# Appendix — United American Telecasters, Inc. v. Federal Communications Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1987
- **Citation:** 481 U.S. 1050

## Text

| Supreme Court, U.S.
' FILED

86 MBSE MAR 30 1987
— we JR.
IN THE

Supreme Court of the United States
OCTOBER TERM, 1986

UNITED AMERICAN TELECASTERS, INC.,
Petitioner
Vv.

FEDERAL COMMUNICATIONS COMMISSION,
Respondent

APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

ROBERT A. ZAUNER

4201 Connecticut Avenue
Suite 600

Washington, D.C. 20016
(202) 686-9000

Counsel for Petitioner

WILSON - EPEes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

})

TABLE OF CONTENTS

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Appendix B (Court of Appeals order dated Dec. 29,
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Appendix C (Court of Appeals judgment dated Oct. 15,
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Appendix D (Federal Communications Commission
opinion and order dated Sep. 24, 1985) .................... Ta
Appendix E (Federal Communications Commission de-
cision (Review Board) dated Oct. 19, 1984) -.............. 16a

Appendix F (Federal Communications Commission de-
cision (ALJ) dated Nov. 4, 1983) .................0.200222...- 58a

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APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1663
UNITED AMERICAN TELECASTERS, INC.
v.
FEDERAL COMMUNICATIONS COMMISSION

And Consolidated Cases 85-1682, 85-1695
[Filed Dec. 29, 1986]

Before: WALD, Chief Judge; RUTH B. GINSBURG and
Bork, Circuit Judges

ORDER

Upon consideration of the petitions for rehearing of
the Kist Corporation, Bethel Broadcasting, Inc. and
United American Telecasters, Inc., it is

ORDERED, by the Court, that the petitions for re-
hearing are denied.
Per Curiam

FOR THE COURT:
GEORGE A. FISHER
Clerk

By: /s/ Robert A. Bonner
ROBERT A. BONNER
Chief Deputy Clerk

2a
APPENDIX B

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1663

UNITED AMERICAN TELECASTERS, INC.
Vv.
FEDERAL COMMUNICATIONS COMMISSION

And Consolidated Cases 85-1682, 85-1695

[Filed Dec. 29, 1986]

Before: WALD, Chief Judge; ROBINSON, MIKvA, ED-
WARDS, RUTH B. GINSBURG, BORK, STARR, SIL-
BERMAN, BUCKLEY, WILLIAMS and D. H. GINs-
BURG, Circuit Judges

ORDER

The suggestions for rehearing en banc of the Kist Cor-
poration, Bethel Broadcasting, Inc. and United American
Telecasters, Inc. have been circulated to the full Court.
No member of the Court requested the taking of a vote
thereon. Upon consideration of the foregoing, it is

ORDERED, by the Court en bance, that the aforesaid
suggestions are denied.
Per Curiam

FOR THE COURT:
GEORGE A. FISHER
Clerk

By: /s/ Robert A. Bonner
ROBERT A. BONNER
Chief Deputy Clerk

Dititin. .

3a
APPENDIX C

UNITED STATES COURT OF APPEALS —
FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 85-1663

UNITED AMERICAN TELECASTERS, INC.,

* Appellant

FEDERAL COMMUNICATIONS COMMISSION,
Appellee

RIVERSIDE FAMILY TELEVISION
SUNLAND COMMUNICATIONS COMPANY,

Intervenors
No. 85-1682
KIST CORP.,
™ Appellant

FEDERAL COMMUNICATIONS COMMISSION,
Appellee

RIVERSIDE FAMILY TELEVISION
SUNLAND COMMUNICATIONS COMPANY,

Intervenors
No. 85-1695
BETHEL BROADCASTING, INC.,
» Appellant

FEDERAL COMMUNICATIONS COMMISSION,
Appellee

RIVERSIDE FAMILY TELEVISION, INC.
SUNLAND COMMUNICATIONS COMPANY,
Intervenors

wee

4a

On Appeals from Orders of the
Federal Communications Commission

[Filed Oct. 15, 1986]

Before: WALD, Chief Judge, GINSBURG and Bork, Cir-
cuit Judges.
JUDGMENT

These cases were reviewed on the record from the
Federal Communications Commission and were briefed
and argued by counsel. The court has considered the
issues presented and concludes that they occasion no need
for a published opinion. See D.C. Cir. R. 13(¢c). For the
reasons indicated by the Commission in its September
24, 1985 deposition, and in the accompanying memoran-
dum, it is

ORDERED and ADJUDGED, by the Court, that the
decision challenged in these appeals be affirmed. It is

FURTHER ORDERED, by the Court, sua sponte, that
the Clerk shall withhold issuance of the mandate herein
until seven days after disposition of any timely petition
for rehearing. See Local Rule 14, as amended on No-
vember 30, 1981 and June 15, 1982. This instruction to
the Clerk is without prejudice to the right of any party
at any time to move for expedited issuance of the man-
date for good cause shown.

Per Curiam

For The Court

/s/ George A. Fisher
GEORGE A. FISHER
Clerk

ee

5a

MEMORANDUM

The administrative law judge and Review Board rea-
sonably concluded that United American Telecasters, Inc.
(United) had not established the requisite financial qual-
ification through the proposal relying on West Olympia
Bank. That bank was unable to supply more than a
relatively small part of the needed funds, and was not
shown to have had any experience in syndicating loans.
Nor does the record indicate that any plans had been
made for syndication of the projected loan to United.
The agency decisionmakers appropriately required evi-
dence that the proposed lender be both willing and able
to furnish the necessary funds.

Furthermore, when West Olympia Bank passed out
of existence, the Review Board acted within the bounds
of its discretion in refusing United’s tender of a sub-
stitute lender. Allowing United a second chance at that
stage of the proceeding would have significantly retarded
the orderly discharge of the Commission’s task.

In light of the circumstances presented, it was per-
missible for the Commission to accept as bona fide the
division of ownership rights and responsibilities between
the general partners of Sunland Communications Com-
pany (Sunland). The majority (Hodin—55%) and mi-
nority (Soto—35% ) stakes in the Sunland venture were
assigned with a reality wholly lacking in the case of River-
dale (sic) Family Television, Inc. (Family), and both
Hodin and Soto, in fact as well as in form, assumed lia-
bility for partnership obligations to third parties. While
the ownership designations made by applicant Family
were properly judged incredible, the Commission was not
similarly impelled to characterize the Sunland arrange-
ment a facade.*

* Our inspection of the Commission’s adjudication confirms the
representation made at argument that the construction permit
grant did not turn on the qualitative enhancement accorded Sua-

6a

land based on Soto’s racial minority status. The Commission rea-
sonably appraised the 35% full-time and 55% part-time integration
credits of Sunland as quantitatively superior to the 37.49% full-
time integration credit of KIST.

Ta

APPENDIX D
FCC 85-512
36158
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

IN RE APPLICATIONS OF

BC Docket No. 81-863
File No. BPCT-810717KK
KIsT Corp.
Riverside, California

BC Docket No. 81-867
File No. BPCT-810720KL
SUNLAND COMMUNICATIONS COMPANY
Riverside, California

BC Docket No. 81-868
File No. BPCT-810720KM
BETHEL BROADCASTING, INC.
Riverside, California

BC Docket No. 81-870
File No. BPCT-810720KO
RIVERSIDE FAMILY TELEVISION, INC.
Riverside, California

BC Docket No. 81-871
File No. BPCT-810720KQ
UNITED AMERICAN TELECASTERS, INC.
Riverside, California

For a Television Construction Permit

MEMORANDUM OPINION AND ORDER
Adopted: September 18, 1985 Released: September 24, 1985
By the Commission:

1. This proceeding involves mutually exclusive ap-
plications for a new UHF television station on channel

8a

62, at Riverside, California. In an Initial Decision, FCC
83D-60, released November 4, 1988, 99 F.C.C. 2d 201,
the ALJ found that United American Telecasters, Inc.
(United) was not financially qualified to be a licensee
and he granted the application filed by Sunland Com-
munications Corporation (Sunland). In a Decision, FCC
84R-74, released October 19, 1984, 99 F.C.C. 2d 173, the
Review Board affirmed United’s disqualification. It re-
versed the ALJ, and granted the application of KIST,
Corp. (KIST). Now before the Commission are Appli-
cations for Review of the Review Board’s Decision, filed
November 21, 1984, by Sunland, Bethel Broadcasting,
Inc. (Bethel), Riverside Family Television, Inc. (Family),
and United.’ Also before the Commission are a Request
for Oral Argument filed November 21, 1984, by Family,’
and a Petition for Leave to Amend filed January 15,
1985, by United.*

2. We affirm the decision of the Review Board in all
respects except its analysis of the integration of owner-
ship and management criterion concerning Sunland and
its ultimate grant of KIST’s application. As discussed
below, while we do not disagree with the general prin-

1 Oppositions to the Applications for Review were filed on De-
cember 21, 1984, by KIST, Sunland, Bethel, Riverside, and United.
KIST filed four Oppositions, one relating to each Application for
Review. On December 28, 1984, Sunland moved to strike KIST’s
multiple Oppositions for failure to comply with the page limitation
of Section 1.115(f) of the Rules. On January 7, 1985, KIST filed
an Opposition to the Motion to Strike. Section 1.115(f) does not
prohibit the filing of multiple oppositions to multiple applications
for review. The Motion to Strike will be denied.

2 On November 28, 1984, KIST filed an Opposition to the Request
for Oral Argument. The request will be denied. Family has not
shown how oral argument would materially assist the resolution
of this proceeding.

3 On January 24, 1985, Family and Sunland filed Oppositions to
the Petition for Leave to Amend. The Petition will be dismissed
as moot.

rn

9a

ciples articu ited by the Board, we conclude that it erred
in applying those principles to this matter.

38. The ALJ awarded Sunland comparative credit for
the full-time integration of Andres Luis Soto, a 35%
partner of Hispanic heritage, who is the proposed general
manager of the station, and for the part-time integra-
tion of Jack Hodin, a 55% partner. See 99 F.C.C.2d at
221-24, 249.4 The Review Board, finding that Mr. Hodin
was the real party-in-interest behind Mr. Soto’s part-
nership interest, denied Sunland credit for the integra-
tion of Mr. Soto into management of the proposed sta-
tion. 99 F.C.C.2d at 189-92.

4. The Board pointed out that Mr. Hodin assumed
the entire responsibility for financing Sunland’s applica-
tion, that he had contributed Mr. Soto’s share of the
initial capital as a loan and that if the application is
not granted, Mr. Soto incurs no obligation to repay Mr.
Hodin for such loan. The Board also noted that although
Mr. Soto was obligated to contribute proportionately to
finance the construction and operation of the station, Mr.
Hodin would finance that contribution as well. When the
station begins earning a profit. Mr. Soto would then be-
come responsible for repaying these loans out of his
share of the profits. Accordingly, the Board concluded
that Mr. Soto had “no legal obligation or responsibility
for the [Sunland partnership] entity.” 99 F.C.C.2d at
190.

5. The Board correctly recognized that “financial in-
vestment ... is not necessarily the sine qua non of an
ownership interest creditable for integration purposes.”

*A 10% interest was formerly owned by another partner who
has withdrawn from Sunland. That interest is now owned by Mr.
Hodin. Sunland, however, is entitled to no integration credit for
that additional 10% interest because of the Commission’s pro-
hibition against post-designation upgrading. Birmingham Family
Television, Inc., 91 F.C.C.2d 848 (Rev. Bd. 1982).

10a

99 F.C.C.2d at 190.5 However, the Board nevertheless
improperly elevated Mr. Soto’s lack of immediate finan-
cial obligation to a decisive consideration. The pertinent
consideration with respect to Mr. Soto’s interest is
whether there has been a good faith division of owner-
ship and whether it appears from the record that Mr.
Soto will have a legitimate interest and influence in the
Sunland partnership to warrant our confidence that his
participation in the station’s operations will be consistez.t
with the purposes behind the integration criterion. We
find that the record here supports such a conclusion.‘

6. For example, the Sunland partnership agreement,
which the Board did not discuss, reposes real authority

5 We specifically reaffirm the policy set forth in Minority Owner-
ship in Broadcasting, 92 F.C.C.2d 849 (1982), in which we approved
the applicability of our tax certificate and distress sale policies to
certain limited partnership type arrangements. We recognized
there the “unique nature of limited partnerships,” but cautioned
“that in order to avoid ‘sham’ arrangements, we will continue to
review such agreements to ensure that complete managerial control
over the station’s operations is reposed in the minority general
partner(s).” 92 F.C.C.2d at 855. Our conclusion here is consistent
with that approach. We reject, as did the Board, the general propo-
sition advanced by some parties here (e.g., Tr. at 3480) that an
essential element of meaningful minority participation is financial
obligation.

® The Board incorrectly concluded that its rulings in Henderson
Broadcasting Co., 63 F.C.C.2d 419 (Rev. Br. 1977) and Berryville
Broadcasting Co., 70 F.C.C.2d 1 (Rev. Bd. 1978), dictated a finding
that Sunland was not entitled to credit for Mr. Soto’s ownership
interest in the partnership. As discussed below, the Sunland
partnership agreement demonstrates to us, as the ALJ concluded,
that it is a bona fide ownership arrangement and that recognizing
Mr. Soto’s 35% ownership would be consistent with the underlying
objective of the integration credit. The facts of Sunland’s owner-
ship arrangement are clearly distinguishable from Henderson and
Berryville to a decisionally significant degree. To use the Review
Board’s words, Mr. Soto will “have a palpable stake in [the]
ultimate license” sufficient to ensure that he “will be scrupulously
faithful to the public trust embodied in a license.” 99 F.C.C.2d
at 186.

eaten

lla

in Mr. Soto, establishing the bona fides of his 35% own-
ership interest. Not only will Mr. Soto be the full-time
general manager of the station, but the partnership
agreement provides him with negative control over major
financial and other partnership decisions.? While Mr.
Hodin’s 55% interest is sufficient to provide him with
de jure control over Sunland, the partnership establishes
an intention to share his authority over the proposed sta-
tion.* Accordingly, we conclude that Mr. Soto is the bona
fide owner of a 35% interest in Sunland, and Sunland
is entitied to integration credit for his full-time partici-
pation as the station’s general manager.

