Apparently, even sell-out corporate shills have their breaking point. Ajit Pai’s FCC released documents on Thursday that explain why it’s sending Sinclair Broadcasting’s proposed takeover of local news in the U.S. to a judge for further review. Defying all expectations, the deal now looks like it’s next to dead.
On Wednesday, the Federal Communications Commission unanimously decided that the $3.9 billion merger between Sinclair and Tribune Media contained enough cause for concern that it should be reviewed independently by an administrative judge. This afternoon, it made the related hearing designation order public and explained for the first time why it believes this deal may “not be in the public interest.”
Before today, there was plenty of reason to believe it was a bad idea to let Sinclair skirt regulation with a loophole and have stations available in 72 percent of American households. One reason is, that’s almost twice the reach federal rules allow one company to control (the standard federally mandated limit is 39 percent); another reason is, Sinclair is a brazen conservative propaganda outlet that forces good reporters to debase themselves; on top of that, Pai, the FCC’s chairman, managed to land himself under investigation for allegedly improper coordination with the broadcasting company after he revived the very loophole that would have put Sinclair in two-thirds of Americans’ living rooms.
Those reasons weren’t included in the FCC’s explanation for pumping the brakes on the deal. As was previously hinted at, the legal problem comes down to Sinclair and Tribune agreeing to divest themselves of 23 local stations as part of an agreement to receive regulatory approval. One Sinclair competitor, Newsmax, argued that the deal effectively left Sinclair in control of some of those stations. In today’s filing, the FCC isolated three stations that “raise significant questions as to whether those proposed divestitures were in fact ‘sham’ transactions.”
In the example of WGN-TV-Chicago, a man named Steven Fader was a proposed purchaser for the station. Citing multiple independent challenges to the deal that were sent to the FCC, the filing says that there is reason to believe foul play is involved due to Fader’s close relationship with Sinclair’s executive chairman and controlling shareholder, David Smith. “Specifically, Fader is the CEO of Atlantic Automotive Group (Atlantic), while David Smith has a controlling interest in Atlantic and serves as a member of its board of directors ... and Atlantic is a Sinclair advertiser and tenant,” the order claims. It also states that the $60 million price tag for the station “appeared to be significantly below market value.” Once again, questions were raised over whether Sinclair “attempted to skirt the Commission’s broadcast ownership rules.”
Virtually the same concerns are involved with the examples of stations in Dallas and Houston that were set to be sold off to Cunningham Broadcasting. A Sinclair associate named Michael Anderson allegedly bought $400,000 worth of Cunningham shares at a rate that was allegedly far below market value. I’m just going to run this example of incestuous corporate ownership in the FCC’s own convoluted words: Another point of concern is “the fact that the children of Sinclair’s controlling shareholders are beneficiaries of trusts controlling the non-voting shares of Cunningham with the parents holding options to buy the voting shares in the future.” On top of all this, Sinclair would still retain the right to buy back the stations in the future, according to the FCC.
Sinclair quickly tried to restructure all of this in a less shady manner on Wednesday in the last-minute hope that it could still win the FCC’s favor.
“As a result and in light of the ongoing and constructive dialogue we had with the FCC during the past year, we were shocked that concerns are now being raised, Sinclair said in a statement announcing its amended divestitures in the Dallas, Houston, and Chicago stations. “Nonetheless, we have decided to move forward with these additional changes to satisfy the FCC’s concerns.” It added: “There can be no question regarding misrepresentation or character given that Sinclair has fully disclosed all terms of all aspects of the transactions it has proposed.”
Despite Sinclair’s shock and begrudged effort to appease the FCC, it appears to be too late. The FCC filing states, “Although these three applications were withdrawn today [Wednesday], material questions remain because the real party-in-interest issue, in this case, includes a potential element of misrepresentation or lack of candor that may suggest granting other, related applications by the same party would not be in the public interest.” To put it another way, Sinclair may be too sleazy to even deal with going forward.
We were unable to reach a Sinclair spokesperson by phone for comment on the FCC’s filing, and the company did not immediately respond to an email requesting comment. We will update when we hear back.
Of course, bad actors can oppose other bad actors sometimes, and it’s worth noting that one of the parties that called this deal a “sham” in a complaint to the FCC was the conservative organization Newsmax. That company is a rival of Sinclair, and it also happens to employ one of Donald Trump’s golfing buddies, Christopher Ruddy. According to the New York Post, Ruddy claims he’s discussed his opposition to the merger with the president “a few times.” Throw in Pai’s inspector general investigation for alleged improper coordination with Sinclair, and it’s easy to see why the big-mug-sipping doofus might want to let a judge rule on this whole thing.