Judge Rejects RKO Deal to Sell KHJ-TV : Must Determine Larger Licensing Issue First

A federal administrative law judge has rejected an agreement that would allow RKO General to sell station KHJ-TV in Los Angeles to Westinghouse Broadcasting & Cable, saying that the proposal would be “detrimental to the public interest.”

The $313-million deal, proposed last November, would have settled a lengthy dispute between RKO and Fidelity Television, a group of prominent Southern California investors, over the ownership of KHJ-TV, Channel 9.

Under the settlement reached by RKO and Norwalk-based Fidelity, RKO would have withdrawn its license renewal application for KHJ-TV at the Federal Communications Commission, leaving Fidelity as the only applicant for the license.

Once the FCC approved Fidelity’s application, Fidelity would immediately transfer the license to Westinghouse Broadcasting. RKO would get $212 million from Westinghouse, which also would pay $95 million to Fidelity’s 52 shareholders, plus a payment for certain liabilities that Fidelity has incurred.

Fidelity shareholders include William G. Simon, who once headed the Los Angeles division of the FBI; Maude Chasen, owner of Chasen’s restaurant; former Rep. George Danielson of Monterey Park, and producer Mervyn LeRoy.

Would Create Delay

In his strongly worded 14-page ruling, Judge Edward J. Kuhlmann said that approval of the agreement “would only create an unwarranted delay at a very crucial moment” in the ongoing proceedings to determine RKO’s qualifications to hold licenses for 13 other broadcast properties. The judge predicted that a decision would be made this fall in the overall case.

“Their proposal is without any support and is inconsistent with repeated commission rulings in this and other cases,” Kuhlmann said of the RKO-Fidelity plan.

In the mid-1960s, the FCC objected to RKO network programming. A decade later, the FCC sued Akron-based Gencorp, RKO’s corporate parent, over alleged bribes and illegal payments to political officials.

RKO General has sold its Boston station and has said it will seek buyers for station WOR-TV in Secaucus, N.J.

Kuhlmann said the FCC has ruled that RKO may not transfer or otherwise dispose of its interest in KHJ-TV until the issue of its qualifications has been resolved.

“To avoid that prohibition, RKO and Fidelity propose a grant to Fidelity and then Fidelity would do what RKO is prevented from doing--it would sell the license to Westinghouse,” he said.

“In fact,” the judge said, the two companies “appear to analogize Fidelity’s role to that of a trustee who has been appointed to oversee the assets and operations of a bankrupt station.”

Opponents of the agreement have argued that allowing the sale to take place would diminish the impact of FCC renewal proceedings on broadcast licenses because RKO would receive $212 million before its qualifications were determined.

RKO and Fidelity disagreed, noting that RKO already has lost the license for its Boston TV station and will receive only two-thirds of the price Westinghouse is paying.