In Re Application of WKKO, INC.,
COCOA, FLA. For Renewal of License and Transfer of Control
BR-2785 and BTC-6210
FEDERAL
COMMUNICATIONS COMMISSION
24 F.C.C.2d 889
RELEASE-NUMBER: FCC 70-739
JULY
8, 1970
OPINION:
[*889]
WKKO, INC., Radio Station WKKO, P.O. Box 1308, Cocoa, Fla.
GENTLEMEN: The
Commission has had under consideration your application (BR-2785) for renewal
of the license for WKKO; an application (BTC-6210) for transfer of control of
WKKO, Inc., to Cocoa One, Inc.; and information concerning certain commercial
practices of WKKO.
Review of an
auditor's report furnished by you to the Commission discloses that in the
period July 1, 1966, through December 31, 1968, WKKO over-billed advertisers on
the station in the amount of $41,805.69.
Also according to that audit, during the same period advertisers were
under-billed $23,425.35. There was,
therefore, a net over-billing of $18,381.24.
You have stated that the over and under billings were unintentional and
apparently resulted from your failure to bill station advertisers on the basis
of commercial advertising actually broadcast as shown in the station's program
logs; rather, bills were rendered on the basis of the station's advertising
contracts. According to representations
made to the Commission by your principals, the billing procedures which gave
rise to these discrepancies were not recognized as deficient until
approximately [**2] September 1968 when
an auditor for Jim Rathmann Chevrolet-Cadillac, Inc., one of your advertisers,
examined the WKKO station records.
Subsequent to that examination, Rathmann filed a lawsuit against WKKO
for damages resulting from the station's failure to comply with the terms of
its advertising contract.
The Commission
has also reviewed selected program logs for WKKO during the period June through
August 1968. It was noted that spot
commercials were entered on the program log on some dates without regard to
limitations on the quantity of commercial content in your programming as
represented by you to the Commission in the application for renewal of license
for WKKO filed in 1966. Many of those
commercial announcements were subsequently stricken off the log so that the
number of commercial announcements actually broadcast was within those
limitations. It does not appear that
adequate provision was made for re-scheduling the stricken commercial
announcements in [*890] other time periods, nor were the affected
advertisers advised of the deletion of their commercial announcements. It was also noted that the number of
deletions of commercial announcements from the program log was markedly
[**3] fewer on dates and in time
periods when commercial traffic on WKKO was comparatively light. This suggests that the over billing in question
was, to some extent at least, the result of station practice of accepting
advertising for specific time periods without reference to the limitations on
commercial quantity expressed in your 1966 renewal application.
In addition,
examination of pre-trial depositions taken in connection with the
above-mentioned lawsuit indicates that station time on WKKO was
"traded-out" for property devoted to the personal use of station
employees. The value of such property
does not appear to have been shown in the station's financial reports to the
Commission, in violation of Section 1.611 of the Commission's Rules.
The foregoing
matters raise questions as to whether your application for renewal of license
should be designated for hearing. This
is indeed a close case. On the one
hand, many advertisers were overbilled substantial amounts, and a former
salesman has stated that he told the then manager of the station about this
practice, without result. On the other,
the licensee also underbilled many advertisers, lending support to its claim
that both over [**4] and underbilling
were unintentional. Two of the persons
closely involved in the billing practices are no longer living. We believe that, on balance, grant of the
renewal is indicated.
There is an
outstanding contract for transfer of control of WKKO, Inc., to a corporation
whose principals are not affiliated with the current principals of WKKO,
Inc. We would, of course, expect prompt
consummation of the sale.
Accordingly, we
are granting both the application for renewal of the license for WKKO and the
application for transfer of control of WKKO, Inc., to Cocoa One, Inc.
Commissioner
Bartley absent; Commissioner Cox concurring in the result; Commissioner Johnson dissenting and issuing a statement;
Commissioner H. Rex Lee dissenting.
BY DIRECTION OF THE COMMISSION, BEN F. WAPLE,
Secretary.
DISSENT:
DISSENTING
OPINION OF COMMISSIONER NICHOLAS JOHNSON
Not content just
to ignore statutory programming standards which compel operation in "the
public interest," this Commission is even prepared to ignore ethical and
professional standards essential to "the industry interest."
Today, without a
hearing, the majority dismisses charges against a licensee -- which have been
admitted [**5] -- that involved fraud of over $41,000 on
advertisers. No industry can operate
without some standards of ethical conduct; in an industry, such as
broadcasting, where the billing scheme is based upon trust by advertisers, such
standards are even more important.
Because this Commission has earlier only found fraud up to $6,000 to be
consistent with the public interest, it
[*891] seemed to me worthwhile
to say a word about today's groundbreaking advance.
Congress created
the Federal Communications Commission to serve "the public interest."
