TKO for RKO

Purged by a parent's payola

Should the sins of a corporate parent be visited on its subsidiary companies? Yes, said the Federal Communications Commission in a startling 4-to-3 decision last week that stripped RKO General of its valuable television broadcasting licenses in Boston, New York and Los Angeles. It was one of the harshest actions in the often sleepy agency's 45-year history.

The past behavior of RKO's parent, General Tire & Rubber Co., determined the decision. Ten years ago, General Tire signed a consent decree with the Justice Department, which charged it with forcing buyers of its tires to advertise them on RKO stations. Four years ago, General Tire disclosed that it made illegal political campaign contributions and foreign payoffs and agreed to pay fines of $200,000 after signing a consent decree with the Securities and Exchange Commission. The FCC complaint emphasized that "RKO was effectively controlled by General Tire and hence General Tire's wrongdoing had a direct bearing on RKO's qualifications" to hold TV licenses.

RKO's problems began when Businessman David Mugar tried to gain control of the broadcaster's Boston TV station and hired a former Watergate attorney, Terry Lenzner, and Washington Post Reporter Scott Armstrong to investigate General Tire. The team uncovered evidence of a number of unsavory practices, which led to the SEC's consent decree.

RKO plans to appeal in federal court, but other broadcasters are deeply worried. "This-decision rocks every broadcasting license in the country," says an alarmed network executive. There may be more rocks and jolts ahead if this action signals a new get-tough mood at the FCC.

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