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Sinclair Broadcasting’s Air War

Sinclair Broadcasting Group has tried to influence the outcome of elections long before the media company became a lightning rod for criticism due to its decision to air a controversial documentary ten days before the Nov. 2 election critical of Democratic Presidential candidate John Kerry’s activities during the Vietnam War.

Two years ago, Duncan Smith, vice president of Sinclair, gave then Maryland GOP gubernatorial candidate Robert Ehrlich extensive use of a luxury helicopter Smith owned and billed Ehrlich’s campaign-at a discounted rate of $1,000 an hour-only after an inquiry by the Baltimore Sun. Smith’s company, Whirlwind Aviation, Inc., rents out the aircraft for $2,500 an hour. “Ehrlich used the helicopter at least six times during and after the gubernatorial campaign,” according to a Nov. 20, 2002 Baltimore Sun story. Smith said at the time that the remaining fee of more than $13,750 would be picked up by Whirlwind and listed by the company as an “in-kind” contribution to Ehrlich’s campaign.

The campaign donation appeared to violate campaign finance laws because it wasn’t reported in a timely fashion. Moreover, the donation raised ethical issues for Sinclair. The media company owns two television stations in Maryland and was providing Ehrlich’s campaign with favorable news coverage, while attacking Democratic incumbent, Kathleen Kennedy Townsend.

“If you’re an entity that owns a news outlet that is supposed to provide fair and balanced coverage of the campaign, and yet at the same time are providing aid to one of the candidates in the campaign, that puts them in a severe position of conflict,” Christopher Hanson, who teaches journalism ethics at the University of Maryland’s Philip Merrill College of Journalism, told the Sun. “I don’t see any way around that.”

Sinclair never told its television viewers that it gave Ehrlich use of Smith’s helicopter during its coverage of the campaign. Furthermore, none of the trips Ehrlich took in the helicopter were reported in campaign finance documents his committee filed months after Ehrlich first started using the helicopter, a violation of state law requiring donations to be listed when they are received. Sinclair’s Smith refused to comment about the two-year old scandal.

But the conflict went even further and it highlights the problems with relaxing federal rules governing media ownership. While Ehrlich campaigned for governor, a campaign that he eventually won, he also lobbied the Federal Communications Commission on behalf of Sinclair who was embroiled in a licensing dispute with the agency. The FCC chastised Ehrlich for intervening on Sinclair’s behalf without disclosing that the company provided him with use of its helicopter.

In September, Sinclair and Ehrlich once again made headlines as a result of the media company’s cozy relationship with the governor. Sinclair produced a series of tourism ads in which Ehrlich appeared and waived its production fee on the condition that the state of Maryland purchase $60,000 worth of time on a Sinclair-owned station to air them, a deal which Ehrlich agreed to.

A week after the 9/11 terrorist attacks, Sinclair Chief Executive David Smith and his three brothers who control the media company handed down an edict to their news and sports reporters, and even a weatherman, at the company’s flagship Baltimore television station, WBFF, requiring the broadcasters to follow up each on-air report with a statement conveying full support for President Bush and the war on terror.

The Sun reported that several journalists objected on the grounds that it would undermine their objectivity. Reporters and management, however, reached a compromise. The message read by reporters on-air said that it came from “station management.”

“Still, according to at least four people at WBFF, some staffers believe they now look as though they are endorsing specific government actions,” the Sun reported in Sept. 18, 2001 story. “Several people interviewed at WBFF described the choice as “no-win”: do something that could erode their reputations as objective journalists, or appear unpatriotic and uncaring toward the victims of last week’s terrorist attacks.”

Sinclair also aired spots on its 60 other stations during the aftermath of 9/11 declaring support for President Bush and other government leaders to battle terrorist groups

The controversies continued to pile up.

Then in December of 2001, Sinclair was fined $40,000 by the FCC in December 2001 for exercising illegal control of business partner Glencairn Ltd., the FCC determined after spending three years investigating the companies’ relationship.

The FCC’s three Republican commissioners said Sinclair and Glencairn were liable for misinterpreting FCC policies. Democratic Commissioner Michael Copps wanted the FCC to pursue harsher penalties against Sinclair, saying Sinclair has repeatedly ‘stretched the limits’ of FCC ownership rules. “Several factors contributed to the FCC’s finding that Glencairn’s president and former Sinclair employee Edwin Edwards did not exercise control of his companies,” according to a Dec. 1, 2001 report in the trade magazine Broadcasting & Cable.

