by Christopher Zoukis

The Federal Communications Commission (FCC) slapped Securus Technologies with a $1.7 million fine for providing misleading and inaccurate information as part of its application to transfer control to another company, but still approved the transfer on October 30, 2017.

Securus, one of the nation’s largest providers of prison and jail phone services, applied to the FCC for permission to transfer control of the company to Platinum Equity, LLC in May 2017. The transfer would facilitate the sale of Securus to Platinum Equity, a firm owned by Gores Trust with Tom Gores and Holly Gores as trustees, for $1.6 billion. Tom Gores also owns the Detroit Pistons basketball team. [See: PLN, Oct. 2017, p.48].

During the period allowed for public comment on the transfer, a group of prisoners’ rights advocates, including the Human Rights Defense Center (HRDC), which publishes Prison Legal News, filed a petition to deny the application. The petitioners argued that Securus had routinely violated FCC rules and otherwise “acted to demonstrate that it lacked the character qualifications to hold Commission authorization.”

In addition to its general unfitness to hold FCC licenses, the petitioners discovered that Securus had submitted a letter to FCC Chairman Ajit Pai during the review period that included misrepresentations designed to speed approval of the transfer. When this was brought to the FCC’s attention, an investigation ensued that ultimately found wrongdoing by the company. Securus was found to have acted without candor and in an untruthful manner, and fined $1.7 million as part of a consent decree.

But the transfer and sale were still allowed to proceed.

Chairman Pai, in a statement attached to the order approving the transfer, called Securus’ actions “a very serious matter” that required “a strong deterrent.” But in a blistering dissent to the approval, Commissioners Mignon L. Clyburn and Jessica Rosenworcel decried the business-as-usual manner in which the transfer was approved.

“Is this transfer of control and consent decree just a slap on the wrist? More like a pat on the back,” wrote Clyburn and Rosenworcel. “And it is precedent-setting. Until now, the FCC has never granted a transfer of control when a company has made misrepresentations during the review process.”

The dissenting Commissioners noted that the $1.7 million fine, levied for “violating our rules, and our trust,” amounted to just one-tenth of 1 percent of the value of the transaction, and “0.12% of the kickbacks Securus paid to correctional facilities from 2004-2014.” Clyburn and Rosenworcel, who have championed meaningful reform of the prison telecom industry, also highlighted Securus’ historical willingness to operate “on the bleeding edge of legality” – alluding to the company’s practice of renaming connection fees “first minute rates” in order to avoid an FCC ban on connection fees. See: In the Matter of Securus Technologies, Inc., FCC File No. EB-IHD-17-000225128.

Prior to joining the FCC, Chairman Pai worked at a law firm where Securus was one of his clients. HRDC had filed an ex parte comment on August 9, 2017 that called on Pai to recuse himself from matters involving the company, including the transfer of control to Platinum Equity.

“Once again Mr. Pai is going to act on an issue that inures exclusively to the benefit of Securus Technologies, his former client, and against the public interest in general and captive market of millions of prisoners and their families whose human contact is monetized for the benefit of Securus and its hedge fund owners in particular,” HRDC wrote in its comment, which resulted in no response from or action by the FCC. [See: PLN, Sept. 2017, p.36].