An investigation of FCC, SEC documents in a citizen-filed 'Petition to Deny' licensing for three stations controlled by the media behemoth may finally help put an end to the 'sham' control of our public airwaves...
originally posted September 23, 2020 at BradBlog.com
Baltimore's crowded TV market highlights the shell game that media goliath Sinclair Broadcasting plays across the nation to illegally dominate the information Americans can consume over our public airwaves. The agency tasked with overseeing those airwaves, the Federal Communications Commission (FCC) has long turned a blind eye to allow Sinclair, the very powerful purveyor of rightwing propaganda, to violate US law.
Baltimore has just eight stations, and three of them are actually owned by Sinclair: WBFF, WNUV, and WUTB.
Sinclair lawyers (who also represent Cunningham Broadcasting and Deerfield Media) will say Sinclair owns WBFF, Cunningham owns WNUV and Deerfield owns WUTB. But, in a September 1 legal Petition to Deny the renewal of all three stations' licenses, due to both the shell game and the lies Sinclair has told to protect its unlawful ownership, Republican attorney Art Belendiuk researched Securities and Exchange Commission (SEC) documents to prove that both Deerfield and Cunningham are actually both controlled by Sinclair.
"Sinclair controls three television stations in Baltimore, while the FCC rules do not permit it to control more than one," the petition, filed on behalf of local viewer Ihor Gawdiak, argues, while detailing how the shell game of nominal ownership by the other two companies is simply meant to mask Sinclair's violation of federal law...
In its application to merge with Tribune Media last year, the FCC balked when Sinclair tried to transfer two Tribune stations in Texas to Cunningham and Chicago's Superstation WGN to Baltimore car salesman Steven Fader, the buddy of Sinclair CEO David Smith. After Sinclair valued WGN at a mere $60 million (TV stations in the tiny Iowa market are valued higher), the FCC cried foul and called a hearing [PDF] to investigate, questioning "whether those proposed divestitures were in fact 'sham' transactions."
On page 14 of that order, the FCC reminded "licensees that they must retain ultimate control over their programming and core operations" to remain licensed.
As the Baltimore Sun summarizes the characterization of Sinclair's "sham" in the Petition to Deny filed in Baltimore, "Sinclair owns almost all the [other two] stations’ assets, guarantees or assumes their indebtedness, approves transactions, expenses and policy decisions and owns options to buy the companies, stations and licenses at below-market value. Sinclair controls personnel and programming," the petition says.
Under a probe by federal regulators, Sinclair eventually withdrew its merger application with Tribune, knowing that lying to the FCC exhibits a lack of character, which would have put their licenses at risk. That should lead to Sinclair losing all of its licenses.
FCC Administrative Law Judge Jane Halprin said [PDF] in dismissing the Tribune merger application: "[T]he misrepresentation and/or lack of candor allegations raised in this proceeding is warranted as part of a more general assessment of Sinclair's basic character qualifications to be a Commission licensee." She insisted the FCC further investigate Sinclair's misrepresentations as the real party in interest of Cunningham and Deerfield, via a license challenge or other public means. "This alleged deception was ostensibly aimed at allowing Sinclair to bypass the Commission's multiple ownership limitations. ... Certainly, the behavior of a multiple station owner before the Commission may be so fundamental to a licensee's operation that it is relevant to its qualifications to hold any station license."
Matt Wood, of media watchdog Free Press told the Sun that Sinclair has used such deceptive ownership arrangements "to control more stations than they’re actually allowed to under FCC’s local ownership rules," describing the actions as "an abuse of FCC rules."
Rather than scrutinizing Sinclair publicly, the FCC's Media Bureau hatched a backroom deal in May 2020 and issued Sinclair (with media revenues of $1.26 Billion in the quarter ending June 30) a paltry $48 million fine [PDF] for their attempted scam in the Tribune merger proposal. The $48 million was touted as the largest FCC fine ever levied, but it includes an earlier $13 million fine that Sinclair simply never paid. And in a case of regulatory déjà vu, the FCC levied a fine against Sinclair way back in 2001 --- for exactly the same shell game the mega corporation continues to play.
