FCC 93-543 Federal Communications Commission Record 9 FCC Red No. 1 I. BACKGROUND Before the 2. In this proceeding, the Review Board granted Fox Federal Communications Commission Television Stations, Inc. (Fox) renewal of its license to Washington, D.C. 20554 operate station KTTV-TV in Los Angeles, California, and denied Rainbow Broadcasting, Inc.©s (Rainbow) mutually exclusive application for a construction permit. The Board found that Rainbow lacked the financial qualifications to MM Docket No. 90-375 be a Commission licensee. 3. Moreover, the Board concluded that Fox was com In re Applications of paratively superior to Rainbow. The Board found that KTTV-TV©s superior broadcast record warranted a strong FOX File No. BRCT-880801LW renewal expectancy, which, was, however, diminished by TELEVISION rule violations. Nonetheless, Fox©s renewal expectancy was STATIONS, INC. deemed sufficient to outweigh Rainbow©s comparative attributes even if it were found qualified to be a licensee. For Renewal of License of 4. We agree with the Board©s disposition of this case. However, we wish to comment on and modify some aspects Station KTTV(TV), of the Board©s decision. Los Angeles, California and II. RAINBOW©S FINANCIAL QUALIFICATIONS 5. To establish its financial qualifications, Rainbow relied RAINBOW File No. BPCT-881101KH initially on a November 18, 1988 letter from the Bank of BROADCASTING, INC. America as demonstrating Rainbow©s reasonable assurance of a $10 million loan.2 We agree with the Board that the For Construction Permit for record amply demonstrates that the letter did not provide the reasonable assurance that Rainbow claims. As the a New Commercial Television Board notes, the bank officials contacted by Rainbow Station in Los Angeles, termed the letter Rainbow was seeking "a letter of conve California nience" indicating only the bank©s willingness to consider a possible future loan request. 7 FCC Red at 3836 f 141, 3839 f I) 165, 168, 3840 f 171. The testimony also indicates MEMORANDUM OPINION AND ORDER that Rainbow did not provide the bank with the financial documentation necessary to support a present intention to Adopted: December 10,1993; Released: December 28,1993 make a loan. Id. at 3836 <fl 141. 3837 f 146, 3839 H 168, 3840 H 171. The bank official who signed the letter testified By the Commission: Chairman Hundt not participating. that it contained "vague generalities versus specific terms and conditions on which they would consider lending." Id. 1. This order denies review of Fox Television Stations, at 3840 f 172. The ALJ found lacking in credibility the Inc., 8 FCC Red 2361 (Rev. Bd. 1993), recon. denied, 8 claim of Rainbow©s principal that the bank had orally FCC Red 3583 (Rev. Bd. 1993).© See also Fox Television agreed to the specific terms that were omitted from the Stations, Inc., 7 FCC Red 3801 (I.D. 199-2). letter. Id. at 3845-46 f 212.3 See, e.g., Scioto Broadcasters, 5 FCC Red 5158, 5160 H 12 (Rev. Bd. 1990), rev. denied, 6 FCC Red 1893 (1991). 1 Before the Commission are: (1) a Third Motion to Reopen f 173. We find that the patent deficiencies in Rainbow©s Novem and to Enlarge the Issues, filed May 28, 1992, by Rainbow ber 1988 letter, which are described below, preclude a finding Broadcasting, Inc., and oppositions filed June 7, 1993, by Fox that Rainbow had good cause to substitute a new letter. See Television Stations, Inc. and the Mass Media Bureau; (2) an Aspen FM, Inc., 6 FCC Red 1602, 1603-04 f 13 (1991). Moreover, Application for Review, filed April 9, 1993, by Fox; (3) an the Far East letter was itself defective because the proposed loan Application for Review, filed June 18, 1993, by Rainbow; (3) exceeded the bank©s lending limit and there was no provision pleadings responsive to the applications for review, filed July 6, made for syndicating the loan. 8 FCC Red at 2443-44 n.187. In 1993, by Fox and the Mass Media Bureau; and (4) a Fourth this regard, we cannot find, as we did in Salt City Communica Motion to Reopen and Enlarge the Issues, filed December 8, tions, Inc., 8 FCC Red 683, 6S>86 1 f 12-18 (1993), a "near 1993, by Rainbow. certainty" that the lender would be able to syndicate the loan, 2 In its November 1, 1988, application. Rainbow declined to based on the lender©s routine past practice. Here, the record certify that it was financially qualified. Thereafter, Rainbow contains only the personal opinion of the lender, who had never amended its application to certify its financial qualifications made a broadcast loan, that syndicating the loan would be easy. based on the November 18 letter. 