FCC Official Cites Broadcaster’s ‘Dishonesty’ : Judge Says RKO Unfit to Run Its Stations

RKO General, the once-giant broadcasting company mired in a decades-old battle to defend its suitability as a license holder, suffered another blow Tuesday when an FCC administrative law judge ruled that the company is unfit to run KHJ-TV Channel 9 in Los Angeles and 13 other television and radio stations across the land.

RKO immediately said it would appeal the decision and does not expect the ruling to harm its 5-month-old agreement to sell KHJ-TV to Walt Disney Co. in a deal worth about $217 million to RKO, a GenCorp subsidiary. GenCorp embarked on a plan two years ago to sell all its broadcast properties and recently sold WOR-TV in the New York metropolitan area to MCA.

Disney Vice President Erwin D. Okun said the Burbank company “absolutely” intends to press ahead with the KHJ acquisition, which requires Federal Communications Commission approval.

In 1982, RKO sold the physical assets of its Boston TV station WNAC, a highly profitable CBS affiliate, for just $24 million after it was stripped of its license on similar grounds. If the commission and courts uphold Tuesday’s decision, RKO conceivably could face a similar situation in which it could sell only assets, not broadcast licenses.

In a toughly worded opinion, Administrative Law Judge Edward J. Kuhlmann branded RKO as a broadcaster of unprecedented dishonesty in the FCC’s experience. The 75-page opinion followed a three-year hearing on the issue of RKO’s character as a broadcaster.

Among his findings, Kuhlmann declared that “there is no question that RKO officials destroyed the 1974 internal audit report” dealing with advertising barter and trade practices questioned by the FCC.

The administrative law judge also concluded that John Fitzgerald, RKO’s former chief controller, “repeatedly lied” in 1984 when he was questioned about the destruction of the audit report.

Fitzgerald has since left the company for unrelated reasons, according to Timothy B. Dyk, a Washington lawyer retained by RKO. The former official could not be located for comment late Tuesday, but Dyk said: “The man made a mistake in his deposition and he corrected it.”

According to the administrative law judge, RKO intentionally filed 30 false and misleading financial reports from 1971 to 1975 for 10 of its stations. Kuhlmann wrote that “no case ever before decided by this Commission presents dishonesty comparable to RKO’s. There is not a single case of fraudulent billing practices investigated and reviewed by this Commission, which exhibits as many practices affecting as many advertisers over as many years.”

In Los Angeles, the ownership of independent KHJ-TV has been in dispute since 1965, when a Los Angeles company called Fidelity Television began a challenge to KHJ’s station license. In a complex deal, Fidelity stands to gain about $103 million from the proposed sale of the station to Disney, because it has agreed to cooperate with GenCorp in a two-stage sale. Under the proposed settlement, Fidelity will briefly hold the station license before the final sale. That two-stage proposal nettles the FCC staff, however, which has lodged objections on procedural grounds.

The station’s fate could be settled as early as next month if the full commission agrees to vote on the settlement embodied in the Disney sale, according to William G. Simon, the former FBI agent who organized Fidelity. The FCC has not disclosed its September agenda, but Simon said he believes that the settlement will appear because “it’s ripe for a hearing.”