DEPARTMENT OF JUSTICES REQUIRES CHANGES AT CABLE COMPANIES TO PROTECT CONSUMERS

FROM: U.S. DEPARTMENT OF JUSTICE ANTITRUST DIVISION
Resolution Preserves Broadband and Video Services Competition Between Verizon and the Cable Companies and Frees Spectrum To Benefit Consumers
　
WASHINGTON — The Department of Justice announced today that it will require Verizon and four of the nation’s largest cable companies—Comcast, Time Warner Cable, Bright House Networks and Cox Communications—to make changes to a series of agreements concerning both the sale of bundled wireless and wireline services, and the formation of a technology research joint venture. The department said that, if left unaltered, the agreements would have harmed competition by diminishing the companies’ incentive to compete, resulting in higher prices and lower quality for consumers. The announcement came after a closely coordinated investigation with the Federal Communications Commission (FCC), with additional assistance provided by the New York State Attorney General’s Office.
　
The department also said that it would allow both Verizon’s proposed acquisitions of spectrum from the cable companies and T-Mobile USA’s contingent purchase of a significant portion of that spectrum from Verizon to go forward. The department said that the spectrum transactions facilitate active use of an important national resource and thereby promise substantial benefit to wireless consumers. The transactions remain subject to review by the FCC, which is expected to release a separate statement regarding the status of its review of the transactions.
　
"By limiting the scope and duration of the commercial agreements among Verizon and the cable companies while at the same time allowing Verizon and T-Mobile to proceed with their spectrum acquisitions, the department has provided the right remedy for competition and consumers," said Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "The Antitrust Division’s enforcement action ensures that robust competition between Verizon and the cable companies continues now and in the future as technological change alters the telecommunications landscape."
　
The department’s Antitrust Division, joined by the New York State Attorney General’s Office, filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to prevent Verizon, Comcast, Time Warner Cable, Bright House Networks and Cox Communications from enforcing a series of commercial agreements. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the concerns alleged in the lawsuit.
　
The department said the proposed settlement protects competition and consumers by removing provisions that would lessen the companies’ incentives to compete aggressively in the areas where Verizon’s FiOS services offer a critical competitive alternative to the cable companies’ video and broadband products. The proposed settlement also limits the duration of the companies’ collaboration to December 2016 in important respects, ensuring that they retain incentives to compete against one another.
　
In December 2011, Verizon Wireless agreed to acquire a significant portfolio of wireless spectrum licenses from a consortium of cable companies—spectrum that today is unused. In June 2012, Verizon Wireless reached an agreement to transfer a significant amount of that spectrum to T-Mobile USA, the smallest of the four nationwide mobile wireless competitors. Verizon Wireless has also announced a public process to sell other previously unused spectrum.
At the same time they entered into the spectrum transactions, Verizon and the cable companies entered into a series of commercial agreements that require the companies to sell each other’s products and create an exclusive technology research joint venture.
　
Verizon and the cable companies are direct competitors in many local markets throughout the United States where Verizon offers video, voice and broadband service. The series of commercial agreements between Verizon and the cable companies would have threatened this competition. Most notably, the agreements, as originally structured, would have required Verizon Wireless to sell the cable companies’ services on an "equivalent basis" with FiOS where FiOS is available, thereby reducing Verizon’s ability and incentive to sell its own services aggressively.
　
The agreements also create a new technology research joint venture through which Verizon Wireless, Comcast, Time Warner Cable and Bright House Networks would collaborate to develop new technologies that integrate wireless and wireline products. The department’s complaint alleges that the potentially unlimited duration of this collaboration is unreasonable and could threaten long-term competition, and also alleges that certain restrictions in the agreements unnecessarily hinder the ability of the companies to innovate outside the joint venture.
　
