The potential perils of foreclosing on a radio station were evident in a Consent Decree released by the FCC’s Media Bureau yesterday, agreeing to an $11,000 penalty to be paid to the FCC U.S. Treasury before a station could be sold by a receiver to help pay off the debts of an AM radio station owner. The fine was imposed both for an unauthorized transfer of control of the licensee of the station, and because of the failure of the receiver appointed by the Court to keep the FCC fully appraised of the status of the control of the licensee company while FCC approval for the receiver’s control of the station was still pending before the FCC. What this case really shows is that in any foreclosure on a broadcast station where there are competing creditors, an uncooperative debtor or anyone else who could possibly contest the process, anyone attempting to collect obligations owed by a broadcaster needs to proceed very carefully, keep the FCC fully informed of the entire process surrounding the exercise of the creditor’s rights, and be advised by an attorney or advisor very familiar with FCC process in addition to counsel in the local court proceedings. Plus, local counsel and FCC counsel need to work together at each stage of the process to make sure that the proper approvals are obtained from the FCC before the local court actions are implemented.
This case demonstrates, like a case we wrote about last week, the complicated interplay between the actions of local courts enforcing private actions and the FCC enforcing the Communications Act. In this case, the orders of the local courts and other authorities dealing with the receivership of station assets and the stock of the licensee company changed over time. The failure to keep the FCC appraised of those changes really led to the $11,000 fine. The receiver initially asked that he be approved to become the “assignee” of the station, as the court order appeared to indicate that he would receive the assets of the debtor’s estate. In the FCC’s eyes, an “assignment of license” is when the assets and license of a station change hands, so that a new licensee is now the operator of the station. Here, later action of the local court changed the nature of the action to one where the receiver, instead of getting the assets of the debtor, would instead be receiving its stock. Where the licensee remains the same, but a new owner takes control, as was the case here where the receiver took control of the stock of the licensee, the FCC deems that to be a “transfer of control.” That was significant to the FCC in this case.
Continue Reading Broadcast Creditors Beware – $11,000 Fine Imposed for FCC Reporting Shortcomings in an AM Foreclosure Action