7. By contrast, we find that the ALJ and the Board
were correct in their conclusion that Ms. Kearney, the
95% stockholder in Riverside Family, is not the true and
actual owner of the applicant and should be considered
for integration purposes as having no ownership inter-

™Under the agreement, salaries of the partners are set by the
partners’ “unanimous agreement.” In addition, Mr. Soto’s consent
is required for the partnership to “borrow or lend money, or make,
deliver or accept any commercial paper, or execute any mortgage,
security agreement, bond or lease, or purchase or contract to pur-
chase, or sell or contract to sell any property for or of the partner-
ship other than the type of property bought and sold in the regular
course of business.” In addition, the agreement provides that Mr.
Soto must sign all checks withdrawing partnership funds. The
partnership agreement also may be amended or the partnership
dissolved only by unanimous agreement of the partners. See Family
Exh. 9 at 4-6.

8 In light of the clearly bona fide nature of the Sunland partner-
ship agreement, we are unpersuaded that there is any relevance to
the manner in which Mr. Hodin and Mr. Soto came to enter into
the agreement. See 99 F.C.C.2d at 191. There may be some cir-
cumstances where such facts are relevant to our determination
of the bona fides of an ownership arrangement. However, where
there is a written agreement entered into demonstrating that there
will be a sharing of ownership authority and no evidence that the
agreement has been ignored by the parties, generalized allegations
concerning the parties’ lack of a previous relationship are unper-
suasive.

12a

est. 99 F.C.C.2d at 181-89, 228-33, 250-52. The record
does not d-monstrate that Ms. Kearney has been signifi-
cantly involved in the Family application, or is likely to
be involved in the affairs of the station as an owner.

8. We simply find it incredible that Mr. Dalton would
make a gift of a 95% interest in this corporation to a
near stranger. As noted earlier, we reject the proposi-
tion that Ms. Kearney’s failure to make a financial con-
tribution to the corporation or incur financial obligations,
by itself, precludes a finding that she has an ownership
interest creditable for integration purposes. The fact
that Ms. Kearney is a minority female and area resident
who would devote full time to working as the general
manager of the station would enhance the corporation’s
chances of obtaining the license and could rationally ex-
plain Mr. Dalton’s awarding her some interest. We can-
not believe that her contributions of this nature, how-
ever, can explain Mr. Dalton’s, in effect, “giving away
the store.” We simply do not find it credible that a 5%
interest in this corporation is sufficient to justify, for
example, Mr. Dalton’s guaranteeing a bank loan for
$500,000 to the corporation, pledging to loan an addi-
tional $500,000 himself if necessary, and providing at
least $70,000 to prosecute the application.

9. The difference between Family’s proposal and other
seemingly similar cases,’® including the proposal of Sun-
land in this proceeding is more than a question simply
of degree. In each of those other circumstances there

®It is, of course, not improper for an applicant to structure its
proposal in a manner that is believed most likely to prevail in a
comparative proceeding if the proposal is bona fide. To the extent
that the Board’s opinion may be read to suggest otherwise (e.g.,
99 F.C.C.2d at 184), it is mistaken.

10 See, e.g., Alexander S. Klein, Jr., 86 F.C.C.2d 423 (1981); Las
Misones de Bejar Television Co., 98 F.C.C.2d 191 (Rev. Br. 1983) ;
San Joaquin Television Improvement Corp., 96 F.C.C.2d 594 (Rev.
Bd. 1983).

13a

was a basis to conclude that the ownership proposals re-
flected a bona fide business arrangement. See 99 F.C.C.
2d at 184-86. Viewing the record as a whole here, we
are unable to conclude that Riverside Family’s proposal
is a bona fide business arrangement." We agree with
the Review Board and the Administrative Law Judge,
therefore, that the real control of this applicant resides
in Mr. Dalton and that Ms. Kearney should receive no
ownership credit for integration purposes.

10. KIST is entitled to credit for the full-time inte-
gration of 37.49% of its ownership, enhanced by 29.6%
local residence and 8.83% Hispanic ownership.” Bethel
is entitled to credit for the full-time integration of 33%
of its ownership enhanced by local residence. Sunland
is entitled to credit for the full-time integration of Mr.
Soto’s 35% ownership interest and the part-time inte-
gration of Mr. Hodins 55% ownership interest. Sun-
land’s integration is enhanced by Mr. Soto’s Hispanic

11 Among other factors, we specifically refer to the overwhelming
percentage of stock given by Mr. Dalton to Ms. Kearney, the fact
that Ms. Kearney has exercised virtually no control over prepara-
tion of the application, that she has had no involvement in obtain-
ing financing commitments, has contributed no capital to the enter-
prise and incurred no financial obligations, that there is no written
agreement defining such things as how authority in the corporation
will be exercised or how the loans will be repaid by the corporation,
and finally the fact that to this point Mr. Dalton has clearly
dominated the affairs of this corporation despite his minimal 5%
stock ownership and has largely ignored the corporate form and
Ms. Kearney’s 95% stock ownership. We note in this regard the
Judge’s finding that the “shareholders and directors of Family
[i.e. Mr. Dalton and Ms. Kearney] have repeatedly ignored the

-company’s corporate form and violated its governing documents.”

99 F.C.C.2d at 233. We lack confidence on this record that such
practices will not continue if this corporation receives a license to
operate a television station in Riverside.

12 While KIST also proposes 4.17% female ownership, this factor
would not alter the outcome of this case. In any event, the prac-
tice of giving credit for female status was set aside in Steele v.
FCC, No. 84-1176 (D.C. Cir. August 23, 1985).

l4a

heritage and local residence. The quantitative differen-
tial between KIST’s and Sunland’s full time integration
proposals is off set by the qualitative enhancement of
Mr. Soto’s 35% interest, the part-time integration of Mr.
Hodin’s 55% interest,* and the fact that Sunland pro-
poses to integrate a majority of its stock ownership.
Sunland’s application is quantitatively and qualitatively
superior to the applications of KIST, Bethal and
Family.”

11. ACCORDINGLY, IT IS ORDERED, That the
Application for Review, filed November 21, 1984, by
Sunland Communications Company, IS GRANTED.

12. IT IS FURTHER ORDERED, That the Applica-
tions for Review, filed November 21, 1984, by Bethel
Broadcasting, Inc., Riverside Family Television, Inc., and
United American Telecasters, Inc., ARE DENIED.

13. IT IS FURTHER ORDERED, That the Motion
to Strike, filed December 28, 1984, by Sunland Communi-
cations Company, IS DENIED.

14. IT IS FURTHER ORDERED, That the Petition
for Leave to Amend filed January 15, 1985, by United
American Telecasters, Inc., IS DISMISSED as moot.

15. IT IS FURTHER ORDERED, That the Request
for Oral Argument, filed November 21, 1984, by River-
side Family Television, Inc., IS DENIED.

16. IT IS FURTHER ORDERED, That the Decision
of the Review Board, FCC 84R-74, released October 19,
1984, 57 RR 2d 49, IS MODIFIED to the extent indi-
cated herein, and in all other respects IS AFFIRMED.

18 Mr. Hodin will spend a minimum of 20 hr. a week at the
proposed station “on a day to day basis.” Sunland Exh. 4. Cf.
Bay Television, Inc., FCC 85-58 n. 2, released March 25, 1985.

14 Family is entitled to no credit for integration and is subject
to a slight demerit for the interest of its principal in a permittee
of a UHF television station in Springfield, Missouri.

l5a

17. IT IS FURTHER ORDERED, That the Applica-
tion (File No. BPCT-810720KL), filed by Sunland Com-
munications Company for a construction permit for a
new UHF Television Station at Riverside, California, IS
GRANTED; and that the applications of KIST Corp.
(File No. BPCT-810717KK), Bethel Broadcasting, Inc.
(File No. BPCT-810720KM), Riverside Family Televi-
sion, Inc. (File No. BPCT-810720KO), and United Amer-
ican Telecasters, Inc. (File No. BPCT-810720KQ), ARE
DENIED.

FEDERAL COMMUNICATIONS
COMMISSION

WILLIAM J. TRICARICO
Secretary

16a
APPENDIX E
FCC 84R-74
0280
BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

IN RE APPLICATIONS OF

BC Docket No. 81-863
File No. BPCT-810717KK
KIsT Corp.
Riverside, California

BC Docket No. 81-866
“File No. BPCT-810720KK
ETTLINGER BROADCASTING CORPORATION
Riverside, California

BC Docket No. 81-867
File No. BPCT-810720KL
SUNLAND COMMUNICATIONS COMPANY
Riverside, California

BC Docket No. 81-868
File No. BPCT-810720KM
BETHEL BROADCASTING, INC.
Riverside, California

BC Docket No. 81-869
File No. BPCT-810720KN
CHANNEL 62, A Limited Partnership
Riverside, California

BC Docket No. 81-870
File No. BPCT-810720KO
RIVERSIDE FAMILY TELEVISION, INC.
Riverside, California

17a

BC Docket No. 81-871
File No. BPCT-810720KQ
UNITED AMERICAN TELECASTERS, INC.
Riverside, California

For a Television Construction Permit

APPEARANCES

James E. Greeley and T. Michael Janowski on behalf
of KIST Corp.; Daniel W. Toohey, John R. Feore, Jr.,
and Todd D. Gray on behalf of Sunland Communications
Company; A. Thomas Carroccio on behalf of Bethel
Broadcasting, Inc.; Jonathan D. Blake and Jonathan L.
Wiener on behalf of Riverside Family Television, Inc.;
and Seymour M. Chase and Robert A. Zauner on behalf
of United American Telecasters, Inc.

DECISiON
Adopted: October 15,1984; Released: October 19, 1984

By the Review Board: MARINO (Chairman), JACOBS,
and BLUMENTHAL.

Board Member BLUMENTHAL:

1. This proceeding involves the mutually-exclusive ap-
plications of KIST Corp. (KIST), Ettlinger Broadcast-
ing Corporation (Ettlinger), Sunland Communications
Company (Sunland), Bethel Broadcasting, Inc. (Bethel),
Channel 62, a Limited Partnership (Channel 62), River-
side Family Television, Inc. (Family), and United
American Telecasters, Inc. (United) for authorization to
construct a new television station in Riverside, Califor-
nia to operate on Channel 62.1 By Hearing Designation

1 Applications by Riverside Telecasters, Inc., Pan-Pacific Broad-
casting, Inc. and Focus Broadcasting of Riverside, Inc. were dis-

18a

Order (HDO), 46 Fed. Reg. 62936, published December
29, 1981, the applications were designated for consoli-
dated hearing on various qualifying issues and on the
standard comparative issue. Additional issues were sub-
sequently specified by presiding Administrative Law
Judge (ALJ) Joseph Chachkin. Order, FCC 82M-1645,
released May 24, 1982. In an Initial Decision (1.D.),
FCC 83D-60, released November 4, 1983, the ALJ in-
itially disqualified Ettlinger, Channel 62, and United on
qualifying issues and selected Sunland as the winning ap-
plicant based on its comparative superiority on the in-
tegration of ownership and management criterion over
the remaining qualified applicants, KIST, Bethel, and
Family.

2. The proceeding is now before the Review Board on
exceptions filed by all of the losing applicants (except
Ettlinger and Channel 627) and on limited exceptions
filed by Sunland. United devotes most of its brief and
exceptions to its disqualification under a financial issue
while the other applicants concentrate their exceptions on
the ALJ’s findings under the integration criterion. Addi-
tionally, the parties have filed contingent petitions to en-
large issues against United and KIST. We have reviewed
the J.D. in light of the exceptions and briefs, the oral
argument held on March 30, 1984, the underlying record,
and the contingent petitions to enlarge issues as well
as the material proffered herein by the parties. We
adopt the findings of fact in the /.D. except as specifically
modified herein, but reverse certain of the ALJ’s dis-
positive conclusions and hold that a grant of KIST’s

missed by the presiding Administrative Law Judge pursuant to
each applicant’s request. Order, FCC 82M-1373, released April 28,
1982; and Order FCC 82M-2471, released August 13, 1982.

2 Because Ettlinger and Channel 62 did not file exceptions to
the Initial Decision, their respective applications will be dismissed
with prejudice for failure to prosecute pursuant to Section 1.276(f)
of the Commission’s Rules, 47 CFR § 1.276(f).

19a

application would best serve the public interest. Before
addressing the integration findings, on which the case
ultimately turns, we will first turn to the only qualifying
issue still contested, the financial issue against United.

3. Financial Qualifications: United. The Commission’s
HDO specified a financial issue against United based
on various deficiencies in United’s application nnancial
showing. See HDO, paras. 18-19. Thereafter, in re-
sponse, United amended its financial proposal on Sep-
tember 1, 1982, whereby it would rely on deferred equip-
ment credit of $877,500 and a $2 million loan from the
West Olympia Bank (then named Bank of Finance) to
finance its estimated construction and three-month opera-
tion costs of $2,182,550. Its amendment was accepted by
Order, FCC 82M-2786, released September 14, 1982. The
deferred equipment credit aspect was not contested at
hearing. Of interest, however, was a West Olympia Bank
letter which expressly stated that the bank was willing
to syndicate loans with its correspondent banks to extend
to United a loan up to $2 million. United Exh. 1, Attach-
ment A. Three witnesses testified at hearing on behalf of
United concerning the purported loan: Mr. Jong Tae
Kim, Executive Vice President of the West Olympia
Bank, member of the bank’s Senior Loan Committee, and
signatory of the letter (Tr. 3235-3237) ; Mrs. Woo-Chang
Lee England, a Vice President of the bank, loan officer,
and because of Mr. Kim’s difficulties with the English
language, editor of the above bank letter (Tr. 2307-11);
and Mr. Goon Suk Han, a director and member of the
Senior Loan Committee of the West Olympia Bank (Tr.
2442-43). Mr. Han is also a director and a twenty-five
percent shareholder in the United applicant (Tr. 2442).

