Federal Regulatory Agencies
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SEC Issues Administrative Proceeding Involving Citigroup
WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following administrative proceeding (No. 3-18646) involving Citigroup:ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER
I. The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Citigroup Inc. ("Respondent").
II. In anticipation of the ... Show Full Article WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following administrative proceeding (No. 3-18646) involving Citigroup: ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER I. The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Citigroup Inc. ("Respondent"). II. In anticipation of theinstitution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order"), as set forth below.
III. On the basis of this Order and Respondent's Offer, the Commission finds1 that:
Summary
These proceedings involve Citigroup Inc.'s ("Citigroup") failure to devise and maintain a sufficient system of internal accounting controls concerning a wholly-owned subsidiary, the Mexican bank Grupo Financiero Banamex, S.A. de C.V. ("Banamex"), sufficient to provide reasonable assurances that Banamex's transactions were recorded as necessary to permit the preparation of Citigroup's financial statements in accordance with generally accepted accounting principles ("GAAP") and to maintain accountability for assets. Over the period between 2008 and February of 2014, Banamex loaned billions of dollars on the basis of invoices and work estimates - also known as "accounts receivable factoring" in the banking industry - reflecting work performed for Petroleos Mexicanos, S.A. de C.V. ("Pemex") by Oceanografia, S.A. ("OSA"), a Mexican marine services provider for the oil industry in the Gulf of Mexico. However, some of the factored documents received from OSA, amounting to about $400 million, were fraudulent and included forged signatures. Banamex had deficient internal accounting controls over its accounts receivable factoring program used by OSA, including lacking internal accounting controls necessary to test the authenticity of the factored documents prior to advancing funds to OSA and recording them as accounts receivable. Banamex also lacked internal accounting controls sufficient to identify and respond to red flags that arose during the relationship between Banamex and OSA potentially warning Banamex of the ongoing fraud. Instead, it was not until the Government of Mexico itself accused OSA of failing to post a satisfactory insurance bond and decided to temporarily cease doing new business with OSA in February of 2014, at a time when Banamex had approved funding of over $600 million dollars to OSA and was still advancing monies to OSA, that Citigroup discovered many of the work estimates were falsified. Banamex's internal accounting controls surrounding the factoring program were not sufficient to allow the earlier detection of OSA's fraud. As a result, Citigroup recorded nearly $475 million in expenses in its financial statements. In particular, Citigroup adjusted its fourth quarter and full year 2013 financial results downward by the then-estimated $360 million loss and recognized an additional loss of $113 million in 2014, when Citigroup had determined the full magnitude of the fraud.
Respondent
1. Citigroup, a Delaware corporation headquartered in New York, New York, is a diversified global financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers. At all times pertinent to this Order, Citigroup's securities were registered with the Commission pursuant to Section 12(b) of the Exchange Act, and its securities traded on the New York Stock Exchange under the symbol "C."
Other Relevant Entity
2. Banamex is a Mexican corporation and is a wholly-owned subsidiary of Citigroup. It was created in August of 2001, when Citigroup acquired Banamex's predecessor entity Grupo Financiero Banamex-Accival. Banamex is a diversified financial services provider to a broad range of consumer and corporate customers, primarily in Mexico, and is the second largest bank in Mexico. Facts
Banamex's Accounts Receivable Factoring Program
3. From at least 2008 through February 2014 (the "Relevant Period"), Banamex offered accounts receivable factoring to certain customers. An accounts receivable factoring product normally involved a supplier of goods or services receiving advances from Banamex in exchange for the supplier assigning to Banamex all rights, including the right to receive payment, under the supplier's invoices to buyers of its goods and services. Depending on the arrangement, either the supplier or the buyer of the goods and services was liable to remit payment to Banamex.
4. Under an accounts receivable factoring program, Banamex typically "discounted" or "factored" the invoice by advancing to its customer an amount less than the face value of the factored invoice.
5. Throughout the Relevant Period, the Banamex accounts receivable factoring facilities were provided in two of Citigroup's banking divisions: (1) the Consumer and Commercial Bank ("CCB") and (2) the Institutional Clients Group ("ICG"). Regardless of whether the facility was in CCB or ICG, Banamex had its own employees in Mexico that were responsible for implementing and monitoring Banamex's accounts receivable factoring facility. All of ICG's global accounts receivable factoring facilities, including those originating within Banamex, were part of the Treasury and Trade Services ("TTS") business at Citigroup.
6. Throughout the Relevant Period, OSA, a customer of Banamex, was a major oil field services provider in Mexico. Among other things, OSA, in operation since the 1960s, provided Pemex with construction, maintenance, and vessel-chartering services for oil exploration, extraction, and production in the Gulf of Mexico. OSA's largest customer was the Mexican Government-owned and -operated oil company, Pemex.
7. Throughout the Relevant Period, Pemex was a financially stable, large oil company with a high credit rating assigned by Banamex and the financial backing of the Mexican Government. Banamex, by contrast, had assigned OSA a lower credit rating.
8. OSA began using Banamex's accounts receivable factoring program in approximately 2008, and over the Relevant Period received over $3.3 billion in financing from Banamex (the "Program"). Over the life of the Program, as some amounts were repaid and additional advances were made, the outstanding amount of accounts receivable on Banamex's financial statements grew to over $580 million and was authorized to grow to approximately $700 million.
9. OSA was at first a CCB customer but was transferred to ICG in 2012, as OSA and the factored amount grew in size.
10. As a result of OSA's fraud, which was not detected earlier in part because of the internal accounting controls deficiencies identified herein, Banamex eventually failed to collect on over $400 million in repayments owed to it under the Program. Banamex Lacked Sufficient Internal Accounting Controls Governing the Transfer of Clients Between Divisions
11. As part of the transfer of the Program from the CCB business to the ICG business in 2012, the Program was selected as one of the products under which Banamex sought to increase its market share and profitability.
12. The CCB group normally manages relationships with customers that are under a certain relatively small market capitalization threshold, whereas the ICG group manages relationships with customers that have a much larger market capitalization, in the hundreds of millions of dollars.
13. Around the same time that the OSA relationship was transferred from the CCB group to the ICG group within Banamex in 2012, OSA was identified by Banamex as a "target client."
14. After the transfer, OSA was subject to a credit approval by Banamex ICG's Independent Risk function, customer acquisition due diligence, and an ICG business process designed to ensure that ICG assets were deployed effectively (the Global Deal Review or "GDR," described below). However, Banamex's internal accounting controls required insufficient additional safeguards, procedures, or diligence with respect to a client upon the transfer of a relationship from CCB to ICG. In particular, Banamex's Independent Risk function did not undertake an additional risk assessment with respect to OSA's use of the Program. Banamex's internal accounting controls did not require it to, for example, revisit the designation of the Program as a credit of Pemex as opposed to of OSA (as further discussed below, and which would have indicated that the advances should in reality have been considered a credit of OSA), review the payment history of the credit facility (which would have revealed that some of the payments were not being received from Pemex directly), or review the controls surrounding the processing of factored documents under the Program (which, as discussed further below, were deficient), or to otherwise do any additional diligence on OSA or its principals with respect to the Program (which would have revealed publicly available allegations of serious fraud, money-laundering, and tax avoidance with respect to such individuals).
15. In addition, Banamex did not require that CCB and ICG share information at the time of the transfer, leading to inconsistencies in how risk was evaluated and the size of the facilities each unit would agree to extend to any particular client, and to OSA in particular. Specifically,
CCB's internal assessment of OSA's use of the Program was not positive for reasons that included its understanding of the reputational risks that made doing business with OSA and its principals undesirable, and CCB was looking to reduce its exposure. But that information was not shared with ICG in 2012, and was not required under Banamex's procedures to be shared. Rather than reduce Banamex's OSA exposure, Banamex's ICG continued to increase OSA's use of the Program by hundreds of millions of dollars.
16. The response to publicly available information regarding OSA and its principals was insufficient. Media reports alleged that OSA had defrauded another Mexican bank of more than $30 million dollars in 2006 under a credit product almost identical to the Program, by submitting fraudulent invoices to obtain financing from that bank, i.e. in the exact manner in which OSA defrauded Banamex. This information was publicized in the media and available to Banamex.
17. Although Citigroup and Banamex had procedures for information sharing, such as periodic country reviews, Banamex's internal accounting controls did not specifically require it to share such reports regarding OSA's negative reputation with TTS management or TTS risk officers (nor did Citigroup's internal accounting controls require that this information be shared outside of a subsidiary into the broader TTS management or risk officers).
18. In 2012, another Citigroup subsidiary refused to permit one of OSA's two principals ("Executive A") to open private bank accounts at that Citigroup subsidiary. In doing so, the subsidiary noted that Executive A presented a serious negative reputational risk, given the publicly available information about him, his dealings, his corrupt connections to the Mexican government, and his alleged violations of law. Accordingly, while one Citigroup subsidiary refused to even open a bank account for Executive A, another Citigroup entity, Banamex, was advancing hundreds of millions of dollars to Executive A's business. Although Banamex reviewed this negative information as part of its anti-money laundering review, its internal accounting controls did not require that this information be shared with, or considered by, the TTS managers and risk officers responsible for the Program. Banamex Improperly Classified the Advances Made to OSA as Credit Risk to Pemex
19. Having failed to properly identify and consider the risks relating to OSA, Banamex's other deficient internal accounting controls compounded the error by failing to ensure that the advances made to OSA under the Program were properly considered by Banamex to be credit risk to OSA, rather than Pemex.
