Inspector General Investigating FCC Chair: Pai Should Recuse Himself from Sinclair Merger Consideration

February 16, 2018

WASHINGTON, D.C. – Responding to news that the Federal Communications Commission’s inspector general has opened an investigation into commission chairman Ajit Pai to determine whether he was biased in his repeated support of Sinclair Broadcast Group Inc., Allied Progress released the following statement:

“The lengths to which Chairman Pai has gone in order to help Sinclair monopolize the local television news industry is astonishing. He has swept aside longstanding FCC policy and advanced a number of rules changes tailor-made for Sinclair’s benefit,” said Karl Frisch, executive director of Allied Progress.

He continued, “Chairman Pai must recuse himself from decisions involving the Sinclair merger. His many biased actions have been an egregious, and likely illegal, example of overreach by the FCC. News that the inspector general is investigating Pai’s questionable support for Sinclair is long overdue.”

The Pai / Sinclair Connection

• As FCC Chair, Pai Has Bent Over Backwards to Help Sinclair. Since becoming FCC Chairman in January 2017, “Pai has undertaken a deregulatory blitz, enacting or proposing a wish list of fundamental policy changes advocated by” David Smith and Sinclair Broadcast Group. Most significantly, Pai, in April 2017, led the FCC in reinstating the UHF discount, “a decades-old regulatory loophole that will keep Sinclair from vastly exceeding federal limits on media ownership.” Under Pai’s leadership, the FCC is considering eliminating the national ownership cap, and already has eliminated the duopoly rule that prohibited a company from owning more than two TV stations in one market. All of these changes took place while the FCC was considering a merger that would allow Sinclair Broadcast to become a local TV “powerhouse” reaching “72% of the country.” [Cecilia Kang, Eric Lipton, and Sydney Ember, “A Conservative TV Giant, Unleashed,” The New York Times, 08/14/17; Margaret Harding McGill and John Hendel, “How Trump’s FCC aided Sinclair’s expansion,” Politico, 08/06/17; Ted Johnson, “FCC Launches Review of TV Station Ownership Cap,” Variety, 12/14/17; Ted Johnson, “The FCC just passed the most significant changes to media ownership regulations in a generation,” Variety, 11/16/17]

• Sinclair Submitted a Comment to the FCC Before it Eliminated the UHF Discount in September, Stating That it “Opposed the FCC’s Plans to Eliminate” the discount. [“FOX, SBGI, TRCO: Hot Stocks,” com, 09/07/16; “FCC Moves to End the UHF ‘Discount’; Says digital broadcasting has rendered all stations equal,” Multichannel News, 09/12/16.]

• The Day After the FCC Voted to Reinstate the UHF Discount in April, Making it Easier for Sinclair to Acquire Stations, “Sinclair Announced the Purchase of Bonten Media.” In July 2017, the FCC “quietly approved the transfer” of seven major television station licenses owned by Bluestone Television/Bonten Media to Sinclair Broadcast Group — without informing the agency’s sole Democratic commissioner, Mignon Clyburn.” Sinclair announced its plans to buy Tribune Media in May 2017, the month after the Ajit Pai-helmed FCC “restored the UHF discount.” [David Dayen, “Trump is Helping Big Media Companies Get Bigger,” The Nation, 05/09/17; Karl Bode, “FCC Boss Tries to Hide His Latest Gift to Sinclair Broadcasting,” DSL Reports, 07/05/17; Christopher Ali, “Changing the way we get TV news; Opinion“, The Conversation, 06/25/17.]

