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Free Press Fires Back at Sinclair in Station Group’s Own Backyard

sinclair_304Free Press, the non-profit media watchdog and authors of a recent article targeting Sinclair Broadcasting is taking another shot at the media giant. This time, the organization has published an op-ed piece in The Baltimore Sun.

In the latest piece about Sinclair, which is based in nearby Hunt Valley, MD, two Free Press authors again take aim at the station group’s use of shell companies and its focus on the bottom line.

“These companies are doing everything they can to maximize profits,” said the authors. “Just last month, Sinclair fired nearly 30 employees from Seattle’s KOMO and Portland, Ore.’s KATU. This is par for the course for Sinclair, where the average number of employees per station has declined by nearly 20 percent since 2001.”

Sinclair president and CEO David Smith responded to the last Free Press article with a missive of his own titled, “Sinclair Comments on Inaccurate and Irresponsible Report Released by Free Press.In his piece Smith said, “While we respect the right of Free Press to express its opinion on the advisability of the FCC’s rules, we vehemently object to their misguided and offensive claims that broadcasters who simply follow the FCC’s rules are using “shell companies” and “shady tactics” to “dodge” FCC rules.”

The op-ed in The Sun, written by Jenn Topper and the man who wrote the original report S. Derek Turner, again calls out Sinclair’s use of sidecar companies and challenges Smith’s assertion in more detail.

The Federal Communications Commission has limits on how many stations one person or company can own in a given market. But, as a new report from public interest group Free Press shows, companies like Sinclair are using outsourcing agreements and shell companies to skirt the rules and create media fiefdoms in markets all over the country.

In a response to the report, Sinclair said it “completely complies” with the law and objects to claims that it uses shell companies and shady tactics to dodge FCC rules.

But in nearly all instances, the only asset a Sinclair shell company owns is a station license. Under FCC rules, Sinclair is able to claim that the shells are separate entities despite clear evidence to the contrary.

Consider Sinclair’s longtime shell, Cunningham Broadcasting. Like many of the companies created to sidestep the FCC’s rules, Cunningham has no physical presence, and is even headquartered at Sinclair’s flagship station WBFF in Baltimore. Sinclair, through Cunningham, controls Baltimore’s WNUV.

Furthermore, under Securities and Exchange Commission rules, Cunningham is considered the same company as Sinclair. And when it communicates with investors, Sinclair refers to its shells, which include Deerfield Media and Howard Stirk Holdings, as “our sidecar companies.” Similarly, it refers to stations nominally operated by these shells as “our stations.” (Sinclair, through Deerfield, controls Baltimore’s WUTB.)

As is typical of parent companies in this situation, Sinclair is usually the sole financier of its shells — and it generally reaps all of the shells’ profits.

What do you think? Is Free Press fighting a worthy fight or is it simply becoming a battle of words?

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