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FCC examines whether Sinclair showed "lack of gloss" when trying to buy Tribune



The Federal Communications Commission is investigating

Sinclair Broadcast Group
Inc.


SBGI 0.79%

misguided the governmental body during the failed attempt to purchase

Tribune Media

this year.

In a June 25 letter to Sinclair seen by The Wall Street Journal, the FCC said it was investigating whether the nation's largest owner of local TV stations "engaged in misrepresentation and / or lack of goodness" with the agency when seeking approval for the $ 3.9 billion deal.

Nexstar Media Group
Inc.

then entered last December and bought the Tribune in a $ 4.1

billion deal still awaiting FCC approval.

If the FCC decides that Sinclair has deceived the agency, it may order a hearing on the matter. An FCC hearing can lead to significant fines or even possible loss of broadcasting licenses, although such extreme actions are rare.

"This is not new," said a Sinclair spokesman on Wednesday. Adding the survey is part of "an ongoing discussion with the FCC" regarding certain allegations raised last year. An FCC spokesman was unavailable for comment.

"This is a big deal. The worst thing you can do with the FCC is lies," said Andrew Schwartzman, professor at Georgetown Law. "This is the only way to lose a license for a broadcast program. Sinclair must prove that they are not lying or that they do not mean and will not return."

The government's probe in Sinclair comes as the company is in the midst of obtaining 21 regional sports channels from Walt Disney Co. for more than $ 10 billion. This agreement requires approval by the Ministry of Justice.

In the letter, the FCC said it was investigating whether Sinclair's plans to spin from stations to comply with FCC regulations and receive approval of the Tribune agreement would actually have left the broadcaster's actual control of the stations.

A spokesman for Sinclair did not immediately respond to requests for comment Wednesday. Sinclair said earlier that the Spinoff plans were "consistent with structures such as Sinclair and many other broadcasters have exploited for many years with the full approval of the FCC."

A hearing on the allegations may affect Sinclair's future broadcast license renewals, as well as its ability to acquire stations in the future.

"This may be the agency starting to look at these claims and deciding what to do with them before the license renewals coming up next year," said Washington, DC, lawyer Jack Goodman, representing broadcast stations, but not Sinclair.

In the letter, the FCC stated that Sinclair has until July 9 to respond, warned that "deliberately and deliberately make any false statement or hide any material fact in response" to its inquiry "punished by fines or imprisonment, and a violation on the Communications Act. "

Such a transaction involved Tribunes WGN TV Chicago, which Sinclair said it would sell to car dealer operator Steven Fader for $ 60 million. Not only was that award considered far below the station's value by industry analysts, but Sinclair chairman David Smith is in charge of a car dealership issue where Mr. Fader is CEO.

In his letter to Sinclair, the FCC said it would have all the details of how Sinclair came up with the $ 60 million valuation, as well as all the discussions the company had with Mr. Fader about who would control the programming, personnel, and finances of the station. Mr. Father couldn't be reached for comment.

The FCC will have similar details about Sinclair's proposed plans to transfer television stations in Dallas and Houston to Cunningham Broadcasting, run by the property of Mr Smith's mother, Carolyn Smith.

This is not the first time Sinclair's actions have made it a government goal. In 2016, FCC Sinclair fines $ 9.5 million for allegedly failing to negotiate in good faith in a dispute with the satellite broadcaster

Dish Network
Corp.

In 2017, FCC Sinclair fined $ 13.4 million for alleged lack of programming marking. It was sent as sponsored content.

The failed Sinclair-Tribune agreement also triggered a major investigation by the Justice Department about television station owners violating the antitrust law by sharing the ad sales information that could potentially lead to higher advertising rates. Sinclair settled with the Justice Department in November this year.

Although most local broadcasters have low profiles, Sinclair has a strong national presence not only because of its size but also because news programming is known to have a conservative editorial voice.

In the presidential election in 2016, the Sinclair stations were seen as a haven for President Trump's campaign. Last year, Sinclair was criticized for demanding the news anchored to read a segment critically over the national news media and accusations of sending "false stories without checking the facts first."

Earlier this week, three Democratic candidates became President-Sens. Elizabeth Warren (D., Mass.), Cory Booker (D., NJ) and Bernie Sanders (D., Vt.) – sent a letter to the FCC and the Ministry of Justice claiming concerns about the proposed Regional Sports Agreement since it could reduce competition in the industry and lead to higher prices for consumers.

Write to Joe Flint at joe.flint@wsj.com and Lillian Rizzo at Lillian.Rizzo@wsj.com


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