The Federal Communications Commission (FCC) is raising detailed questions about the financing, structure and relationship involving Raycom Media of Alabama and other entities involved in the transfer of the ownership and broadcast license of Honolulu station KFVE TV .
The FCC Media Bureau’s actions are in response to Media Council Hawaii’s (MCH) objections to a proposed sale and transfer of the KFVE broadcast license (made November 2013) to a company known as American Spirit. MCH objected, saying that the deal was a sham, that American Spirit is a shell company wholly controlled by Raycom. There are 7 American Spirit stations; all of them run by Raycom. MCH believes that this transfer and sale of the license is a thinly disguised effort by Raycom to further its control of three television stations—KGMB, KHNL, and KFVE—through a so-called Shared Services Agreement (SSA).
In 2009, Raycom engineered a deal in which it effectively took control of Honolulu stations KGMB, KHNL, and KFVE. Using the SSA, assets and call letters were swapped in a way that gives Raycom outright ownership of KGMB (CBS)and KHNL(NBC)—two of the top four stations in Honolulu—and de facto ownership and control of KFVE. When the deal was first announced, Raycom CEO Paul McTear stated that this was not a sale and “at the end of the day no money is changing hands.”
Raycom claims that station KFVE is a separate and independent entity, operated by HITV Inc., even though the company has only 2 employees, and no: studio, equipment, transmitter, or means of independent operation.
Documents made public pursuant to the Freedom of Information Act, reveal that Raycom executed a note, promising to pay HITV 22 million dollars plus quarterly interest payments of $275,000, plus annual principal payments. Also signed was an option agreement permitting the sale of KFVE to another company variously identified as Otumwa Media Holdings, American Spirit Media, and Southeastern Media Holdings.
Is American Spirit a real broadcasting company in that it can run a broadcast station independent of Raycom Media? What are the financial details involved in the transaction? The Media Bureau’s letter investigates these and other questions about the license transfer.
MCH filed a complaint with the FCC aimed at stopping the original merger on the grounds that it violated FCC ownership limits prohibiting one entity from owning two stations in the top 4 (KGMB –CBS and KHNL-NBC) and ownership/control of three stations. The FCC’s Media Bureau ruled in November 2011, that the merged operation violated public policy aimed at promoting diversity, competition and localism, but since the transaction did not involve application for a broadcast license, the FCC had no basis for action.
The Media Bureau said that it would include the question of SSAs in their Quadrennial Review and that MCH might properly raise this question when the station licenses were up for, renewal (2015). MCH filed an appeal of this decision that is pending before the full Commission.
With their letter of September 9, the FCC is finally asking the right questions, says MCH president, Chris Conybeare.
We are pleased that the FCC is trying to follow the money, blow away the smoke and look behind the mirrors of these sham transactions. This fight for media diversity is far from over. We look forward to the mandatory license renewal, process and will be filing objections to the continued misuse of the public airwaves by Raycom media.
MCH will be posting detailed information about these issues on its blog (www.mediacouncil.org) , including information about its objection to broadcast license renewals by Raycom and its shell companies.