20. At Banamex, and consistent with Citigroup global policy, an accounts receivable factoring program where the ultimate repayment obligation rests primarily on the supplier is called a "seller centric" program, and an accounts receivable factoring program where the ultimate repayment obligation rests primarily on the buyer of the goods (and not the supplier) is called a "buyer centric" program.
21. From the outset of the Program, Banamex misclassified the loans it advanced to OSA as credit risk to Pemex (i.e., as "buyer centric"), instead of what it really was, credit risk to the 6 much-less financially secure OSA (i.e., as "seller centric"), and lacked the internal accounting controls over the accounts receivable factoring products necessary to identify and correct this error.
22. This was particularly important in the context of OSA because if the Program were properly understood - as credit to OSA and not to Pemex - Banamex would not have made advances at even a fraction of the size that it actually made to OSA. Given the lower credit rating that Banamex itself assigned OSA, OSA could not meet Banamex's credit guidelines for the magnitude of the advances made under the Program.
23. The group at Banamex that was tasked with classifying the Program, the Independent Risk function, relied heavily on the assertions made to it by the business and product functions within Banamex who were in charge of the relationship between Banamex and the borrower. In other words, the classification of advances as buyer or seller centric was essentially committed to the discretion of the very individuals who stood to gain - in stature and compensation at Banamex - from increasing the advances.
24. The foregoing is in fact what occurred with respect to Program advances to OSA: the "independent" risk group relied largely on the assessment made by the business and product people in charge of the OSA relationship, the people who advocated repeatedly for increasing the loan amounts, that the Program was properly considered buyer centric such that Banamex need only consider the creditworthiness of Pemex, and not of OSA.
25. The OSA accounts receivable factoring facility was thus opened and operated as a buyer centric program (i.e., the credit risk was considered that of Pemex).
26. But this categorization was erroneous. For one, the advances to OSA did not meet Banamex's internal criteria for which advances were properly considered buyer centric, and Banamex lacked the internal accounting controls sufficient to identify situations, such as this, when an accounts receivable factoring program was misclassified.
27. For example, under Citigroup's guidelines for accounts receivable factoring programs, a facility was properly considered "buyer centric" if the buyer provides the bank an unconditional acceptance of the commercial transaction, if the credit facility originates with the buyer, and if the buyer's payments flow directly to Banamex. The Banamex advances to OSA did not meet all of these criteria, but none of Banamex's internal accounting controls prevented the financing to OSA from being improperly classified as buyer centric.
28. In addition, throughout the life of the Banamex-OSA accounts receivable factoring facility, Banamex 's internal accounting controls were insufficient to appropriately evaluate numerous red flags, specifically signs that indicated the loans should have been characterized as seller centric, including:
a. Pemex's refusal in 2010 to pay Banamex on certain invoices OSA had factored with Banamex;
b. Banamex's limited contact with Pemex with respect to the advances;
c. The use of Banamex's advances to OSA in certain instances to extinguish prior (and sometimes aging) debt for unrelated earlier advances;
d. OSA - not Pemex - telling Banamex in certain instances to which advances any particular payment should be applied; and
e. Several individuals within Banamex raising questions about the propriety of classifying the program as buyer centric.
29. Despite these warnings, Banamex continued to misclassify the Program as buyer centric, which rendered irrelevant Banamex's assessment of the creditworthiness of the "borrower." Banamex therefore wrongfully analyzed the creditworthiness of Pemex, rather than OSA, the true borrower, in extending hundreds of millions of dollars in loans. Banamex Lacked Sufficient Internal Accounting Controls For Invoice Processing
30. The processes by which Banamex disbursed funds to OSA under the Program were critically flawed in another respect. Specifically, the internal accounting controls surrounding the advancing of funds allowed a single Banamex employee to verify invoices that led to disbursement of funds with insufficient oversight. This flawed process allowed OSA to defraud the bank under the accounts receivable factoring program.
31. In December of 2009, Banamex had already lost $1 million under the accounts receivable factoring program when it factored invoices for another company that was a supplier for Pemex without properly validating the documents with Pemex. Claiming that the supplier's work was not timely, Pemex ultimately refused to pay the invoices.
32. When, eventually, Banamex did make changes to the validation procedures, it failed to adopt sufficient oversight or verification of the actions of the employee charged with validating the factored documents under the accounts receivable factoring program generally and under the OSA Program specifically.
33. Banamex's revised procedures, for example, allowed Pemex invoices to be factored without a stamp or validation from Pemex, and eventually began to discount work estimates rather than finalized invoices. The procedures also allowed Banamex to reconcile payments on submitted invoices not with Pemex, but with the submitting company, including OSA.
34. The discounting processes, including those relating to the validation of invoices or work estimates for payment, were developed beginning in 2010 largely by a Banamex employee ("Employee A") and implemented primarily by other employees. Employee A was terminated by Banamex in 2012 after it was discovered that he had engaged in undisclosed personal business with, and received undisclosed payments from, OSA. Even after Employee A was fired, Banamex did nothing to investigate the controls created by Employee A, especially with respect to OSA.
35. After the fraud by OSA on Banamex was discovered, another Pemex supplier was also discovered to have defrauded Banamex under the same deficient discounting processes that OSA was able to use to defraud Banamex.
36. In all, Banamex's deficient discounting processes under the Program resulted in at least three different loss events, two of which involved companies being able to defraud the bank.
37. Banamex's internal accounting control deficiencies over the Program were such that it could not match payments it received from Pemex to the OSA work estimates in connection with which it had made advance payments to OSA and recorded a receivable. Periodically, Banamex did a "reconciliation" with OSA, at which time OSA would tell Banamex which Pemex payments to apply to which work estimates. Essentially, Banamex lacked an adequate ability to independently monitor and keep track of which accounts receivable factoring advances had been paid and which remained outstanding.
38. In addition, OSA itself at times directed Banamex to use new funds received under the Program to cover previously outstanding amounts owed to Banamex, which was made possible by a lack of controls over invoice tracking and permitted OSA to convert past due obligations into current ones. This preemptively limited an additional review of the Program by giving the impression that the Program was working as intended, was profitable, and the accounts receivable balance was current.
39. There was an internal audit of the TTS Mexico business, the report of which was issued in November 2013. The scope of this audit included, among other TTS products and services, accounts receivable factoring facilities originating within Banamex. The audit report raised several control issues associated with those facilities, and reported that accounts receivable factoring transactions, "which are manually input into the back-end processing system, can be manipulated by a single person and as a result, funds can be directed to incorrect beneficiaries" and that the "situation could expose the bank to fraud risk and operational losses." The audit report also noted other, generally applicable control issues relating to accounts receivable factoring transactions.
40. The OSA fraud came to light three months after the audit report was issued, during which period the corrective action plans required by the audit proceeded on a normal timeline, despite the audit's findings. Banamex Failed to Follow Through on Whatever Internal Accounting Controls Were in Place
41. To the extent Citigroup's policies required internal accounting controls that applied to advances under the Program, Banamex in some instances failed to adhere to them. 42. For example, Citigroup had the GDR process, which was in addition to the credit review and approval process and was intended to ensure that Citigroup was appropriately deploying its assets on a global basis. But the Program was submitted to GDR only three times - when the credit facility was transferred to ICG in June 2012, as part of a Mexico portfolio review in September 2013, and again in December 2013.
43. In the period between the first two GDR reviews, the Program grew substantially--from approximately $400 million to almost $700 million. Citigroup did not have a triggered process in place requiring additional review of the financing facility in light of these significant changes in the size of the risk exposure.
44. In September 2013, the Banamex employees responsible for the Program advocated strongly that the Program be increased, claiming, incorrectly, that the credit risk was an exposure to Pemex. However, a high level ICG manager specifically stated that he was uncomfortable with the amount of credit already extended under the Program. At that late date, individuals within Banamex and Independent Risk for the Latin American Region also openly questioned whether there was sufficient support for the credit facility being classified as a buyer centric program and whether the process for validation and payment of factored documents was sufficiently robust. All of these concerns were apparently assuaged with additional assurances from the business, product and risk teams at Banamex - the very individuals who had mischaracterized the facility as buyer centric.
45. In September 2013, ICG management also specifically questioned Banamex employees as to why they were not more familiar with the Program, given its size, and they also questioned whether the facility had gone through GDR, but little was done as a result of these concerns.
46. After Independent Risk had reviewed and approved credit increases to the Program, Banamex eventually brought the increased Program to GDR for review and approval from a business perspective in December 2013, where it was tabled - meaning that approval was put on hold until the Banamex business team provided additional information. The Banamex team proceeded as if GDR approval had been granted, even though the GDR procedures required reconsideration by the GDR committee.
Violations
47. By virtue of the conduct described above, Citigroup failed to devise and maintain internal accounting controls sufficient to provide reasonable assurances that Banamex's accounts were accurately stated in accordance with generally accepted accounting principles.
48. As a result of the conduct described above, Citigroup violated Section 13(b)(2)(B) of the Exchange Act, which requires all reporting companies to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that, among other things, transactions are executed in accordance with management's general or specific authorization; transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets; access to assets is permitted only in accordance with management's general or specific authorization; and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Citigroup's Remedial Efforts
In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff.
