Sinclair’s Growth Matched by Criticism

For a glimpse at the Sinclair Broadcast Group’s particular place in the American media landscape, consider the firm’s quest several years ago to add a new group of TV stations to its growing empire. The Federal Communications Commission had some problems with the deal -- a sensitive transaction because it involved the still largely banned practice of owning more than one station in a given market. In this case, not only was Sinclair getting the stations for a “small fraction of their value,” but the commission found that the company, operating under an agreement merely to manage the stations, had instead effectively taken control of the outlets before the purchase.

The agency fined the company $40,000 for violating FCC rules.

Then it let Sinclair buy the stations anyway.

One commissioner, Michael J. Copps, was disturbed enough to write a strongly worded dissent to the 2001 opinion. “What makes Sinclair’s practices disquieting ... are its maneuvers to acquire interests in multiple stations in seeming contravention -- if not violation -- of commission rules,” he wrote. “With each transaction over the years, Sinclair has stretched the limits of the commission’s local television ownership rules.”

Under President and Chief Executive David D. Smith, the conservative-leaning, publicity-shy Sinclair has grown from its modest beginnings by pushing the limits of government regulations. The company has drawn notice for aggressively expanding its control over multiple outlets in a single market, sometimes in ways its critics call underhanded, although the FCC generally has gone along.

In the last two years, Sinclair has started to take advantage of its reach with controversial programming decisions such as centralized newscasts intercut with right-skewing commentary, and banning its seven ABC affiliates from showing Ted Koppel’s roll call of military dead in Iraq, deeming it an overly political edition of “Nightline.”

But its most recent move -- a plan to air a film attacking Sen. John F. Kerry days before the Nov. 2 election -- catapulted it into the midst of a hotly contested presidential race. Though Sinclair, under pressure from advertisers, shareholders, viewers and Democrats, changed course and ended up offering what was generally regarded as a balanced report on 40 stations Friday night, the flap brought widespread attention to the firm and its practices.

Not lost on the company or its critics is the fact that Sinclair, like most other major media companies, will need the continued goodwill of government overseers to reach its future goals. “This administration has significantly loosened the media consolidation rules and Sinclair, having benefited from this, is now returning the favor,” said Andrew Jay Schwartzman, who heads the Media Access Project, a longtime company critic.

Sinclair now owns or controls 62 TV stations, including affiliates of Fox, ABC, CBS and NBC, as well as WB and UPN. It operates outside the nation’s biggest media markets -- the largest of the 39 cities where it has a presence is Tampa, Fla., ranked 13th in the nation, and its smallest is Peoria, No. 117.

*

Located 16 miles from downtown Baltimore in Cockeysville, in an area made fragrant by a spice plant, Sinclair’s brick-and-black-glass five-story headquarters stands out on the horizon, the Sinclair name in two-foot-high letters atop the building. A few feet away sits the local headquarters of the Bush-Cheney campaign, to which Sinclair’s owners and executives have contributed. This election cycle, Sinclair executives have given nearly $68,000, 97% of it to Republicans, according to the Center for Responsive Politics, which documents campaign contributions. In other years they have given more, as in the 2000 campaigns, when they donated nearly $178,000, 98% of it to Republicans.

During Maryland’s last gubernatorial election in 2002, a company formed by J. Duncan Smith, a Sinclair officer and David Smith’s brother, provided free executive helicopter services to the Republican candidate and eventual winner, Robert L. Ehrlich Jr.

Ehrlich, it turned out, was one of three congressmen who a year earlier had prodded the FCC to move more quickly on requests by Sinclair for approval to purchase a group of television stations. After the matter was made public, Ehrlich’s campaign committee, to satisfy campaign laws, eventually paid $34,300 for eight trips on the luxury helicopter owned by Whirlwind Aviation. Sinclair representatives did not return repeated calls seeking comment for this article, and a Times reporter on Thursday was denied entrance to the headquarters building after he requested an interview with David Smith.

Like Ted Turner’s cable empire, which was built on the back of a single TV station, Sinclair got its start on the fringes of broadcasting. Founded by Julian Smith, who at the beginning of his broadcast career ran a training school for radio station announcers in downtown Baltimore, Sinclair began with a station that went on the air in 1971 and operated on UHF, a TV frequency with less reach than mainstream stations. The Smith family dynasty now is headed by Julian’s son, David. Two other sons, Frederick G. and J. Duncan Smith, are company vice presidents who, along with their other brother, Robert E. Smith, serve on the board.

According to the company’s website, among David Smith’s early endeavors was founding, in 1978, Comark Communications, which made high power transmitters for UHF stations. He became Sinclair’s president and chief executive officer in 1988.

