Sinclair Broadcast Group and its quest to aquire Tribune Media last year.
Last year at this time, the Sinclair Broadcast Group was riding about as high as a media company can ride these days.
The Hunt Valley-based company was poised to close on a $3.9 billion deal for Tribune Media that would make it the most powerful broadcast group in the nation with more than 200 stations and, finally, a presence in such big-time markets of New York and Los Angeles.
It clearly had a friend in the White House in Donald Trump, and it looked as if the president’s support was going to make the deal a slam dunk for Federal Communications Commission approval with a little help from FCC Chair Ajit Pai, who was greasing the skids by rolling back ownership cap rules.
Sinclair was giving $1,000 bonuses to employees at the end of last December with management saying what a great deal Trump’s tax package was for its employees.
And, oh, yeah, there was all that political ad money from the new Tribune stations in those big markets that would be rolling in from hotly contested midterm races once the sale was approved, not to mention the enhanced political clout that would come with controlling local TV stations in big battleground states. Being a player in the world of conservative politics is something the Smith family that controls Sinclair has been chasing for decades — at least back to 2002 when it provided an executive helicopter to Republican gubernatorial candidate Robert L. Ehrlich Jr. during his campaign.
But what a difference 12 months have made in the life of Sinclair. It might not have been as rough as what the Queen of England’s termed her “annus horribilis” in 1992, but it was plenty bad by any broadcaster’s standards.
In August the deal to take over Tribune not only turned to dust, but it ended with the Chicago-based company suing Sinclair for $1 billion for breach of contract. The FCC had sent the Sinclair deal to its doom by ordering further review after essentially accusing the company of shady behavior in the information it did — and did not — share with the regulators about its plan to sell stations in Chicago and Texas.
Sinclair's image problem: The CEO of the company it was about to partner with and the chair of the FCC are both calling its conduct into question — and one of them is willing to take on the president of the United States who appointed him and the other is going to court to prove it.
“Sinclair repeatedly and willfully breached its contractual obligations in spectacular fashion,” the Tribune suit alleges. “In an effort to maintain control over stations it was obligated to sell if advisable to obtain regulatory clearance, Sinclair engaged in belligerent and unnecessarily protracted negotiations with [the Department of Justice] and FCC over regulatory requirements, refused to sell stations in specific markets required to obtain approval and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay — all in the service of Sinclair’s self-interest and in derogation of its contractual obligations.”
The FCC said that Sinclair, in its effort to maintain that control, failed to "fully disclose facts" about the people and entities to which it proposed to sell Tribune stations to meet regulation requirements in what are known as “sidecar arrangements.” The FCC highlighted a Sinclair plan to sell Chicago’s iconic WGN-TV to Steven B. Fader, CEO of Atlantic Automotive Corp., a Baltimore-based holding company for MileOne Autogroup, which has its corporate offices in Towson.
Sinclair would have owned most of WGN’s assets and been responsible for many aspects of its operations, according to the FCC. Additionally, the FCC said, Fader would have purchased the station for a price that appeared to be below market value, and Sinclair would have had an option to buy back the station in the future.
Pai, the FCC chair, said such proposals by Sinclair raised “serious concerns” about whether the sale of Tribune to the company was in the public interest.
And Pai, remember, was appointed to lead a Republican-controlled FCC by Trump, who had been publicly signalling his support of Sinclair and the transaction. Even more remarkable, Pai had been defining his tenure by re-interpreting or changing FCC rules to allow just the kind of corporate consolidation the Sinclair-Tribune deal represented. (He is best — or maybe I should say worst — known for ending net neutrality.)
Sinclair has denied misleading the FCC, insisting that it had been transparent about all aspects of the proposed deal. It has counter-sued Tribune, saying that the Chicago-based company is exploiting the “unfortunate” turn of events in hopes of gaining a “windfall.”
Think about it: Pai took on the president who appointed him, a man known to punish those who do not bend to his will, rather than push through approval of this deal for Sinclair.
But really, what part of having an executive in the auto business from Maryland holding the license of a Chicago landmark station sounds like a broadcaster operating in the public interest to you?
Sinclair stock, which peaked in 2018 at $39.50 in January, fell to a low of 25.41 on Aug. 1, a week before the collapse of the Tribune deal was reported in the mainstream press. So far this month, the high is 31.69, a decline of about 17 percent from where it was a year ago.
The broadcaster is said to be in the mix of companies bidding to buy the Fox regional sports networks, which might have a positive effect on stock prices and image if they wind up as the buyer.
Sinclair declined to comment for this article.
Media critics like me have focused much attention on what happened onscreen with Sinclair stations, such as the company’s hiring in 2017 of former Trump communications aide Boris Epshteyn as its chief political analyst just weeks before the purchase of Tribune was announced.
In July, in the wake of Pai sending the proposed sale to an administrative law judge, Trump tweeted again about Sinclair: “So sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune. This would have been a great and much needed Conservative voice for and of the People. Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!”
When the deal feel apart in August, I wrote that Sinclair flew too close to the sun in its relationship with Trump and handling of the Sinclair deal. As I had warned when the proposed purchase of Tribune was first announced in 2017, Sinclair was now going to get national scrutiny after decades of flying under the radar. In addition to becoming the most powerful station group in the nation, I wondered if it might also become the most reviled as a result of that scrutiny.
Sinclair has taken a PR pounding this year for some of the things it has done onscreen, no doubt about it. But I wonder if the deeper takeaway at the end of the year doesn’t involve what happened off-screen with the FCC’s repudiation of the Trump-like crony capitalism that the Baltimore broadcaster was proposing in those sidecar arrangements on stations like WGN. Between the Tribune suit and the FCC action, would you be eager to go into business with Sinclair after the way Tribune and the FCC characterized its behavior?
Maybe the metaphor is not flying too close to the sun, but getting too deeply into the mud with Trump and his style of strong-arm, push-the-boundaries, bring-on-the-lawyers way of doing business learned at the knee of the infamous Roy Cohn, the disbarred lawyer who was his mentor.
Trump failed to get Sinclair the FCC approval it needed, and now Nexstar Media is buying Tribune for $4.1 billion in a deal that will make it the largest station group in the nation if it wins FCC approval.
Sinclair, meanwhile, is stuck with Epshteyn, Trump’s propaganda puppet, as its chief political analyst — and all the PR damage that has come from criticism of its business tactics by Tribune, questions of its commitment to the public interest by the FCC and questions from media critics and public interest groups as to whether it has allowed right-wing politics to infect its news product.