PTI blames admin for loss of board member

Gov. Juan N. Babauta has pushed for the adoption of enforcement provisions and bonding requirements in connection with the proposed purchase of Verizon’s local operations, saying that prospective buyer Pacific Telecom Inc. has already violated an agreement sanctioned by the Commonwealth Telecommunications Commission by failing to disclose who its board members would be.

That, according to PTI’s Jose Ricardo Delgado, is only because, with the overlong process his company has been subjected to by the Babauta administration, PTI has been scrambling to keep its prospective board members onboard and interested in going through with the matter. Delgado said PTI has already lost one of these potential board members, Warren Harruki, who had agreed to be PTI’s vice chairman.

“It is of little wonder that PTI is having trouble convincing its all star cast of board members to remain interested in being part of the CNMI business community when almost nine months have passed since the latest submission to the CTC and there is no clear-cut approval, when this administration is intent on favoring some companies to the detriment of others, and when there is a threat of continued litigation and harassment of PTI by the administration on an ongoing basis.

“The fact that PTI has not submitted a final list is simply because we have been trying to hold on to some of those who signified their intentions to join the board. Harruki, who had been on standby for six months, has since moved on to other endeavors. Because of all the roadblocks thrown in PTI’s way by the administration, the CNMI has yet again squandered the possibility of a having top notch business person contribute to the development of its economy,” said Delgado.

He added that PTI is surprised that the administration would actually make an issue out of the matter since the administration’s “highly controversial tactics” are ultimately the reasons why the company could not submit a complete list on time.

“Moreover, this unrelenting harassment of PTI will continue to sour the investment climate in the CNMI. Based on the existing state of the economy, this is something this administration should take full responsibility for,” he added.

Babauta’s lawyer, Assistant Attorney General James D. Livingstone, and CNMI consumer counsel Brian Caldwell said the list of prospective board members was supposed to be submitted by the PTI pursuant to one of the agreed points in the Final Agreed Negotiation Report, which was earlier released by CTC settlement officer Sean Frink.

They said PTI’s “written commitment” to disclose the prospective board members and their resumes was due on May 15. To date, however, the PTI has yet to make the disclosure before them and the CTC.

“It is extremely disappointing that the purchasers have failed to comply with their first obligation. We hope that they take their obligations much more seriously,” the government lawyers said.

Livingstone and Caldwell filed Monday with the CTC a joint submission answering certain questions about their proposal for the establishment of enforcement provisions to ensure PTI’s compliance with its obligations. They have also proposed requiring the company to post at least $10 million as performance bond to ensure its financial capability to fulfill its obligations.

Delgado also said the delay in the submission of their list of prospective board members is because “there are some who are no longer sure they want to be part of the mess that Saipan has become under this present administration: power failures, a bankrupt government, and an administration hell bent on scaring away and impairing foreign investment.

“After all, after repeatedly violating agreements with the CTC as far as bringing in new points of contention, this latest salvo with the bond and other ludicrous proposals has delayed our approval,” he said.

The two lawyers said strong enforcement provisions are necessary to curtail alleged abuses that have been committed by Micronesian Telecommunications Corp., the company currently operating Verizon.

Despite the existence of the Commonwealth Telecommunications Act, they said that MTC has been charging separate toll for interisland calls within the CNMI and rates based upon tariffs “that were never properly subjected to the tariff implementation process,” among other alleged abuses.

“Clearly, despite being a regulated company, MTC does, and will continue to, abuse the present system. Therefore, any aggrieved party should be able to seek minimum substantial penalties from MTC for their non-compliance with [an approved settlement]. A strong minimum penalty amount would further deter abuses,” they said.

The governor’s proposed enforcement procedures outline provisions providing for a $10,000 minimum penalty against PTI if the firm violates an approved settlement. Livingstone and Caldwell noted, however, that the amount is even well below the $25,000 per day fine the CTC is currently authorized to impose.

The proposed enforcement provisions would also require PTI to submit an annual report to ensure compliance with its obligations, which should cover the notices of violations it received for the year and the actions done to correct them. This, among other provisions, would help ensure that the CTC knows what is happening with PTI, so that it could conduct an investigation when necessary, the lawyers said.

“The enforcement mechanism does not limit the power of the Commission to undertake enforcement actions and it places the Commission in a role similar to that of a court in which it sets the ground rules and makes all final decisions,” they added.

They said that, while current laws allow for remedy by an aggrieved party, the proposed enforcement mechanism would help avert future litigation, saving time and money and encouraging the parties to assert their rights. The government lawyers also considered the funding problem the CTC is currently facing to emphasize the need for a special enforcement mechanism.

The proposed enforcement provisions state that the CTC should retain jurisdiction over enforcing an order that would approve the telecommunications sale. They seek to allow any individual or organization to file a complaint with the CTC and serve it on PTI to enforce the order.

Under the proposal, anyone who believes that PTI is violating the settlement can provide the company a written notice of violation, which will give the firm 30 days to cure violation. After 30 days, the complaining entity may then file with the CTC a complaint that attaches the written notice.

The CTC shall then retain jurisdiction to award damages and costs incidental to the complaint. The proposal also provides for a minimum penalty of $10,000 per day of violation up to $500,000 under existing law from the first day after the cure period or from the day the violation started until it is remedied. The penalty will accrue from the first day of the violation if it was intentionally committed.

As for the proposed bond requirement, the lawyers said the form of security does not matter, as long a financial guarantee exists to ensure PTI’s compliance with its commitment. As an example, they said the PTI could secure a letter-of-credit from a bank or create an escrow account that the CTC could draw upon for violations.

‘Anti-business’

Delgado earlier said the bond proposal is a manifestation of Babauta’s bias against him, noting that the governor has not given his company any incentive instead.

Delgado had said that the administration’s prejudicial stance against his company’s proposed venture in the CNMI paints a negative picture of the islands to potential foreign investors.

The MTC had also expressed its disagreement over the proposed enforcement provisions and bond requirement, saying the bond would just add to the cost of business operations, curtailing the money’s use for other purposes that could benefit employees.

The MTC underscored the existence of the CTC’s regulatory enforcement powers over telecom companies, claiming that the company has operated well since 1981 and has one of the largest workforce locally.