Transaction parties fined for incomplete disclosure


Ultimately, the FCC gets to decide what is and is not germane information when it comes to a station transfer, and one of the things it wants to know about are the details on any SSAs that may be tied to the deal. The buyer and seller of a Puerto Rico FM will each be $3K poorer for providing inadequate info.

The station is now using call letters WTOK-FM. At the time of the deal in which it was sold by Luis Mejia to MSG Radio Inc., the calls were WIAC-FM.

The $4M deal was handled entirely via seller paper. MSG principal George Reed (of brokerage Media Services Group) used Media Services Group to hold a small $1K deposit and drafted a promissory note for the full $4M payable to Mejia.

However, the FCC noted the presence of an earlier SSA/purchase deal with Malifide Inc., the details of which were lacking on the Mejia/MSG transfer application. FCC noted the parties’ application statement to the effect that certain documents not deemed germane to the transaction were withheld, and said that the Malifides situation was certainly germane.

Both parties were hit with a $3K fine. They timely appealed, and noted that the Malifides situation was mentioned in the contract. But the FCC wanted more.

RBR-TVBR checked the contract and found the following phrase: “Buyer will have entered into a Shared Services Agreement with Malifide, Inc. for use of the certain equipment and services in conjunction with Buyer’s operation of the Station after Closing.”

The FCC felt it needed more info to properly review the proposed Mejia/MSG sale.

The sale did get approval, and on 1/27/09, Reed found a buyer for the station – it went to WIAC-FM Inc., headed by Jesus M. Soto and Luis A. Soto, who asked for a waiver to add it to an over-sized radio station cluster. The unique geographical situation presented by the Puerto Rico Arbitron market makes such waivers fairly routine. The Soto deal was for money owed to Mejia plus all expenses incurred by MSG related to its role in finding a new licensee for the station.