As a by-product of this regulation, the industry was to be served by the
government's prevention of ruinous, signal interference. Therefore, an important duty of this
Commission -- although secondary to its duty to uphold the public interest --
is to foster industry structure and practices that serve the best interests of
constructive commerce. Presumably, the
public will also benefit from a strong, ethical industry able to operate at a
profit while serving its audiences. I
have often written of my concern with the FCC's failure to serve the
public. This case shows that it cannot
even be counted on to serve the best interests of the regulated
industries. [**6] This is not the first time these Commission
failings have become apparent. See Star
Stations of Indiana, Inc. [WIFE], 19 F.C.C. 2d 991 (1969) ($6,000 fraud).
This station,
WKKO, is licensed to serve the community of Cocoa, Florida. In 1961, the Commission became concerned
over its commercialization practices and refused to renew its license for the
normal renewal period. Instead the
station was given a short-term renewal as a sanction. The present staff investigation reveals that the station's unethical
practices began at about that time. The
station began to schedule enough advertising to fill 20 minutes per hour, but
to meet its promises to the Commission it would delete enough commercials to
leave only 18 minutes per hour. Often,
the deleted commercials were not deleted from the advertiser's bill. In fact, during the period July 1, 1966,
through December 31, 1968, the licensee concedes that it over-billed
advertisers in the amount of $41,806.59!
(As its unusual business practices resulted in its also under-billing
other advertisers $23,425.35, the net gain to the station was only $18,381.24.)
The licensee
maintains that these practices were unintentional and unknown [**7]
to management. The facts are
inconclusive on the degree of licensee involvement in the fraud; normally
hearings are used to determine facts.
Not so in this case. But even if
it is assumed that the licensee was ignorant of the fraud, the licensee was
negligent in failing adequately to supervise its employees and in failing to
abide by established station practices.
The majority of this Commission recently imposed a sanction on a small,
community-service station for violating its own internal procedures. Jack Straw Memorial Foundation [KRAB], 21
F.C.C. 2d 833 (1970). I think their failure to do less here can only be
explained by the type of programming produced by the stations. The word is going out loud and clear: Stick
to the old movies and "top-40" records. (KRAB's principal offense was simply controversy and involvement
with its community.)
Our
investigation in this case showed that substantially more than half of the
over-billing was done to national advertisers (soft drink companies, beer
companies, and others not located in the community). It is more than coincidence that these are the very companies
that are likely to be least a aware of advertisements not run. I can [**8]
think of little as destructive of the present scheme of advertiser-supported
broadcasting as the destruction of advertiser faith in the system that is
bound [*892] to result from cases like this one and WIFE. If the system dies the death predicted by
some, it will not be the result of government intervention or
"anti-establishment radicals," as some industry sources feel. The destruction of the present broadcasting
system will be the result of cancerous rot from within: unrestrained greed
perpetrated by corporations and sanctioned by the U.S. Government.
The misconduct
of the licensee came to light when it was sued by a local advertiser for fraudulent
billing. Judgment was rendered against
the licensee for $1,160. At that trial,
several employees testified of the practices used by the licensee. The evidence they gave is more than enough
to dictate further action by this Commission.
For example, there was evidence that management knowingly ordered fraud
over the protests of employees! The
trial also produced information that the licensee had "traded-out"
advertisements for goods and services from advertisers. The value of these "free" goods
were not reported to the Commission as [**9]
revenue.
How does the
Commission respond to this great mass of information indicating fraud on
advertisers and deception on the Commission?
It concluded that the public interest dictates that the licensee should
be allowed to sell the station and retire from broadcasting. Think of the precedent this case sets:
Anytime a broadcaster finds himself in trouble with the Commission he need only
sell his broadcast property, take his capital gains, and leave the industry. All past transgressions are forgiven, if
only the property is sold. That is not
the way I think the FCC should operate; it is certainly not the type of system
contemplated by Congress in creating this Commission. Broadcast stations are licensed to be operated in the public
interest. If that sacred trust is
violated, the license should be withdrawn.
To allow a profitable "bail out" on the part of a fraudulent
broadcaster is to make a mockery of these statutory standards.
A hearing
looking toward denial of license renewal is required. The public is entitled to have the facts of this case come to
light, broadcast advertisers are entitled to have this agency enforce their
rights, and the broadcasting industry is
[**10] entitled to have
unethical operators purged from their ranks.
Anything less violates the statutes governing this Commission’s actions
and destroys the principles which it was established to serve.
I regret the
necessity to write an opinion of this length to explain, once again, why I
believe fraud to be inconsistent with the public interest. But if one does not occasionally take the
time to restate the truth of the self evident, it is possible to lose one's
sensibilities in this weird Orwellian wonderland known as the United States Federal
Communications Commission.
I dissent.