• Pai’s Pro-Sinclair Maneuvers on the FCC Predate his Chairmanship. Even before becoming Chairman, Pai made decisions as FCC Commissioner that have benefitted Sinclair. “Just seven months into” his tenure at the FCC, in December 2012, Ajit Pai met with “Sinclair’s general counsel, and two of the company’s Washington-based corporate lawyers” at his office. They discussed joint sales agreements (J.S.A.s), with Sinclair’s lawyer telling Pai that “‘to his knowledge, not a single example of harm to program diversity or competition for viewers resulting from J.S.A.s has been documented.’ Although the “Sinclair executives made the same pitch to the other commissioners,” it was Pai “who aggressively picked up the company’s cause in opposing the commission’s crackdown on the disputed agreements.” Follow-up visits with Pai’s chief of staff, in early 2014, were also attended by Rebecca Hanson, a Sinclair lobbyist “who had just left a job at the F.C.C.” Hanson shared “data that showed the benefits to consumers of joint sales agreements,” which Pai inserted “almost word for word, in his formal legal argument when voting against” an F.C.C. measure that would crack down on the agreements. [Cecilia Kang, Eric Lipton, and Sydney Ember, “A Conservative TV Giant, Unleashed,” The New York Time, 08/14/17.]

• Pai Has Fought to Let Sinclair Keep More Stations During Mergers. “Pai criticized the need for Sinclair to surrender the licenses of” three television stations for the company to win “final regulatory approval for the $985 million purchase of Allbritton Communications’ TV properties” in 2014. Pai argued that allowing WCIV in Charleston, SC, to be “owned and operated by Howard Stirk Holdings, Inc., an African-American owned broadcast company,” would have benefitted “ownership diversity” – despite the fact that Howard Stirk Holdings is “owned and operated by” Armstrong Williams, “a longtime business partner of Sinclair,” which is “controlled by a wealthy white family.” [Brooks Boliek, “FCC approves $1B Allbritton TV sale,” Politico, 07/24/14 and Federal Communications Commission, Press Release, 07/24/14; Federal Communications Commission, Press Release, 07/24/14; Ajit Pai and Michael O’Rielly, “Statement of Commissioners Ajit Pai and Michael O’Rielly on the Negative Impact of the Decision to Restrict Television Stations’ Use of Joint Sales Agreements,” Federal Communications Commission, 05/29/14; Howard Stirk Holdings, Armstrong Williams, accessed 07/13/17 and Paul Farhi, “How a giant TV company helped Trump’s campaign,” The Washington Post, 12/22/16; Paul Farhi, “Station Owner Accused of Fronting for Another Firm,” The Washington Post, 04/10/99.]

• Sinclair’s David Smith Praised Pai in 2014, When He Said, on a Conference Call, “You’re Seeing Commissioner Pai Stand Up and Make Some Pretty Bold Statements About, Will Somebody Please Sue the FCC Because They’re Breaking the Law.” At the time, Sinclair Broadcast Group was working on a “$1 billion deal to acquire television stations from Allbritton Communications.” [“Q1 2014 Sinclair Broadcast Group Earnings Conference Call – Final,” FD (Fair Disclosure) Wire, 05/07/14; Lorraine Mirabella, “Sinclair plans Aug. 1 closing on $1 billion Allbritton deal,” The Baltimore Sun, 07/25/14.]

• Pai Met with Representatives of Sinclair Broadcast Group for a “Demo” at the Wynn in Las Vegas in April 2016. [Catherine Farley, “RE: Demo in Las Vegas”, Email, 04/14/16.]

• Sinclair “‘Actively Court[ed]'” Pai, Who Was Appointed Chairman of the Federal Communications Commission (FCC) by Donald Trump. Several days after the election, Pai attended a gathering of Sinclair “executives and a meeting with its Executive Chairman David Smith” at “for a company conference in Baltimore’s Four Seasons hotel.” “The gleaming harbor-front hotel” was “home to fare including a $32 crab cake sandwich and a $15 ‘Ulterior Motive’ cocktail.” [Todd Shields, “Possible Tribune Suitor Sinclair Woos FCC’s Pai on Regulations,” Bloomberg, 03/27/17; Rebecca Hanson, “Invitation for Commissioner Pai”, Email, 09/06/16.]

