NAB reports (Jan-Dec 1946)

COURT REVERSES FCC WOKO DECISION Reversing the Commission in its revocation of the license of WOKO, Albany, the United States Court of Appeals, District of Columbia, has rendered the following decision: WOKO, Incorporated, appellant v. Federal Communications Commission, appellee Appeal from the Federal Communications Commission. Argued October 18, 1945 Decided January 21, 1946 Mr. William J. Dempsey, with whom Mr. William C. Koplovitz was on the brief, for appellant. Mr. Harry M. Plotkin, Assistant General Counsel, with whom Messrs. Rosel H. Hyde, General Counsel, Benedict P. Cottone, Assistant General Counsel, and Philip Bergson, Counsel, all of the Federal Communications Commission, were on the brief, for appellee. Before Groner, C. J., and Wilbur K. Miller and Prettyman, JJ. WILBUR K. MILLER, J.: On September 28, 1942, the appellant, WOKO, Inc., applied to the Federal Communi¬ cations Commission for a renewal of the radio station license held by it for the operation of its broadcasting facilities at Albany, New York. Under permits periodi¬ cally procured this radio station has been operated in Albany for some fifteen years last past. After extended hearings concerning the application of September 28, 1942, the Commission declined to renew the license. This appeal followed under that section of the Communications Act (U. S. C., Title 47, § 402(b) ) which grants to an applicant for renewal of a broadcasting station license the right to appeal to this court from an adverse decision. Prior to November 1930, Station WOKO was located, first at Peekskill, and later at Poughkeepsie, New York. The license was held by the Hudson Valley Broadcasting Company, a partnership composed of Harold E. Smith and Raymond M. Curtis. Under authority granted by the Commission, the station was moved to Albany on November 25, 1930, and, shortly thereafter, the license was assigned by Smith and Curtis to the appellant. Early in 1931 broadcasting was begun at Albany. While the station was at Poughkeepsie its operation was not profitable, and Cui’tis suggested that the license be surrendered. Smith thought it possible that a network affiliation might solve the financial difficulty. Accordingly, he visited the Columbia Broadcasting System at New York, where he met Sam Pickard, a vice president in charge of station relations. Pickard advised that CBS would not be interested in the station at Poughkeepsie, but suggested that if it were removed to Albany CBS would be interested in having WOKO as an affiliate. Smith went to Albany and conferred with The Press Company, the publisher of the Albany Evening News and the Knickerbocker Press, with the purpose of interesting that company in the entei’prise and obtaining financial assistance from it, as Curtis had tired of his losses at Poughkeepsie and was unwilling to finance the station further. The newspaper people agreed to aid, and it was determined that a corporation should be organized with one thousand shares of capital stock, seven hundred fifty shares to be divided equally between Smith and Curtis and the remaining two hundred fifty shares to be held in the treasury under the option of The Press Company to pur¬ chase it. The corporation was organized on December 9, 1930, The Press Company endorsed for it a note to the extent of $35,000, the shares of the capital stock were issued as planned, and the station began to operate at Albany early in 1931. Pickard performed his promise to aid in obtaining a CBS affiliation agreement, and assisted also in other ways. At one of his conferences with Smith, Pickard suggested that he be given an interest in the ap¬ pellant corporation. It was finally agreed that he have twenty-four per cent of the capital stock and, pursuant to this agreement, on October 23, 1931, Smith and Curtis transferred of record to Pickard a total of one hundred forty shares, and, at his suggestion, to Lawrence Lowman, another vice president of CBS, a total of one hundred shares. These certificates were endorsed by Pickard and Lowman and then delivered to The Press Company to serve as a part of the collateral securing its endorsement. In August 1932, the appellant’s loan had been paid and the two hundred forty shares of stock in the names of Pickard and Lowman were released from the pledge and transferred of record to Pickard’s wife. On February 2, 1933, the certificates evidencing the same two hundred forty shares, having been endorsed by Mrs. Pickard, were reissued to Smith, endorsed by him in blank and forwarded to Pickard. Smith continued as the owner of record of that block of two hundred forty shares until June, 1934, when, at the request of Pickard, he assigned eighty shares each to Mrs. Pickard and two holding companies controlled by the Pickards. Sam Pickard had been a member of the Federal Radio Commission before he became a vice president of Columbia Broadcasting System. When he first asked for and ob¬ tained an interest in WOKO, Inc., he requested of Smith that his ownership in the station be kept secret, on the ground that he would be personally embarrassed if his associates at CBS should learn of it. He also informed Smith that there would be no need to disclose his ownership to the Federal Radio Commission, as that Commission was interested only in knowing whether or not any of the stockholders were aliens. Smith agreed to protect Pickard in that respect and did not disclose to the Radio Commis¬ sion the fact that Pickard was a stockholder. In 1934, however, when more searching inquiries were made con¬ cerning stock ownership by the forms required to be filed with the Communications Commission, Smith notified Pickard that he must divest himself of the stock and that, failing that, he (Smith) would divulge the facts to the Commission. As a result of this ultimatum, Pickard in¬ formed Smith that he had decided to give the two hundred forty shares to his wife’s brother-in-law, R. K. Phelps, an assistant United States attorney at Kansas City. Mrs. Pickard and the two holding companies, the record owners of eighty shares each of the block of two hundred forty shares in question, endorsed and surrendered the cer¬ tificates and a new certificate for two hundred forty shares was issued on July 2, 1934, in the name of R. K. Phelps. The stock has remained in his name on the corporate records since that time -and has been so represented to the Commission. When the Commission received on October 1, 1942, the appellant’s application for a renewal of its license, dated September 28, 1942, it designated the matter for hearing and specified the following issues: “(1) To determine whether the representations and statements made to the Commission or its predecessor, the Federal Radio Commission, by the licensee, its officers, directors, stockholders, or agents, with respect to the ownership or transfer of, subscription to, or con¬ sideration paid for the stock of WOKO, Inc., truly and accurately reflect the facts. “(2) To determine all the circumstances and condi¬ tions under which the stock of WOKO, Inc., has been issued, transferred, or assigned. “(3) To determine whether or not the applicant is qualified to continue the operation of Station WOKO. “(4) To determine whether, in view of the facts ad¬ duced under the foregoing issues, public interest, con¬ venience, and necessity would be served by a grant of this application.” There followed then a period of rather intensive investi¬ gation by the Commission, which included visits to Albany and Kansas City by a member of the Commission’s legal staff. On June 26, 1943, the appellant petitioned the Com¬ mission to amend and enlarge the issues by including the following: “1. To determine the nature, character and extent of the program service rendered by Station WOKO in the past, as well as that which is proposed to be rendered in the future. “2. To determine the nature, character, and extent of ( Continued on next page) JANUARY 28, 1946-58