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01/14/80 Sea Island Broadcasting v. Federal Communications

January 14, 1980




Before, LEVENTHAL. and ROBINSON, Circuit Judges, and RICHEY,.. United States District Judge for the District of Columbia.


Rehearing Denied March 5, 1980. Certiorari Denied October 6, 1980.

Appeal from an Order of the Federal Communications Commission.



See 101 S. Ct. 105. This case is before the court on appeal by Sea Island Broadcasting Corporation (Sea Island) from a decision of the Federal Communications Commission which revoked its license to operate WSIB, an AM radio station in Beaufort, South Carolina. *fn1 The Commission's revocation was based primarily on grounds that the owner and officers of Sea Island made deliberate misrepresentations and other misleading and deceptive statements to the Commission in order to conceal improper billing practices. The Commission concluded that Sea Island has shown "a classic pattern" of such misrepresentations and misleading statements "when it believed it could effectively conceal suspected wrongdoing." *fn2 It further ruled that the kinds of fraudulent billing used by Sea Island "were serious and reinforced our conclusion to revoke Sea Island's license." The Commission concluded:

In short, the effective regulation of the communications industries under our jurisdiction is premised on our ability to depend on the accuracy and truthfulness of our licensee's representation to us. Once we find that we cannot rely on a licensee's representations to us, the only suitable penalty is revocation of the license.

In denying reconsideration, the Commission pointed out that it had given Sea Island a fair opportunity to present its arguments and that it had had oral argument before the Commission upon the exceptions to the initial decision of the presiding administrative law judge. The Commission stated:

Hearing oral argument in a proceeding such as this provides the Commissioners with the opportunity to ask the parties probing questions on any matters of record, including the evidence and the findings and conclusions of the presiding judge as well as the significant arguments raised in the written pleadings of the various parties.

The case arises out of an investigation by the FCC's Broadcasting Bureau in 1973 into the station's advertising sales and billing practices. The Commission's rules provide that no licensee shall knowingly issue any documents which misrepresent the amounts charged for advertising, the nature, content or quality of the advertising, or the date or time of broadcast. *fn3

The record discloses that Sea Island admitted the facts forming the basis for the Commission's finding that it violated the rule. It suffices here to mention the violation that occurred when Charles Bell, Jr., sales and station manager, and a vice president, treasurer and director, entered into an agreement with one Smith, manager of a TV store (Palmetto). Smith agreed to purchase cooperative advertising on WSIB, and in return Bell agreed to rebate to Palmetto its share of the cost of the cooperative advertising. The mother of Charles Bell, who was secretary of the corporation, and business manager, issued rebate checks of approximately $2500, which caused a national cooperative advertiser, Philco-Ford, to pay twice what it should have paid for the advertising run on WSIB. Eventually Charles Bell, Sr. wrote to the Bureau on November 16, 1973, admitting to the rebates by WSIB of one-half of the amount of monthly billings to Palmetto. However, when the field investigators interviewed both Charles Bell, Sr. and Charles Bell, Jr. in April 1973, they denied knowledge of fraudulent billing. At the hearing Charles Bell, Jr. admitted that his statement was false. His position was that he did not believe the rebates violated the rule though he thought the arrangement was shady. As to Charles Bell, Sr. he had previously written a letter to the Commission on October 3, 1977, in response to letters from the Complaints Division of the Broadcast Bureau on August 29, requesting information, and on September 18, indicating that comparison of ledger sheets gave indication that WSIB may have been involved in fraudulent billing.

In the October 3 letter Charles Bell, Sr. stated that the billing procedures had been "carefully reviewed," stated that he had been unable to find an explanation from the employee who made the bookkeeping entries ("not a trained bookkeeper") of the matter and advised that it was not the handwritten ledger sheets but the typewritten ledger sheets that were used for billing. Bell's subsequent testimony revealed that before sending the October 3 letter he had not questioned his wife (the bookkeeper), his son, or Palmetto's proprietor about the matter and had not inspected the typewritten ledger sheets which had been used. He later wrote the Bureau that it was not until after his October 3 letter and his examining the typewritten ledger sheets as instructed, that he discussed the matter with his wife and son and learned that his son had agreed to the rebate.

The Administrative Law Judge reached the following conclusion as to the credibility of Bell, Sr.:

It has been found that time after time Bell, Sr. denied knowledge of the fraudulent billing under circumstances which render those denials impossible of belief. He apparently believed that if he could paint himself as the credulous victim of a wife and son who permitted him to destroy himself through their ...

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