IV. In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Citigroup's Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Citigroup cease and desist from committing or causing any violations and any future violations of Section 13(b)(2)(B) of the Exchange Act.
B. Citigroup shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $4.75 million to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. * 3717. Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;
(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier's check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:
Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
Payments by check or money order must be accompanied by a cover letter identifying Citigroup as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Sanjay Wadhwa, Senior Associate Director, Division of Enforcement, New York Regional Office, Securities and Exchange Commission, 200 Vesey Street, New York, NY 10281.
C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any part of Respondent's payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Respondent by or on behalf of one or more investors based on substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.
By the Commission.
Brent J. Fields
Secretary
Footnote:
1. The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
SEC Announces Settlement With Two Traders in Innate Insider Trading Case
WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following litigation release:The Securities and Exchange Commission announced the entry of final judgments against two traders who received tips of material, nonpublic information about negative drug trial results for Innate Immunotherapeutics.
Lauren Zarsky and her mother, Dorothy Zarsky, consented to the entry of final judgments without admitting or denying the charges that they sold their shares of Innate based on tips they received from Cameron Collins, Lauren Zarsky's boyfriend. The SEC separately charged U.S. Congressman ... Show Full Article WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following litigation release: The Securities and Exchange Commission announced the entry of final judgments against two traders who received tips of material, nonpublic information about negative drug trial results for Innate Immunotherapeutics. Lauren Zarsky and her mother, Dorothy Zarsky, consented to the entry of final judgments without admitting or denying the charges that they sold their shares of Innate based on tips they received from Cameron Collins, Lauren Zarsky's boyfriend. The SEC separately charged U.S. CongressmanChristopher Collins, an Innate board member, with tipping his son, Cameron Collins. Cameron Collins and another individual, Stephen Zarsky, were charged with trading and tipping others on the basis of the material, nonpublic information.
Lauren Zarsky agreed to disgorge her ill-gotten gains of $19,440, plus prejudgment interest of $839, and pay a civil penalty of $19,440. Dorothy Zarsky agreed to disgorge her ill-gotten gains of $22,600, plus prejudgment interest of $975, and pay a civil penalty of $22,600. The final judgments enjoin Lauren Zarsky and Dorothy Zarsky from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. Pursuant to a settlement offer, the Commission issued an order suspending Lauren Zarsky, a CPA from appearing or practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC's order permits her to apply for reinstatement after five years.
The SEC's case against Christopher Collins, Cameron Collins, and Stephen Zarsky is ongoing. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions. It also seeks an officer and director bar against Christopher Collins.
The SEC's investigation has been conducted by William Max Hathaway, Colby A. Steele, Patrick McCluskey, and Carolyn M. Welshhans in the Enforcement Division's Market Abuse Unit. The case has been supervised by Joseph G. Sansone, Chief of the Market Abuse Unit, and Robert A. Cohen. The litigation is being led by Melissa Armstrong and Cheryl Crumpton. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.
For additional information, please see Litigation Release Number 24231.
NRC Receives Event Notification Involving Kettering Medical Center
WASHINGTON, Aug. 16 -- The Nuclear Regulatory Commission issued the following event notification (No. 53539) involving Kettering Medical Center, Ohio:AGREEMENT STATE REPORT - PATIENT OVEREXPOSURE
The following information was received via E-mail:
"The licensee reported to the [Ohio] Department [of Health] on 8/3/2018 that a potential medical event had occurred due to a delay in a surgical procedure. The delay was caused by the insurance company rescinding approval to remove a breast tumor until three medical opinions were obtained. The licensee implanted a 472 microCi I-125 seed [radioactive ... Show Full Article WASHINGTON, Aug. 16 -- The Nuclear Regulatory Commission issued the following event notification (No. 53539) involving Kettering Medical Center, Ohio: AGREEMENT STATE REPORT - PATIENT OVEREXPOSURE The following information was received via E-mail: "The licensee reported to the [Ohio] Department [of Health] on 8/3/2018 that a potential medical event had occurred due to a delay in a surgical procedure. The delay was caused by the insurance company rescinding approval to remove a breast tumor until three medical opinions were obtained. The licensee implanted a 472 microCi I-125 seed [radioactiveseed localization] (RSL) in the tumor on 5/29/2018 after receiving approval from the insurance company. The surgery was scheduled for 6/4/2018. The expected dose to the patient was 12.65 Rem to the tissue and 1.52 Rem EDE [Effective Dose Equivalent]. The surgery was delayed until approval from the insurance company was obtained, and was performed on 8/2/2018. The delay resulted in a tissue dose of 99.45 Rem and EDE of 11.93 Rem.
"A follow-up will be conducted with the routine inspection in September."
Ohio State Report: OH180006
A Medical Event may indicate potential problems in a medical facility's use of radioactive materials. It does not necessarily result in harm to the patient.
Agreement State
Event Number: 53539
Rep Org: OHIO BUREAU OF RADIATION PROTECTION
Licensee: KETTERING MEDICAL CENTER
Region: 3
City: KETTERING State: OH
County: MONTGOMERY
License #: 02120580021
Agreement: Y
Docket:
NRC Notified By: MICHAEL J RUBADUE
HQ OPS Officer: BRIAN LIN
Notification Date: 08/08/2018
Notification Time: 16:46 [ET]
Event Date: 08/02/2018
Event Time: 00:00 [EDT]
Last Update Date: 08/08/2018
Emergency Class: NON EMERGENCY
10 CFR Section:
AGREEMENT STATE
Person (Organization):
MICHAEL KUNOWSKI (R3DO)
NMSS_EVENTS_NOTIFICATION (EMAIL)
PATRICIA MILLIGAN (INES)
DAN COLLINS (EMAIL)
FTC Provides Back-to-School Advice for Parents
WASHINGTON, Aug. 16 -- The Federal Trade Commission issued the following news release:As students across the country head back to school, the Federal Trade Commission has advice for parents on talking to their kids about online safety, protecting their children's personal information, and back-to-school shopping.
In the first blog post, published today as part of a three-part series, the FTC urges parents to talk to their children about being safe online. The blog post encourages parents to discuss their expectations for appropriate online behavior, and stresses the importance of keeping lines ... Show Full Article WASHINGTON, Aug. 16 -- The Federal Trade Commission issued the following news release: As students across the country head back to school, the Federal Trade Commission has advice for parents on talking to their kids about online safety, protecting their children's personal information, and back-to-school shopping. In the first blog post, published today as part of a three-part series, the FTC urges parents to talk to their children about being safe online. The blog post encourages parents to discuss their expectations for appropriate online behavior, and stresses the importance of keeping linesof communication open even when their children do something inappropriate online.
The other blog posts, which will be posted over the next week, will focus on safeguarding children's personal information, including their Social Security numbers, and tips for how to save time and money on back-to-school shopping.
The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357).
FCC Issues Order on Karousel Satellite
WASHINGTON, Aug. 16 -- The Federal Communications Commission issued the following order:In the Matter of Karousel Satellite LLC
Application for Authority to Launch and Operate a Non-Geostationary Earth Orbit Satellite System in the Fixed Satellite Service
IBFS File Nos. SAT-LOA-20161115-00113 and SAT-AMD-20180801-00058
Call Sign S2980
MEMORANDUM OPINION, ORDER AND AUTHORIZATION
Adopted: August 15, 2018 Released: August 16, 2018
By the Commission:
I. INTRODUCTION
1. In this Memorandum Opinion, Order and Authorization, we authorize Karousel Satellite LLC (Karousel) to construct, deploy, ... Show Full Article WASHINGTON, Aug. 16 -- The Federal Communications Commission issued the following order: In the Matter of Karousel Satellite LLC Application for Authority to Launch and Operate a Non-Geostationary Earth Orbit Satellite System in the Fixed Satellite Service IBFS File Nos. SAT-LOA-20161115-00113 and SAT-AMD-20180801-00058 Call Sign S2980 MEMORANDUM OPINION, ORDER AND AUTHORIZATION Adopted: August 15, 2018 Released: August 16, 2018 By the Commission: I. INTRODUCTION 1. In this Memorandum Opinion, Order and Authorization, we authorize Karousel Satellite LLC (Karousel) to construct, deploy,and operate a proposed non-geostationary-satellite orbit (NGSO) satellite system comprising twelve satellites for the provision of fixed-satellite service (FSS) around the world.1 In granting those parts of Karousel's Application that were accepted for filing, we address concerns expressed by commenters seeking various conditions on the grant and partially deny two Petitions to Deny. Grant of this Application will enable Karousel to deploy a novel video and data distribution service to rural consumers in the United States and around the world who lack access to adequate or affordable broadband connectivity.2
II. BACKGROUND
2. Application. On November 15, 2016, Karousel filed an application requesting authority for its proposed NGSO FSS satellite system, comprising twelve satellites operating in highly inclined, elliptical, geosynchronous orbits, with apogees around 40,002 kilometers and perigees around 31,569 kilometers.3 In its Application, Karousel proposes to operate in the 10.7-12.7 GHz (space-to-Earth), 14.0- 14.47 GHz (Earth-to-space)4, 17.8-19.3 GHz (space-to-Earth), 19.7-20.2 GHz (space-to-Earth), and 27.5- 30.0 GHz (Earth-to-space) frequency bands.5 Karousel also requests waivers of certain Commission rules.6
3. Comments. On May 26, 2017, the Karousel Application was accepted for filing.7 ViaSat, Inc. (ViaSat) filed a petition to deny the Karousel Application unless certain conditions are imposed on the grant.8 Telesat Canada (Telesat) also filed a Petition to Deny the Karousel Application requesting that any grant to Karousel be subject to certain conditions.9 SES S.A. and O3b Limited (SES and O3b) requested that any grant of the Karousel Application be subject to certain conditions, including the same conditions that were placed on other NGSO FSS authorizations.10 Space Exploration Technologies Corp.