4. In his decision, the ALJ concluded that the bank
letter could not be credited as establishing United’s basic
financial qualifications. See 1.D., paras. 136-137. He
observed that the proposed loan was well-beyond the legal
lending limit of the West Olympia Bank ($150,000 to

20a

$160,00 unsecured loans; $300,000 for secured loans, see
id., para. 19), and that in the absence of any showing
that other banks would be willing to participate in the
loan, there was no reasonable basis for concluding that
the West Olympia Bank would be able to make the full
loan in question to United. Jd., para. 136. He therefore
concluded that United was not financially qualified. /d.,
para. 137.

5. Exceptions have been filed on this issue by United
and “jiimited” exceptions filed by Sunland and KIST. In
its exceptions, United challenges its disqualification, ar-
guing first that the standard utilized by the ALJ of re-
quiring an applicant to show a willingness on the part
of the correspondent banks to make the loans goes beyond
the Commission’s standard; and, second, that the testi-
mony by the aforementioned witnesses removes all doubt
that United had reasonable assurance of the availability
of the bank loan. Sunland and KIST, on the other hand,
argue that the ALJ erred in not providing two alter-
native bases for rejecting United’s proffered bank loan;
i.e., the applicant’s failure to satisfy the pertinent col-
lateral requirements or to provide the bank with the
requisite financial information.

6. In addition to the matters indicated above, new
developments, which it is argued have an impact on the
financial qualifications of United, have come to our at-
tention. Specifically: (1) Family filed, on December 29,
1983, a contingent petition to enlarge and to reopen the
record, contending that two United principals, Andrew
and Rachel Kimm filed a Chapter 13 bankruptcy petition
on July 13, 1983 with the United States Bankruptcy
Court, Central District of California. Family therefore
seeks the addition of reporting, candor, and legal quali-
fications issues against United. (2) On December 30,
1983, Sunland filed a contingent motion to reopen the
record and to enlarge the issues, asserting that United’s
former counsel sued United and its individual sharehold-

a ee ro

a eee

2la

ers in the U.S. District Court for the District of Colum-
bia for collection of legal fees, obtaining a default judg-
ment on February 1, 1983. Sunland further submits that
Andrew and Rachel Kimm cross-claimed against United
and the individual shareholders, alleging that the cross-
defendants had fraudulently induced them into entering
into the ‘broadcast application venture upon the under-
standing that they would not be personally liable for the
total indebtedness incurred, but that expenses would be
shared pro rata. Sunland thus seeks against United an
issue to explore the circumstances surrounding the fraud
allegations and a reporting issue. (3) On March 6, 1984,
KIST filed a petition to reopen the record questioning the
continuing validity of the deferred equipment credit let-
ter, which had expired by its terms in March 1983. KIST
argues that it should not be presumed that the credit
arrangement will be available should the application be
granted in light of the serious financial difficulties cur-
rently being experienced by United and its principals.
And (4) a series of petitions for leave to amend were
filed by United on April 23, June 6, and August 15, 1984,
respectively, informing the Board that the West Olympia
Bank went out of existence (February 1984) and that
its equipment credit letter expired (March 1983); that
it has a new bank letter from the Los Angeles National
Bank for a loan up to $2.5 million and a new equipment
letter for equipment costing $1.8 million; and that its
corporate charter is being amended to permit issuance of
non-voting stock to various persons or companies, after
which the equity in the company will be shared by the
50% voting stockholders and the 50% holders of pre-
ferred non-voting stock. The United petitions also in-
cluded letters from correspondent banks indicating a
willingness to participate in the syndicated loan and
from the Los Angeles National Bank stating that its
collateral requirements have been satisfied. Family, Sun-
land aud KIST filed oppositions to the above petitions to
amend contending that United has failed to demonstrate

22a

“good cause” for acceptance of the amendments. See 47
CFR § 73.3522. Opponents assert that the amendments,
if accepted, raise many new issues requiring further evi-
dentiary hearing.

7. The proper starting point on this issue is the ques-
tion of whether the ALJ was correct in concluding at
hearing that United failed to demonstrate the requisite
financial qualifications to be a Commission licensee. Al-
though we are mindful that United’s original proposal,
viz., the West Olympia Bank letter et al., would be moot
in any event in light of the bank’s subsequent faiiure, it
would be impossibly disruptive of our administrative
processes (not to mention further delay of inauguration
of a new broadcast service to the residents of Riverside)
to afford United or any other comparative applicant, if
correctly found financially unqualified after an extensive
trial-type hearing, a post-hearing opportunity to estab-
lish its financial qualifications merely because of the
fortuitous occurrence of the post-hearing failure of the
bank relied upon by United. “Good cause” for accepting
a late amendment must be shown. See generally Cali-
fornia Broadcasting Corp., 90 FCC 2d 800, 808 (1982)
(fact that amendment was submitted to meet a disquali-
fying issue does not relieve the proponent of an amend-
ment from meeting the Commissions “good cause” re-
quirements).* A second and separate hearing under the

3 The Commission has adopted a six-point “good cause” test under
47 CFR § 78.3522 (b).

(1) the amendment was prepared with due diligence; (2) was
not required by the voluntary act of the applicant; (3) will not
necessitate modification or addition of issues or parties; (4)
will not disrupt the orderly conduct of the hearing or necessi-
tate additional hearing; (5) will not unfairly prejudice other
parties; and (6) will not cause the applicant to gain a com-
parative advantage.
Erwin O’Conner Broadcasting Co., 22 FCC 2d 140, 148 (Rev. Bd.
1970). While the Commission has relaxed its “good cause” test for
amendments going to basic qualifications, see Anax Broadcasting,
Inc., 87 FCC 2d 483 (1981) (foreseeability not relevant and “due

23a

instant circumstances would be enormously disruptive at
this stage and would not be in the public interest. Ob-
viously, if an applicant had established its financial qual-
ifications at hearing and, subsequently, the bank upon
which it relied for funds failed unexpectedly, the Com-
misison would take into consideration the equities of the
case in determining whether the applicant would be per-
mitted to amend its application. See, e.g., Valley Broad-
casters, Inc., 95 FCC 2d 448 (Rev. Bd. 1983); Anazx
Broadcasting, supra note 3. In this proceeding, however,
we need not speculate over what action would have been
appropriate in the above situation since we find that
United failed to establish its financial qualifications at
hearing. See paras. 8, 10, infra.

8. Thus, the ALJ properly refused to credit the West
Olympia Bank letter and correctly held that it did not
demonstrate United’s financial qualifications to be a Com-
mission licensee. As a general proposition, the Commis-
sion holds that a bank loan commitment letter provides
reasonable assurance of the availability of a bank loan
in the absence of a showing undermining the validity of
the letter or the bank’s ability to make the loan. See
Jay Sadow, 39 FCC 2d 808 (Rev. Bd. 1973). But, where
the proposed loan would prima facie violate statutory
limitations governing the amount a particular bank may
lend, the Commission may require a “futher showing” of
availability. See CBS, Inc., 49 FCC 2d 1214, 1228-29
(Rev. Bd. 1974). United submits that the “further
showing” requirement is satisfied simply by submitting
evidence that the lead bank issuing the commitment letter
is aware that the proposed lean will require the par-
ticipation of other banks. See United Exceptions at 5.
We disagree. Although the precedent relative to syndi-

diligence” depends on the surrounding equities), it has not aban-
doned all prerequisites for the acceptance of such post-hearing
amendments. See Shoblom Broadcasting, Inc., 93 FCC 2d 1027
(Rev. Bd. 1983), aff'd, FCC 84-119, released April 2, 1984 (Comm’n).

24a

cation loans may. be written somewhat unevenly, see
Washington's Christian TV Outreach, Inc., 94 FCC 2d
1360, 1362-1364 (Rev. Bd. 1983), we note that virtually
all of the cases cited by United in support of its legal
proposition contain significant elements which militate
against the acceptance of the lax standard postulated by
United.t More recent precedent holds that a “further
showing” must be made that correspondent backs are
willing to participate in the proposed loan. See, e.g.,
CBS, Inc., supra, 49 FCC 2d at 1229; Advanced Mobile
Phone Service, Inc. (Philadelphia), 52 RR 2d 1598, 1597
(CC Bur. 1983).° In any event, where a specific issue
has been designated by an ALJ and evidence from bank
personnel has been taken, the question of whether there
was, in fact, reasonable assurance of the availability of
the applicant’s funding must be evaluated on the basis
of the evidence of record.

9. In that regard, United submits that the testimony
presented by bank witnesses removed any doubt that it
had reasonable assurance of the availability of the bank
loan. United Exceptions at 7. It argues: (1) that Mr.

4 See, e.g., TVue Associates, Inc., 5 FCC 2d 419 (Rev. Bd. 1966)
(applicant submitted letters from five other banks confirming that
they would share in the loan to the applicant); Adirondack Tele-
vision Corp., 5 FCC 2d 623 (Rev. Bd. 1966) (failure to show that
Commission had not fully considered matter prior to designation) ;
Lamar Life Broadcasting Co., 26 FCC 2d 112 (Rev. Bd. 1970)
(applicant submitted a bank letter committing five banks and in-
vestment company to lend it the necessary funds); Advanced
Mobile Phone Service, Inc. (Phoenix), 58 RR 2d 12 (CC Bur. 1983)
(lead bank had capacity to provide entire credit package in the
event other banks did not partiicpate) ; Cherokee Broadcasting Co.,
88 FCC 2d 188 (Rev. Bd. 1967) (bank’s board of directors approved
handling the proposed loan applicant).

5 Contra Lamar Life Broadcasting Co., 26 FCC 2d 9382, 988 (Rev.
Bd. 1970), where the Board indicated that letters of commitment
from participatory banks are not necessary. However, the language
there did not relate to a financial issue, but was instead directed
to a request for a reporting issue.

25a

Kim, a member of the Senior Loan Committee and sig-
natory of the letter, testified that the (now-defunct)
bank intended to syndicate the loan and did not then per-
ceive any problem in arranging the syndication; (2)
that Mrs. Woo-Chang Lee England, a loan officer, said
she had known of three occasions where her bank had
made participation loans, one of which was in the sum
of $1,500,000; and (3) that Mr. Goon Suk Han, a di-
rector of the failed West Olympia Bank and a principal
of United, noted that he was aware of at least one syn-
dicated loan in which the bank had participated. See id.

10. Nonetheless, the ALJ was correct in finding that
the general testimony of United’s three witnesses pro-
vided no reasonable assurance of the availability of the
total United loan. Initially, the failed bank’s assets were
relatively small, totalling a little over $22 million (Tr.
2314). Its unsecured loan limit was approximately
$160,000 (Tr. 2315) and even its secured loan limit was
only $300,000 (Tr. 2315).° The proposed loan here in
question was for $2 million, or approximately 12 1/2 times
the bank’s unsecured credit limit and nearly 7 times its
secured credit limit. Second, it remains unclear to what
extent the bank had previously participated in syndica-
tion loans. Mr. Han, who for two years had been a
member of the bank’s Senior Loan Committee (Tr. 2443),
and is a United principal, testified vaguely that he was
aware of one occasion in which his bank had participated
in a syndicated loan (Tr. 2466). But, Mr. Kim, who
had also been with the bank for two years and was also
a member of the Senior Loan Committee (Tr. 3236-37},
testified that he was unaware of the bank’s involvement

® Secured loans were normally those guaranteed by a savings
account (up to 85%), a savings secured loan, a first trust lien, or
a guarantee by government agencies. Tr. 2316, 3323. In light of the
financial problems experienced by this applicant and the secured
interest on the equipment by the manufacturer, it is wholly open to
question as to whether United would have been able to meet the
bank’s criteria for a second loan.

26a

in any syndicated loans during his tenure (Tr. 3277).
Mrs. England, a loan officer (but not a member of the
Senior Loan Committee (Tr. 2318, 2322) ), testified that
she had no personal knowledge of the bank’s approval
of any loans in excess of its legal lending limit (Tr.
2319), though she said that she had been told by the
Senior Loan Administrator that there were at least three
occasions where the bank had made participation loans of
unstated magnitude, perhaps for more than $1 million
(Tr. 2325). However, the Senior Loan Administrator,
who might have shed more light on this matter (see Tr.
2326), did not testify. Third, no arrangements whatever
had been made with any other bank for participation in
the proposed West Olympia loan (Tr. 3277), nor had
that bank examined the financial statements of the prin-
cipals or the applicant, save for an estimated income
statement of the applicant (Tr. 3278). Fourth, the late
West Olympia Bank was completely unaware that
United’s proposed $1,800,000 in broadcast equipment
would be subject to a prior security interest by the equip-
ment manufacturer (Tr. 3295), and its Loan Committee
had not even considered the proposed United loan (Tr.
3352). Finally, we differ with United’s positive char-
acterization of Mr. Kim’s testimony; Kim merely indi-
cated that he did not think the West Olympia Bank
would “have a problem to syndicate the loans if we had
a good product” (Tr. 3328). But, whether the “product”
was “good” was apparently never discussed. In the face
of the designated financial issue, the evidentiary burden
of establishing reasonable assurance of the availability
of the bank loan was on United, and, like the ALJ, we
find that United failed this burden.’ Rather, based on

7 United implicitly argues that it should have a lesser standard
of proof to meet, and concludes that the Commission has been mov-
ing steadily in the direction of removing financial impediments
for minority persons to own and operate broadcast stations. See
United Exceptions at 8. Although the Commission has, indeed,
indicated its concern relative to minority financing, e.g., Minority

27a

the record evidence, it would seem that the West Olympia
letter may have been more of an accommodation to Mr.
Han, a director of the former bank, than a_ firm com-
mitment that the Commission could credit as reasonable
assurance of a $2 million loan. United’s position here
differs critically from the applicant who had relied on a
similar bank letter in Washington’s Christian TV Out-
reach, Inc., supra. There we felt that the applicant did
not have sufficient opportunity at hearing to prove the
availability of its financing, and we remanded the case
for evidentiary hearing so that it might offer persuasive
evidence See 94 FCC 2d at 1364. In the instant case,
United has had its full hearing opportunity, and it has
not provided persuasive evidence in its favor. If any-
thing, the evidence it did present casts serious doubt that
the West Olympia Bank had the resources to make the
loan or was reliably committed to that loan (on its own
or with likely correspondent banks). In sum, we affirm
the ALJ’s conclusion that United is not financially quali-
fied. In light of that disposition, we need not grant the
petitions for enlargement of issues. Having failed once
to demonstrate the financial qualifications, we will not
reopen this hearing to decide whether United would be
disqualified yet again, nor to make the rubble bounce.’