7 FCC Red at 3835 f 137. Tr. 979-80, 1002-03. After a financial issue was designated against Rainbow in Au 3 Our own examination of the December 21, 1988 letter writ gust 1990, Rainbow attempted to secure additional representa ten by Rainbow©s principal to the bank, and supposedly sum tions from the bank. In January 1991, however, Rainbow marizing the terms orally agreed to, indicates only that a withdraw its reliance on the Bank of America and attempted to discussion of the bank©s typical lending practices occurred. See 1 substitute a letter from the Far East National Bank. Id. at 3840 FCC Red at 3839 1 166. 62 9 FCC Red No. 1 Federal Communications Commission Record FCC 93-543 6. Rainbow argues at length in its application for review 10. Additionally, Rainbow©s allegations provide no basis that the Board ignored relevant evidence indicating that it for a favorable ruling on its financial qualifications. had reasonable assurance of a loan. According to Rainbow, Hoagland©s inquiry occurred in 1990 and thus could not the bank officials testified that they were familiar with have caused the bank©s unwillingness in 1988 to provide Rainbow©s principals (who assertedly have a combined net Rainbow with reasonable assurance of a loan. In this re worth of over $16 million) and desired to help them. gard, we find no basis to conclude that the hearing testi Rainbow further contends that the bank seriously negoti mony of the bank©s witnesses concerning the 1988 dealings ated with Rainbow and discussed the terms and conditions between Rainbow and the bank might have been "tainted" of a loan and that the bank would have issued a stronger by Hoagland©s inquiry. The witness© testimony concerning letter but for the fear of being legally bound. According to the bank©s unwillingness to provide reasonable assurance to Rainbow, a loan would have been attractive to the bank. Rainbow in 1988 is amply corroborated. It is undisputed, These assertions, however, do not undermine the decisive for example, that the bank officials initially declined to factors discussed above. Nonetheless, because one matter execute a draft letter supplied by Rainbow and, even after raised by Rainbow is especially sensitive, we believe that it repeated prodding by Rainbow, declined to include signifi is desirable for us to address it at length. cant requested provisions in the final letter. See 7 FCC Red 7. Rainbow claims that Fox©s principal, K. Rupert at 3836-39 H f 140-64. It is also undisputed that the bank, Murdoch, interfered with its attempts to establish its finan before issuing the letter, did not request the type of docu cial qualifications. Rainbow bases this allegation on deposi mentation concerning Rainbow©s proposal that it would tion testimony by Ralph F. Huesman, a regional vice customarily review before making a loan decision. See Id. president of the Bank of America. Huesman testified that at 3837 5[ 146. This corroboration dispels any inference that in September 1990 (shortly after a financial issue had been the unfavorable testimony of these witnesses is a product of designated against Rainbow), he received two telephone recent developments. Moreover, for the reasons set forth in calls concerning Rainbow from Steve Hoagland, an account note 2, above, Hoagland©s inquiry creates no equities in executive in the Bank of America©s New York Office. See favor of accepting Rainbow©s substitute bank letter. Huesman Deposition 122-27, 141-66, 215-24. See also De position (second) Exh. 1 (note regarding one of the calls). During the course of the conversations Hoagland inquired III. FOX©S QUALIFICATIONS about Rainbow©s bank letter and informed Huesman that 11. The Board concluded that, based on the record of Murdoch©s company was a customer of the bank. Huesman KTTV-TV during the license term, March 6, 1986 (when insisted, however, that Hoagland did not attempt to influ Fox acquired the station from Metromedia Radio & Televi ence the Los Angeles office©s relationship with Rainbow. sion, Inc.) to November 30. 1988, Fox was entitled to a Dep. 153-57. renewal expectancy. The Board evaluated Fox©s entitlement 8. In its application for review, Rainbow contends that to a renewal expectancy using the following criteria: (1) the Murdoch©s alleged interference chilled the bank©s willing licensee©s efforts to ascertain the needs, problems, and in ness to confirm or clarify its commitment to Rainbow and terests of its community; (2) the licensee©s programmatic taints the hearing testimony of bank officials regarding response to those ascertained needs; (3) the licensee©s repu Rainbow©s letter. Rainbow asserts that it should be tation in the community for serving the needs, problems, permitted to conduct discovery regarding this matter. and interests; (4) the licensee©s record of compliance with 9. We agree with the Board that there is insufficient basis the Communications Act and FCC rules and policies; and to pursue this matter further.