Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:
- Investigation Into Undisclosed Radio Station Owner With a History of Felonies Leads to Hearing Designation Order
- FCC Settles With Alaskan Broadcaster After Disastrous Station Inspection
- FCC Reinstates Licenses for Tennessee and Alabama Radio Stations, Then Immediately Threatens to Revoke Them
Troubled Past: Alleged Misrepresentations Lead FCC to Designate Applications for Hearing
In a recent Hearing Designation Order (“HDO”), the FCC’s Media Bureau raised serious concerns over the control of several midwestern AM stations.
The ordeal began when a father sought to help his adult son get a start in the radio business. According to the HDO, the father established a trust in 2006 for the purpose of acquiring radio station assets, and appointed his son as the sole beneficiary and a family friend/local attorney as the sole trustee. This trust was formed orally and not put in writing until 2012. For the next several years, the father provided the trust with millions of dollars to acquire AM stations in Missouri and Illinois. Unbeknownst to the FCC, however, was the father’s felonious past, having been convicted for obstruction of justice and bank fraud. The FCC’s assignment and transfer application forms specifically ask whether any parties to the application have been convicted of felonies. The FCC’s view is that such behavior casts doubt on whether that person’s involvement with a station would be in the public interest.
Shortly after the trust’s creation, the son supposedly formed a separate company which, according to the trust, managed all of the stations’ operations, including employment and finances. According to the trust, this agreement, like the 2006 trust agreement, was an oral agreement, and never reduced to writing.
Suspicions regarding control over the trust arose in 2012, when a local resident and listener filed a Petition to Deny the stations’ license renewal applications. He had sought a job with the stations and was directed to speak to the father. This raised red flags for the listener, who subsequently began perusing the stations’ Public Inspection Files. In them, he found indications that the father was running the stations’ day-to-day operations, such as communications from the trust’s counsel to the father regarding basic station operations and business matters.
To complicate matters further, the son (and sole beneficiary of the trust) passed away in 2015, leaving the trust’s assets, including the station licenses, to his father. According to the trust, however, the father declined them and a year later assigned the beneficial interests in the trust to his girlfriend. In the meantime, the trust entered into a programming and marketing agreement with another broadcaster.
Once the girlfriend was made the beneficiary, she and the family friend/trustee entered into an agreement to assign the trust’s assets, including the station licenses, to a new trust, and filed assignment of license applications to seek FCC approval for that assignment. The petitioner filed another Petition to Deny the assignment applications, claiming that the assignments were a “subterfuge” to enable the father to continue to control the stations.
In its review of the multiple pending applications, the FCC determined that substantial and material questions were raised regarding whether: (1) an undisclosed transfer of control to the father took place either before or after the son’s death; (2) the father is an undisclosed real party-in-interest to the applications; (3) the original trust was used to shield the father or other trust beneficiaries from the FCC’s ownership attribution requirements; and (4) the trust engaged in misrepresentations and/or a lack of candor in its applications and other communications with the FCC.
Further complicating the investigation, the FCC noted that the trust had failed to provide significant documentary evidence for many of its claims, with the trust blaming this in part on the destruction of “a great majority of [the stations’] business records” that took place shortly after the son’s death.
To resolve these questions and to determine whether the applications should be granted, the applications have been designated for a hearing before an Administrative Law Judge. It is not uncommon for such hearing proceedings to take years to be resolved.
Seward’s Folly: Alaskan FM Station Settles With FCC Over 6-Year-Old Violations
The FCC recently entered into a Consent Decree involving numerous rule violations by an FM station licensed to Seward, Alaska, including infractions relating to the now-repealed Main Studio rule, and basic station monitoring and Emergency Alert System requirements. According to the FCC, the licensee also failed to respond to multiple Notices of Violation (“NOVs”) previously issued to the station. Continue reading →