan that was implemented as a result of the internal audit.

While the noncompliance and civil penalty may have been unprecedented, many things included in the consent decree are becoming part of the new normal. As with several other consent decrees we blogged about in recent weeks, the settlement included an admission of liability by Canadian National Railway and referred to monetary payments as “civil penalties” rather than “voluntary contributions.” This is further evidence of the substantial shift in the Enforcement Bureau’s policy for settlement like negotiating consent decrees. Wireless licensees should pay close attention to these actions and take them into consideration when choosing a course of action in the face of discoveries about possible nonconformance. The Canadian National Railway Consent Decree also serves as a strong reminder that any company or enterprise making an acquisition should always conduct sufficient due diligence to ascertain whether radio operations requiring FCC licenses are involved and, if so, to ensure that the proper authorizations have obtained and maintained and that any FCC procedural requirements connected to the proposed acquisition are identified and followed.

Notably, the Bureau found that, prior to responding to the NAL, Lubbock Aero had not provided the specific date prior to April 1, 2009, when it last operated the radio station. Yet in its response to the NAL, Lubbock Aero argued a forfeiture was inappropriate because the operation during the seven-day period falling within the statute of limitations – April 1, 2009, being “the date of Lubbock Aero’s last broadcast activity on the frequency,” according to the company – was “’infrequent,’ typically lasting no more than 30 seconds, and without (to its knowledge) complaint of any interference.” The Bureau considered this description of brief, infrequent communications enough of an admission that there had been unauthorized operation within the last few days of the limitations period to warrant a forfeiture; the Bureau separately noted that circumstances made it “highly unlikely” that Lubbock Aero did not engage in operations on the frequency during the seven days after March 25, 2009. In short, the Bureau found that the preponderance of the evidence warranted a finding that there had been unauthorized operations after March 25, 2009, even though no specific transmission was identified. The Bureau emphasized that any unauthorized operation “is a serious violation” regardless of frequency or duration, explaining that, once it concluded it was more probable than not that there had been unauthorized operations, it could have adjusted the base forfeiture upward for unauthorized operations that occurred outside the limitations period.

The Bureau’s order is also noteworthy in two other respects. It reminds operators that, in enforcement proceedings, the Bureau does not consider absence of interference a mitigating factor or a basis for cancellation of a proposed forfeiture. (Indeed, interference is a violation separate from unauthorized operation.) In the case at hand, the Bureau did remark on, but did not describe as being of decisional importance, the potential for interference with authorized operations at 123.300 MHz, which is reserved for “aviation support stations used for pilot training, coordination of lighter-than-air aircraft operations, or coordination of soaring or free ballooning activities.” (The order is not entirely clear, but Lubbock Aero’s operations may have been consistent with these purposes.) Further, the Bureau suggests that fines for unauthorized operations by past license holders whose authorizations have expired will not be any less severe than those applicable to persons who operate without ever having a license, other factors meriting adjustment otherwise being the same, thereby providing a reminder to licensees to renew in a timely fashion.