(SpaceX) expressed concerns about certain technical characteristics of the Karousel system.11 Hughes Network Systems, LLC (Hughes) requested conditions related to sharing with geostationary orbit (GSO) systems.12 Hughes also partially supported the ViaSat Petition to Deny.13 Karousel opposed the petitions to deny and responded to the comments.14
4. NGSO FSS Order. On September 26, 2017, following the close of the comment cycle in this proceeding, the Commission adopted a Report and Order updating several rules and policies governing NGSO FSS systems, including the proposed Karousel system.15 Among other changes, the Commission adopted EPFD limits on NGSO FSS systems operating in portions of the 17.8-20.2 GHz and 27.5-30 GHz frequency bands in order to protect GSO FSS networks. The Commission also adopted a more flexible milestone schedule for NGSO constellations. As these changes are now in effect,16 we consider below their pertinence to the public interest analysis required to act upon the Karousel Application.
III. DISCUSSION
5. After review of the record, we conclude that grant of the Karousel Application as set forth herein will serve the public interest, subject to the requirements and conditions specified herein.17
Below we address the various outstanding issues raised by commenters on Karousel's Application. We also address Karousel's waiver requests. Where appropriate, we defer matters of general applicability to ongoing or potential future rulemakings.
6. ITU Coordination. In its Petition to Deny, Telesat expressed concerns that the proposed Karousel system had the potential to cause interference to its system because the two systems would operate in overlapping geographic areas on overlapping Ka-band frequencies, and observed that international coordination will be required between the Karousel system and its own NGSO FSS system.18
Telesat argued that, at a minimum, any grant to Karousel should be conditioned upon compliance with this international obligation, as was provided in the Commission's grant of OneWeb's NGSO authorization, and on compliance with the outcome of the NGSO FSS rulemaking proceeding. Finally, Telesat argues that Karousel fails to recognize that Telesat's NGSO filings with the ITU have date priority over those filings associated with the proposed Karousel system. In response, Karousel argued that the Commission should reject Telesat's assertions that its Application should be denied on the basis of hypothetical interference and that the Commission should reject Telesat's assertion that that ITU filing date priority overrides the Commission's processing round procedures.19 We recently declined to adopt Telesat's proposal to tie coordination obligations and licensing conditions directly to ITU filing dates by awarding priority according to those dates,20 and accordingly deny Telesat's petition insofar as it reiterates Telesat's ITU filing date priority proposal. We include a condition requiring Karousel, as with all other NGSO FSS operators, to comply with the spectrum sharing requirements specified in Section 25.261 of the Commission's rules with respect to any other NGSO FSS system licensed or granted U.S. market access pursuant to the processing rounds in which Karousel participated.21 We recently adopted changes to Section 25.261 that replaced the avoidance of in-line interference methodology for triggering spectrum division (absent coordination) with a default spectrum splitting mechanism that is triggered when the change in system noise temperature caused by interference, or T/T, exceeds a threshold of 6 percent.22 We note, however, that outside the United States (i.e., when communications to or from the U.S. territory are not involved) the coexistence between Karousel's operations and operations of a system that received a grant for access to the U.S. market are governed only by the ITU Radio Regulations as well as the regulations of the country where the earth station is located and are not subject to Section 25.261. We include a condition, which was also included in the OneWeb Order, that provides that when Section 25.261 is not applicable, Karousel, when coordinating with other systems, is required to comply with the ITU Radio Regulations.23
7. EPFD Analysis. Karousel provided an EPFD analysis as part of its Application showing compliance with the Commission's rules and with the limits established by Article 22 of the Radio Regulations, including an analysis using ITU approved software.24 We find that these demonstrations are sufficient to justify grant of Karousel's Application. To ensure that Karousel will satisfy its EPFD obligations going forward, we condition this grant on Karousel receiving a favorable or "qualified favorable" finding of its EPFD demonstration by the ITU prior to the initiation of service. Review by the ITU of Karousel's compliance with ITU EPFD limits, using methods now approved by the ITU,25 will provide sufficient assurances, beyond the other technical demonstration that Karousel has already provided, that it will comply with the EPFD limits specified in Article 22 of the Radio Regulations.
8. As we did in other recent approvals for NGSO FSS operations,26 we are permitting Karousel to operate up to the PFD and EPFD levels specified in applicable regulations, rather than the levels associated with specific demonstrations in its Application. We find this flexibility is warranted given the preliminary nature of the system design, the fact that this grant is conditioned on Karousel's satisfaction of the ITU's EPFD assessment, and the condition that Karousel cooperate with other NGSO operators to meet limits for aggregate EPFD. We therefore reject ViaSat's arguments that Karousel should be limited to the levels used in the EPFD demonstration in its Application and deny this portion of ViaSat's Petition to Deny.27
9. Orbital Debris. An applicant for a space station authorization must submit a description of the design and operational strategies that it will use to mitigate orbital debris, including a statement detailing post-mission disposal plans for space stations at the end of their operating life.28 Karousel provided a preliminary orbital debris mitigation analysis as part of its Application29 and provided additional details about its plans,30 but indicates throughout its Application that the debris mitigation plan is a preliminary assessment and that neither the plan nor the spacecraft design has been finalized. Accordingly, we condition this grant on Karousel presenting and the Commission granting a modification of this authorization to include a final orbital debris mitigation plan.31 The modification should include, among other things, details of the planned disposal orbit and fuel reserves to be maintained for final orbital maneuvers.
10. Additionally, Karousel will be subject to the same conditions as other NGSO operators, including the requirement that it coordinate its physical operations with space stations of NGSO systems operating with similar orbital parameters.32 To the extent that Karousel and other NGSO operators fail to come to an agreement regarding physical coordination, the Commission may intervene as appropriate.
11. Matters Broadly Applicable to NGSO FSS Applications. Hughes urges the Commission to adopt mechanisms for ensuring that aggregate EPFD limits are met by all NGSO systems authorized in the United States.33 SpaceX suggests that the Commission should consider conditions of grant that would promote efficient spectrum sharing among operators, including uplink power limits for earth stations communicating with the Karousel system and conditions designed to promote sharing among LEO and HEO systems.34 ViaSat questions the sufficiency of the EPFD limits proposed by the Commission to protect GSO systems from harmful interference and requests that each NGSO operator be held jointly and severally liable for harmful interference caused to GSO systems until the Commission adopts adequate aggregate EPFD limits and enforcement mechanisms.35
12. All of these comments relate to issues of general applicability that are more appropriately addressed in the context of a rulemaking. Several of these issues were already raised in the rulemaking concerning NGSO FSS matters36 and addressed in the NGSO FSS R&O adopted September 26, 2017.37 For example, Hughes and ViaSat express concerns about international EPFD limits and aggregate EPFD enforcement mechanisms, but these issues were previously addressed in the NGSO FSS R&O.38 Earth station power limits as suggested by SpaceX were also considered in the NGSO FSS R&O and the Commission declined in that order to adopt any such limits.39 To the extent that commenters raise any other issues of general applicability that are pending in any ongoing Commission rulemaking proceedings, we defer consideration of such issues to those proceedings, and condition grant of the Karousel Application on the outcome of such rulemaking proceedings, based on the record in those proceedings.40
13. We note that as with our other recent authorizations of NGSO FSS systems, grant of the Karousel Application will not prejudge any decision, including a contrary action, in any future rulemaking proceedings.41 Rather, decisions of general applicability in such proceedings will be based on the totality of comments and proposals in those proceedings, including Karousel's. Accordingly, in addition to being subject to any future proceedings, Karousel would have to comply with any new orbital debris requirements.
14. Radio Astronomy. The transmission of out-of-band signals into allocated radio astronomy bands can cause interference to radio astronomy observations. We also note that radio astronomy as a service frequently makes use of observations (passive) in bands not allocated to the radio astronomy service. This practice is a result of scientifically valuable signals being subject to the Doppler Effect and shifted in frequency outside radio astronomy-allocated bands. Although not a condition to this authorization, Karousel should be aware of these facts and contact the National Science Foundation Spectrum Management Unit (esm@nsf.gov) to assist with coordination and information on radio astronomy sites.
15. Waiver Standard. Karousel seeks waivers of certain Commission rules.42 Generally, the Commission may waive any rule for good cause shown.43 Waiver is appropriate where the particular facts make strict compliance inconsistent with the public interest.44 In making this determination, we may take into account considerations of hardship, equity, or more effective implementation of overall policy on an individual basis.45 Waiver is therefore appropriate if special circumstances warrant a deviation from the general rule and such deviation will serve the public interest.46 We address the specific requests for waivers below.