The proposed settlement forbids Verizon Wireless from selling cable company products in FiOS areas and removes contractual restrictions on Verizon Wireless’s ability to sell FiOS, ensuring that Verizon’s incentives to compete aggressively against the cable companies remain unchanged. In addition, under the proposed settlement, Verizon Wireless’s ability to resell the cable companies’ services to customers in areas where Verizon sells DSL Internet service ends in December of 2016 (subject to potential renewal at the department’s sole discretion), thereby preserving Verizon’s incentives to reconsider its decision to stop building out its FiOS network and otherwise innovate in its DSL territory. Finally, the proposed settlement limits the duration of the technology joint venture and other features of the agreements, ensuring that the agreements will not dampen the companies’ incentives to compete against one another going forward.
　
The proposed settlement also requires the commercial agreements to be amended so that:
Verizon retains the ability to sell bundles of services that include DSL, Verizon Wireless and the video services of a direct broadcast satellite company (i.e., DirecTV or Dish Network);
After five years, the cable companies are no longer barred from selling the wireless services of Verizon Wireless’s competitors, and may partner with other wireless providers;
The cable companies can elect to resell Verizon Wireless services using their own brand at any time as provided for under the amended agreements; and
Upon dissolution of the technology joint venture, all members receive a non-exclusive license to all the joint venture’s technology, and each may then choose to sublicense to other competitors.
The settlement also forbids any form of collusion and restricts the exchange of competitively sensitive information. Verizon and the cable companies would also be required to provide regular reports to the department to ensure that the collaboration does not harm competition going forward.
　
Verizon Communications Inc. is a Delaware corporation headquartered in New York. Verizon’s consumer wireline segment, Verizon Telecom, is one of the nation’s largest providers of wireline telecommunications services. As of the second quarter of 2012, Verizon Telecom had more than 4 million FiOS video subscribers, more than 5 million FiOS broadband subscribers, more than 2.5 million FiOS voice telephony subscribers, and more than 3.5 million DSL broadband subscribers. Verizon Communications owns 55 percent of Cellco Partnership, which does business as Verizon Wireless, a Delaware general partnership headquartered in New Jersey. Vodafone Group Plc owns the remaining 45 percent of Verizon Wireless. Verizon Wireless is one of the nation’s largest wireless services providers, with approximately 108 million connections to its wireless voice and data services and revenues of $59 billion in 2011. Verizon Communications operates and manages Verizon Wireless.
　
Comcast Corporation is a Pennsylvania corporation headquartered in Philadelphia. It is one of the nation’s largest providers of wireline telecommunications services. As of the second quarter of 2012, Comcast had more than 22 million video subscribers, more than 17.5 million broadband subscribers, and more than 9 million voice telephony subscribers. Comcast had revenues of more than $27 billion from its residential broadband and video businesses in 2011.
　
Time Warner Cable Inc. is a Delaware corporation headquartered in New York. It is one of the nation’s largest providers of wireline telecommunications services. As of the second quarter of 2012, it had more than 12 million video subscribers, more than 10.5 million broadband subscribers, and more than 4.5 million voice telephony subscribers. Time Warner Cable had revenues of more than $15 billion from its residential broadband and video businesses in 2011.
　
Bright House Networks LLC is a privately held Delaware limited liability company headquartered in New York. As of March 2012, it was the 10th largest provider of video programming distribution, and also provides broadband and voice services. Bright House Networks derived billions of dollars in revenues from its residential broadband and video businesses in 2011.
　
Cox Communications Inc. is a privately held Delaware corporation headquartered in Georgia. It is a large multi-state provider of wireline telecommunications services. As of March 2012, it was the fifth largest video programming distributor, and also sells broadband and voice services. Cox derived billions of dollars in revenues from its residential broadband and video businesses in 2011.
　
T-Mobile USA, is a Delaware corporation headquartered in Bellevue, Wash. T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.2 million wireless connections to wireless devices. In 2011, T-Mobile earned mobile wireless telecommunications services revenues of $18.5 billion. T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.
　
As required by the Tunney Act, the proposed 10-year settlement, along with the department's competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Lawrence M. Frankel, Assistant Chief, Telecommunications & Media Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 7000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed settlement upon finding that it is in the public interest.

