Media Bureau Requests More Information on Sinclair Sharing Arrangements in Allbritton Deal

The bureau’s request for data on the financial relationships between Sinclair and affiliated companies Deerfield Media and Howard Stirk Holdings (HSH) is connected to a letter it sent to Sinclair requesting the restructuring of some of the deals connected with the Allbritton transaction (CD Dec 9 p5) and petitions to deny filed by public interest groups and the American Cable Association (CD Sept 17 p7). Representatives of ACA, Free Press and the Rainbow PUSH Coalition were part of a conference call last month in which the bureau asked for the financial data, said the Sinclair filing. The call occurred because Sinclair hadn’t submitted all of the information requested by the bureau in its previous letters to Sinclair, said Free Press Policy Counsel Lauren Wilson in an interview.

Free Press and other public interest groups have argued that Deerfield and HSH are “shell companies” that are effectively fronts for Sinclair, and that bonuses paid to Sinclair under sharing arrangements along with the entanglement of those companies’ finances with Sinclair’s will demonstrate the companies aren’t viable or profitable without Sinclair. Sinclair said bonuses that companies involved in sharing arrangements pay to Sinclair are “the sole and absolute discretion of station licensees.” Sinclair also said it’s negotiating a deal with Cunningham Broadcasting to restructure some of the arrangements flagged by the bureau, as it promised to do in an earlier letter (CD Jan 21 p5). Sinclair and the bureau didn’t comment for this story.

With the FCC reportedly considering a rulemaking limiting sharing arrangements (CD Feb 25 p1) and the Department of Justice weighing in against them (CD Feb 24 p7), the bureau’s persistence in digging into the Sinclair/Allbritton deal looks good for public interest opposition to the deal, Wilson said. Free Press is filing acknowledgments of confidentiality to get access to the financial information, which Wilson expects to bolster arguments that the connections among Deerfield, Sinclair and HSH violate the FCC’s ownership rules.

There’s an impression within the broadcast industry that bureau staff are on the lookout for reasons not to approve transactions involving joint sales agreements or shared service agreements, said a broadcast attorney who deals extensively with such deals. “They would not have asked these questions six months ago,” the attorney said of the bureau’s requests to Sinclair. However, the requests for information may not necessarily indicate Sinclair/Allbritton won’t be approved, said Fletcher Heald broadcast attorney Peter Tannenwald. Since FCC Chairman Tom Wheeler said in a speech that special attention would be paid to such deals, it makes sense that bureau staff would deploy extra scrutiny on a large deal involving them, Tannenwald said. “The bureau is more likely to have someone look over their shoulder.”

Though Tribune’s deal to buy Local was approved by the bureau, it’s facing its own challenge on sharing arrangements in the form of a Free Press application for review of the deal. In opposition comments filed Tuesday, Tribune and Dreamcatcher -- one of the companies with which Tribune is involved in a sharing arrangement -- challenged Free Press’s request for review for not pointing out any violations of the commission’s rules (http://bit.ly/1jxRu4k). The public interest filing “does not address the transaction at all, except to offer a rehash of arguments the Media Bureau already considered and properly rejected variously as inaccurate, irrelevant or speculative,” Tribune said. “Instead, and in an apparent concession that the Commission’s attribution standards permit the business arrangements under review, Free Press has asked the Commission to adopt new attribution standards that would prohibit them.” The FCC should “forcefully reject” the Free Press application, Tribune said.