Babauta asks CTC to impose sanctions on PTI

Facing a lawsuit over public land leases barely two weeks after taking over Verizon’s operations, Pacific Telecom, Inc. stands in front of another possible obstacle, with Gov. Juan N. Babauta asking the Commonwealth Telecommunications Commission Friday to impose sanctions of at least $170,000 on the company for alleged violation of a CTC order.

Babauta said PTI failed to comply with the commission’s order requiring the company to file all financing documents at least 10 days before closing the telecom firm takeover deal with Micronesian Telecommunications Corp. PTI has officially announced purchasing all of MTC’s common stocks last Sept. 20.

Babauta’s counsel, assistant attorney general James Livingstone, said PTI only submitted incomplete financing documents to the CTC on Sept. 26.

“It did provide drafts of some of the documents on Aug. 24, 2005, but that production was not complete and the drafts provided were changed prior to closing. In other words, PTI did not comply with its obligations at all,” Livingstone said.

“PTI is off to an inauspicious start. The commission’s final order in this matter imposed only one obligation on PTI prior to the closing of this transaction,” Livingstone said. “Providing the final financing documents 10 days prior to closing was the one obligation that PTI had to meet. It blew off this obligation. And it has provided no reason for doing so.”

Livingstone said the company should be sanctioned to remind it that the CTC’s orders should be respected and followed. Citing a provision of Public Law 12-39, he said the commission could impose a fine of $25,000 per day of violation or a total of $500,000 for continuing violations of its orders.

But the governor expressed his belief that the appropriate fine would be $10,000 per day from Sept. 10, 2005—the 10th day prior to the telecom transaction’s closing—to Sept. 26, 2005, when PTI made submissions of financing documents to the CTC.

He found it troublesome that PTI made no justification as to why it had to close the transaction with MTC on Sept. 20, when the CTC had given the companies until Oct. 1 to consummate the multi-million-dollar telecom deal.

“If the commission lets PTI ignore its orders without penalty or valid excuse, the commission will have more trouble regulating it in the future,” the governor’s attorney said.

Livingstone said PTI has yet to submit to the CTC a copy of the final purchase and sale agreement.

“The final purchase and sale agreement is particularly important because PTI and Verizon [MTC] made numerous representations throughout the sales proceedings regarding which of MTC’s obligations would undertake and which obligations would remain the obligations of Verizon despite the closing,” he said.

PTI has reportedly assumed MTC’s obligations relating to Verizon’s leases of public lands. The Marianas Public Lands Authority and its board filed with the Superior Court last Tuesday a civil action against MTC and PTI, which has sought to evict Verizon from their main Susupe offices and other facilities.

The MPLA and its board also asked the Superior Court for still unspecified damages for Verizon’s use of public lands where the telecom firm’s cables are buried. They sued Verizon for alleged violation of the Fiber Optic Act by charging inter-island tolls since it began providing services between Saipan, Tinian and Rota over the fiber optic cables in 1997. Verizon only began to phase out inter-island tolls when PTI took over MTC last Sept. 20.

The MPLA accused Verizon of breaching lease agreements other than that pertaining to the Susupe property. The leases pertain to public lands in As Gonno, Garapan and Kagman, with each measuring 929-sqm, and a 2,090-sqm lot in Sinapalu, Rota. The MPLA and Verizon executed the lease agreements on the first three properties in 1990, while they agreed on the Sinapalu lease in 1992. All the leases have a term of 25 years and entail an option for Verizon to extend the term for an additional 15 years.

MPLA’s attorneys pointed out that those leases provided that Verizon should pay the public agency any surplus resulting from subtracting the minimum annual rental from 3 percent of the gross receipts within 45 days from the end of the quarter, in addition to the guaranteed minimum annual rental. Gross receipts pertain to any revenue derived by Verizon from its services in connection with the use of the leased public lands. They said Verizon failed to pay MPLA a percentage of its gross revenues pursuant to the lease agreements.

The lease agreements also required MPLA’s approval to any lease assignment. Its attorneys said the MPLA had no consent to the assignment of the leases from MTC to PTI, when the latter company acquired the former’s outstanding stocks last Sept. 20.

The MPLA also wants Verizon to pay for public lands easement for buried cables, from which no payment has allegedly been made by the telecom firm to the public corporation since the 1980s.

But former Marianas Public Lands Corp. executive director William R. Concepcion took the cudgels in defending Verizon, telling the current MPLA board not to be blinded by strict monetary gain. The MPLC is the MPLA’s predecessor. Concepcion became the MPLC’s executive director from October 1989 to May 1994, rising from the ranks since he had joined the agency as chief planner in July 1979. Concepcion was the MPLC’s executive director when the agency entered into four lease agreements with MTC, which are among the subjects of the current MPLA suit.

Concepcion said there was an understanding between MTC and the Trust Territory government that the company has the right to use the public right of way to place its buried cables and telephone boxes. He said the improvement and expansion of the telephone system was viewed by the MPLC not as commercial venture but a quasi-public capital improvement project in partnership with the CNMI government.

During his term, Concepcion said public lands were being leased not strictly for strict monetary gain but for the “greater impact in inducing the economic growth and enhancing the quality of life of the people.”

Both the MPLA and Verizon camps, though, have expressed willingness to get back to the bargaining table while the lawsuit is ongoing. Before the filing of the suit, the MPLA had demanded Verizon to pay it some $2.1 million.