In one of the toughest enforcement actions in its history, a deeply divided Federal Communications Commission voted in January to strip RKO General Inc. of licenses to run television stations in three of the nation's five largest markets -- New York, Boston and Los Angeles.
The FCC said at the time that the involvement of RKO's parents company, General Tire & Rubber Co., in overseas bribery schemes and the close ties between the two firms made the company an unfit licensee.
Now, while the FCC's 4-3 decison itself is headed for review in the U.S. Court of Appeals, the commission is trying to figure out what to do with the company's other 13 broadcasting outlets, and the controversy over the outcome of the matter could show whether the commission is committed to the tough standards is set for itself in the RKO decision.
The question involves outlets, worth tens of millions of dollars, including a television station in Memphis and major radio stations in New York, Boston, Los Angeles, San Francisco and WGMS-AM and FM in Washington. The stakes are clearly enormous.
RKO wants to create a new, publicly held company for its 13 other stations. The stock of the new company would be distributed to the 45,000 shareholders of General Tire, including the tire firm's directors and other controlling interests. The management then would divest itself of the stock, which would be placed in a trust until the divestiture is complete.
The new firm, according to RKO, would be entirely separate from the existing company, and past or present members of either the RKO or General Tire boards would be excluded from the new company's management, RKO says the separate company "will be entirely separate from, and have no connection or overlap with, the directors or management of General Tire" or its subsidiaries.
Predictably, the National Association of Broadcasters, the leading industry trade group, supports the RKOproposal. It argues that, if the decision to strip the company of its three major television stations is upheld on appeal, "no present or future broadcaster will have the slightest temptation to engage in the broadcast misconduct of which RKO will have been found guilty, just because RKO would be permitted to divest itself of the 13 remaining stations."
But the proposal has raised concerns on several fronts. The FCC's Broadcast Bureau, noting that the spin-off proposal "presents a possible alternative" to continuing operation of the stations by current RKO management, recommended in comments filed this week on the matter that the commission hold hearings on the plan.
The commission must assure itself that all ties with present and former officers of RKO and General Tire are severed," bureau officials wrote. "This should be accomplished by requiring all persons in this category to divest themselves of all stock in the new corporation within six months of the spin-off."
The bureau concluded that the commission, if its RKO decision is to hold any weight, should not grant renewals of any of the 13 stations.
Nevertheless, a coalition of six citizens groups, including the National Citizens Committee for Broadcasting and the Black Citizens for Fair Media, has labeled the RKO spin-off plan as a "sham."
Pointing out that the controlling shareholders of General Tire and RKO still would be permitted to profit from their large holdings of the new firm's stock, the groups told the FCC that the proposal is inadequate.
"They would still realize a profit from those shares, either through dividends paid by the new corporation or sale of the stock," the group said. They went on to suggest that such a scheme would violate the Communications Act and said the RKO proposal "must be rejected out of hand."
Instead, NCCB and the other citizen groups have proposed that the FCC issue a notice seeking new applicants.
On the other hand, four members of Congress, including two who represent the Ohio home base of General Tire -- Reps. Ralph Regula, (r-Ohio), Carroll Hubbard (D-Ky.), John Seiberling (D-Ohio) and Joseph Addabbo (D-N.Y.)-have asked the commission to approve the RKO proposal, arguing that other alternatives would result in long FCC proceedings and would wind up harming the company's stockholders.