11. Integration of Ownership and Management. The
I.D. concluded that the qualified applicants were entitled
to quantiative integration credit as follows: KIST,
37.49% fulltime; Sunland, 35% fulltime and 55% part-
time; Bethel, 33.3% fulltime; and Family 0%. The J.D.

Ownership of Broadcaster Facilities, 69 FCC 2d 1591 (1978), it
has not as of this date adopted lower financial qualification stand-
ards for minority applicants. See, e.g., Bison City TV 49 Limited
Partnership, 91 FCC 2d 26, 30 n.5 (Rev. Bd. 1982).

8 The recent bankruptcies and lawsuits involving United’s princi-
pal would demand that a new hearing be held on United’s financial
qualifications, and we will not disrupt this proceeding to afford
United yet another full hearing on its potential finances. It has
already had its “day in court” and a fair hearing.

28a

summarized that Sunland’s integration proposal was
superior to the other applicants because “only Sunland
proposes to integrate a majority of its stock ownership
(90%).” I.D., at para. 165. We will review the excep-
tions to the underlying findings and conclusions.

12. Integration Proposal of Family Family excepts to
the ALJ’s rejection of its ownership integration proposal,
specifically his refusal to credit Ms. Cheryal Kearney as
an 80% integrated owner of the applicant. His view is
that the purported 5% principal, Jack Dalton, is the true
party-in-interest and the de facto head of Family while
the contrasting claim that Ms. Kearney is an 80% con-
trolling owner is merely a “facade to maximize Family’s
chances of winning the comparative hearing.” J/.D., at
para. 159.° The ALJ’s findings and conclusions on this
matter are set forth, respectively, at id., paras. 101-112
and paras. 157-163. Summarizing the facts below, we
analyze the exceptions under extant legal principals.

13. The ALJ found that the sole progenitor and pro-
moter of the Family application was Jack Dalton, a
resident of Nashville, Tennessee,’® who previously had a
33% interest in the assignee of a construction permit
for a television station in Springfield, Missouri (KSPR-

® Our inconsistency as to the respective ownership interests of
Kearney and Dalton arises because of Family’s post-“B” cutoff
increase of Kearney’s putative ownership interest from 80% to
95% (and a corresponding reduction of Dalton’s from 20% to
5%). Compare I.D., para. 98, with id., para. 157. The ALJ noted
that even if Kearney was entitled to ownership integration credit,
it could not exceed the 80% proposed before the legal deadline for
comparative “upgrading.” Jd., at n.42. While Family’s exceptions
skim over this matter and are occasionally inconsistent on the point,
compare Family Exceptions at 27 (“Ms. Kearney has a 95% inter-
est”), with id., at 41 (“Family should have been awarded full 80%
integration credit for Ms. Kearney”), we affirm the ALJ’s ruling.
Post-cutoff comparative “upgrading” will not be permitted. Bir-
mingham Family Television, Inc., 91 FCC 2d 348 (Rev. Bd. 1982).

10 7.D., 0.25.

29a

TV), an interest he sold during the course of this pro-
ceeding. J.D., para. 99. After becoming aware of the
instant Riverside opening, he singularly arranged for a
$500,000 loan with his bank, Commerce Union Bank of
Nashville, personally guaranteed that loan, and even
personally guaranteed that same amount to Family
should the $500,000 bank loan prove inadequate.” Up to
the close of hearing, Dalton “has provided all the funds
for Family” in its quest for the station (i.e., $65-70
thousand at that time).’* Moreover, Dalton personally
and unilaterally contracted with Sterling Communica-
tions, a consulting firm he had used in connection with
his previous applications in Daytona Beach, Florida and
Richardson, Texas, to “put the [Family] application to-
gether.” *

14. Enter Ms. Kearney, a black resident of Los An-
geles who, for the past 13 years, has been a “freelance
set decorator,” having earned her degree in interior de-
sign at Woodbury College and studied further in Paris
where she met Mrs. Jack Dalton who was also studying
there at that time.* Apart from one alleged social visit
to the Dalton’s Nashville home in 1980, she had never
met Jack Dalton or discussed the broadcasting business
with him until he telephoned her and sought her iden-
tity in the Riverside application.’* Jack Dalton never met
Kearney again until this hearing,” and Ms. Kearney

11 Jd., para. 110.

12 Jd.

13 Jd., para. 109. Further, “Ms. Kearney had nothing to do with
securing the Amvest equipment lease... .” Jd., at para. 108.

14 Jd., at para. 107. For example, “the programming and EEO
sections were prepared entirely by Sterling.” KIST Reply at 9.

15 Jd., paras. 102, 104.
16 Jd., paras. 104, 107.
17 Jd., para. 104.

80a

has invested no money in the applicant. Dalton claims
to have advanced the $1,000 for her purchase of her
(95%) stock share in Family, expects no repayment,
and “Ms. Kearney testified that they never discussed re-
imbursement of Mr. Dalton’s advances.” J.D., at para.
109. In fact, “[t]here was an explicit agreement that
Ms. Kearney would not be required to pay for her stock,
make loans or make other advances to Family.” Jd.
(transcript citation omitted). Moreover, while Dalton
set up Family’s corporate account in Nashville at Com-
merce Union Bank and was a signatory to the account,’®
Kearney (a purported 95% owner) was not even made
a signatory until much later. And, while many checks
have been written during the prosecution of the applica-
tion, Kearney had never written a check on the Family
account.”° Dalton has written the checks for the appli-
cant’s bills and retains the checkbook in Nashville, far
away from Kearney.”* Finally, although seeking credit
for fulltime (day-to-day) integration credit as the 95%
owner of a new television station, Kearney would not, at
hearing, commit herself to moving from Los Angeles or,
indeed, moving closer to Riverside (a city some 65 miles
east) even if Family should here prevail.” In light of

18 Jd., para. 106.

19 As was a Dalton associate in Nashville, Doctor Crants, who
was involved in Dalton’s Daytona Beach and Richardson applications
(I.D., para. 111), but who is not even a principal of Family.

20 Jd., para. 111.
21 Jd. Doctor Crants (supra note 19) also signed Family’s checks.

22 Id., para. 102. Notwithstanding Kearney’s declination to indi-
cate a move to Riverside or her complete lack of broadcast manage-
ment experience, it is asserted that “she will supervise the construc-
tion and operation of the station” and “will be responsible for
making decisions regarding employment, programming and the
station’s operating budget.” Jd., at para. 101. Even had we not
rejected Kearney’s integration credit on the grounds set forth
herein, her refusal to commit to a change of residence to (or close
to) Riverside would probably deprive her of the right to be con-
sidered a local owner for integration purposes.

8la

the foregoing (as well as other revelatéry indicia dis-
cussed in the J.D.), the ALJ invoked the principles re-
affirmed in Berryville Broadcasting Co., 70 FCC 2d 1
(Rev. Bd. 1978), looked beyond Family’s paper corpo-
rate construct, and found—to no real surprise—that Dal-
ton de facto controlled the corporation. Using the lan-
guage of Henderson Broadcasting Co., Inc., 63 FCC 2d
419, 426 (Rev. Bd. 1977), he opined that recognizing Ms.
Kearney as a bona fide 95% integrated owner of Family
would “make a mockery of the underlying objective of
the integration credit.” *

15. Relying chiefly on the Commission’s decision in
Alexander S. Klein, Jr., 86 FCC 2d 423 (1981), Family
argues that “an applicant should receive integration
credit for a principal who was given stock in the appli-
cant precisely to enhance the applicant’s integration show-
ing by gaining a minority preference.” *® Thus, while
unabashedly conceding at hearing that the “sole reason”
Ms. Kearney was listed as a 95% owner of Family (and
Dalton willing to retain a nominal 5%) was to disposi-
tively outdistance his competitors on ownership integra-
tion credit 7” Family submits that “there are strong policy

28 Td., para. 163.
24 Td.

25 Family also relies heavily on two subsequent Board decisions:
Las Misiones de Bejar Television Co., 538 RR 2d 119 (Rev. Bd.
1983) ; San Joaquin Television Improvement Corp., 54 RR 2d 1206
(Rev. Bd. 1983). See Family Exceptions at 13-14.

26 fd., at 13. Preferential comparative treatment is given to
broadcast applicants who propose to integrate (racial) minority
(and/or female) principals into the management of a station. See,
e.g., West Michigan Broadcasting Co. v. FCC, No. 82-2513 (D.C.
Cir. May 25, 1984).

277.D., para. 105 (and supporting transcript citations). Inte-
gration of ownership with management yields a substantial prefer-
ence under the seminal Policy Statement on Comparative Broadcast
Hearings, 1 FCC 2d 393 (1965). Cf. West Michigan Broadcasting,
note 26 above.

32a

reasons for allowing applicants to achieve integration
credit by giving equity to minorities interested in enter-
ing broadcasting.” * Additionally, Family protests the
ALJ’s rejection of the ownership integration credit
sought for Ms. Kearney while accepting the integration
proposals of two of its competitors, Sunland and United;
it asserts *°: :

Finally, the ALJ’s disparagement of the relationship
between Ms. Kearney and Mr. Dalton is in remark-
able contrast to his failure even to note that the
financing principals of Sunland and United had
never met proposed integrated principals in their
application, Messrs. Soto and Digati, until their
respective applications were filed or even later.
Messrs. Soto and Digati also had not contributed to
the finances of their respective applicants . . ., sid
were expressly recruited to enhance the comparative
position of their respective applicants.

16. Family’s vital reliance on Alexander S. Klein, Jr.,
supra, as a basis for crediting Ms. Kearney as a 95%
integrated owner is rejected. As the ALJ reasoned, while
the Klein Commission credited the integration pledge of
a principal whose minor 5% stock interest in the appli-

28 Family Exceptions at 13.

29 Jd., at 15-16 (citations omitt«<). See also id., at 30-41. Family
is not alone in questioning the A ‘_s’s acceptance of Sunland’s inte-
gration, for:

In their proposed findings, all parties except Ettlinger and
Sunland analyzed the Sunland partnership structure, conclud-
ing that it should be treated as a sham, thus entitling Sunland
to 0% full-time integration credit under the doctrines of
Berryville Broadcasting Co., .... However, the ALJ refused
to engage in an extensive analysis and concluded that Sunland
was entitled to the integration credit which it claimed.

KIST Exceptions at 3 (citations and footnotes omitted). Sunland’s
integration proposal and the alleged disparate treatment are dis-
cussed infra, paras. 22-26.

33a

cant was a gift from her long-time employer, /.D. at
para 159.** First, there is no former employment rela-
tionship between Kearney and Dalton which, in any at-
mospheric sense as in Klein; could be equated with
“consideration” for the stock; there was no relationship
between Jack Dalton and Ms. Kearney before the filing
of the application, and precious little thereafter. See
I.D., paras. 104-112. Nonetheless, Family buttresses its
theory that the gift of 95% of its stock to Kearney is
creditable for ownership integration purposes by citing
two recent Board decisions, Las Misiones de Bejar Tele-
vision Co. and San Joaquin Television Improvement
Corp., supra note 25. However, both of those cases are
sharply different. In Las Misiones, the Board was faced
with an integration proposal involving 11% minority
owners who had taken bank loans to purchase their
stock, but whose non-minority principal had guaranteed
those loans. 53 RR 2d at 123. Quoting the ALJ, we there
reflected that “[t]hose minorities recognized their limited
stock interest,” id., and that all of the minority stock-
holders were personally liable for their stock. Jd.** San

30 See 86 FCC 2d at 432. All the Cpmmission there held was:
“Giving media entrepreneurship to a trusted former employee is a
logical means of promoting minority involvement in broadcasting.”
But see Dissenting Statement of Comm’r Anne P. Jones, FCC 81-
500, released December 2, 1981 (reconsideration of Klein).

31 Tt may be perceived by some (as was jibed at oral argument)
that the difference between Klein and Family is analogous to the
difference between petty larceny and grand larceny, but the differ-
ence in a comparative sense is truly substantive. Compare West
Michigan Broadcasting, supra note 26 (100% minority-female inte-
grated ownership entitled to significant enhancing weight). with
Horne Industries, infra note 32 (15% minority ownership “com-
paratively insignificant”).

382 There were other telling differences in Las Misiones as well:
for example, minority stockholders there were involved in the nego-
tiations for the applicant’s loans and certain ones either sought
their own financing for the loans or were prepared to pledge their
personal net worth for the applicant’s loans. See 53 RR 2d at 123.
Family points to dictum in Las Misiones which may have suggested

34a

Joaquin is completely inapposite. There the question was
whether a “limited” partnership agreement allocating
45% of the equity of the applicant to the “limited” part-
ners (who provided capital but no other future services
and who sought no integration credit) and 55% to the
“general” partners (who provided no capital but would
fully manage the station) was cognizable for ownership
integration purposes. The Board there found that the
“limited” partnership agreement conformed in all re-
spects to the Uniform Limited Partnership Act and rep-
resented a bona fide business arrangement. See 54 RR
2d at 1210-1211. Under the holding of Anax Broadcast-
ing, Inc., 87 FCC 2d 483, 487-488 (1981), the integration
of the “general” partners was credited.“ But, in San
Joaquin, there was no strained attempt by the “limited”
partnership principals to structure the ownership so as to
garner enhanced integration credit for minority and/or
female ownership. Indeed, the only female principal of
the winning applicant (Darlene Spano) was a joint owner
of the 45% “limited” partner; she neither asked for nor

that even if the stock to the 11% minority principals had been a
gift, “[oJur action on this matter is squarely controlled by .. .
Klein.” See, e.g., Family Exceptions at 13 (citing 53 RR 2d at
124). While the Las Misiones Board might, under similar factual
circumstances, have extended Klein’s beneficience from 5% to
11%, that is a far cry from Family’s situation. For while we
generally consider 11% minority ownership to be “comparatively
insignificant," Horne Industries, Inc., 94 FCC 2d 815, 828 (Rev.
Bd. 1983) (15% minority interest deemed “comparatively insig-
nificant”), modified, FCC 84-286, released July 20, 1984 (Comm’n),
a 95% ownership credit for an integrated minority female would be
dispositive in most cases. See West Michigan Broadcasting Co.
v. FCC, supra note 26.

