TELESTAR SAYS FCC AND MCI FORCED IT INTO BANKRUPTCY
OREM TELECOMMUNICATIONS FIRM GETS LAWMAKERS’ HELP IN URGING PROBE OF AGENCY
A failing telecommunications firm in Orem has enlisted the help of Utah's congressional delegation to investigate actions by the Federal Communications Commission that have allegedly bankrupted the company.
Noel Stewart, president and founder of TeleSTAR Inc., says the FCC and MCI Telecommunications Inc. have teamed up against his fledgling firm that once envisioned building a digital telecommunications system serving the western United States and is now nearing liquidation.Stewart has apparently convinced Utah Republicans Rep. Howard Nielson and Sen. Jake Garn that something stinks at the FCC, and both congressmen have requested congressional investigations into alleged FCC complicity with Tele-STAR's competitors.
"The commission's actions smack of discrimination against the fledgling company in favor of its giant competitor," Neilson said in a press release announcing the House investigation earlier this year.
"Something is wrong here, and I want some answers."
In a terse letter to FCC chairman Dennis R. Patrick, Garn said: "In the 13 years (as a senator) I have never seen such stonewalling of a decision by an agency of the government or such unequal treatment of petitioners.
"I am personally offended and do not intend to stand idly by," Garn said.
Rep. Wayne Owens, D-Utah and Sen. Orrin Hatch, R-Utah, have also fired off letters to the FCC and to legislative colleagues charged with investigating such matters.
An investigation of the FCC by a House subcommittee of the Energy and Commerce committee is underway, but a Senate probe is on hold until FCC acts on the TeleSTAR case.
Meanwhile, Stewart, a 44-year-old electrical engineer, is working full-time waging his own legal war against the FCC and TeleSTAR's frustrated shareholders, who have requested a federal bankruptcy court judge order a liquidation of the company.
The battle began in 1985 when MCI and Western TeleCommunications Inc. (WTCI) complained to the FCC that TeleSTAR failed to apply for FCC permits before constructing a telecommunications system between Salt Lake and Denver.
The commission's administrative law judge found TeleSTAR guilty of intentionally violating FCC rules and denied the firm a license to operate. It took three years for TeleSTAR's appeal of that decision to make it the full commission last December. But, instead of either upholding or overruling the previous order, the commission remanded it for a rehearing.
Meanwhile, as TeleSTAR's appeal wound its way through the FCC, Stewart fired back at the competition by submitting complaints against MCI for building a 100-mile microwave route in Pennsylvania without proper permits. An FCC administrative law judge found MCI had broken the rules and fined the telecommunications giant $10,000, but didn't yank MCI's operating license.
Ironically, that fine is what has
TeleSTAR, Nielson and Garn complaining.
"MCI is getting off with a slap on the wrist, while TeleSTAR has been hanging on by the skin of its teeth for over three years and has been forced into bankruptcy proceedings," Nielson said. "Throughout the review (of MCI's case), MCI has been allowed to continue to operate, while TeleSTAR has been completely shut down" during its review period.
In a letter to chairman Patrick, Garn criticizes the FCC's comparatively swift handling of MCI's case, while prolonging TeleSTAR's appeals. He said another hearing will involve 120 witnesses over 12 days, when the 1984 hearing over 3 days already produced 3,000 pages of testimony and documents from 10 witnesses.
"It appears to me that there is no reason for a remand proceeding," Garn wrote, noting the FCC has a petition, supported by its staff, to make a final ruling one way or the other.
"Why is the commission delaying when the choices are clear cut?" Garn asked Patrick, referring to either supporting or overruling the administrative law judge's decision to deny TeleSTAR an operating license.
The FCC has declined to comment on TeleSTAR's cases because they are restricted proceedings, prohibiting the agency from commenting.
But MCI calls TeleSTAR's and Nielson's accusations of complicity "ridiculous."
"There's no complicity on our part to drive them (TeleSTAR) out of business," MCI spokesman John Houser said. "We have nothing against competition, but we don't like to see the competition come in and bend the rules to meet their own needs."
He said MCI's violations were unintentional and a result of communication problems within the company, which have since been corrected.
TeleSTAR has balked at the FCC's remand order, refusing to submit further evidence for additional hearings, which prompted a new order denying TeleSTAR an operating license. But Stewart has appealed that latest order to the commission for review, hoping that will get a final determination from the FCC on TeleSTAR's status.
As he waits on the FCC, Stewart said his failing firm is in its eleventh hour. Later this month a federal bankruptcy judge will consider a motion to liquidate the company. Stewart said the motion comes from frustrated shareholders "who want to tan my hide" for the $3.5 million they invested in TeleSTAR.
But Stewart holds some hope in recent reports that the FCC will act within the next two weeks.
If the FCC grants TeleSTAR an operating license, Stewart has a better chance of fighting off enemy shareholders and buying time to reorganize his company and possibly restart his project.
But the Vietnam veteran, who confesses that his tenacity often got him in trouble with his superiors, says he's prepared to continue the fight if the FCC upholds the administrative law judge's order to deny an operating license.
He could take that final ruling to a federal appeals court, but he stands to lose his company in bankruptcy court if the judge decides chances are slim TeleSTAR will succeed in an appeal.
If he finally loses his enterprise, Stewart, who has already racked up a $140,000 legal bill, said he will go after MCI with a $500 million civil damages suit.
He has already filed additional complaints with the FCC against MCI and WTCI for new allegations of building without proper permits. He has also filed an appeal in the Washington, D.C., Circuit Court on the FCC's alleged mishandling of MCI's case.
"I thought of giving up, but if I do it will just make it easier for others to give up," he said. "Somebody's going to appreciate this."