He has also had less celebrated moments. He was arrested on suspicion of soliciting a prostitute in Baltimore in 1996, according to published reports. And during the 1970s, he was a partner in a company that his co-partner said was raided for distributing 8mm pornographic movies.

Though Smith has claimed an aversion to publicity -- “We would tend to maintain as much anonymity as we can,” he told the Baltimore Sun in 1995 -- he can cut a memorable figure. He bucked local fashion standards by showing up at company headquarters wearing loafers without socks, according to the Sun article, and jokingly underscored his aggressiveness by keeping a toy shark and rattlesnake on his desk. And some of his comments at the time were anything but retiring: “We’re forever expanding -- like the universe,” Smith said.

Indeed, like Turner, the Smiths have been hailed as visionaries at times because of the way they have taken advantage of technological advances and a fast-changing media landscape to leverage their lowly assets into something much larger.

The explosion of cable made it easier for UHF stations, like those owned by Sinclair, to reach more viewers. The company also profited from the start of the WB and UPN networks in 1995, which were in need of stations to air their shows. Sinclair today has 19 WB affiliates. (Tribune Co., parent of The Times, is a part-owner of the WB.)

Simultaneously, the FCC, trying to improve the financial viability of small UHF stations, made it radically easier for one company to control more outlets in a given market. The FCC rules broadly allow one company to own one station and control another in a community, under an arrangement known as a Local Marketing Agreement; in some cases companies can own two stations outright in an arrangement called a duopoly.

Through this formula, Sinclair has amassed a portfolio with two or more stations in 21 markets, according to a list on its website.

The company itself has acknowledged the importance of favorable regulatory actions to its future. In a quarterly report filed with the Securities and Exchange Commission in August, Sinclair listed a series of negative consequences should the FCC tighten its rules on local marketing agreements and turn down the company’s requests for waivers. Among the possibilities listed is the forced sale of assets.

*

In its most recent effort at expansion, Sinclair has been seeking approval to purchase five stations currently owned by Cunningham Broadcasting. The FCC has said no, once, on the grounds Sinclair violated 1999 regulations limiting multiple ownership. But if a pending Sinclair appeal is approved, the sale would give Sinclair outright control of a second station in several markets where it already operates.

Jesse Jackson’s Rainbow/PUSH coalition, a longtime opponent of Sinclair’s expansion efforts, has charged that the proposed purchase is a sham and that Sinclair actually controls Cunningham. Among other things, the Rainbow/PUSH lawyers noted that Cunningham’s vice president is Carolyn Smith, David Smith’s mother. They also charged that the proposed sale price for the Cunningham stations was “a tiny fraction of their value.”

Rainbow/PUSH and other Sinclair opponents have argued that the company’s use of purchase agreements with the stations it manages has, at least in some cases, given it the ability to expand its media empire at a deep discount.

Similar charges were leveled in the 2001 case, which ended with the FCC’s split decision -- a $40,000 fine and permission to buy the stations.

“From Day One, [Sinclair’s] approach has been to see what they can get away with,” said Schwartzman, of the Media Access Project. “And to the frustration of many of us they have been extraordinarily successful. The FCC has repeatedly let them off the hook despite blatant violations and a policy of superficial efforts at compliance.”

The regulations that have allowed Sinclair to take on so many outlets -- including three apiece in Nashville and Birmingham, Ala. -- were designed to make financially foundering stations viable and keep a local flavor in television. Yet Sinclair in October 2002 created a centralized newscast that it bills as a “revolutionary news model.”

Sinclair contends that centralizing operations allows newscasts by stations that otherwise couldn’t afford to offer them. In an interview with The Times this year, Mark Hyman, the company’s spokesman, said that since its “News Central” launched -- with national news produced in Baltimore and local news wrapped around it -- Sinclair has hired 350 news employees and launched 13 newscasts on stations that didn’t previously carry news. Hyman hasn’t returned recent calls.

In the May interview, Hyman said “News Central” presented a “very balanced view.”

“The reason why some on the left characterized us as conservatives is we run stories that others in the media spike,” he said. One example he singled out at the time was a news conference by a group, little known at the time, that called itself Swift Boat Veterans for Truth. Over the summer, it emerged as one of Kerry’s most powerful critics, pouring millions of dollars into ads attacking him. The Swift boat group, whose claims have been largely discredited by eyewitnesses and military records, has since allied itself with former Vietnam POWs who appear in the anti-Kerry film “Stolen Honor: Wounds That Never Heal,” five minutes of which were incorporated into the Sinclair broadcast Friday night.