16. Waivers for Frequency Use. Karousel requests several waivers in connection with operations in certain frequency bands, including the list of frequencies available for FSS in Section 25.202(a)(1), the U.S. Table of Frequency Allocations, and the Commission's Ka-band Plan to permit operations in the 10.7-11.7 GHz, 17.8-18.6 GHz, and 19.7-20.2 GHz frequency bands.47 In the NGSO FSS R&O, the Commission eliminated the informational list of available FSS frequency bands in Section 25.202(a)(1)48 making Karousel's request for a waiver of this Section moot. The Commission also adopted changes to the U.S. Table of Frequency Allocations and the Commission's rules to permit NGSO FSS operations in the 17.8-18.6 GHz and 19.7-20.2 GHz frequency bands.49 Karousel's proposed operations in the 17.8-18.6 GHz and 19.7-20.2 GHz bands are consistent with the Commission's rules as modified and consequently Karousel's related waiver requests are moot. Karousel must comport its operations in these bands with the Commission's rules as modified by the NGSO FSS R&O, any applicable PFD and EPFD limits and requirements specified in Article 21 and Article 22 of the ITU Radio Regulations, and aggregate EPFD limits specified in Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations. We also note that in accordance with U.S. Table of Frequency Allocations, Karousel's operations in the 17.8-18.3 GHz band will be on a secondary basis with respect to the fixed service.50
17. Concerning operations in the 10.7-11.7 GHz frequency band, Karousel requested waivers of footnote NG52 to the U.S. Table of Frequency Allocations and Section 25.202(a)(1), n.6 in order to permit Karousel to operate its user terminal earth stations in the 10.7-11.7 GHz band on a nonconforming, non-interference, unprotected basis.51 Section 25.202(a)(1), n.6 was recently eliminated from our rules, and accordingly we dismiss the waiver request as moot.52 Footnote NG52 applies to the operation of GSO space stations.53 As the system proposed by Karousel is an NGSO system, NG52 does not apply and we dismiss the waiver request as moot.
18. Concerning operations in the 18.6-18.8 GHz frequency band, Karousel requests a waiver of footnote NG164 to the U.S. Table of Frequency Allocations to permit NGSO FSS operations on a nonconforming, non-interference basis.54 Karousel states that its operations will comply with the Commission's PFD limits for the 18.6-18.8 GHz band, and the PFD limits described in Article 21 of the
ITU Radio Regulations, and with the PFD limit specified in Footnote US255.55 Footnote NG164 specifies that the FSS operations in the 18.6-18.8 GHz frequency band are limited to GSO networks.56 This frequency band is also allocated to both Federal and non-Federal passive services in the U.S. Table of Frequency Allocations.57 The Commission recently considered and adopted modifications to its rules and the U.S. Table of Frequency Allocations to permit NGSO FSS operations in several bands previously designated exclusively for GSO FSS, although the 18.6-18.8 GHz frequency band was not among those considered in that proceeding.58 However, in light of the technical information provided in Karousel's Application and Schedule S, the characteristics of its highly elliptical orbit NGSO system and small number of satellites, and its willingness to operate on a non-interference basis, we find good cause to grant the requested waiver of footnote NG164. Accordingly, we grant this waiver and condition operations in the 18.6-18.8 GHz band on Karousel operating on a non-interference basis to Federal and non-Federal systems and satisfying the applicable power flux-density limits in Section 25.208(d) of the Commission's rules and Article 21 of the ITU Radio Regulations.
19. Section 25.146(a) Waiver. Karousel requests a temporary waiver of Section 25.146(a) of the Commission's rules, which requires a comprehensive technical showing that a proposed NGSO FSS system will not exceed certain EPFD limits.59 Before its Application was placed on public notice Karousel submitted a supplemental technical demonstration including the information required by Section 25.146(a).60 Based on this submission, Karousel provided the necessary information to review its Application and consequently Karousel's request for a waiver of this requirement is moot.
20. Section 25.156(d)(4) Waiver. Karousel requests a waiver of Section 25.156(d)(4) of the Commission's rules.61 This rule section requires that applications for feeder-link authority be treated as an application separate from associated service bands.62 As an FSS system, Karousel by definition does not have feeder-links.63 Consequently, Karousel's request for a waiver of this requirement is moot.
21. Section 25.156(d)(5) Waiver. Karousel requests a waiver of Section 25.156(d)(5) of the Commission's rules.64 At the time Karousel filed its Application, Section 25.156(d)(5) stated that in frequency bands where the Commission has not adopted band specific service rules it will not consider applications for NGSO-like operation after it has granted an application for GSO-like operation, and viceversa, unless the Commission establishes NGSO/GSO sharing criteria for that frequency band, but the Commission recently eliminated Section 25.156(d)(5) in the NGSO FSS R&O.65 As the modified rules adopted in that proceeding are now in effect, Karousel's request for a waiver of this requirement is moot.
22. Other. In the 14.0-14.2 GHz band, the National Aeronautics and Space Administration (NASA) operates Tracking and Data Relay Satellite System earth station facilities at three locations: Guam (latitude 13 36'55" N, longitude 144 51'22" E); White Sands, New Mexico (latitude 32 20'59" N, longitude 106 36'31" W and latitude 32 32'40" N, longitude 106 36'48" W); and Blossom Point, Maryland (latitude 38 25' 53" N, longitude 77 05' 06" W). For transmissions in the 14.0-14.2 GHz band from NGSO FSS earth stations located within 125 kilometers of these three sites, earth station operators should take account of these NASA facilities.
IV. CONCLUSION
23. We conclude that grant of the Karousel Application, as conditioned and set forth herein, will serve the public interest by enabling Karousel to pursue its goal of providing access to on-demand content to unserved and underserved consumers in the United States and around the world.
V. ORDERING CLAUSES
24. Accordingly, IT IS ORDERED, that the Application filed by Karousel Satellite LLC as accepted for filing IS GRANTED IN PART AND DISMISSED IN PART, as set forth in this Memorandum Opinion, Order and Authorization, for operations in the 10.7-12.7 GHz (space-to-Earth), 14.0-14.47 GHz (Earth-to-space), 17.8-19.3 GHz (space-to-Earth), 19.7-20.2 GHz (space-to-Earth), 27.5- 29.1 GHz (Earth-to-space), and 29.5-30.0 GHz (Earth-to-space), pursuant to Section 309(a) of the Communications Act of 1934, as amended, 47 U.S.C. * 309(a).
25. IT IS FURTHER ORDERED that this authorization is subject to the following requirements and conditions:
a. Karousel must timely provide the Commission with the information required for Advance Publication, Coordination, and Notification of the frequency assignment(s) for this constellation, including due diligence information, pursuant to Articles 9 and 11 of the ITU Radio Regulations. This authorization may be modified, without prior notice, consistent with the coordination of the frequency assignment(s) with other Administrations. See 47 CFR * 25.111(b). Karousel is responsible for all cost-recovery fees associated with the ITU filings. 47 CFR * 25.111(d).
b. Operations in the 10.7-11.7 GHz (space-to-Earth) frequency band are authorized up to the applicable power flux-density limits in 47 CFR * 25.208(b), and up to the equivalent power fluxdensity requirements of Article 22 of the ITU Radio Regulations, as well as Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations.
c. Operations in the 10.7-11.7 GHz band must be coordinated with the radio astronomy observatories listed in 47 CFR * 2.106, footnote US131, to achieve a mutually acceptable agreement regarding the protection of the radio telescope facilities operating in the 10.6-10.7 GHz band. For the purposes of coordination with these listed facilities or the National Radio Quiet Zone, correspondence should be directed to the National Science Foundation Spectrum Management Unit (Email: esm@nsf.gov).
d. Operations in the 11.7-12.2 GHz (space-to-Earth) frequency band are authorized up to the power flux-density limits in Article 21 of the ITU Radio Regulations, and up to the equivalent power flux-density requirements of Article 22 of the ITU Radio Regulations, as well as Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations.
e. Operations in the 12.2-12.7 GHz (space-to-Earth) frequency band are authorized up to the power flux-density limits in 47 CFR * 25.208(o) and Article 21 of the ITU Radio Regulations, and up to the equivalent power flux-density requirements of Article 22 of the ITU Radio Regulations, as well as Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations. f. Operations in the 14.0-14.47 GHz (Earth-to-space) frequency band are authorized up to the equivalent power flux-density requirements of Article 22 of the ITU Radio Regulations.
g. Operations in the 17.8-19.3 GHz and 19.7-20.2 GHz frequency bands must complete coordination with U.S. Federal systems, in accordance with footnote US334 to the United States Table of Frequency Allocations, 47 CFR * 2.106, prior to being used. The use of space-to-Earth operations in the 17.8-19.3 GHz, and 19.7-20.2 GHz bands must be in accordance with any signed coordination agreement between Karousel and U.S. Federal operators. Two weeks prior to the start of any operations in the 17.8-19.3 GHz and 19.7-20.2 GHz bands, Karousel must provide contact information for a 24/7 point of contact for the resolution of any harmful interference to Jimmy Nguyen, Email: Jimmy.Nguyen@us.af.mil.
h. Operations in the 17.8-18.3 GHz (space-to-Earth) frequency band are on a secondary basis with respect to the fixed service.
i. Operations in the 17.8-18.6 GHz (space-to-Earth) frequency band are authorized up to the power flux-density limits in Article 21 of the ITU Radio Regulations, and up to the equivalent power flux-density requirements of Article 22 of the ITU Radio Regulations, as well as Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations.
