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Thursday, July 19th, 2018Last Update: Friday, June 1st, 2018 10:41:02 AM

Efforts to Reopen Southwestern Bell Rate Case

By: Constitution Staff

Efforts to Reopen Southwestern Bell Rate Case Reach U.S. Supreme Court

The U.S. Supreme Court is expected to rule on the bribery refund applicants’ petition before the end of its term in early summer.

The fight to return billions of dollars to Oklahoma ratepayers has reached the United States Supreme Court. The applicants in the over $16 billion AT&T bribery refund case filed a petition on March 19, asking the Nation’s highest court to hear their appeal. They are seeking relief from rulings by both the Oklahoma Corporation Commission (OCC) and the Oklahoma Supreme Court that have allowed a bribed order to stand for almost 30 years.

In their petition for writ of certiorari, the applicants argue their “right to petition” under the First Amendment was violated when the OCC dismissed their bribery refund application “with prejudice,” prohibiting them from ever raising the issue. In addition to guaranteeing rights to freedom of religion, free speech, free press, and free assembly, the First Amendment to the United States Constitution also guarantees citizens the right “to petition the government for a redress of grievances.” The 2015 bribery refund application was, in effect, a petition asking the OCC to redress the grievance (or, correct the injustice) of AT&T’s bribery.

The bribery refund applicants are six prominent citizens who, as phone customers of Southwestern Bell (which later acquired the AT&T name), were defrauded when an attorney for the company bribed a Corporation Commissioner in a 1989 rate case. The bribed vote allowed the company to keep millions in excess revenues resulting from a federal tax change rather than refunding that money to ratepayers as most of the state’s other public utilities did. Ironically, the 1986 corporate income tax rate reduction that precipitated the case was very similar to the recent Tax Cuts and Jobs Act of 2017.

When the Tax Reform Act of 1986 was passed by Congress and signed by President Ronald Reagan, lowering tax rates for corporations and changing the ways corporate taxes were calculated, the OCC did not have time to investigate exactly how these tax changes would affect all the utilities it regulated before the changes went into effect in July 1987. So the OCC issued orders placing several utilities’ rates subject to refund between July 1987 and whenever the commission was able to determine the impact of the lower tax rates on those utilities. By doing this, the OCC was anticipating that if a regulated monopoly public utility is paying significantly lower taxes, its costs would be lower and that the benefit should accrue to the ratepayers in the form of lower rates. If the lower rates would be delayed going into effect, then existing rates must be declared “temporary” to permit excess revenues collected to be refunded later when the final orders would be issued.

But, in 1989, the OCC voted 2 to 1 (with only Commissioner Bob Anthony dissenting) to accept a settlement negotiated by the agency’s staff with Southwestern Bell to reinvest the millions it saved through the federal tax cut into upgrading its network instead of refunding to customers and lowering rates.

However, it was later learned that the OCC decision was decided by a bribed vote. With the help of Commissioner Anthony who was first elected to the commission in 1988, federal prosecutors secured bribery convictions against former Commissioner Bob Hopkins, who had voted in favor of the settlement, and William Anderson, an attorney who worked on behalf of Southwestern Bell and other utility companies. Hopkins was convicted for taking a $10,000 bribe received from Anderson. Hopkins and Anderson, who are both now deceased, went to federal prison following their convictions.

The OCC dismissed the bribery refund application in September 2016. In a 2-1 vote, Commissioners Todd Hiett and Dana Murphy agreed with AT&T that the commission was powerless to do anything about the bribery and decided neither the application nor the new evidence of fraud were worth hearing. Commissioner Bob Anthony, who worked with the FBI to uncover the bribery, vehemently disagreed. “By not hearing this case, the Oklahoma Corporation Commission forfeits an opportunity to perform its Constitutional duty of ‘correcting abuses’ and joins AT&T in declaring to the public that ‘bribery wins’ and ‘bribed votes do count’ in Oklahoma,” Anthony wrote in a 200-page dissenting opinion. “Respectfully, I dissent.”

