Published on Sunday, October 17, 2004 by Knight-Ridder
Media Firm Accused of Dodging FCC Rules
by Leon Lazaroff
Poised to pre-empt programming on its 62 television stations to run a negative documentary about Sen. John Kerry, Sinclair Broadcast Group has come under fire from critics calling it partisan and questioning whether it is failing federal broadcast requirements to reflect local interests.
Members of Congress and independent media groups have questioned the company's willingness to respect "localism," a section of federal law that requires media companies to cover local issues and provide an outlet for local voices.
"Sinclair has turned localism on its head," said Mark Cooper, research director of the Consumer Federation of America, a union of 300 consumer groups. "Instead of using its right to pre-empt national programming to preserve a local voice, it wants to impose its political will on 62 local stations."
Sinclair's practices as a television operator have also been criticized for removing local control. The company increasingly uses "distance-casting" whereby local news, sports and weather is uniformly broadcast to its many stations from Sinclair's headquarters in suburban Baltimore.
Television viewers receive on-camera reports from "News Central" that appear to be coming from local stations. Sinclair spokesman Mark Hyman delivers conservative commentary that must be carried on local news reports.
"Their whole business model is about cutting operating costs," said Andrew Jay Schwartzman, president and CEO of the Media Access Project, a legal watchdog group. "They fake the localism by presenting the hometown station feel but without any of the presence and journalism that local communities deserve."
Sinclair's stations include 20 Fox affiliates, eight from ABC, six from UPN, four from NBC, three from CBS and 19 from the WB, a network partly owned by Tribune Co., owner of the Chicago Tribune. Sinclair has a "shared services" arrangement with two additional stations.
According to the Center for Public Integrity, Sinclair owns or operates two stations, called "duopolies," in more markets--20--than any other media company in the country. The company, which reported 2003 revenues of $738 million, also owns or operates more television stations--62--than any media company.
Sinclair did not respond to repeated requests to comment for this article. However, a telephone recording at the company's headquarters says, "The program has not been videotaped and the exact format of this unscripted event has not been finalized. Characterizations regarding the content are premature and are being promoted by groups pushing a political agenda."
Listeners are given a phone number for Sen. Kerry's campaign office in Washington, D.C., and asked to urge him to appear on the show. Kerry's campaign on Friday asked that each station carrying the "Stolen Honor: Wounds That Never Heal" documentary provide a similar amount of time to Kerry supporters.
House Minority Leader Nancy Pelosi (D-Calif.) and 84 other House Democrats on Thursday joined 19 senators in calling for the FCC to investigate Sinclair's apparent intentions to air "Stolen Honor" on its stations just days before the Nov. 2 election.
Democrats strike back
Prompted by Sinclair's plans to run the documentary, Sen. Byron Dorgan (D-N.D.) this week pledged to attach limits to media mergers to one of a handful of spending bills that must be approved before legislators adjourn at the end of the year.
FCC Chairman Michael Powell made clear that the commission would not attempt to stop Sinclair from airing the program. While emphasizing that he was unsure whether the program would trigger "equal-time" rules, Powell emphasized their importance when discussing controversial issues.
"We do have equal-time rules and I do think that in a political season it is beneficial for both sides of an issue to be heard," Powell said at a public appearance Friday in New York City.
Launched in 1971 with a single UHF station in Baltimore, Sinclair grew rapidly during the 1990s, buying stations mostly in medium-size cities such as Milwaukee, Dayton and Nashville.
Using a business arrangement known as a Local Marketing Agreement, or LMA, Sinclair became the operator of stations in markets where it already owned a television broadcaster.
Sinclair operates six LMAs through a company called Cunningham Broadcasting, previously known as Glencairn Ltd. Cunningham is controlled by trusts in the name of Carolyn Smith, the mother of Sinclair president and CEO David Smith, as well as two Sinclair vice presidents, Duncan Smith and Frederick Smith, and Robert Smith, a director on Sinclair's board.
The FCC established LMAs in the early-1990s to assist failing stations or to help start-ups share costs for such expenses as maintenance and advertising with older, established broadcasters.
However, Schwartzman says Sinclair used these business arrangements for the sole intention of eventually acquiring the stations themselves. "Sinclair has operated these LMAs as little more than a fig leaf for all but owning them outright," he said. "They've been pressed on this but unfortunately this FCC has let them off the hook."
Sinclair's use of LMAs goes back to 1991 when it purchased WPGH-TV in Pittsburgh and then sold a Pittsburgh station it already owned, WCWB-TV, to a station employee, an African-American named Edwin Edwards. Edwards became the president of Glencairn, owning it under a minority tax-incentive program.
Between 1994 and 1997, Sinclair acquired second television stations in San Antonio, Greenville, S.C, Asheville, N.C. and elsewhere, placing them under Glencairn.
When the FCC liberalized its "duopoly rules" in 1999, permitting companies such as Sinclair to own two stations in markets with eight or more independent television owners, Sinclair applied to the FCC to purchase all of Glencairn's stations.
However, Rainbow/PUSH, which has historically lobbied broadcasters to cover minority issues, filed a complaint charging that the company had "misrepresented facts and concealed the true extent of their business relationships" to own television stations that otherwise would not have been permitted under federal rules.
Pulitzer Broadcasting and Post-Newsweek Stations, a joint venture between the Washington Post Co. and the magazine by the same name, filed similar complaints with the FCC alleging that Glencairn was a Sinclair shell operation.
Practices called `disquieting'
In November 2001, the FCC fined both Sinclair and Glencairn $40,000 for violations to the 1934 Communications Act. However, FCC Chairman Powell and two other Republican appointees approved Sinclair's request to purchase all but six stations. Shortly afterward, Glencairn's name was changed to Cunningham Broadcasting.
In his dissent, Commissioner Michael Copps, a Democrat, called Sinclair's practices "disquieting." He said the company's maneuvering "raises questions of whether these stations were merely owned by Glencairn but controlled by Sinclair until such times as Sinclair could own them under our revised multiple ownership rules"
Rainbow/PUSH filed a follow-up petition in 2003, still pending before the FCC, that calls on the commission to determine whether Sinclair's present and past conduct of its LMAs makes it qualified to hold licenses to use the public airwaves.
At present, rules governing duopolies are in flux.
In June, the 3rd Circuit Court of Appeals in Philadelphia ordered the FCC to rewrite rules that would have allowed one company to own as many as three TV stations, eight radio stations and a newspaper in a single market.
The FCC has not announced whether it will appeal the 3rd Circuit Court's decision.
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