j. Operations in the 18.6-18.8 GHz (space-to-Earth) frequency band are authorized on a non-conforming basis. Such operations are on an unprotected basis and must immediately terminate upon notification of harmful interference. In addition, such operations must comport with the applicable power flux-density limits in 47 CFR * 25.208(d) and Article 21 of the ITU Radio Regulations.
k. Operations in the 18.8-19.3 GHz (space-to-Earth) frequency band are authorized up to the power flux-density limits in Article 21 of the ITU Radio Regulations.
l. Operations in the 19.7-20.2 GHz (space-to-Earth) frequency band are authorized up to the equivalent power-flux density limits in Article 22 of the ITU Radio Regulations, as well as Resolution 76 (Rev. WRC-15) of the ITU Radio Regulations. m. In the 27.5-28.6 GHz and 29.5-30 GHz (Earth-to-space) frequency bands reception is permitted at levels up to the applicable equivalent power flux-density requirements of Article 22 of the ITU Radio Regulations. n. Operations in the 27.5-28.35 GHz (Earth-to-space) frequency band are secondary with respect to Upper Microwave Flexible Use Service (UMFUS) operations, except for FSS operations associated with earth stations authorized pursuant to 47 CFR * 25.136, and will comply with any determinations set forth in the Spectrum Frontiers Proceeding (GN Docket 14- 177).66
o. Operations in the 28.35-28.6 GHz and 29.5-30 GHz (Earth-to-space) frequency bands are on a secondary basis with respect to GSO FSS operations.
p. Prior to initiation of service, Karousel must receive a favorable or "qualified favorable" finding in accordance with Resolution 85 (WRC-03) with respect to its compliance with applicable equivalent power flux-density limits in Article 22 of the ITU Radio Regulations.
q. Karousel must cooperate with other NGSO FSS operators in order to ensure that all authorized operations jointly comport with the applicable limits for aggregate equivalent power flux-density in the space-to-Earth direction (EPFDdown) contained in Article 22 of the ITU Radio Regulations, as well as Resolution 76 (WRC-03) of the ITU Radio Regulations.
r. Operations must comply with spectrum sharing procedures among NGSO FSS space stations specified in 47 CFR * 25.261 with respect to any NGSO system licensed or granted U.S. market access pursuant to the processing rounds initiated in Public Notice, DA 16-804 and Public Notice, DA 17-524. Spectrum sharing between Karousel's operations and operations of NGSO systems granted U.S. market access, where such operations do not include communications to or from the U.S. territory, are governed only by the ITU Radio Regulations and are not subject to Section 25.261.
s. Karousel must comply with the sharing of ephemeris data procedures described in 47 CFR * 25.146(e).
t. Upon finalization of its space station design and prior to initiation of service, Karousel must seek and obtain the Commission's approval of a modification containing an updated description of the orbital debris mitigation plans for its system, as discussed in paragraph 9 above.
u. Karousel must coordinate physical operations of spacecraft with any operator using similar orbits, for the purpose of eliminating collision risk and minimizing operational impacts. The orbital parameters specified in this grant are subject to change based on such coordination.
v. This authorization is subject to modification to bring it into conformance with any rules or policies adopted by the Commission in the future. Accordingly, any investments made toward operations in the bands authorized in this order by Karousel in the United States assume the risk that operations may be subject to additional conditions or requirements as a result of any future Commission actions.
26. IT IS FURTHER ORDERED that this authorization is also subject to the following requirements:
a. Karousel must post a surety bond in satisfaction of 47 CFR ** 25.165(a)(1) & (b) no later than September 17, 2018, and thereafter maintain on file a surety bond requiring payment in the event of a default in an amount, at minimum, determined according to the formula set forth in 47 CFR * 25.165(a)(1); and
b. Karousel must launch 50 percent of the maximum number of proposed space stations, place them in the assigned orbits, and operate them in accordance with the station authorization no later than August 16, 2024, and Karousel must launch the remaining space stations necessary to complete its authorized service constellation, place them in their assigned orbits, and operate each of them in accordance with the authorization no later than August 16, 2027. 47 CFR * 25.164(b).67
27. Failure to post and maintain a surety bond will render this grant null and void automatically, without further Commission action. Failure to meet the milestone requirements of 47 CFR * 25.164(b) may result in Karousel's authorization being reduced to the number of satellites in use on the milestone date. Failure to comply with the milestone requirement of 47 CFR * 25.164(b) will also result in forfeiture of Karousel's surety bond. By September 2, 2024, Karousel must either demonstrate compliance with its milestone requirement or notify the Commission in writing that the requirement was not met. 47 CFR * 25.164(f).
28. IT IS FURTHER ORDERED that the request for waivers of the United States Table of Frequency Allocations, 47 CFR * 2.106, footnote NG164, and the Commission's Ka-band plan, with regard to NGSO FSS operations in the 17.8-18.6 GHz and 19.7-20.2 GHz frequency bands IS DISMISSED as MOOT for the reasons set forth herein.
29. IT IS FURTHER ORDERED that the request for a waiver of the United States Table of Frequency Allocations, 47 CFR * 2.106, footnote NG164, with regard to NGSO FSS operations in the 18.6-18.8 GHz frequency band IS GRANTED for the reasons set forth herein. 30. IT IS FURTHER ORDERED that the request for waivers of the United States Table of Frequency Allocations, 47 CFR * 2.106, footnote NG52 IS DISMISSED as MOOT for the reasons set forth herein.
31. IT IS FURTHER ORDERED that the request for waiver of 47 CFR * 25.146(a) IS DISMISSED as MOOT for the reasons set forth herein.
32. IT IS FURTHER ORDERED that the request for waiver of 47 CFR * 25.156(d)(4) IS DISMISSED as MOOT for the reasons set forth herein.
33. IT IS FURTHER ORDERED that the request for waiver of 47 CFR * 25.156(d)(5) IS DISMISSED as MOOT for the reasons set forth herein.
34. IT IS FURTHER ORDERED that the requests for waiver of 47 CFR ** 25.202(a)(1) and 25.103 ARE DISMISSED as MOOT for the reasons set forth herein.
35. IT IS FURTHER ORDERED that the Petitions to Deny of Telesat Canada and ViaSat, Inc. ARE GRANTED to the extent that certain conditions requested by Telesat Canada and ViaSat are imposed, as indicated herein, and are otherwise DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Footnotes:
1. Karousel LLC, Application for Authority to Launch and Operate a Non-Geostationary Earth Orbit Satellite System in the Fixed Satellite Service, IBFS File No. SAT-LOA-20161115-00113 (filed Nov. 15, 2016) (Application). Karousel provided a supplemental filing with an additional technical showing prior to its application going on public notice. See Letter from Monish Kundra, Vice President, Karousel LLC, to Marlene H. Dortch, Secretary, FCC (filed Dec. 27, 2016) (Karousel Dec. 27 Letter). Karousel's request for operations in the 29.1-29.5 GHz band is not before us because the International Bureau has not accepted that part of the application for filing. See Satellite Policy Branch Information: Space Station Applications Accepted for Filing, Public Notice, Report No. SAT-01277 (IB Oct. 20, 2017). Karousel filed an amendment to its application changing the applicant from "Karousel LLC" to "Karousel Satellite LLC," a wholly owned subsidiary of Karousel LLC. See IBFS File No. SAT-AMD-20180801- 00058 (filed Aug. 1, 2018). Because the change in applicant is the result of a corporate restructuring and involves no change in the ultimate ownership or control of the Karousel system, we find that the amendment is not a major amendment within the meaning of Section 25.116(b) of the Commission's rules and therefore it is not necessary for the amendment to be placed on public notice. See 47 CFR * 25.116(b).
2. Application, Narrative at 4.
3. Application, Schedule S Tech Report. Karousel filed this Application in response to an International Bureau public notice that initiated a "processing round" for additional NGSO applications in the 10.7-12.7 GHz, 14.0-14.5 GHz, 17.8-18.6 GHz, 18.8-19.3 GHz, 27.5-28.35 GHz, 28.35-29.1 GHz, and 29.5-30.0 GHz frequency bands. OneWeb Petition Accepted for Filing, IBFS File No. SAT-LOI-20160428-00041; Cut-Off Established for Additional NGSO-Like Satellite Applications or Petitions for Operations in the 10.7-12.7 GHz, 14.0-14.5 GHz, 17.8-18.6 GHz, 18.8-19.3 GHz, 27.5-28.35 GHz, 28.35-29.1 GHz, and 29.5-30.0 GHz Bands, Public Notice, 31 FCC Rcd 7666 (IB 2016).
4. Although Karousel listed in its Schedule S that it would be operating from 14.0-14.5 GHz, it clarified in its application that it would not operate between 14.47-14.5 GHz. Compare Application, Schedule S with Application, Narrative at 69. The scope of this grant is limited accordingly.
5. Application, Narrative at 37-39.
6. Karousel requests waivers of Sections 2.106, footnotes NG52 and NG164; 25.103; 25.146(a); 25.156(d)(4)-(5); and 25.202(a)(1). Application, Narrative at 56-66.