83 See also Minority Ownership in Broadcasting, 92 FCC 2d 849,
853-855 (1982).

%4In fact, neither “general” partner (hence 100% of that appli-
cant’s integratior base) received minority or female enhancement.
See FCC 83D-35, released June 27, 1983 (ALJ), (/.D., para. 53).

35a

received integration credit or “female enhancement.” See
54 RR 2d at 1210.

17. Importantly, though, neither Klein nor any sub-
sequent case has overturned Henderson and Berryville,
supra, or the critical precepts set forth therein to ensure
that a purported principal is a true party-in-interest or,
de facto, has that quantum of controlling leverage de-
picted in the paper organizational structure. These mat-
ters are important not only from a comparative licensing
standpoint, but unless proposed applicant principals have
a palpable stake in ultimate license, there is considerably
less assurance that an alleged “integrated owner” will be
scrupulously faithful to the public trust embodied in a
license. Or, to put it aphoristically, “ease come-easy go.”
Thus, in Henderson, the Board rejected the ambitious
scheme of a designing entrepreneur to secure 100% own-
ership integration credit by purporting to donate all of
the corporate “voting stock” and “all but one share of its
non-voting stock” to the applicant’s “vice-president, di-
rector, and general manager,” a man whose tangible
contribution to the corporation had been about $300. 63
FCC 2d at 421. Ignoring the paper veil, the Board found
that the applicant’s entrepreneur who held “control of its
‘purse strings’” (id., at 425), who had dominated the
applicant by being virtually its “sole financier,” and who
would “contribute ll of the monies required for the cost
of construction and operation of the station” (id., at
421) was “the real owner and sole propriétor” (id., at
425) despite the de jure emblements. Similarly, the
Berryville Board refused to credit the integration pro-
posals of two “nominal partners” claiming ownership
interests of 20% each and found that the (legal) 60%
owner, who had advanced all the funds for the partner-
ship, was the true and actual owner. Like Ms. Kearney
of Family, the “nominal” Berryville “partners” had con-
tributed no capital to the venture, whereas—by contrast
and like Family’s Dalton—the 60% Berryville principal!
had not only contributed all the advance funds, he had

36a

singularly arranged the bank loan (70 FCC 2d at 10),
controlled the company checkbook (id., at 9), and had
prior involvement in broadcast stations (id.) .*°

18. From the foregoing paragraph, it might be in-
ferred that the Commission’s inevitable route to a deter-
mination as to de facto ownership was cartographed by
“Watergezie’s” celebrated “Deep Throat,” who persist-
ently enjoined: “Follow the money.” While an imme-
diate financial investment is not the exclusive watermark
of actual applicant ownership, see, e.g., San Joaquin,
supra, it has long been recognized that financial domi-
nance is a strong determinant of de facto control. Thus,
the court has long appreciated that even a mere creditor
whose position enables him to control aspects of an appli-
cant’s financial affairs must be recognized as negatively
affecting an applicant’s integration proposal. WLOX
Broadcasting Co. v. FCC, 260 F.2d 712 (D.C. Cir. 1958).
And, financial leverage remains a trustworthy clue in the
Commission’s search for de facto control, irrespective of
legal title. See, e.g., Stereo Broadcasters, Inc., 55 FCC
2d 819, (1975) (“the search for control necessarily calls

35 To be sure there were other indications in Berryville that the
20% minority principals were not bona fide partners. And, while
the Board—citing Klein (see 70 FCC 2d at 8 n.13)—there recog-
nized that individuals from minority groups could, under appro-
priate circumstances, be considered the beneficiaries of an outright
gift of a portion of equity, it found no gift in that case. Similarly,
while Family’s exceptions and brief casually invoke Klein and covet
its “gift” precedent, Dalton testified that he merely “lent” the
money so far spent to Kearney. /.D., para. 109. He said that the
“loan” would accrue interest at 1% above prime after station
operations begin. Jd. Moreover, Family’s brief is at pains to argue
that Kearney is financially committed. Family Exceptions at 21-24.
It states, for example, that her out-of-pocket expenses during the
prosecution of the application (including “loss of other salary’)
“are well in excess of the $950.00 that Mr. Dalton paid Family for
her stock.” Id., at 22. To the extent that Family asserts that
Kearney has furnished reasonable consideration for the ($1,060)
price of her stock, the “gift” precedent appears inapplicable.

Pe eee ee ee ee eer

87a

for an investigation beyond stock ownership in order to
determine effectively where actual control resides”). See
also George E. Cameron, Jr. Communications, 91 FCC
2d 870, 887-893 (Rev. Bd. 1982), recon. denied, 93 FCC
2d 789 (1983) .*

19. On the instant record, there can be no serious
question that Jack Dalton has solely controlled, and will
for the foreseeable future control, the actual destiny of
Family, regardless of the names on the company stock
shares.** While Family continues to pound away on Ms.
Kearney’s 95% “voting” control, it is clear here—as it
was in George E. Cameron, Jr. Communications, supra—
that Dalton, the de jure minority principal, totally con-
trols the flow of the Family vessel, can shift course at
will, or can stop it dead in the water at any time. No
further prosecution of the application could take place
without his impetus; not a spade of earth could be turned
nor a tower girder riveted without Dalton’s pure acquies-
cence. And even were Family to be licensed, not a studio
bulb could light, a program be purchased, or a signal be
emitted without Dalton’s complete cooperation, irrespec-
tive of how Ms. Kearney “voted” her stock; many TV
seasons wold pass before her empty “vote” could (but not
necessarily would) translate into anything approaching
practical control.

20. We are not insensitive to the movement to assist
minorities who wish to enter broadcasting, and we have

36 Cf. Metromedia, Inc., 55 RR 2d 1278 (1984), recon. denied,
FCC 84-364, released August 10, 1984, where the Commission, citing
Stereo Broadcasters, supra, found that an individual with far less
than voting control of a public corporation had long had de facto
control.

37 Dalton has openly confessed that he has not paid too much
attention to “corporate formalities.” J.D., at para. 112. Family
“directors,” Dalton and Kearney, have never had a corporate meet-
ing, and Dalton continuously ignored corporate bylaws by taking
unilateral action legally delegated to the Family board of directors.
See id.

88a

granted many, many licenses to qualified minority (or
part-minority) applicants. We have, from time-to-time,
even bent the precedent backwards to assist. See, ¢.g.,
Washington’s Christian TV Outreach, Inc., 94 FCC 2d
1360 (Rev. Bd. 1983). But, even as the Commission has
altered its views on ownership structures and organiza-
tional control mechanisms to aid minority entry into
broadcasting, see Minority Ownership In Broadcasting,
92 FCC 2d 849 (1982) (recognizing, eg.. “limited”
partnership device for promoting venture capital), the
Commission, recognizing the serious potential for abuse,
pointedly warned “that in order to avoid ‘sham’ arrange
ments,” it would monitor such arrangements on a case-
by-case basis to ensure that actual control reposes in
minority principals. Jd., at 855. While Family likens
Dalton to a “limited” partner who provides only the cap-
ital financing (and, presumably, likens Kearney to. a
“general” partner) ,** there are critical factual and legal
differences: “general partners are personally liable for
the partnership debts,” Minority Ownership, supra, 92
FCC 2d at 854; Family’s Kearney is liable for none.
I.D., paras. 109-110. “Limited” partners “do not exercise
any managerial control and do not incur any personal
debts beyond their limited capital contribution.” 92 FCC
2d at 854. Family’s Dalton controls, and will control,
Family absolutely for the foreseeable future; and he (a
nominal 5% owner) has personally guaranteed the cor-
poration’s entire $500,000 bank loan (and personally
promised an equal amount if necessary). J.D., para.
110.

38 See, e.g., Family Exceptions at 14-15. Family insists that it
should not be penalized for choosing corporate rather than partner-
ship form. But it is not a matter of “form”; under law, partners
(particularly “general” partners) have obligations and liabilities
that corporate stockholders do not. See Minority Ownership, supra,
92 FCC 2d at 854.

89 While Ms. Kearney’s personal guarantee and financial state-
ment was also offered to Dalton’s Nashville bank, the bank was

89a

21. In sum, Sunland states the matter at issue most
succintly *°:

Family presents a classic case for the application of
Henderson and Berryville. Dalton utilized Family’s
ostensible stock structure as a contrivance to further
his own ambitions to acquire a television station at
Riverside by gaining credit under the integration
criterion. He then exercised control over the appli-
cant in a manner wholly inconsistent with the struc-
ture. It is hardly possible to imagine a more trans-
parent artifice. Failing to apply Henderson and
Berryville here means the end of their vitality in
policing the bona fides of proposals to the Commis-
sion.
We concur, and the ALJ’s well-documented and well-
considered rejection of Family’s claim for 95% (or 80%)
ownership integration credit is affirmed.

22. Integration Proposal of Sunland. As noted above,
Sunland forcefully pleads against a concession on the
ALJ’s_ rejection of Family’s ownership integration
scheme **; but other parties hereto demand with equal
vigor that Sunland’s own integration proposal is, ad
eundem, flawed.** Armored in the spiney carapace of
righteous indignation over alleged discriminatory treat-
ment by the ALJ, Family leads the pack of Sunland’s
predators and charges that “special provisions” in the
Sunland partnership agreement wholly undercut the puta-
tive ownership interest of one of Sunland’s two pur-
ported partners, Andres Luis Soto, a local (Riverside)

uninterested, ].D., para. 110, and Dalton did not even submit her
material to the bank. KIST Reply at 8.

4° Sunland Reply at 16.
#1 Sunland Reply at 13-16.

42 See, e.g., KIST Exceptions at 8-19; Bethel Exceptions at 7-16;
United Exceptions at 22-26; Family Exceptions at 15-16, 30 et seq.

40a

hispanic citizen with a reported 35% partnership interest
in Sunland.** The other applicants opposing Sunland’s
integration credit for Soto, citing Henderson and Berry-
ville, contend that Soto’s commitment to, and responsi-
bility for, Sunland’s application and its potential future
operations are nonexistent, thus depriving Sunland of
Soto’s credit for ownership integration. They claim that
the real party-in-interest is Jack M. Hodin, a 55% Sun-
land principal and a present (long-time) resident of
Scranton, Pennsylvania, who also holds a 30% interest
in a Scranton supermarket chain as well as having other
substantial investments in that region.

23. In crediting Sunland with Soto’s integration pro-
posal, the ALJ considered the objections of the parties,
but found ‘*:

. . . Mr. Soto is fully obligated to contribute pro-
portionately to finance the construction and operation
of the station. Thus, it is clear that Mr. Soto has a
financial stake in the Sunland partnership.

However, it is stipulated by Sunland that (1) “prior to
the grant of Sunland’s application Hodin would con-
tribute Soto’s share of capital on a loan basis” and (2)
“if Sunland’s application, was not granted, Soto would
have no obligation for these contributions.” *°

48 Family Exceptions at 16, 36-37. It also asserts infirmities in
the integration proposals of “EBC, United, Bethel, and Channel 62.”
See id., at 31 (et seq.).

447.D., at para. 154. Soto is the proposed fulltime general man-
ager of the potential Sunland broadcasting facilitly. J.D., para. 80.

45 Sunland Reply at 5. And, like Family’s Cheryal Kearney, Soto
has contributed no “financial resources to Sunland to aid in the
application and hearing process.” J.D., at para. 154, Soto, who
was not Hodin’s first choice as a hispanic partner because he could
not contribute anything to the venture, testified:

I indicated to him [Hodin], vell I’m not a rich man and so I
can’t really contribute financially.

KIST Exceptions at 11 (quoting Tr. 1261).

4la

24. We have observed (supra para. 18) that an imme-
diate financial investment, though generally signalling a
positive ownership commitment, is not necessarily the
sine qua non of an ownership interest creditable for in-
tegration purposes. See e.g., San Joaquin Television Im-
provement Corp., supra. It is merely one indicator, and
had the parties here alleged nothing more than lack of
“front money” from Soto, Sunland might well deserve
creditation of Soto’s purported 35% partnership interest.
However, not only need Soto contribute no initial capital
for prosecuting the application or constructing or oper-
ating any new station, and not only is he indemnified
from all past and present Sunland expenses should it not
receive this permit, the Sunland partnership agreement
was specifically modified to provide **:

Net losses shall be borne in proportion to contribu-
tions actually made by the partners in the partner-
ship. Until Hodin is reimbursed for the contribu-
tions advanced by him on behalf of Strimel and Soto,
all contributions shall be deemed to have been made
by Hodin.

Thus, even if Sunland received the instant construction
permit and commenced operations, Soto would still not
have incurred one dime’s worth of legal obligation or
responsibility for the entity. Or, as one of the other
parties framed it, having incurred no risk up to now,
nor incurring any liability for future expenses or losses,
Soto eould simply “walk away from the partnership”
with no less than he entered it. This is no genuine “part-
nership”—in the legal or any other sense.*’ See Berry-

46 Bethel Exceptions at 11 (quoting Family Exhibit 9 at p. 4).
Soto’s testimony affirmed his understanding that he is not legally
obligated to pay his proportionate share of any partnership losses.
KIST Exceptions at 16 (citing Tr. 1271).

