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RKO Faces Loss of 14 Radio and TV Station Licenses

August 12, 1987 GMT

WASHINGTON (AP) _ GenCorp says it will appeal an administrative law judge’s ″unprecedented and unjustified″ ruling that could strip its RKO General subsidiary of licenses for 14 radio and television stations.

The decision Tuesday said RKO General is unfit to hold the licenses, worth an estimated $750 million, because it has a history of filing false financial reports, fraudulent billing and other improprieties in its dealings with the Federal Communications Commission.

RKO General President Pat A. Servodidio said the judge failed to give adequate consideration to the company’s ″record of superior programming and community involvement.″

Servodidio cited 18 Emmy awards for RKO’s Los Angeles TV station and 125 awards for the company’s radio stations this year. ″I am hopeful the full commission will give proper recognition to our exceptional broadcasting record,″ he said.

In his 75-page decision, Judge Edward J. Kuhlmann said ″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,″ he said.

The judge said RKO gave the FCC false and misleading financial reports, destroyed copies of a 1974 internal audit report in hopes of keeping the document from the FCC’s attention, and overcharged advertisers on the RKO Radio Networks.

The appeal will send the case to the FCC for a decision on the licenses.

The FCC has denied license renewals for similar reasons in the past, and in several cases more than one station was involved. However, FCC officials could not recall any rulings affecting as many stations as the RKO decision.

A. William Reynolds, chairman of Akron, Ohio-based GenCorp, called Kuhlmann’s decision ″unprecedented and unjustified. Since the FCC’s decision to remove RKO’s Boston TV license (in 1980) RKO has scrupulously sought to adhere to FCC regulations.″

But Kuhlmann said he reviewed allegations that dated to 1971 and ″from that time forward the record reflects a history of repeated and continuous dishonesty by RKO.″ Even the denial of the Boston TV license ″and the knowledge that all of RKO’s license applications might be denied did not alter RKO’s pattern of behavior.″

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If the FCC strips RKO General of any of its licenses, the company would be unable to operate those stations and would be left only with the physical hardware and property, which would be worth far less than licensed, operating stations.

The stations involved are KHJ-TV, KHJ-AM and KRTH-FM, Los Angeles; WHBQ-TV and WHBQ-AM, Memphis, Tenn.; WOR-AM and WRKS-FM, New York; WRKO-AM and WROR- FM, Boston; WGMS-AM, Bethesda, Md.; WGMS-FM, Washington; KFRC-AM, San Francisco; WAXY-FM, Fort Lauderdale, Fla.; and WFYR-FM, Chicago.

Mario Gabelli, chief investment officer of the New York-based Gabelli Group, estimated that without the cloud over its licenses, RKO’s broadcast properties would be worth about $750 million. However, he said the FCC threat makes the stations worth less to RKO in negotiations with competing applicants when the licenses come up for renewal.

Gabelli estimated that RKO would receive only about $475 million, or $300 million after taxes, for the properties in negotiated settlements.

The various licenses have come up for renewal over several years. There are competing applicants for each of the stations, and settlements are pending for several stations, the FCC said.

Walt Disney Co. has agreed to pay $320 million to acquire KHJ-TV. RKO would receive about $220 million and the rest would go to an investment group that also has been fighting for control of the station’s license.

Settlements also are pending for Boston stations WRKO-AM and WROR-FM and Memphis station WHBQ-AM. Reynolds said he did not expect the judge’s decision to affect the settlement proceedings and said RKO will continue to try to reach settlements with competing applicants for the other stations.

RKO’s problems with the FCC date back more than 20 years. The trouble began with its alleged lack of candor concerning an investigation of its parent corporation, then known as General Tire & Rubber Co.

In 1980, the FCC voted to strip RKO of its licenses for WNAC-TV in Boston, WOR-TV in New York and KHJ-TV in Los Angeles because of GenCorp officials’ involvement in an overseas bribery scandal, alleged improper advertising deals at its stations and a ″persistent lack of candor″ in disclosing financial information.

The next year, a federal appeals court ruled the FCC had been justified in stripping the license for WNAC-TV because of RKO’s lack of candor before the agency. But the court ruled that the WNAC case could not automatically be used to strip RKO of the other licenses without further hearings.