A new public interest group with ties to a Washington, D.C.-based communications law firm has filed a petition with the Federal Communications Commission (FCC) seeking to block the transfer of five broadcast television licenses from Sinclair, Inc. to a new company founded by one of its former sports executives.
The petition, filed on Monday by Frequency Forward, demands a hearing at the FCC that will explore whether Sinclair can demonstrate it has the character and fitness to hold broadcast TV licenses for the five affected stations, which are due to be sold to Rincon Broadcasting, asThe Desk reported last month.
Frequency Forward makes no direct argument that Rincon Broadcasting and its owner, ex-Bally Sports executive Todd Parkin, are unqualified to receive the TV licenses as part of Sinclair’s asset sale. Instead, the entire petition focuses squarely on Sinclair’s history as a broadcaster, including its use of so-called “sidecar” companies — entities that are formed to “own” TV stations and receive their broadcast licenses, while allowing other companies to exert financial and operational control over them.
That arrangement is typically effectuated through schemes known as “local marketing agreements” or “shared services agreements,” and the FCC has long known about the practice among broadcasters. Sinclair has a number of local marketing agreements with other companies, as do broadcasters like Nexstar Media.
Public interest groups say those types of arrangements are exploited as a loophole that allows local TV station owners to sidestep federal ownership regulations, which limit the number of licensed broadcast stations a company may own to those that reach no more than 39 percent of the American TV audience.
The petition filed by Frequency Forward argues that Sinclair uses its local marketing agreements with companies like Deerfield Media and Cunningham Broadcasting to do just that, and suggests Rincon Broadcasting is yet another shell company set up by a purported third party to allow Sinclair to divest its stations on paper while still exerting control over them.
For that reason, much of the petition focuses on Sinclair’s history as a broadcaster, and challenges the notion that the company is able to satisfy the FCC’s character requirement to hold licenses for its TV stations.
Among other things, the petition examines Sinclair’s failed merger with Tribune, which was subject to FCC scrutiny at the time it was proposed. During the evaluation period, Sinclair executives told the FCC that they could satisfy rules regarding direct ownership of local TV stations by transferring the license of Chicago-area WGN-TV (Channel 9) to a company owned by Steven Fader, which was partially bankrolled by Sinclair’s executive chairman, David Smith.
“Sinclair proposed to transfer WGN-TV to Fader, an individual who not only lacked any prior broadcasting experience, but who also has extensive business relationships with David Smith,” the petition said. “The Commission found that the sale of WGN-TV to Fader involved many atypical deal terms, as well as several agreements that delegated operation of many aspects of the station to Sinclair.”
One of those aspects included the formation of a shared services agreement, which would have allowed Sinclair to continue operating WGN-TV, while allowing Fader’s company to own the assets and hold the broadcast licenses. In this respect, Sinclair would be ade facto owner of the station, the petition argues — something that the FCC recently held true in a case involving Nexstar and its TV station, WPIX-TV, which is operated through a similar local marketing agreement.
A Freedom of Information Act (FOIA) request filed with the FCC later turned up documents that, according to Frequency Forward, revealed Sinclair’s valuation of WGN-TV at $60 million was problematic because it was determined based on non-generally accepted accounting principles (non-GAAP), among other reasons.
Sinclair and Tribune ultimately did not move forward with the merger. Nexstar acquired Tribune’s local TV assets and various websites in 2019.
The petition largely takes exception with the way Sinclair conducts its business, and makes no allegations that Rincon is not fit to hold a broadcast license — only to suggest that the type of close business connections between Sinclair, Smith and Fader that were proven to be problematic in the WGN matter several years ago are again at play in the transaction between Sinclair, Rincon and Parkin.
Frequency Forward appears to be a relatively new public interest group, formed earlier this year, with its web address registered on February 21 — about two weeks before the Sinclair-Rincon transaction was announced.
The group lists an address that resolves to a D.C. law firm called Smithwick & Belendiuk, which practices communications and media-related litigation. Priciples Gary Smithwick and Arthur Belendiuk are promoted on the law firm’s website as helping its clients — owners and potential owners of radio and TV stations — “navigate the FCC’s rulebook.”
Belendiuk is listed as the signatory on the petition before the FCC. A source familiar with Frequency Forward’s foundation said it is being housed at the law firm for now, but intends to grow into its own non-profit group in the near future, and affirmed Belendiuk is one of two co-founders of the organization.
A spokesperson for Sinclair declined to comment on the petition.
The issue may be rendered moot in the coming weeks: The FCC Is currently weighing public comment on a number of proposals, including one that would see ownership caps on broadcast radio and TV stations eliminated. The agency’s current chairman, Brendan Carr, has also expressed views in the past few months that indicate he is amenable to modifying regulations that benefit local TV broadcasters.