In settling the matter quietly behind the scenes, FCC legal experts insist the FCC violated the law. "Once the FCC set a public hearing to determine Sinclair's qualifications to hold licenses, it has to finish it publicly," argued the Republican attorney Belendiuk.
The question remained whether TV licensees Cunningham and Deerfield retain ultimate control of their stations which are operated under Local Marketing Agreements and Shared Service Agreements and Joint Services Agreements, all of which are ostensibly legal under FCC rules, but have strict limitations. On page 13 of the Petition, Belendiuk lists the criteria the FCC considers to determine who would actually control the Cunningham and Deerfield stations...
- Who controls daily operations (Sinclair);
- Who carries out policy decisions (Sinclair);
- Who is in charge of employment, supervision and dismissal of personnel (Sinclair);
- Who is in charge of paying financial obligations, including operating expenses, (Sinclair);
- Who receives monies and/or profits from the operation of the station (Sinclair).
Belendiuk then reveals the complicated financial shell game used to cover it all up.
Even Wikipedia's description of Sinclair reveals that Sinclair's Smith family controls both Cunningham and Deerfield. WNUV and WUTB websites even bear Sinclair logos. But Belendiuk found the "official" owner of Deerfield is Sinclair CEO Smith's personal banker, Stephen Mumblow, and the "official" owner of Cunningham is Cunningham's former banker Michael Anderson, a man with no broadcast experience and, in fact, is a paid employee of Sinclair.
In a circular deal Belendiuk describes in detail starting on page 15 of the Petition, Anderson acquired all the voting shares of Cunningham for $405,000, far below the company's actual worth. Page 25 of the Petition charges: "Only a front would agree to sell his voting shares in Cunningham for approximately $400,000, when Cunningham, just for its consolidated stations, generated $39 million in revenues in the first quarter of 2020." In addition, the Sinclair founding family Smith brothers have an option to buy the shares for that same $405,000 plus 1% per annum - for the next 32 years.
It is all, indeed, a "sham".
In addition, Sinclair's shell game gives the media behemoth options to purchase Cunningham and Deerfield's stations for a fraction of their worth, for terms as long as 48 years. In November 2012, Sinclair, using the shell Deerfield, purchased Baltimore's WUTB from FOX Television for $2.7 million, but by July 2014, SEC documents reveal, Sinclair was given the option to buy WUTB from Deerfield for a mere $330,000.
Should media ownership laws continue to be relaxed, as they have under the FCC's Chairmanship of Trump appointed Ajit Pai, Sinclair will exercise options for its Cunningham and Deerfield properties for far below market rates, freezing out legitimate prospective buyers, and expanding its power to misinform Americans beyond scrutiny of federal agencies.
The real culprit, however, is the FCC. The agency is required to serve the public interest by regulating broadcasters use of the limited airwaves on behalf of We the People. But it is so captured by the corporations it is meant to regulate that it simply ignores its own statutory mandate. Belendiuk's petition to deny the licenses of WBFF, WUTB and WNUV aptly prosecutes the crime against the public. Will the FCC ignore it? Probably, unless We the People rise to protect that which is ours --- the public airwaves.
The FCC does not respond to public pressure, but does respond to Congressional inquiries. It's time to alert your Congresspersons so that this Petition gets a hearing before the FCC that is not a sham.
You can read the entire 39-page Petition to Deny here. The link to the FCC file will be made available as soon as the FCC posts it.
APTRA, RTNDA, PRNDI and Emmy-winning Sue Wilson is a broadcast activist journalist, the director of the documentary Broadcast Blues, and founder of the Media Action Center. Reach her at act@mediaactioncenter.net or via Twitter at @SueBluesWilson
* * *UPDATE FROM BRAD 9/25/2020: Sue Wilson and Art Belendiuk, the Republican attorney who filed the "Petition to Deny" described above, joined me to discuss this case on today's The BradCast...
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