The Federal Communications Commission, in one of the toughest actions of its history, yesterday stripped RKO General Inc. of television licenses in Boston, New York and Los Angeles because of illegal payments here and abroad by its parent corporation.
The commission, in a 4-to-3 decision, said the "natural and scope of the misconduct by RKO and its parent coporation, General Tire, was so extensive and serious and so unlike any other situation" it previously faced that the FCC "could not be assured that RKO could be trusted in the future to operate [its stations] in a manner consistent with FCC standards."
A spokesman for General Tire called the FCC action shocking and said the company would challenge the decision in federal appeals court. In the meantime, he said, RKO would continue to operate the stations.
RKO told the FCC last year that a denial of the license renewal could wipe out the company's entire broadcasting holding, which totals between $300 million and $400 millon.
The decision was based on a lengthy investigation of General Tire & Rubber Co. prepared for the Securities and Exchange Commission.
In a report to the SEC, General Tire, admitted it had maintained an illegal slush fund for payoffs here and abroad from 1971 to 1976.
A followup report by the SEC that was submitted to the FCC concluded that General Tire was guilty of foreign tax evasion, falsification of stockholders reports, filing false reports to the FCC and bribing foreign agents and officals.
The decision primarily focused on the RKO station in Boston, WNAC-TV, Channel 7, whose license was challenged by the New England Television Corp.
Although RKO told the FCC that it should not be penalized for the behavior of its parent company, the FCC concluded that there is "a close relationship" between the two firms and noted that the same person is chairman of the board for both General Tire and RKO.
In addition, the commission said that General Tire and RKO attempted to "pressure companies into placing advertising with RKO stations as a condition of doing business with General Tire."
The Justice Department, General Tire and RKO agreed to a consent decree in 1970, three years after the government filed a civil complaint concerning the advertising practices. The SEC also settled its case wtih the companies in a consent agreement.
FCC Chairman Charles Ferris said late yesterday that the decision "demonstrated that the commission does make a judgment with respect to the requiste qualifications of licenses."
Ferris also noted that the FCC decision indicates judgments about the fitness of licensees also can be based on "a very full record developed here and also at other agencies, like the SEC."
But the FCC decision, reached durng an all-day closed-door meeting, also demonstrated a deep rift over the issue within the commission.
"I believe the commission is indulging in gross bureaucratic overkill in denying" the licenses, FCC Commissioner James H. Quello wrote in a dissent.
Noting that an FCC administrative law judge had recommended that the license for the Boston station be granted, Quello said yesterday's vote was "based on uproven charges and unsupported concusions" and "represents the type of bureaucratic oppression that is causing public outcry for reform."
Recation was also swift from the broadcast industry's leading trade association, the National Association of Broadcasters. Erwin Krahnow, senior vice president and general counsel, said the decision "goes to the very important and yet unresolved issue pending before the FCC, namely license stability."
"The courts have held that the public interst is best served when broadcasters have a resonable expectation of license stability," Krasnow said. b"We agree with the three commissioners who concluded that it was most unfair to take away RKO's license."
In addition to RKO's major holdings in Boston, New York and Los Angeles, the company holds 13 other broacast licenses, including a TV station in Memphis.
The FCC and RKO's "other broadcast holdings could be affected" by the decision. The commission asked its staff and other involved parties to submit further pleading on the impact of yesterday's decision on RKO's other holdings.