47 As observed in the Commission’s most recent Minority Owner-
ship policy statement, supra, one of the primary characteristics of
a true general partnership is that each such partner is “personally

42a

ville, supra. We might hypothetically, view Hodin’s mu-
nificence as a “gift,” except that—while arguing that
Alexander S. Klein, Jr., supra, controls its integration
credit—Sunland inconstantly argues just as strenuously
that **:

. .. it must be remembered that Mr. Soto is required
to pay back any advances to him from future station
profits. Further, Mr. Soto is fully obligated to con-
tribute proportionately to finance the construction
and operation of the station. Thus, it is clear that
Mr. Soto has a financial stake in the Sunland part-
nership. ...

But future “profits” are subject to many vicissitudes:
viz., payments to principals; withdrawal of partnership
equity; leveraged business expansion. Or, mercy, real
operating losses, and profits from this Riverside UHF
facility are far from a sure thing. More to the point
regarding the applicability, vel non of Klein, if Hodin
considers Soto to be contractually obligated to reimburse
for all prior and future Sunland expenses (out of hypo-
thetical ‘“‘profits’”), then there is no “gift” as in Klein.
Sunland cannot, as they say, have it both ways.

25. Further, as with Family’s misreliance on Klein,
Sunland’s must fail for similar reasons. For apart from
the fact that Klein uniquely involved a mere 5% gift of
stock to a trustworthy former employee (see supra note
30), the sequence of events precipitating Soto’s 35%

liable for the partnership dates.” 92 FCC 2d at 854. Here, Hodin
has absolutely relieved Soto of liability for Sunland’s losses.

48 Sunland Reply at 5 (quoting J.D., at paras. 51-52) (footnote
omitted). Sunland further submits (id.) :

If a gift of a critical ownership interest could qualify for inte-
gration credit under Klein, certainly a nonrecourse advance of
funds, to be repaid if the applicant prevails, would pass muster.

Unfortunately for Sunland, its partnership agreement does noi call
for repayment “if the applicant prevails.”

43a

“partnership” interest confirms the underlying differ-
ences. As related by the excepting parties, Hodin’s orig-
inal application listed one George B. Strimel as a 10%
partner.*® Advised of the Riverside opening by Wash-
ington counsel, Hodin went to Riverside to conduct the
“ascertainment” study of community leaders. He met
Soto and told him that he would like to add a hispanic
investor who could contribute financially to the venture.
Soto introduced Hodin to a friend in the banking busi-
ness, but the friend had no interest in contributing (nor
could Soto find another hispanic investor interested in
contributing). Unable to so augment his application,
Hodin—just four days before the “B” cutoff deadline—
listed Soto himself as a 35% partner.” This bears no
relationship to the facts in Klein and is little different
than the exploits of Family’s Jack Dalton explained
supra.

26. We are constrained to find Soto to be a Sunland
“partner” in name only, Berryville, supra, and reverse
- the .D. in its grant of ownership integration credit for
Soto’s putative interest. Whereas the ALJ was certainly
correct in denying such ownership integration credit for
Ms. Kearney of Family, Family is also quite correct in
asserting that, pari passu, Soto has no greater legal or
practical obligation to Sunland than Kearney does to
Family. Nor any greater entitlement to the unique “gift”
precedent of Klein. Like Family’s Cheryal Kearney,
Andres Soto—an otherwise highly impressive individ-

49 See I.D. at para. 77 & n.17. Strimel dropped out after the “B”
cutoff date, raising Hodin’s current share to a 65% partnership
interest. Because we do not allow comparative “upgrading” after
the deadline (see supra note 9), Hodin is legally regarded here as
a 55% owner. He was credited with only parttime integration (20
hrs. per week or less), since he has substantial investments he must
attend to in Scranton. See KIST Exceptions at 10.

50 For a more complete chronology, see KIST Exceptions at 10-11.

44a

ual "has no present tangible interest in, or true (pro-
portionate) partnership position with respect to the Sun-
land applicant.*? That he “might” in the future (profits
and many other matters being congenial) does not make
him a true Sunland partner at present. Uniformly ap-
plying the precedents, particularly Berryville, no full-
time credit will be given based on Soto’s nominal part-
nership interest in Sunland.

27. Other Integration Proposals. The ALJ awarded
KIST 37.49% fulltime integration credit,** but denied
credit for their proposed parttime principals, holding
that the ordinary sales positions the latter would occupy
were nonmanagerial.** The only real challenge to KIST’s
fulltime credit comes from Family, which asserts that
KIST’s “non-integrated Chairman of the Board and larg-
est single stockholder who is also Chairman of the Board
of the bank upon which KIST is relying for a loan testi-
fied that he had ‘the ultimate decision on the conduct of

51 See I.D., paras. 80-82. But, while Soto is slated to be the
Sunland station’s general manager, see id., at para. 80, he is said
to have virtually no business or managerial background. KIST
Exceptions at 16.

52 Bethel (and others) further argue, in essence, that Soto will
have no control over the affairs of Sunland, e.g.:

Nothing in the Sunland partnership agreement prohibits Mr.
Hodin, as majority partner, from exercising total, unfettered
control over such critical items as the proposed station’s
programming and personnel policies.

Bethel Exceptions at 13. But—unlike the situation with the hyper-
ambitious Family applicant where Ms. Kearney was depicted as
the 95% principal (with all of the influence and control that
“lion’s share” ordinarily implies) Soto was always portrayed as a
minority partner. Sunland has never claimed that Soto would
control the- entity or that Hodin did not have both de jure and
de facto control.

53 7.D., para 152.
54 Td,

45a

the Station Manager and all personnel.’”® Well, we
should hope so, but we rather miss Family’s point. KIST
- has not claimed fulltime integration credit for its Chair-
man (and 12.5% principal) ,** and we would assume that
his position—with the support of the majority stockhold-
ers—would generally prevail.*7 And KIST’s 37.49%
credit inherently reflects that the owners who are to be
integrated do not control the entity. For its part, KIST
excepts to the ALJ’s rejection of its parttime proposal
and an hispanic “enhancement” for another principal
(Carlos Fox) on the claim that Fox’s grandfather was
born in Cuba. We have reviewed the record, and will
afford KIST a very slight enhancement for Fox’s
(8.33%) interest; the ALJ’s reasons for denying Fox’s
claimed hispanic status are not necessarily determina-

55 Family Exceptions at 32 (quoting Tr. 908). It later submits:

Finally, KIST’s non-integrated Chairman of the Board’s similar
position with the bank upon which KIST is relying for its loan
should raise far more serious questions than Family’s reliance
upon a bank in which one of its principals has deposits.

Id., at 35.
56 7.D., para. 65.

57 KIST’s largest stockholder and Chairman is Hugh B. Mac-
Cauley, 7.D., para 50; as noted, his request for integration credit
as a would-be part-time salesman has been denied and no “residual
credit” as mentioned in the J].D. (para. 165) is due to KIST.

58 KIST Exceptions at 23. The question of who qualifies for
preferential treatment as a hispanic is apparently unsettled. In
incorporating a minority preference in the FCC’s lottery authority
(see 47 U.S.C. §3809(i) (3) (A) (1982)), Congress stated that
“Office of Management and Budget Statistical Policy Directive No.
15 ‘Race and Ethnic Standards for Federal] Statistics and Adminis-
trative Reporting’ be utilized with regard to any dispute as to an
individual’s membership in a named group.” H.R. Rep. No. 97-765,
97th Cong., 2d Sess. 45 (1982) (Conference Report). In pertinent
part, Directive No. 15 considers hispanic a “person of . . . Cuban
... or other Spanish culture or origin... .” Jd. (at p. 37).

46a

tive.° We will deny KIST’s exceptions to the ALJ’s
denial of parttime credit, for his analysis in the J.D. is
clearly correct that KIST’s request for “residual credit”
for the two salesmen (including banker MacCauley who
said he would help in sales) is not supported by prece-
dent.”

28. Bethel, a nonstock corporation, was awarded
33.33% fulltime integration credit for the proposed par-
ticipation of one of its three directors, Carl E. Vaughn,
who would serve as the station’s general manager.™
KIST contends that although a director of a nonstock
corporation is usually ceded integration credit in pro-
portion to the number of directors (such directors being
likened to principals or shareholders™), Vaughn should
receive none here because the applicant “is completely
controlled and dominated by Bethel Christian Center.”
Imposing an analysis similar to that used with Family
and Sunland’s integration proposals, KIST asserts that
the “Center has provided all Bethel funding,” ® “Bethel
has no bank account,” and its “funds remain in the ac-
count of the Center.”™ It also observes that the Chair-
man of the Center (by Bethel’s by-laws) will always be
a Bethel board member.” Family’s exceptions make the
same point.” Bethel does not deny the substance of the
foregoing; instead it labels such “a patent attempt to

59 See I.D., para. 152 (no hispanic surname, little Spanish spoken,
not a member of hispanic organizations, mother not hispanic).

60 See KIST Exceptions at 23-27.
61 7.D., para. 155.

62 we, e.g., Farragut Television Corporation, 8 FCC 2d 279
(1967).

63 KIST Exceptions at 28.
“Id. |
65 Td.

66 Family Exceptions at 34.

47a

interject a real party-in-interest issue” at a belated pro-
cedural point.”

29. We will affirm the ALJ. In so doing, we must
note at the outset that the Henderson and Berryville
mode of analysis for filtering integration credit is not a
particularly good fit in the case of nonstock entities.
Most cases dealing with this issue involve either religious
or educational applicants where a parent institution spe-
cially creates a new corporation, the sole purpose of
which is to apply for and operate a broadcast station.
See, e.g., Roanoke Christian Broadcasting, Inc., 92 FCC
2d 1477, 1478-1479 (Rev. Bd. 1983) (fulltime participa-
tion by all four directors of nonstock corporation yields
100% integration credit); see also Las Misiones, supra
(withdrawal of 1 of 3 directors reduces integration credit
to 66%). When dealng with such entities, it is silently
assumed that the directors of the applicant organization
are not necessarily the financiers. Yet—for integration
purposes—we have regarded those directors as tanta-
mount to “principals.” To do otherwise would, most
likely, deprive such institutions of any opportunity for
integration credit and, therefore, usually the license.
Furthermore, in an early comparative case the Commis-
sion reversed the Board’s denial of integration credit for
directors of a nonstock corporation, which entity was con-
trolled by a parent corporation (having common directors
with the applicant corporation). Farragut Television
Corp., supra note 62 8 FCC 2d at 282-283. Nothing
here distinguishes Bethel from this line of cases, nor do
the exceptors prove so. The management integration of
one of Bethel‘s (three) corporate directors will be cred-
ited and the ALJ affirmed.

30. United has been disqualified on finances (supra,
paras. 3-10), and we need not resolve the questions posed
by the exceptions to its integration proposal.

87 Bethel Reply at 6-7.

48a

31. Comparison of Ownership Integration. Having
rejected the integration proposals of Family and Sunland
(and finding it unnecessary to ruminate on the integra-
tion proposal of the disqualified United), the two leading
applicants under this particular comparative criterion
are KIST, which is afforded a 37.49% fulltime factor,
and Bethel, with a corresponding 33.3% factor.** There
being no clear quantitative difference between the two,
see, e.g., North Carolina Radio Service, Inc., 92 FCC 2d
621 (Rev. Bd. 1982), review denied. FCC 83-211
(mem.), released May 3, 1983 (Comm’n), any preference
under this criterion depends upon the qualitative dif-
ference between the integration proposals. See id. In
that regard, Bethel urges that it be preferred because of
its integrated (33.39%) principal’s “local residence and
local civic involvement.” ® It relies, in part, on the fact
that KIST’s 29.16% local residence level is below its
33%. But, KIST is entitled to a very slight enhancement
of its integration credit for its 4.17% female” and its
8.33% hispanic ™ principals. In light of the Commission’s
racial and sexual preference policies, KIST wins under
the integration criterion, although we must say that its
leading edge is relatively razor thin.

32. Diversification of Control of the Media of Mass
Communications. The ALJ concluded that al! of the re-

68 As indicated supra, neither KIST nor Bethel receives parttime
credit.

6° Bethel Exceptions at 17.
70 7.D., para. 152.

71 See supra para. 27 according consideration of Carlos Fox’s
grand-paternal genotype. Even so, KIST’s enhancement for these
levels of FCC-favored racial and Sexual characteristics is relatively
slight, see Alexander S. Klein, Jr., supra, 86 FCC 2d at 428-429.
As the Commission clarified recently, it “will continue to consider
participating minority [and female] ownership which is less than
controlling to the degree of minority [and female] ownership and
participation represented.” Horne Industries, Inc., FCC 84-286,
released July 20, 1984, at para. 6.

49a

maining applicants were even under the diversification
criterion. Except for Family, none of the other appli-
eants nor their principals hold other media interests. /.D.,
para. 148. With respect to Family, its de facto sole stock-
holder (see supra, paras. 12-21), Jack Dalton, became a
“limited” partner subsequent to the B cut-off date in the
proposed assignee of a construction permit in Spring-
field, Missouri for KSPR(TV), an assignment subse-
quently approved by the Commisison. The interest was
not attributed to Family, however, because—prior to the
consummation of the sale—Mr. Dalton expressly agreed
to sell his interest and, in fact, did divest the Springfield
interest shortly after the Commission approved the as-
signment. See id., para. 150. Moreover, Ms. Emma L.
Freeman, Family’s secretary was a 2% stockholder of a
construction permittee for a new television station at
Reno, Nevada at the time Family filed its application.
She has since sold her interest. The ALJ discounted the
Reno interest because she has no ownership interest in
Family nor, it his view, a position of managerial signifi-
eance. See id. Sunland excepted, claiming that Family
should have received some media diversification demerit
for Dalton’s and Ms. Freeman’s interests.

