Likely Sale Spurs Torrance Audit of Cable TV Firm

The Torrance City Council voted unanimously this week to audit Paragon Communications, which provides cable television service for about 54,000 homes in five South Bay cities.

Under Federal Communication Commission rules, it is likely that Paragon will be sold as a result of the merger of Time Inc. and Warner Communications Inc. City officials said they want information on the company’s finances so that they can negotiate a franchise agreement with a new owner.

Without discussion, the council voted Tuesday to pay the Sherman Oaks accounting firm of Coopers & Lybrand $15,000 for the audit. Ken Flewellyn, Torrance’s assistant financial director, said he does not know how long the audit will take to complete.

Officials Interested

The city has not previously audited Paragon, which took over the cable TV franchise from Group W Cable in 1987, he said. The audit would also “make sure we are receiving our fair share” of the company’s revenues, Flewellyn said.

Paragon has franchise agreements with Torrance, Gardena, Lawndale, Hawthorne and El Segundo. Officials in the five cities are interested in the possible sale because their franchise agreements with Paragon require the cities to approve any change in ownership.

Torrance City Atty. Kenneth Nelson said the FCC will probably require the sale because otherwise Time Warner Inc. would control both Paragon and KCOP-TV in Los Angeles, which serves most of Southern California.

Time now owns 82% of American Television and Communications, which owns 50% of Paragon. Warner owns 42% of BHC Inc., which owns KCOP.

The FCC prohibits a company from holding more than 5% of the stock in both a cable system and a television station in the same market, agency officials said.

Barrett Brick, a lawyer for the FCC in Washington, said the agency has granted Time Warner Inc. until January, 1991, to come into compliance with the regulation. He said Time Warner Inc. can sell KCOP to comply with FCC rules, but he said the company will most likely sell Paragon.

Not Opposed to Audit

Jerome Ramsey, vice president of Paragon Communications, said he is not opposed to an audit but hopes the auditors can avoid disrupting the company’s work schedule.

While officials in the other South Bay cities have yet to take action similar to Torrance’s, in the past they have said they would be watching the merger because the sale of Paragon would permit them to renegotiate their franchise agreements with the new cable company.

Harry Reeves, Hawthorne’s chief of special services, said that if Paragon is sold, the city could negotiate a new agreement that would include improvements to the cable system.

Reeves said Torrance’s audit of Paragon is “a prudent thing to do.” Hawthorne has not asked for an audit of Paragon but may do so soon, he said. “I think it might be a good thing for all the cities to do.”