7. Applications Accepted for Filing; Cut-off Established for Additional NGSO-like Satellite Applications or Petitions for Operations in the 12.75-13.25 GHz, 13.85-14.0 GHz, 18.6-18.8 GHz, 19.3-20.2 GHz, and 29.1-29.5 GHz Bands, Public Notice, DA 17-524 (IB rel. May 26, 2017). As previously noted, the International Bureau did not accept Karousel's request to operate using the 29.1-29.5 GHz band because the International Telecommunications Union (ITU) Radio Regulations limit the use of the band 29.1-29.5 GHz by the FSS to geostationary satellite systems and feeder links to NGSO systems in the mobile-satellite service. See 5.535A of the ITU Radio Regulations. In the same public notice, the International Bureau initiated a processing round for additional frequency bands requested by applicants, including several bands requested by Karousel. Id.
8. ViaSat, Inc. Petition to Deny (filed June 26, 2017) (ViaSat); ViaSat Reply (filed July 14, 2017).
9. Telesat Canada Petition to Deny (filed June 26, 2017) (Telesat); Telesat Reply (filed July 14, 2017).
10. SES S.A. and O3b Limited Comments at 8-10 (filed June 26, 2017) (SES and O3b); SES and O3b Reply (filed June 26, 2017).
11. Space Exploration Technologies Corp. Comments (filed June 26, 2017) (SpaceX); SpaceX Reply (filed July 14, 2017).
12. Hughes Network Systems, LLC Comments (filed June 26, 2017) (Hughes); Hughes Reply (filed July 7, 2017).
13. Specifically, Hughes supported ViaSat's request to condition grant on compliance with the outcome of the NGSO FSS proceeding and part of ViaSat's proposal related to aggregate interference.
14. Karousel Response to Comments and Opposition to Petitions to Deny (filed July 7, 2017) (Karousel Response and Opposition). Although it did not file comments on the Karousel Application, the MVDDS 5G Coalition has expressed concern in other proceedings regarding protection of current and potential future MVDDS operations in the 12.2-12.7 GHz band. See, e.g., Letter from MVDDS 5G Coalition to Marlene H. Dortch, Secretary, FCC (filed March 6, 2018) (on file in IBFS File No. SAT-LOA-20161115-00118). Such concerns are addressed by paragraphs 24(e) and 24(v) below, requiring Karousel to comply with established PFD limits in this band and subjecting the authorization to modification to conform it to any future rules or policies adopted by the Commission in pending rulemaking proceedings. See, e.g., Petition of MVDDS 5G Coalition for Rulemaking, RM-11768 (filed Apr. 26, 2016).
15. Update to Parts 2 and 25 Concerning Non-Geostationary, Fixed-Satellite Service Systems and Related Matters, Report and Order and Further Notice of Proposed Rulemaking, 32 FCC Rcd 7809 (2017), recon. pending (NGSO FSS R&O).
16. See 82 FR 59972 (Dec. 18, 2017); 83 FR 22391 (May 15, 2018).
17. SES and O3b requested that the Commission include in any Karousel authorization standard operating conditions, and specifically several of the same grant conditions included on O3b's initial grant of market access. See SES and O3b Comments at 8-10. To the extent that the Karousel application raises the same concerns as other authorized NGSO FSS systems, we impose substantially identical conditions on Karousel as we did in those orders, including O3b's recent grant. In addition, since O3b's initial market access grant, the Commission has adopted significant revisions to its rules and policies governing NGSO FSS systems. The conditions herein are consistent with these rule changes.
18. Telesat Petition to Deny; Telesat Reply at 9-13; see also ITU Radio Regulations, No. 9.12 (requiring coordination of certain NGSO systems), No. 9.53 (requiring parties in coordination to "make every possible mutual effort to overcome [coordination] difficulties, in a manner acceptable to the parties concerned"), No. 11.42 (requiring the immediate cessation of harmful interference actually caused to a recorded assignment with which coordination is required but has not been effected).
19. Karousel Response and Opposition at 7-9.
20. NGSO FSS R&O, 32 FCC Rcd at 7825-26, para. 50.
21. See WorldVu Satellites Limited, Petition for Declaratory Ruling Granting Access to the U.S. Market for the OneWeb NGSO FSS System, Order and Declaratory Ruling, 32 FCC Rcd 5366, 5377, para. 23(k) (2017) (OneWeb Order).
22. 47 CFR * 25.261; NGSO FSS R&O, 32 FCC Rcd at 7825, para. 49.
23. OneWeb Order, 32 FCC Rcd at 5376, para. 23(a). Compliance with ITU coordination procedures is a requirement of the ITU Radio Regulations, which hold the force of treaty to which the United States is a party. Compliance with the ITU Radio Regulations is a typical condition of both U.S. space station licenses and grants of U.S. market access. See 47 CFR 25.111(b); see also, e.g., Inmarsat Mobile Networks, Inc., Application to Operate a Fixed- Satellite Service Gateway Earth Station Facility in Lino Lakes, Minnesota with the Inmarsat-5 F2 Space Station, Order and Authorization and Declaratory Ruling, 30 FCC Rcd 2770, 2784, para. 41c (IB 2015).
24. Karousel Dec. 27 Letter.
25. Letter from Francois Rancy, Director, ITU Radiocommunication Bureau, to Administrations of ITU Member States, "Examinations under Resolution 85 (WRC-03)" (Dec. 6, 2016), http://www.itu.int/md/R00-CR-CIR- 0414/en.
26. See, e.g., Telesat Canada, Order and Declaratory Ruling, 32 FCC Rcd 9663, 9666, para. 11 (2017) (Telesat Canada Order).
27. ViaSat Petition to Deny at 3-8.
28. Mitigation of Orbital Debris, Second Report and Order, 19 FCC Rcd 11567, 11619 (2004); 47 CFR * 25.114(d)(14).
29. Application, Narrative at 39-42.
30. Letter from Monish Kundra, Vice President, Karousel LLC, to Jose P. Albuquerque, Chief, Satellite Division, International Bureau, FCC (filed April 11, 2017).
31. The International Bureau has previously required applicants to file a modification application including updated orbital debris mitigation in some instances. See Telesat Canada, Order and Declaratory Ruling, 32 FCC Rcd 9663, 9668-69, 9675-76 (2017) (Telesat Canada Order); Northrop Grumman Space & Mission Systems Corp., Order and Authorization, 24 FCC Rcd 2330, 2363-64, para. 102 (IB 2009); ContactMEO Communications, LLC, Order and Authorization, 21 FCC Rcd 4035, 4052-53, para. 47 (IB 2006).
32. See, e.g., Telesat Canada Order, 32 FCC Rcd at 9673, para 29(c).
33. Hughes Comments at 2-4.
34. SpaceX Comments at 2-9.
35. ViaSat Petition to Deny at 8-9.
36. Update to Parts 2 and 25 Concerning Non-Geostationary, Fixed-Satellite Service Systems and Related Matters, Notice of Proposed Rulemaking, 31 FCC Rcd 13651, 13656-58 (2016).
37. See generally NGSO FSS R&O.
38. We considered ViaSat's concerns regarding the sufficiency of existing international EPFD limits and found that as ViaSat has not proposed any new EPFD limits it would be inadvisable to remain without Ka-band EPFD limits in our rules pending such deliberations. Thus, we adopted the ITU EPFD limits in the 17.8-30 GHz frequency range and require authorized NGSO FSS systems to comply with existing aggregate EPFD limits. NGSO FSS R&O, 32 FCC Rcd at 7821-21, para. 35. ViaSat has sought reconsideration of the Commission's decisions to adopt EPFD limits in the 27.5-28.6 GHz band, and that argument will be addressed in the context of that petition for reconsideration. Petition for Reconsideration of ViaSat, Inc., IB Docket No. 16-408 (filed Jan. 17, 2018) (also seeking reconsideration of EPFD limits in the 29.5-30 GHz band).
39. NGSO FSS R&O, 32 FCC Rcd at 7827, para. 55.
40. We note that this condition addresses several comments that requested that grant of the Karousel Application be conditioned on compliance with certain pending and future rulemakings. See ViaSat Petition to Deny at 9; Hughes Reply at 2; SpaceX Comments at 9. To the extent that commenters believe that their concerns are not already addressed by ongoing rulemakings, we remind commenters that they have the option to file petitions for rulemaking with the Commission.
41. See, e.g., NGSO FSS R&O; Use of Spectrum Bands Above 24 GHz for Mobile Radio Services, Report and Order and Further Notice of Proposed Rulemaking, 31 FCC Rcd 8014 (2016); Expanding Flexible Use in Mid-Band Spectrum Between 3.7 and 24 GHz, Notice of Inquiry, 32 FCC Rcd 6373, 6377, n.14 (2017).
42. See supra, note 6.
43. 47 CFR * 1.3.
44. Northeast Cellular Tel. Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990).
45. WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969), cert. denied, 409 U.S. 1027 (1972); Northeast Cellular, 897 F.2d at 1166.
46. Northeast Cellular, 897 F.2d at 1166.
47. Application, Narrative at 56-64. Karousel also requested a waiver of Section 25.103 of the Commission's rules, which provides a list of definitions applicable to Part 25. 47 CFR * 25.103. Although this rule Section includes a definition for the "Conventional Ka-band" that specifies 19.7-20.2 GHz as designated for primary GSO FSS, this does not conflict with the Commission's recent decision to adopt a secondary NGSO FSS allocation in that frequency band and consequently no waiver is necessary.
