Sinclair Broadcast Group Inc. faces a shareholder derivative suit alleging its directors and officers misled the federal government in pursuit of the company’s failed merger with Tribune Media.
Sinclair officers and directors engaged in self-dealing and then misrepresented facts to the Federal Communications Commission to cover it up, according to a Nov. 29 complaint. This cost the company its proposed merger with Tribune Media Co., the complaint said.
The merger, initiated in 2017, would have required Sinclair to sell off some of its local stations. The company filed a divestment plan with the FCC without disclosing the full extent of its executives’ ties to the proposed buyer, the complaint said. These divestitures “would allow Sinclair to control those stations in practice, even if not in name, in violation of the law,” the complaint said, quoting FCC Commissioner Ajit Pai.
The FCC rejected the merger because the agency “took issue with the proposed divestiture plans offered by Sinclair,” according to the complaint. The failed merger also led to numerous other lawsuits against the company, the complaint said. And Sinclair’s damage to its relationship with the FCC could pose licensing problems in the future, according to the complaint.
The officers and directors should have to repay Sinclair for the damage their actions caused, the complaint said. The suit also seeks to have Sinclair “reform and improve its compliance procedures and governance policies.”
Sinclair didn’t immediately respond to a comment request sent through its website. In an Aug. 29 press release, the company said it had “fully complied with [its] obligations under the merger agreement and worked tirelessly to close the transaction.”
The case is Fire and Police Retiree Health Care Fund, San Antonio v. Smith, D. Md., No. 1:18-cv-03670, complaint filed 11/29/18.
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