COMPANY FINED FOR DISCHARGES OF OIL IN LOUISIANA

FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, August 15, 2012
Delaware Company Fined for Unlawful Discharges of Oil in Jefferson Parish, Louisiana
Cedyco Corporation Ordered to Cease All Operations in Louisiana and Divest Itself of Its Hydrocarbon Business Interests in the State
　
WASHINGTON – A Delaware company was fined $557,000 for negligently discharging oil into the bayous of Jefferson Parish, La., the Department of Justice announced.

Cedyco Corporation, headquartered in Houston, was sentenced today in federal court in the Eastern District of Louisiana.
　
On May 23, 2012, Cedyco pleaded guilty to three counts of violating the Federal Water Pollution Control Act (Clean Water Act). The Clean Water Act makes it a misdemeanor to negligently discharge harmful quantities of oil into navigable waters of the United States.


All of the fine money will be directed to the Oil Spill Liability Trust Fund to aid the U.S. Coast Guard in responding to future oil spills. Additionally, Cedyco also agreed to cease operations and divest itself of all hydrocarbon business interests in the state of Louisiana.
　
"We owe a debt of gratitude to the men and women of the U.S. Coast Guard along with EPA-CID and Louisiana DEQ for their continued vigilance in protecting our precious environment and water resources from companies and individuals who discharge oily waste into our waters," said Jim Letten, U.S. Attorney for the Eastern District of Louisiana. "We will remain committed to the apprehension and punishment of these violators in defense of our environment. The protection of our precious environment is a critical mission which we take very seriously. Simply stated, we will not tolerate the negligent contamination of our waterways."
　
"It’s important that we hold polluters accountable for their actions, and today's sentence does this," said Captain Peter Gautier, Commander of Coast Guard Sector New Orleans. "I applaud the efforts of our partner agencies and internal investigators for their tireless efforts in prosecuting this case. The Coast Guard, EPA, LDEQ and Department of Justice will continue to hold polluters responsible for their actions."
　
"Our nation’s environmental laws are designed to protect oceans and inland waterways from illegal and harmful pollutant discharges," said Ivan Vikin, Special Agent in Charge of EPA’s criminal enforcement program in Louisiana. "Today’s sentence sends a clear message that companies that refuse to operate lawfully and pollute our waters, threatening people's health and the environment, will be vigorously prosecuted."
　
Cedyco owned and operated several hydrocarbon facilities, including fixed barges, platforms and wells, in the brackish bayous of South Louisiana. As a general matter, Cedyco’s facilities were poorly maintained and operated without plans and permits required by regulations issued by the Louisiana Department of Environmental Quality (LDEQ) as administrator of the federal Clean Water Act. Cedyco’s negligent operation and poor maintenance of three of its facilities in Jefferson Parish led to harmful discharges of oil into the navigable waters of the United States. The three facilities are the tank battery known as the "Bayou St. Denis facility," the production and storage facility known as the "Bayou Dupont facility," and the production well adjacent to the Bayou Dupont facility known as "Well #10." Each facility will be addressed in turn.
　
"DEQ and its partners are dedicated to policing and enforcing environmental laws. Today’s sentence further illustrates that commitment," said LDEQ Secretary Peggy Hatch.


Cedyco’s Bayou St. Denis facility was a tank battery located south of the Barataria Waterway. A May 29, 2008, joint inspection by the U.S. Coast Guard (USCG) and LDEQ revealed that the facility was storing oil without the required Facility Response Plan, Spill Prevention and Control Plan, and LDEQ permit as required under Clean Water Act regulations. The condition of the facility was extremely poor with corroded pipes and spilled oil on the deck. On June 15, 2008, enough oil was leaking from the facility that a sheen was visible on the surface of the water. A fisherman reported this sheen to the USCG, and a subsequent site visit by LDEQ on June 20, 2008, confirmed that oil was leaking into the adjacent waterway from the facility’s outfalls.