The bribery refund applicants immediately appealed the OCC’s decision to the Oklahoma Supreme Court. But just days before Christmas 2017, the state’s highest court issued an 8-1 decision upholding the OCC’s dismissal while completely ignoring both the new evidence of fraud and the constitutional questions about bribery raised in the applicants’ appeal. Notably, Chief Justice Douglas L. Combs dissented from the decision of the court’s other justices.

“We took on this fight when the Attorney General stopped representing Oklahoma ratepayers and started defending AT&T,” said bribery refund applicant and Nichols Hills Mayor Sody Clements. “We hoped the Corporation Commission and the Oklahoma Supreme Court would finally do the right thing – declare once and for all that bribed votes don’t count in this state, and give the billions stolen by AT&T back to the ratepayers. Unfortunately everyone has passed the buck and claimed it’s someone else’s problem to fix. We believe the buck will stop at the United States Supreme Court.”

“Eight justices of the Oklahoma Supreme Court have joined a long list of Corporation Commissioners and Attorneys General who have not just neglected their sworn duties as state officeholders, they have willfully failed to perform them,” wrote applicant and former commanding general of Tinker Air Force Base Richard A. Burpee in a scathing response. Calling their failure to overturn the bribery “dereliction of duty,” Burpee said.

In September 2016, the U.S. Department of Defense (DOD) cited “compelling evidence of intrinsic fraud utilized by Southwestern Bell Telephone Company” and “criminal activity” in a filing seeking to join the AT&T bribery refund case. Although the OCC dismissed the DOD’s motion when it dismissed the bribery refund application, a similar attempt to join the case at the federal level may be accepted. Refunds due for thousands of phone lines at military installations and federal agencies across the state are at stake.

“The bribery in this case isn’t alleged; it was proven beyond a reasonable doubt and upheld on appeal,” said former Special Agent-in-Charge of the FBI in Oklahoma Bob Ricks who assisted in the original investigation and is another of the bribery refund applicants taking the case to the United States Supreme Court. “I’m confident the U.S. Supreme Court will see this case for what it is – a bribed vote that has been allowed to fester into one of the largest cases of corporate fraud in American history.”

“There is more than just billions of dollars at stake – Oklahoma’s reputation is on the line,” said bribery refund applicant and businessman Rodd Moesel. “For decades, there were massive corruption schemes among county commissioners, corporation commissioners and even at the Oklahoma Supreme Court itself. Some people want to say that’s all water under the bridge. But in the last 15 years, we’ve also had an insurance commissioner and a state auditor convicted of bribery. Now, we have allegations of misappropriated funds at the state Health Department and numerous sheriffs and state legislators recently charged with or convicted of wrongdoing. Getting justice in this case would finally send a message that we’re not going to do business that way in this state anymore.”

“The unconstitutional defects of the bribed order should have been corrected, and refunds ordered, decades ago when the bribery convictions were confirmed by the United States Court of Appeals,” said expert witness and bribery refund applicant James Proctor. Proctor is the former director of the commission’s Public Utility Division.

“Sometimes it takes an outsider like the United States Supreme Court to hold up a mirror and force you to take a hard look at yourself,” said Clements. “There are folks in the business community that want to ignore this case and pretend the bribery never happened. But this idea that ‘bribed votes do count’ if you’re a big corporation willing to make big campaign contributions and drag things out in court is contrary to the fundamental values of honesty and fair play held by most Oklahomans. We’ve taken up this cause on behalf of Oklahoma ratepayers because we believe – and we believe they believe – it’s the right thing to do.”

The U.S. Supreme Court is expected to rule on the bribery refund applicants’ petition before the end of its term in early summer. A new website – OklahomansAgainstBribery.org – explains the case and its history in layman’s terms and offers links to the various court filings.

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