“His incorrect report on the amount of debt Glencairn would assume with the purchase of several Sullivan stations. Purchase rights held by Sinclair for Glencairn stations at prices well below market rate. Glencairn’s agreement to sell all but two of its stations to Sinclair as soon as the FCC relaxed rules restricting ownership of local TV stations,” the trade publication reported.

The controversies surrounding Sinclair’s blatant political leanings took its toll on the company’s stock, but none more so than an announcement the company made on Christmas Eve 2002 by Sinclair’s board of directors who voted in favor of investing $20 million in cash in Summa Holdings Ltd., which owns auto dealerships, retail tire franchises and a leasing company controlled by Sinclair CEO David Smith.

In a post-Enron world, the deal appeared to be a serious conflict-of-interest. Sinclair said Summa would spend money to advertise its auto dealerships on Sinclair-owned television stations. The deal sent Sinclair’s stock plummeting 17 percent on Christmas Eve, a historically light day for trading, and sparked shareholder outrage, with many stockholders calling for a Securities and Exchange Commission investigation and threatening to file shareholder lawsuits.

Sinclair told its shareholders at the time that it set up a special committee of outside directors to evaluate the investment and approved the deal, saying a conflict did not exist.

“Because the automobile industry represents the largest category of advertisers for television stations, and because Summa is a profitable and well-run company, we believe that the Summa investment is an attractive one for Sinclair,” said communications attorney Martin Leader, who chaired the committee of outside directors.

Now, two years later, Sinclair plans to air a controversial documentary on Friday, 10 days before the Nov. 2 election, highlighting Democratic Presidential candidate John Kerry’s antiwar activities during the Vietnam War. But the move is backfiring on the company big time.

More than 80 of Sinclair’s advertisers have abandoned the media company’s five-dozen television stations since last week, according to National Public Radio, due to fears of a massive public boycott. Moreover, Sinclair’s stock has been battered over the past two days, falling 10 percent to settle Tuesday at a 3 year low of $6.35-a direct result of its decision to air the anti-Kerry film, “Stolen Honor,” on a majority of its television stations.

The company’s decision to broadcast the documentary and its impact on Sinclair’s shares has led to another shareholder revolt and at least one prominent securities litigator, William Lerach, has threatened to take legal action against the company.

But on Tuesday, David Smith, Sinclair’s chief executive, said Sinclair would not air the anti-Kerry documentary “Stolen Honor.” Instead, Sinclair stations will broadcast a “special one-hour news program” entitled “A POW Story: Politics, Pressure and the Media,” which will “focus in part on the use of documentaries other media to influence voting, which emerged during the 2004 political campaigns, as well as on the content of certain of these documentaries.”

“The program will also examine the role of the media in filtering the information contained in these documentaries, allegations of media bias by media organizations that ignore or filter legitimate news and the attempts by candidates and other organizations to influence media coverage,” according to the news release.

But, according to the company’s news release, excerpts of “Stolen Honor” will be aired “in the context of the broader discussion outlined above” and will discuss the allegations surrounding Senator John Kerry’s anti-Vietnam War activities in the early 1970s raised by a number of former POWs in “Stolen Honor.”

Joe DeFeo, Sinclair’s Vice President of News said, “As with all news programming produced by Sinclair’s News Central, ‘A POW Story’ is being produced with the highest journalistic standards and integrity. We have not ceded, and will not in the future cede, control of our news reporting to any outside organization or political group. We are endeavoring, as we do with all of our news coverage, to present both sides of the issues covered in an equal and impartial manner.”

Sinclair claimed on Tuesday that company executives have met privately with members of Kerry’s campaign, “including a recent face-to-face meeting with senior campaign officials, for approximately two weeks in order to negotiate participation in the special by either Senator Kerry or his designee.”

Kerry has declined Sinclair’s invitation.

Smith said those involved in producing the documentary “have endured personal attacks of the vilest nature, as well as calls on our advertisers and our viewers to boycott our stations and on our shareholders to sell their stock. In addition, and more shockingly, we have received threats of retribution from a member of Senator John Kerry’s campaign.”

A spokesman for the Kerry campaign vehemently denied the allegations, and Wall Street doesn’t buy it either. Many of Sinclair’s largest shareholders have said privately that Smith has failed to take responsibility for the firestorm he created and has blamed Democrats for the toll his actions have taken on the Sinclair’s finances.

Indeed, as Jim Glickenhaus, general partner of Glickenhaus & Co., a Wall Street firm whose clients own about 6,100 shares of Sinclair stock, said Tuesday in an interview with CBS Marketwatch, Sinclair “management is not acting in the interest of shareholders. By showing something that’s clearly propaganda, they are damaging the (broadcast) network.”

JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

 

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JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

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