48. NGSO FSS R&O, 32 FCC Rcd at 7817-18, para. 27.
49. NGSO FSS R&O, 32 FCC Rcd at 7812-13, para. 7-10.
50. 47 CFR * 2.106.
51. Application, Narrative at 57-59.
52. We recently modified our rules concerning the use of the 10.7-11.7 GHz frequency band to permit blanket licensing of receive earth stations on an unprotected basis. See NGSO FSS R&O, 32 FCC Rcd at 7817, paras, 24-25; 47 CFR * 25.115(f).
53. 47 CFR * 2.106, footnote NG52.
54. Application, Narrative at 61-62.
55. Application, Narrative at 68.
56. 47 CFR * 2.106, footnote NG164.
57. 47 CFR * 2.106.
58. See, e.g., NGSO FSS R&O, 32 FCC Rcd at 7813, para. 10 (permitting NGSO FSS operations in the 18.3-18.6 GHz and 19.7-20.2 GHz frequency bands).
59. We note that since the filing of the Karousel Application Section 25.146 was modified in the NGSO FSS R&O. See NGSO FSS R&O, 32 FCC Rcd at 7822-23, paras. 41-42.
60. Karousel Dec. 27 Letter.
61. Application, Narrative at 65.
62. 47 CFR * 25.156(d)(4).
63. 47 CFR * 25.103.
64. Application, Narrative at 66.
65. NGSO FSS R&O, 32 FCC Rcd at 7821-22, para. 39.
66. See generally Spectrum Frontiers R&O and FNPRM.
67. We note that the NGSO FSS R&O modified Section 25.164(b) to offer additional flexibility and requires launch and operation of 50 percent of an authorized system within six years of grant and the remaining satellites within nine years of grant.
FCC Commissioner Rosenworcel Testifies Before Senate Commerce Committee
WASHINGTON, Aug. 16 -- The Federal Communications Commission issued the following testimony by Commissioner Jessica Rosenworcel before the Senate Commerce, Science and Transportation Committee:"Good morning, Chairman Thune, Ranking Member Nelson, and Members of the Committee. Thank you for the opportunity to appear before you today.
"I believe the future belongs to the connected. No matter who you are or where you live in this country you need access to modern communications to have a fair shot at 21st century success. Clearing the way for this connected future should be at the heart of everything ... Show Full Article WASHINGTON, Aug. 16 -- The Federal Communications Commission issued the following testimony by Commissioner Jessica Rosenworcel before the Senate Commerce, Science and Transportation Committee: "Good morning, Chairman Thune, Ranking Member Nelson, and Members of the Committee. Thank you for the opportunity to appear before you today. "I believe the future belongs to the connected. No matter who you are or where you live in this country you need access to modern communications to have a fair shot at 21st century success. Clearing the way for this connected future should be at the heart of everythingwe do at the Federal Communications Commission.
"Last week marked a year since I returned to the Commission. A lot can happen in twelve months. So let me offer you a quick year-end report.
"Too many Americans lack access to broadband. Let's put a number on it. Right now, 24 million Americans have no high-speed service. This is not acceptable. We need to do better. Too often during the last year the agency acted at the behest of the corporate forces that surround it, shortchanging the American people. You can see that clearly with our roll back of net neutrality. You see it, too, with our efforts to foster the deployment of new networks but failure to fully engage those who need a voice in our policies--the cities and towns that should be our partners in the process, the Tribal communities that are entitled to government-togovernment consultation, and the Department of Commerce which just last month expressed concern about how our rush to reform could harm national security and public safety services.
"Likewise, you see it in proposed reforms that undermine our Lifeline program--and the populations that rely on it, including those served by domestic violence shelters, military veterans, homeless youth, and residents of Puerto Rico who are still recovering from a harrowing storm and grave humanitarian crisis.
"Too often our procedures fall short of what good governance requires. Our mapping practices for broadband do not accurately reflect the state of connectivity on the ground. Our claim that the agency suffered a Distributed Denial of Service Attack following John Oliver's report on our net neutrality plans was not credible, as demonstrated by last week's report from the FCC Inspector General. And in the meantime, the agency has ignored the fact that this public docket is flooded with fraud--including half a million comments from Russia and two million individuals with stolen identities.
"I believe these things need to be fixed. So many people think that Washington is rigged against them. It saddens me when on too many occasions during the last year this agency proved them right. But good reports do not only look to the past, they offer an eye to the future--and a take on what is possible.
"I believe at this table there is a desire to extend the reach of broadband service, lead the world in 5G wireless deployment, and bring the opportunities of the digital age to more people in more places.
"So here are three things we can do to make that happen.
"First, we need a new broadband plan. And we need to begin with the end in mind. At the start I mentioned there are 24 million Americans without access to broadband. There are 19 million Americans in rural areas who lack this service. There are 12 million students who fall into the Homework Gap because they do not have the broadband at home they need for nightly school work. Let's commit now to a plan to ensure that every one of them has access to the high-speed service they need--by 2020. Call it Broadband 2020.
"Second, we are in a worldwide race to lead the future of wireless. We are making progress, but other nations are moving further, faster. South Korea, the United Kingdom, Spain, Italy, Germany, Ireland, and Australia have held or will hold a 5G auction before the United States. China, too, is poised to dole out key frequencies already reserved for 5G use. We have a blitz of bands under consideration, including 2.5 GHz, 3.5 GHz, 3.7-4.2 GHz, 4.9 GHz, 5.9 GHz, 6 GHz, 24 GHz, 26 GHz, 28 GHz, 32 GHz, 37 GHz, 39 GHz, 42 GHz, 47 GHz, 50 GHz, and above 95 GHz. But we have only one auction scheduled. What we need now is something simple: a calendar. We need to tell the wireless ecosystem--from carriers to equipment manufacturers to consumers--just how and when the FCC will auction new airwaves to support 5G services.
"Third, it's time to set some audacious goals. Let's not settle for the same broadband standard we have been using for years--let's raise it to 100 Megabits per second. Let's make sure every school has access to Gigabit speeds. Let's ensure every rural health care facility has the speed they need for the newest innovations in telemedicine.
"While we're at it, let's do something that should not be bold--but may feel like it is. Let's reiterate the FCC's support for the First Amendment and commit to media policies that ensure news organizations can report without fear or favor.
"Thank you for having me at this hearing. I look forward to answering any questions you may have."
Citigroup to Pay More Than $10 Million for Books and Records Violations and Inadequate Controls
WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following news release:The Securities and Exchange Commission today announced that Citigroup has agreed to pay $10.5 million in penalties to settle two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary.
In the first action, Citigroup Inc. and its U.S. broker-dealer subsidiary ... Show Full Article WASHINGTON, Aug. 16 -- The Securities and Exchange Commission issued the following news release: The Securities and Exchange Commission today announced that Citigroup has agreed to pay $10.5 million in penalties to settle two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary. In the first action, Citigroup Inc. and its U.S. broker-dealer subsidiaryCitigroup Global Markets Inc. (CGMI) agreed to pay a $5.75 million penalty to settle charges of inaccurate books and records and CGMI's failure reasonably to supervise traders. Citigroup and CGMI settled without admitting or denying the SEC's findings and agreed to cease and desist from future violations.
The SEC found that from 2013 to 2016, three CGMI traders mismarked illiquid positions in certain proprietary accounts they managed, in two cases covering losses from widespread unauthorized trading. The discovery of the mismarking led to the termination of the traders and the recognition of $81 million in losses not previously reflected in CGMI's or Citigroup's books and records. The SEC's order finds that CGMI failed to detect the traders' misconduct earlier because it had inadequate supervisory procedures and systems and did not independently verify the valuations of the mismarked positions.
In the second action, Citigroup agreed to pay a $4.75 million penalty to settle charges that it failed to devise and maintain adequate internal accounting controls. Citigroup settled without admitting or denying the SEC's findings and agreed to cease and desist from future violations. The SEC's order finds that Citigroup subsidiary Grupo Financiero Banamex S.A. de C.V. loaned approximately $3.3 billion to Oceanografia, S.A. (OSA) between 2008 and 2014 based on invoices and work estimates for services that OSA provided to Petroleos Mexicanos (Pemex), the Mexican state-owned oil company. According to the order, many of the OSA work estimates were fraudulent and did not reflect amounts Pemex actually owed to OSA. Citigroup ultimately lost approximately $475 million as a result of OSA's fraud. The SEC's order finds that Banamex and Citigroup lacked the controls necessary to verify the invoices before making loans to OSA and ignored numerous red flags that should have led to discovery of the fraud.
"Today's charges reflect the Commission's view that Citigroup fell short of its obligations to supervise its traders and maintain appropriate controls to guard against fraud," said Marc P. Berger, Director of the SEC's New York Regional Office. "Citigroup's lax supervision and weak internal accounting controls allowed a handful of rogue traders to mismark positions over several years and, separately, resulted in the unnecessary loss of hundreds of millions of dollars of its shareholders' assets to fraud."
The mismarking and unauthorized trading investigation was conducted by Derek Schoenmann, Janna Berke and Celeste Chase. The Banamex investigation was conducted by Olivia Zach, Jorge Tenreiro, James Addison and Ms. Chase. Both investigations were conducted out of the SEC's New York office and supervised by Sanjay Wadhwa.