• Pai Met with Sinclair Chairman David Smith, CEO Chris Ripley, and Sinclair commentator Armstrong Williams in January 2017, the Day Before “News Reports of Pai’s Appointment by Trump Broke.” At the meeting, which was held “at the Arlington, Virginia office of News Channel 8, a Sinclair property,” Pai and the Sinclair executives discussed “the lack of minority broadcast owners and the prospects for relaxing a recent joint sales agreement rule, according to an official disclosure.” The following month, Chris Ripley told investors, “‘We’re very optimistic about this new FCC and the leadership of Ajit Pai.'” [Todd Shields, “Possible Tribune Suitor Sinclair Woos FCC’s Pai on Regulations,” Bloomberg, 03/27/17; Margaret Harding McGill, “A peek at Pai’s calendar shows post-election agenda,” Politico Pro, 03/10/17; “Notice of Ex Parte Communication and Support of Expansion of Minority Ownership,” Federal Communications Commission, 01/23/17.]

• Sinclair Bragged in SEC Filing About the Positive Impact Reinstating the UHF Discount Would Have on the Company Just Before Pai’s FCC Reinstated the Discount. In February 2017, shortly before the UHF discount was reinstated, Sinclair Broadcast Group said, in a filing “before the U.S. Securities and Exchange Commission,” that “‘[i]f the UHF discount is restored…it would expand our ability, to make televisions station acquisitions in the future.'” In the filing, Sinclair also wrote that the “majority of the stations we own and operate, or to which we provide programming services, are UHF. As a result of the recent elimination of the UHF discount, counting all our present stations and pending transactions, we reach over 38% of U.S. households, limiting our future ability to make television station acquisitions.” [“FCC Commissioner Clyburn Issues Statement on Reinstatement of UHF Discount,” Targeted News Service, 04/20/17; “FORM 10-K,” U.S. Securities and Exchange Commission, 02/28/17.]

• Sinclair’s Chris Ripley Praised Pai, Telling Investors in February 2017, “‘We’re Very Optimistic About this New FCC and the Leadership of Ajit Pai.'” He said he expected “‘this new FCC to tackle the ownership rules'” and “‘definitely anticipate[d] that more consolidation will happen'” under Pai’s leadership. [Todd Shields, “Possible Tribune Suitor Sinclair Woos FCC’s Pai on Regulations,” Bloomberg, 03/27/17.]

• Within Weeks of Becoming FCC Chair, Pai Took Steps to Push Technology Promoted by Sinclair. Pai, within weeks of becoming Chairman of the FCC, “circulated a Notice of Proposed Rulemaking to the other commissioners that would allow TV stations to start rolling out the ATSC 3.0 advanced TV transmission standard on a voluntary basis.” Sinclair has promoted the new transmission standard for years, even establishing ONE Media in 2014, a joint venture with Coherent Logix that planned to “alternative to the new ATSC 3.0 standard being developed by the Advanced Television Systems Committee.” Sinclair would also directly benefit from the new standard; Diaelectric, “a wholly owned subsidiary of Sinclair,” produces antennas “with integrated ATSC 3.0-ready technology.” [John Eggerton, “FCC’s Pai Proposes ATSC 3.0 Rollout,” Broadcasting & Cable, 02/02/17; George Winslow, “Coherent Logix, Sinclair Launch ONE Media,” Broadcasting & Cable, 05/06/14; “Dielectric to Unveil High-Power Broadband Pylon Antenna with ATSC 3.0-Ready Technology at 2017 NAB Show,” Dielectric, 04/05/17.]

• Pai Has Appeared on Obscure Sinclair Programming – Received Drooling Praise During Appearance. Ajit Pai appeared on “The Right Side with Armstrong Williams” in March 2017, which “airs on all of Sinclair’s more than 150 television stations nationwide.” Williams praised Pai’s “courage” and said that Pai “understands and respects the law” and “has no political agenda.” Williams then asked Pai, “Where do find that kind of self-awareness, that kind of courage that propels you to have the sort of no-bars attitude to get it done?” [“The Right Side with Armstrong Williams: FCC Chairman Ajit Pai Profile,” WJLA, 03/18/17 and Janell Ross, “Armstrong Williams: The man of political mystery behind Ben Carson,” The Washington Post, 01/28/16; The Right Side W/ Armstrong Williams, Armstrong Williams, accessed 07/13/17.]

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