Hyman anchors daily commentaries called “The Point,” which are so pointed that some Sinclair stations have balked at airing them and had to be forced by headquarters to do so, according to current and former employees who spoke on condition of anonymity for fear of retribution. Hyman’s recent commentaries lambasted Kerry every night for two weeks.

*

Long before the company began its march toward its current media empire, David Smith in the mid-1970s was a partner in a company called Cine Processors, according to public records and an interview with one of his former partners.

David E. Williams, a co-partner in the business with Smith, said the Baltimore company turned out hundreds of copies of 8mm pornographic films at a property which was owned at the time, records show, by the Commercial Radio Institute, the company founded and headed by Smith’s father, Julian.

Williams -- who eventually had a falling out with Smith over expenses, and money Williams says he was owed for medical bills stemming from an automobile accident while on company business -- said that Cine dealt exclusively in pornographic films. Repeated requests for comment from David Smith, now 54, went unanswered.

Williams said that the film company went out of business in 1975 or 1976 after a raid in which police confiscated film and other materials.

“They hauled all the stuff out. They even tried to take out the processor. They did give that up, though,” Williams recalled.

Baltimore police officials said they were unable to locate records of the raid since it took place decades ago.

Lawyers for Cine challenged the legality of the search warrant in Baltimore City District Court and succeeded in forcing the police to return all the film, and the matter was dropped. Williams said the lawyers hired by the partners had little difficulty convincing the judge that the search warrant was illegal. He said that the search warrant had been issued based on obscene film a police officer contended had come from a Cine trash can on company property. Williams’ account was confirmed by a second source, who spoke on condition of anonymity but has direct knowledge of the raid and the company’s activities.

Court records show Smith and Williams, along with a third partner, were sued in Baltimore District Court for nonpayment on film processing equipment. The records also show that Smith sued Williams in an attempt to recover money that Smith claimed was a loan and Williams said was money owed him for business expenses.

More recently, Smith was in the public eye when the Baltimore Sun, the Washington Post and Variety reported that a police officer arrested him on suspicion of soliciting a prostitute in a Sinclair-owned Mercedes in August 1996. A spokeswoman for the Baltimore city state attorney’s office said Thursday she could not find the outcome of Smith’s case.

At the time, a company spokeswoman said: “The allegations against Mr. Smith are of a personal nature and do not relate to the business of the Sinclair Broadcast Group. Mr. Smith is charged with a misdemeanor, involving an alleged consensual act with an adult woman.” The spokeswoman said the company would “continue to operate under the direction of its current management.”

Sinclair stayed on stride. By July 1998, the firm announced it had become one of the nation’s largest owners of TV and radio stations, according to the International Directory of Company Histories published in 1999. “As the end of the decade approached,” it said, “Sinclair’s goal was set at obtaining 100 TV stations and over 100 radio stations.”

*

(BEGIN TEXT OF INFOBOX)

Sinclair’s reach

Sinclair Broadcast Group owns or controls 62 television stations in 39 markets. Forty of its stations aired a program including parts of a film critical of John F. Kerry’s anti-Vietnam War activities.

--

The company

Headquarters: Cockeysville, Md.

Reach: About 24% of U.S. households

Breakdown of stations: Fox affiliates 20; WB 19; UPN 6;

ABC 8; NBC 4; CBS 3; independent 2

Employees: 3,300

--

History

1971 Julian Sinclair Smith starts a UHF channel in Baltimore.

1986 Sinclair Broadcast Group Inc. is formed.

1990 Smith’s four sons purchase their parents’ interest in the company and take it over.

1991 Makes its first acquisition, WPGH-TV in Pittsburgh. The company introduced its local marketing agreement, allowing it to operate a second TV station in markets where it already owns a station.

1995 Goes public. Adds five more stations.

1997 Signs affiliation deal with WB network.

1998 Doubles in size with major acquisitions.

2002 Launches a news network in several markets.

April 2004 Refuses to allow its ABC stations to show a ‘Nightline’ roll call of dead in Iraq.

Oct. 14 Federal Communications Commission Chairman

Michael K. Powell says it has no authority to block Sinclair from making its stations show film critical of Kerry.

--

Contributions: Political donations by the company, employees and spouses from 2003 to 2004 included $68,005 to Republicans, of which $50,000 was by Vice President Frederick G. Smith to the Republican National Committee; donations to Democrats totaled $2,000

*

Sources: Company reports, Dwight Morris & Associates, Times research. Researched by Times librarian John Jackson

*

Jensen reported from New York; Roche from Washington, D.C., and Baltimore. Times researcher Janet Lundblad contributed from Los Angeles.