The FCC on Thursday pushed the $3.9 billion Sinclair-Tribune merger to near extinction and put Sinclair’s basic qualifications to be a broadcast licensee into question, unanimously ordering a full-blown hearing to determine whether Sinclair misled the agency in connection with the spin offs of three TV stations.
The hearing before an administrative law judge, the FCC says in its hearing order, is needed to determine whether Sinclair was the “real party in interest” in the companies it was selling the three stations to and, if it was, whether it was guilty of “misrepresentation” and “lack of candor,” perhaps the most serious violation one can commit at the FCC.
The hearing, which would take several months, will likely spell the end of the merger. FCC Commissioner Michael O’Rielly, in a statement, called hearing order “death sentences.”
But the collapse of the merger may not be Sinclair’s biggest concern.
Misrepresentation or lack of candor could have an impact on the overall qualifications of a party to be a broadcast licensee and could lead to a loss of licenses, said one veteran communications attorney.
And such charges don’t go away even if Sinclair withdraws its merger application, he said.
“Some resolution of the charge will eventually have to be reached, if not in the Tribune case, then the next time Sinclair comes in to buy or sell a station or tries to renew one of its licenses.”
Another lawyer pointed out that the misrepresentation could be resolved by a fine, but that it would be an “eye-popping one.”
At issue is the sale of three stations that were intended to bring the Sinclair-Tribune deal into compliance with FCC ownership limits.
One was of WGN Chicago to Steven Fader, a business partner of Sinclair Executive Chairman David Smith.
The other two were of KDAF Dallas and KIAH Houston to Cunningham Broadcasting, a so-called sidecar company that Sinclair set up long ago to operate stations that it could not own outright under the ownership rules.
“Sinclair represented to the commission that it would comply with our broadcast ownership rules by seeking approval of its application — in part based on the proposed divestitures to Cunningham and Fader — and did not fully disclose facts such as the pre-existing business relationships between Fader, Smith and Sinclair nor the full entanglements between Cunningham, Smith, and Sinclair,” the FCC says in the order.
“As such there is a substantial and material question of fact as to whether Sinclair affirmatively misrepresented or omitted material facts with the intent to consummate this transaction without fully complying with our broadcast ownership rules.”
After FCC Chairman Ajit Pai said on Wednesday that he was asking his fellow commissioners for a vote, Sinclair said it would withdraw the three offending sale agreement and find true third-party buyers for them.
But it was too little, too late.
Tribune late this afternoon said it was evaluating the implications of the hearing order and “assessing all of our options in light of today’s developments.
“We will be greatly disappointed if the transaction cannot be completed, but will rededicate our efforts to running our businesses and optimizing assets.”
There’s been no comment from Sinclair following release of the hearing order.
Comments (23)
Larry Patrick says:
July 19, 2018 at 5:07 pm
Do the words RKO General and license revocation strike a chord here? Seems like a far more serious issue than Sinclair believes it is. Some attorneys at Pillsbury are going to have their children’s education paid for by Sinclair for this arrogant misinterpretation of what the FCC would accept. When the Republicans turn against Sinclair, there is real trouble.
Megatron81 says:
July 19, 2018 at 11:13 pm
I don’t see it as RKO General for Sinclair they’ll be fine I don’t see them being disbanded the merger is getting killed. Tribune will be sold piecemeal just my opinion.
MrSitcom says:
July 19, 2018 at 6:03 pm
Why am I so giddy over this turn of events?
Larry Patrick says:
July 19, 2018 at 6:44 pm
No need to be giddy but could be a seminal case in broadcast regulation. Should have wrapped this up long ago and closed on the stations. The August 8th deadline where either party can walk away now looms. Really a serious mishandling of the process.
MrSitcom says:
July 21, 2018 at 8:15 pm
Okay…thanks Larry (rolling my eyes).
Tony Peters, Jr. says:
July 19, 2018 at 10:12 pm
Sinclair’s hubris, arrogance, and greed look certain to end the company’s existence as a station owner/operator and broadcast licensee (maybe it could survive as a technology/equipment vendor), but I’m a bit worried, because it has seemingly become the broadcast television industry’s standard-bearer, its collapse could lead to the end of the industry itself (whether that’s a good thing or a bad thing is a question for another time, and one which I don’t feel qualified to answer).
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