33. We agree with Sunland to the extent that the
remaining applicants are entitled to a very slight diver-
sification preference over Riverside Family because of
Dalton’s “limited” partnership interest in the Spring-
field, Missouri construction permit. See Greater Wichita
Telecasting, Inc., 52 RR 2d 926, 928 (1984); Greater
Wichita Telecasting, Inc., 90 FCC 2d 1046, 1049 (Rev.
Bd. 1982). As a general matter, in order to prevent
comparative “upgrading” after the legal deadline, we do
attribute media interests to an applicant if its principals
hold such interests on the “B” cutoff date unless the
applicant submits an unequivocal commitment on or be-
fore that date to divest the interest upon grant of its
application. See, eg., High Sierra Broadcasting, Inc.,
55 RR 2d 627, 635 (Rev. Bd. 1983). Here, Dalton was

50a

a principal of the Springfield applicant on April 14,
1982 (see United’s amendment filed on April 23, 1982
reporting the Springfield interest), but the application
was not granted until August 4, 1982, and that interest
not sold until August 17, 1982. The Springfield interest
must therefore be attributed to Family for diversification
purposes. The ALJ acted correctly, however, in discount-
ing Ms. Freeman’s interest since, indeed, she is neither
an owner of Family nor occupies any significant mana-
gerial interest. See Policy Statement on Comparative
Broadcast Hearings, 1 FCC 2d 393, 394 n.5 (1965).

34. Auwiliary Power. Sunland urges that the ALJ erred
in rejecting its auxiliary power exhibit and in failing
to accord it a comparative preference for its auxiliary
power proposal. The ALJ rejected the exhibit on two
grounds: (1) credit was not sought prior to the B cut-
off date; and (2) auxiliary power credit is given only
for AM and FM stations, not television proposals. See
Tr. 408, 410, 438. Subsequent to that ruling, however,
the Review Board accorded a television applicant a pref-
erence for its auxiliary power proposal. See San Joaquin
Television Improvement Corp., 54 RR 2d 1206, 1214
(Rev. Bd. 1983). KIST observes in its reply that it too
tendered a similar exhibit, which was likewise rejected,
and that if one applicant is awarded a minor enhance-
ment for auxiliary power, then each of the applicants
who proposed auxiliary power should be awarded the
same credit. See KIST Reply 3-4. We will deny the ex-
ception. Although one ground supporting the ALJ’s rul-
ing has been vitiated by San Joaquin Television Improve-
ment Corp., the remaining basis warrants affirmance of
the ALJ’s ruling. That is, an applicant cannot “upgrade”
its comparative position after the deadline for filing
amendments as of right (the B eut-off date) has elapsed.
Birmingham Family, supra note 9. None of the parties
will receive a comparative preference for belated pro-
posals of auxiliary power.

5la

35. Public File Issue. By Order, FCC 82M-1645, re-
leased May 24, 1982, the ALJ added an issue against
Family to determine whether it had violated Section
73.3526 of the Commission’s Rules and, if so, the effect
on its comparative qualifications to be a Commission li-
censee. That rule requires broadcast applicants to main-
tain a public inspection file containing the material spe-
cifically prescribed therein. The J.D. found that two ap-
plication amendments were not placed into Family’s in-
spection file in a timely manner. J.D., paras. 47-49. He
did not assess the applicant a comparative demerit, how-
ever, because there was no evidence of either an intent
to conceal information or any harm to a member of the
public, and also because the violation appeared to be de
minimis. Sunland argues that a slight demerit is ap-
propriate, citing HLD&M Communications, FCC 82D-64,
released September 13, 1982 (ALJ). We disagree. In
HLD&M Communications, several individuals, including
a news reporter, requested to inspect the file over a
multi-month interval and were unable to see the file
because it was missing. A slight demerit was there as-
sessed. Here, the violation was less serious, and was
quickly remedied when the applicant was apprised that
its public file was incomplete. /.D., para. 146. Under the
circumstances, we conclude that the ALJ properly de-
clined to assess Family any comparative demerit. See
Gilbert Broadcasting Corp., 55 FCC 2d 579, 582 (Rev.
Bd. 1975), where the Board refused to specify a public
file issue on allegations that a single amendment was
absent from the applicant’s public file.

36. Request for ex parte issue. By petition of August
23, 1984, Family requested the addition of an issue to
determine whether KIST has violated either Section
1.1225 or Section 1.1227(e) of the Commission’s Rules
barring the solicitation of ex parte contacts in an on-

52a

going adjudicatory proceeding.” Family’s petition was
inspired by servic on the parties of a copy of a letter
from the Commission’s Office of Managing Director to
Congressman Alfred A. McCandless advising the Con-
gressman of the status of this case and refusing to ad-
dress the merits of the case by citing our ex parte rules.”
The Congressman’s inquiry had been stimulated by a
request for assistance by KIST’s Board Chairman, Ed-
ward G. Butler, who complained that the Board’s defer-
ral of this case pending the outcome of settlement nego-
tiations between the parties was delaying a decision in
this proceeding.”

37. Based on KIST’s reply to Family’s petition and
our review of the material on record, we will not add
the requested issue. Where the facts are not obscure or
in dispute, an evidentiary hearing is not needed. Stone y.
FCC, 466 F.2d 816, 322-323 (D.C. Cir. 1972). Both
KiST and Butler admit that Butler solicited the assist-
ance of Congressman McCandless in compelling a deci-

72 47 CFR § 1.1225 bars the solicitation of ex parte contacts seek-
ing to address the merits of a case; § 1.1227(e) goes so far as to bar
the solicitation of ex parte contacts going to the status of a case.

73 See Letter of August 15, 1984 from Edward J. Minkel (per
Thomas P. Campbell) to the Honorable Alfred A. McCandless
(Attachment to Family Petition).

74 See Letter of July 23, 1984 from Edward G. Butler to Con-
gressman Alfred A. McCandless which concluded: “Anything you
could do to help would be greatly appreciated.” It is explained
that, following oral argument before the Board in which we sug-
gested that the parties settle amicably, we were advised by letters
of April 20, 1984 that the parties were attempting to negotiate
a settlement of the case. Unfortunately, by letter of June 12, 1984,
the Board was advised in writing by counsel that an agreement was
unlikely, to which we responded that we would proceed to consid-
eration of the case. See Letter of June 19, 1984 from Review
Board Chief for Law, Allan Sacks, to Jonathan L. Weiner, Esq.
(copies to counsel).

53a

sion,”* and Butler’s letter to the Congressman might sug-
gest to some a violation of Section 1.1277(e). But, as
the court observed in the recent Amigos Broadcasting,
Inc. v. FCC, 696 F.2d 128 (D.C. Cir. 1982), the Com-
mission’s concern over status inquiries makes “. . . a
necessary exception to the prohibition of ex parte con-
tacts for congressional inquiries directed to administra-
tive delay.” Jd., at 129. See also Davison Communica-
tions Corp., 53 RR 2d 223 (1983). We recognize that
the Amigos Broadcasting court was concerned that, al-
though the written communications of record between the
applicant and a U.S. Senator were inoffensive, certain
oral conversations between the Senator’s staff and FCC
staff might have been explored more deeply.’ Here, how-
ever, there is no evidence or claim of oral communications
with decision-making FCC personnel.”* None of the other

™ See KIST Opposition to Petition at 4-5; Butler affidavit of
August 24, 1984 (Opposition, Attachment B).

™ We note that while Butler complained to Congressman Mc-
Candless that our deferral of this case pending settlement negotia-
tions has delayed the case, Congress itself recently relaxed 47 U.S.C.
§311(d) because of its view that settlements greatly expedite
proceedings involving mutually exclusive applicants. See H. Rep.
97-765, 97th Cong., 2d Sess. 49-50 (1982). We-agree with Congress
and actively encourage setthements which would terminate a com-
parative case and telescope the delivery of new broadcast service.
Ironically, Butler’s actions have held up the release of this deci-
sion while we awaited the completion of the pleading cycle on the
ex parte allegations and considered the claims and responses filed by

the parties.
TT See 696 F.2d at 1380.

8 We observe that Butler’s letter to the Congressman might
have skirted the merits when he complained that “[w]e have been
given to understand that the Review Board hesitates to make a de-
cision on this case because two of the applicants (including Sun-
land) have minority involwement, which could pose some legal
problems.” On the whole, however, and in context, it seems clear
that Butler’s communicatiom to Congressman McCandless was di-
rected to administrative delay.

54a

parties seeks an ex parte issue, and Family has neither
replied to KIST’s opposition nor suggested that the rec-
ord on this matter is either incomplete or inaccurate.
Further inquiry over this matter would be doubtlessly
unproductive.

CONCLUSION

38. Our ultimate choice of a permittee in this case is
obviously hinged heavily on our rejection of the Family
and Sunland ownership integration proposals. These are
serious actions, we know, and a few final words of ex-
planation may be due. We acknowledge that there may
be some surface tension between the precedent (a) that
demands a penetrating look beyond paper organizational
constructs when the empirical evidence suggests a very
different regime and where de facto control appears com-
fortably lodged in other quarters (see Henderson and
Berryville, supra) and (b) recent Commission policies
such as those discussed in the 1982 Minority Ownership
statement noted in para. 20, supra, which accept the
proposition that certain types of principals who contrib-
ute no venture capital to a particular applicant may still
be considered “controlling,” all other prima facie indicia
being wholly congruent. Yet,, beneath that surface, we
believe that no fundamental inconsistency is present and
that the Commission continues to demand that applicant
principals who hold out to be substantial or controlling
owners possess the de facto ownership interests (and not
merely “nominal” interests) that their de jure status
implies, particularly in the comparative setting where
ownership integration and, now, minority or female en-
hancements loom so prominently. See, e.g., West Michigan
Broadcasting, supra note 26. Because of that prominence
in comparative licensing cases, we will continue to uni-
formly apply the Henderson and Berryville principles to
help ensure the integrity of our policies and processes, a
stated concern of the Commission in this delicate area.
See Minority Ownership In Broadcasting, supra, 92 FCC

55a

2d at 855 (Commission will be alert to reject “ ‘sham’
arrangements”). From the standpoint of minority own-
ership, we believe that nothing would more swiftly bury
the Commission’s preferential treatment policies in an
avalanche cf contumely than our uncritical acceptance of
the applications of roving sharp-shooters such as Family’s
Jack Dalton of Tennessee who have cynically calculated
that even, at worst, a minority share of a southern Cali-
fornia television construction permit worth—right off the
printing press—many millions of dollars is a sufficiently
lucrative target and hoped to convert a bulls-eye into a
multiple return on initial investment. Indeed, Dalton
brashly admits that to be his game.*® Sunland’s Jack
Hodin of Scranton, Pennsylvania, while less “philan-
thropic,” is practically no different. Neither entrepre-
neur has the slightest interest in serving the “public in-
terest” in Riverside, California; only their own interests
in the fastest dollar west of Las Vegas.

39. All decisionally significant exceptions have been
considered. KIST, Bethel and Sunland are entitled to a
very slight preference over Family under the diversifi-
cation criterion. Only KIST and Bethel have been cred-
ited with fulltime quantitative integration credit
(37.49% and 33.3% respectively), entitling them to mod-
erate integration preferences over the other qualified
applicants. See Nuance Corp., 85 FCC 2d 412, 419 (Rev.
Bd. 1981), where an applicant with 26% fulltime inte-
gration credit received a moderate preference over an

79 Even in Alexander S. Klein, Jr., supra, where the gift of stock
to the former minority employee was a mere 5%, the Commission
stated that the “. . . proposal merits especially close scrutiny,” 86
FCC 2d at 430, and that the prospect of exploitation of the Com-
mission’s racial preference policy there was “troublesome.” Id.,
at 431.

89 See I.D., para. 105 (citing Tr. 2274); see also Tr. 2276-2277
(Dalton testifies that despite personally bearing all expense of
prosecuting application and constructing station, his marginal share
of a potentially winning applicant was better than “nothing.”)

56a

applicant with no fulltime integration credit. And KIST
prevails over Bethel on integration criterion because of
its slightly superior qualitative attributes. See supra
para. 81. No other preferences or demerits have been
given. Having weighed these factors, we find that KIST
is the preferred applicant under the Commission’s com-
parative Policy Statement. While its margin over Bethel
is very narrow, it nonetheless in enough to win. See
Alexander S. Klein, Jr., supra, 86 FCC 2d at 432 (5%
minority-female ownership by winning applicant is dis-
positive).

40. ACCORDINGLY, IT IS ORDERED, That the pe-
tition for leave to amend filed by United American Tele-
casters, Inc. on February 17, 1984, IS GRANTED, and
the amendment IS ACCEPTED, and that its petitions for
leave to amend filed on April 23 and August 15, 1984,
ARE DISMISSED as moot; that the petitions for leave
to amend filed March 20 and May 14, 1984, by River-
side Family Television, Inc. ARE GRANTED, and the
amendments ARE ACCEPTED; and the petition for
leave to amend filed August 29, 1984, by KIST Corp. IS
GRANTED, and the amendment IS ACCEPTED; and

41. IT IS FURTHER ORDERED, That the Request
for Official Notice and Contingent Petition to Enlarge
and to Reopen the Record filed December 29, 1983, by
Riverside Family Television, Inc. IS DISMISSED; that
the Contingent Motion to Reopen the Record and to En-
large the Issues Against United American Telecasters,
Inc. filed December 30, 1983, by Sunland Communica-
tions Company IS DISMISSED; that the Contingent Pe-
tition to Reopen and Record filed March 6, 1984, by
KIST Corp. IS DISMISSED; and that the Contingent
Petition to Add Ex Parte Issues filed August 23, 1984
by Tiverside Family Television, Inc. IS DENIED; and

42. IT IS FURTHER ORDERED, That the applica-
tion of KIST Corp. (File No. BPCT-810717KK) for au-
thority to construct a new television station in Riverside,

haps

57a

California, IS GRANTED; that the applications of
Sunland Communications Company (File No. BPCT-
810720KL), Bethel Broadcasting, Inc. (File No. BPCT-
810720KM), Riverside Family Television, Inc. (File No.
BPCT-810720KO) and United American Telecasters, Inc.
(File No. BPCT-810720KQ) ARE DENIED; and that
the applications of Ettlinger Broadcasting Corporation
(File No. BPCT-810720KK) and Channel 62, a Limited
Partnership (File No. BPCT-810720KN) ARE DIS-
MISSED.

