Aborted Sale of Radio Stations Brings Lawsuit

Executives of Malrite Communications Group Inc., a Cleveland-based broadcasting conglomerate, thought they had closed the biggest U.S. radio station sale ever when they contracted last month to buy Los Angeles stations KTNQ-AM and KLVE-FM for $36 million.

But, in a 30-page lawsuit filed last week in U.S. District Court in Los Angeles, Malrite alleged that the three brothers who own the two Spanish-language stations breached that contract in order to sell them for $40 million to an unnamed buyer from Phoenix.

Elias, Julio and Jose Liberman, the principals of two corporations that operate the two stations, are all named as defendants, along with James Gammon, a Maryland media attorney who allegedly counseled the brothers to abandon the Malrite offer.

$10-Million Punitive Damages

The suit seeks to enforce the Malrite contract at the $36-million price tag and also asks the court to award Malrite $10 million in punitive damages.

Several attempts to contact the Libermans for comment failed.

Although the suit was filed March 5, Malrite did not announce the filing until Wednesday. A company spokesman explained that the release was authorized after rumors and at least one published report misstated Malrite’s role in the ongoing attempt to take over the two stations.

A two-page letter, dated Jan. 24 and on Malrite letterhead, was attached to the suit as an exhibit and purported to outline details of the $36-million transaction.

$100,000 Check

The letter, addressed to the Libermans’ K-LOVE Radio Broadcasting Inc., promised that Malrite would “pay to seller $35 million cash and execute a promissory note in the amount of $1 million for the building and real estate at the studio office location.”

Attached to the original letter was a $100,000 check that was to have been placed in escrow until the sale closed, according to the suit.

According to several industry sources, the highest previous price ever paid for an AM/FM radio combination was $35 million. Gannett Broadcasting, which owns KIIS-AM and FM in Los Angeles, paid that sum for two Houston stations last fall.

The Libermans first acquired KLVE-FM in 1976 and, three years later, bought the then-rock format KTNQ-AM from Miami-based Storer Communications Inc.

They turned both stations into Spanish-language stations with a heavy emphasis on sportscasting.

The stations are the exclusive Spanish-language outlets for broadcasts of Dodger and Angel baseball games as well as Raiders and Rams football games, the Malrite lawsuit points out.

Owns 4 TV Stations

A Malrite spokesman said Wednesday that Malrite still does not know who the Phoenix buyer is who offered $4 million more for the stations than Malrite.

An executive of Edens Broadcasting, the largest radio station conglomerate based in Phoenix, said Wednesday that the company had no plans to add the two Los Angeles stations to nine broadcast properties.

Malrite, which became a publicly traded company in 1984, owns television stations in Cincinnati, Rochester, N.Y., and West Palm Beach and Jacksonville, Fla.

It also owns 11 radio stations in Cleveland, New York City, San Francisco, Denver, Minneapolis-St. Paul and Milwaukee.