Cedyco’s Bayou Dupont facility is an oil storage and production platform located to the northeast of Bayou St. Denis, close to the Plaquemines Parish line. From Feb. 18, 2008, to May 19, 2008, Cedyco operated this facility without a Facility Response Plan, Spill Prevention and Control Plan and LDEQ permit. A joint USCG and LDEQ inspection on Feb. 19, 2008, revealed that the facility was in extremely poor condition with pools of oily water and emulsified oil on the deck, as well as ample evidence of extensive corrosion and leaks. The required spill response equipment was either missing or defective. For example, an absorbent boom meant to soak up oil spills had a plant growing out of it. During rain events that took place from Feb. 19, 2008, through May 18, 2008, the deck oil made its way unimpeded into the bayou through unfiltered outfalls and cracks in the deck and containment structures. The sources of this oil were not only chronic leaks and occasional spills, but at times resulted from acute events such as the leak from the slop oil tank that occurred on May 18, 2008. The May 18 slop oil tank spill was observed by an LDEQ inspector who took photographs at the scene. During the charged period, the quantity of oil that was present on the deck of Bayou Dupont facility was sufficient to cause a sheen when rain caused the oil to wash into the adjacent waterway.


Cedyco’s Well #10 is located in an area of bayou adjacent to the Bayou Dupont facility. Cedyco did not properly maintain Well #10, and as a result of that negligence, the well began to leak on or about May 17, 2008. The leak continued for at least two days. Before it was contained with boom, the leak resulted in an oily sheen that was detected as far as two miles downstream from the well. The leaking oil also resulted in an emulsion being deposited on the adjacent shoreline.


The case was investigated by agents of CGIS and Environmental Protection Agency-Criminal Investigation Division (EPA-CID) and by USCG and LDEQ inspectors. The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section and Dorothy "Dee" Taylor of the U.S. Attorney’s Office for the Eastern District of Louisiana.

SEC CHARGES PETRO-SUISSE LTD. AND MARK GASARCH WITH OFFERING FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced today that on August 14, 2012, it filed a civil injunctive action in the United States District Court for the Southern District of New York charging Petro-Suisse Ltd. ("Petro-Suisse") and Mark Gasarch ("Gasarch") with offering fraud.

The Commission’s complaint alleges that between 2003 and 2006, in connection with the purchase and sale of 21 limited partnership interests offered by Petro-Suisse to finance the drilling of oil wells in Trinidad, Gasarch, Petro-Suisse’s Director, Treasurer, and legal counsel, drafted 21 private placements memorandums ("PPMs") that contained materially false and misleading information. Specifically, the PPMs stated that Petro-Suisse or an affiliate, as general partner of the 21 limited partnership offerings, would cause each of the 21 partnerships to enter into written agreements to finance the drilling of oil wells in Trinidad for which the partnerships would receive contractual rights to receive returns measured by the net revenues of the wells drilled and payable out of those revenues. The PPMs contained materially false and misleading information because the partnerships never entered into any such written agreements.

Without admitting or denying the allegations in the complaint, Petro-Suisse consented to the entry of a proposed Final Judgment enjoining it from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Gasarch consented to the entry of a proposed Final Judgment enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The proposed Final Judgments also orders Gasarch and Petro-Suisse jointly and severally liable to pay $8,370,000 in disgorgement, deemed satisfied by the previous payments made by Petro-Suisse to the limited partnership investors, and for Gasarch to pay a $130,000 civil penalty. The proposed settlements are subject to the approval of the district court.

FORMER PUBLIC COMPANY CEO CHARGED BY SEC WITH FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Former Public Company CEO with Fraud
　
On August 9, the Securities and Exchange Commission filed a complaint in the United States District Court for the Northern District of Texas alleging that Ronald D. Brooks committed securities fraud while serving as CEO and chairman of Standard Oil Company USA, Inc., a purported energy company headquartered in Dallas, Texas.

According to the SEC’s complaint, Brooks signed and certified Standard Oil’s initial disclosure statement filed with the Pink OTC Markets and made available to investors through that market’s website. Brooks represented in the disclosure statement that he had no prior criminal convictions. In fact, however, Brooks has three prior felony convictions, two for securities violations. The SEC therefore alleges that Brooks defrauded Standard Oil’s investors. The complaint charges Brooks with violating Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder and seeks a permanent injunction, a civil monetary penalty, an officer-and-director bar, and a penny-stock bar.