/s/ Norman B. Blumenthal
NORMAN B. BLUMENTHAL
Member, Review Board
Federal Communications Commission

58a

APPENDIX F
FCC 83D-60

524
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

IN RE APPLICATIONS OF ;
BC Docket No. 81-863 i
File No. BPCT-810717KK
KIsST CORP.
Riverside, California

BC Docket No. 81-866
File No. BPCT-810720KK
ETTLINGER BROADCASTING CORPORATION
Riverside, California

BC Docket No. 81-867
File No. BPCT-810720KL
SUNLAND COMMUNICATIONS COMPANY
Riverside, California

BC Docket No. 81-868
File No. BPCT-810720KM
BETHEL BROADCASTING, INC.
Riverside, California

BC Docket No. 81-869
File No. BPCT-810720KN
CHANNEL 62, A Limited Partnership
Riverside, California

BC Docket No. 81-870
File No. BPCT-810720KO i
RIVERSIDE FAMILY TELEVISION, INC.
Riverside, California

BC Docket No. 81-871
File No. BPCT-810720KQ |
UNITED AMERICAN TELECASTERS, INC.
Riverside, California |

——— .

For a Television Construction Permit

59a

APPEARANCES

James E. Greeley and Peter Gutmann, on behalf of
Kist Corp.; Stanley S. Neustadt and Robert C. Burns,
on behalf of Ettlinger Broadcasting Corporation; Todd
D. Gray, Daniel W. Toohey, Linda Hicks and John R.
Feore, Jr., on behalf of Sunland Communications Com-
pany; Edward J. Smith, Jr. and A. Thomas Carroccio,
on behalf of Bethel Broadcasting, Inc.; A. Harry Becker,
on behalf of Channel 62, A Limited Partnership; Jona-
than D. Blake, John J. McKetta, III, and Jonathan L.
Weiner, on behalf of Riverside Family Television, Inc.;
Seymour M. Chase, Joyce L. Ausbeck, Harry F. Cole,
David F. Tillotson and Pamela Stanton Baron, on behalf
of United American Telecasters, Inc.; and Stephen Yelv-
erton, on behalf of the Mass Media Bureau, Federal Com-
munications Commission.

INITIAL DECISION OF ADMINISTRATIVE
LAW JUDGE JOSEPH CHACHKIN

Issued: October 27, 1983 Released: November 4, 1983

Preliminary Statement

1. This proceeding involves the mutually exclusive ap-
plications of Kist Corp. (Kist), Ettlinger Broadcasting
Corporation (EBC), Sunland Communications Company
(Sunland), Bethel Broadcasting, Inc. (Bethel), Channel
62, A Limited Partnership (Channel 62), Riverside
Family Television, Inc. (Family) and United American
Telecasters, Inc. (United), each seeking authorization
to build a new television station to operate on Channel
62 at Riverside, California.’

1 Applications by Riverside Telecasters, Inc., Pan-Pacific Broad-
casting, Inc. and Focus Broadcasting of Riverside, Inc. were dis-
missed by the Presiding Judge with prejudice pursuant to each
applicant’s request. Order, FCC 82M-1373 (released April 28, 1982;
and Order, FCC 82M-2471 (released August 13, 1982).

60a

2. In the Hearing Designation Order, 46 Fed. Reg.
62936 (December 29, 1981, the Commission, by the Chief,
Broadcast Bureau, designated the competing applications
for hearing in a consolidated proceeding on the following
issues: ?

(1) To determine with respect to Sunland Communi-
cations Company:

(a) whether the applicant has available an ad-
ditional $2,026,593 for its construction and
three month operating costs;

(b) whether, in light of the evidence adduced
pursuant to (a) above, the applicant is fi-
nancially qualified.

(2) To determine with respect to Bethel Broadcast-
ing, Inc.:

) (a) whether the applicant has available an ad-
ditional $1,327,800 for its construction and
three month operating costs;

(b) whether, in light of the evidence adduced
pursuant to (a) above, the applicant is fi-
nancially qualified.

(3) To determine with respect to Channel 62, A
Limited Partnership:

(a) the information required by Tables I and
II, Section II, FCC Form 301 with respect
to officers, directors, an stockholders of
Channel 62, Incorporated and the Greater
Riverside Chambers of Commerce;

(b) the information required by questions 17
(1)-17(4), Section II, FCC Form 301;

2 The issues directed at the three applicants who are no longer
parties to this hearing are not enumerated.

6la

(ce) whether, in light of the evidence adduced
pursuant to (a) and (b) above, the appli-
cant is legally qualified ;

(d) the cost of purchasing or leasing land for
15 months;

(e) whether the applicant has available an ad-
ditional $1,206,365 plus the costs of pur-
chasing or leasing the land;

(f) whether, in light of the evidence adduced
pursuant to (d) and (e) above, the ap-
plicant is financially qualified.

(4) To determine with respect to United American
Telecasters, Inc.:

(a) whether the applicant has available $2,187,285
for its construction and three month op-
erating costs;

(b) whether, in light of the evidence adduced
pursuant to (a) above, the applicant is fi-
nancially qualified.

(5) To dete nine whether there is a reasonable pos-
sibility that the tower heights and locations pro-
posed by Sunland, Bethel, and United would con-
stitute a hazard to air navigation.

(4) To determine which of the proposals would, on

a comparative basis, best serve the public in-
terest.

(7) To determine, in light of the evidence adduced
pursuant to the foregoing issues, which of the
applications should be granted.

3. By Order, FCC 82M-1645 (released May 24, 1982),
the Presiding Judge added the following issues with re-

spect to the applicants who remain parties to this pro-
ceeding:

(6) To determine whether Bethel Broadcasting, Inc.
has violated Section 73.3514 of the Commission’s

62a

Rules and, if so, the effect thereof on this ap-
plicant’s comparative qualifications to be a li-
censee of the Commission.

(7) To determine whether Channel 62, A Limited
Partnership has violated Section 73.3514 of the
Commission’s Rules and, if so, the effect thereof
on the applicant's comparative qualifications to
be a licensee of the Commission.

(8) To determine whether Channel 62, A Limited
Partnership has violated Section 73.3526 of the
Commission’s Rules and, if so, the effect thereof
upon the applicant’s basic or comparative quali-
fications to be a Commission licensee.

(9) To determine whether the staff proposed by the
Ettlinger Broadcasting Corporation is adequate
to effectuate its operating proposals and, if not,
whether this applicant is qualified to be a li-
censee of the Commission.

(10) To determine whether Riverside Family Tele-
vision, Inc. has violated Section 73.3526 of the
Commission’s Rules, and, if so, the effect thereof
upon the applicant’s comparative qualifications
to be a Commission licensee.

(11) To determine whether the applicant and sub-
sequent amendments of Sunland Communications
Company were executed and certified in ac-
cordance with the Commission’s requirements
and, in light of the evidence adduced, the effect
thereof on the applicant’s basic or comparative
qualifications to be a licensee of the Commis-
sion.® *

8 The added issues have been numbered 6-1 and present issues
6-7 will be renumbered 12 and 13. 4

4 The burdens of proceeding and proof on added issues 6, 7, 9, 10
and 11 were placed on the respective applicants. The burden of
proceeding on added issue 8 was placed on Pan-Pacific, with the
burden on proof placed on the applicant.

Tf

63a

4 By Order, FCC 82M-1410 (released May 3, 1982),
the Presiding Judge granted a “Motion for Summary
Decision” by United on the air hazard issue (Issue 5)
and resolved that issue in United’s favor. By Memo-
randum Opinion and Order, FCC 82M-2394 (released
August 3, 1982, the Presiding Judge granted Sunland’s
“Motion for Summary Decision” on the certification issue
(Issue 11) and resolved that issue in Sunland’s favor.
By Order, FCC 82M-2786 (released September 14, 1982,
the Presiding Judge granted Sunland’s “Motion for Sum-
mary Decision” on the financial issue (Issue 1) and re-
solved that issue in Sunland’s favor.

5. Prehearing conferences were held on March 17,
1982, April 2 and 28, May 10, 1982 and July 16, 1982.
Admissions sessions were held on September 8 and 9,
1982. Hearing sessions were conducted on September 14,
15, 16, 17, 20, 21, 22, 28, 24, 28 and 29, 1982. A post-
hearing conference was held on October 14, 1982. A re-
buttal hearing session was conducted on October 20, 1982.
The record was closed by Order released January 27,
1983 (FCC 83M-354). Proposed findings of fact and
conclusions of law were filed by the applicants on Janu-
ary 7, 1983 and reply findings and conclusions were filed
on February 18, 1983.

Findings Of Fact
Qualification Issues

Issue 2—Bethel Financial Qualifications

6. Bethel’s cost of constructing and operating its pro-
posed station through the first three months on the air

4a A “Motion To Enlarge” was filed April 15, 1988 by Channel 62.
An opposition was filed April 28, 1983. A “Petition To Reopen The
Record And To Enlarge The Issues” was filed April 27, 1983 by
KIST. Responsive pleadings were filed on May 11, 1983. The mo-
tion and the petition were denied by Order, FCC 83M-1930, released
June 14, 1983.

64a

will be $1,408,550. (Bethel Ex. 4). From its proposed
equipment supplier, Bethel will have available net de-
ferred credit totaling $759,656. (Bethel Ex. 4). JP As-
sociates, Bethel’s proposed equipment supplier, is an es-
tablished supplier capable of meeting its commitment to
Bethel. (Bethel Ex. 10). This capability is confirmed by
the stated willingness of Bogner Broadcast Equipment
Corp. and Harris Corporation to provide their equipment
to JP Associates on deferred credit basis (Bethel Ex. 12).
Bethel also has available to it existing capital in the
amount of $10,000. These earmarked funds are retained
on deposit at Security Pacific National Bank (Bethel
Ex. 4).

7. Bethel’s president, Carl E. Vaughn, undertook to
obtain a commitment for the additional funds, approxi-
mately $638,894, necessary to meet Bethel’s construction
and first quarter operating costs (Tr. 1348-50). On
December 23, 1982, DeAnza National Bank, together
with Golden Pacific Nationa! Bank and Gateway Western
Bank, issued a commitment letter for a participation
loan to Bethel in the amount of $750,000. As renayment
of that loan will not begin until 120 days after the pro-
posed station begins operation, the full amount of the
loan will be available to Bethel.

8. On January 5, 1983, Bethel proffered both an
amendment to the financial portion of its application and
a reformed Hearing Exhibit No. 4 (Financial Qualifica-
tions). The application amendment and the reformed
hearing exhibit demonstrate Bethel’s ability to meet its
financial requirements of $1,408,550 by relying on exist-
ing capital ($10,000), deferred equipment credit
($759,656) and the loan commitment ($750,000), which
totals available financial resources of $1,519,656. (Re-
formed Bethel Ex. 4).

Issue 3(a) to (c)—Channel 62 Legal Qualifications

9. A legal qualifications issue was specified against
Channel 62 on the basis of missing information in Sec-

65a

tion II of its application. Missing was the Table I and
Table II information for the officers, directors and share-
holders of Channel 62, Incorporated and the Greater
Riverside ‘‘hamber of Commerce (Chambers). Chambers
holds 100% of the stock of Channel 62, Incorporated.
Also missing was the information required by questions
17(1) through 17(4) of Section II relating to the other
media interests of such officers, directors and sharehold-
ers of Channel 62, Incorporated and the Chambers.

10. The information has been supplied by Channel 62
in amendments and in Channel 62 Exhibits 2, 4, 5, 6
and 7. This information-is reflected in the description
in the Channel 62 applicant found at Findings 91-94
infra.

Issue 3(d) to (f)—Channel 62 Financial Qualifications

11. The Designation Order, 46 Fed. Reg. at 62938,
determined that Channel 62’s cost of construction and
operation for three months would be $1,268,143 plus the
cost of purchasing or leasing land for five months. Ac-
cording to Channel 62 Exhibit 18, the cost of rental for
the station’s stud‘o facilities would be $2,500 per month,
while the cost for leasing the transmitter site would be
$1,900 per month. The total cost to construct and oper-
ate this station for three months would thus be:

Cost in designation order $1,268,143 ©

Rental of studio facilities (5 months) 12,500

Rental of transmitter site (5 months) 5,000
$1,285,643

12. To meet this cost of $1,285,643, Channel 62 pro-
poses to rely on $150,000 from its limited partners and
a bank loan in the amount of $2,000,000 from the River-
side National Bank.

5This amount includes the $350,000 downpayment and the
$119,875 representing four installment payments on the Harris
equipment credit package, as well as $187,610 for equipment to be
purchased for cash.

66a

13. With respect to its reliance on its limited partners
for contributions of $150,000 toward the prosecution of
its application, Channel 62 has submitted balance sheets
for each of its proposed contributors showing the avail-
ability of funds to make their respective capital contri-
butions. While these balance sheets, in some cases, were
somewhat dated, Channel 62 submitted affidavits from
these individuals stating that the submitted balance sheets
reflected their current financial position (Channel 62
Exs. 19-29; 33-41).

14. Channel 62 submitted a letter from the Riverside
National Bank dated January 29, 1982 stating that the
bank “would be pleased to consider participating in a
loan of $2,000,000.” (Channel 62, Amended Ex. VI).
The bank qualified its participation by noting that it
“would be conditioned upon our ability to review and
approve the financial details of this loan prior to fund-
ing, including but not limited to proposed guarantors,
collateral availability and cash flow requirements. More-
over, since we are unable to totally fund your request
ourselves, the bank’s participation will be predicated
upon our ability to obtain additional participants willing
to accept the proposed terms.” (Jd.).

15. Subsequently, in response to questions raised at
the hearing, Channel 62 submitted two further letters
from the Riverside National Bank clarifying some of the
terms of the first letter. The bank stated in its letter
dated September 10, 1982 that its legal lending limit was
currently $600,000 (Channel 62 Ex. 32), a

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_2023%3A2. Public record. Not legal advice.