FCC says Sinclair may have proposed ‘sham’ station deals

Sinclair TV station map
Sinclair TV station map. (Sinclair)

The FCC has gone public with its hearing order regarding Sinclair’s $3.9 billion Tribune acquisition and is questioning whether the company proposed “sham” transactions.

In its new filing, the FCC specifically calls out Sinclair’s planned divestitures of Tribune’s stations in Chicago, Dallas and Houston. In the case of WGN-TV in Chicago, the FCC said that Sinclair planned to sell the station to Steven Faber, a person with no prior broadcasting experience who serves as CEO of a company that’s majority owned by Sinclair Executive Chairman David Smith. The FCC said that Sinclair would have owned most of WGN-TV’s assets and controlled many aspects of the station’s operations. It also accused Sinclair of selling the station to Faber for well below the market value while retaining the right to purchase the station back in the future.

“Such facts raise questions about whether Sinclair was the real party in interest under Commission rules and precedents and attempted to skirt the Commission’s broadcast ownership rules,” the FCC wrote.

The FCC said that it would not grant Sinclair’s application until an administrative law judge reviewed the material questions. The questions put forth by the FCC ask whether Sinclair was the real party in interest to the sale of WGN-TV, KDAF in Dallas, and KIAH in Houston; whether Sinclair engaged in misrepresentation and/or lack of candor in its applications with the commission; and whether consummation of the overall transaction would be in the public interest.

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“Given the seriousness of the issues presented, we direct the Media Bureau to hold in abeyance all other pending applications and amendments thereto related to the overall proposed Sinclair-Tribune transaction until the issues that are the subject of this Hearing Designation Order have been resolved with finality,” the FCC wrote.

Although Sinclair on Wednesday revised its divestiture plan to address concerns over the Chicago, Dallas and Houston stations, Jefferies analyst John Janedis said that could be too little, too late.

“Despite [Sinclair’s] putting forth a new proposal regarding the divestiture of the 3 stations supposed to be in question (Dallas, Houston, Chicago), the FCC voted unanimously to refer the SBGI/TRCO transaction to an administrative law judge—likely killing the deal,” Janedis wrote in a research note.