FCC report found no 'favoritism' on proposed Sinclair deal

WASHINGTON (Reuters) - The U.S. Federal Communications Commission's inspector general said there was no evidence of impropriety relating to the proposed, and now defunct, merger of Sinclair Broadcast Group and Tribune Media Co, concluding FCC Chairman Ajit Pai had not shown bias in favor of the deal.

According to its report released on Monday, the Office of Inspector General said there was "no evidence, nor even the suggestion, of impropriety, unscrupulous behavior, favoritism toward Sinclair, or lack of impartiality related to the proposed Sinclair-Tribune merger."

U.S. Representatives Elijah Cummings and Frank Pallone, Democrats, asked the FCC inspector general last November to probe whether Pai was biased in favor of Sinclair, which had sought approval of a $3.9 billion acquisition of Tribune. Sinclair announced on May 8, 2017, that it wanted to buy Tribune's 42 television stations in 33 U.S. markets and cable network WGN America.

Cummings and Pallone cited FCC decisions that benefited Sinclair, the largest U.S. television broadcast group, and a 2016 Politico news report that Donald Trump's presidential campaign had struck a deal with Sinclair for favorable media coverage.

Pai said in a statement on Monday that he was pleased with the finding, adding that the suggestion that he favored any one company was "absurd." He could not immediately be reached for comment beyond the statement.

Pallone said in a statement that the report provided the "first detailed responses to Congress' questions. Beyond that, questions remain regarding the Chairman's personal communications, which the IG noted were beyond his reach, and his conversations with Jared Kushner and (White House Counsel) Don McGahn."

The Sinclair deal was scuttled this month after the Republican-led FCC expressed opposition to the deal, questioning Sinclair's candor over the planned sale of some stations.

In December 2016 Politico reported, citing remarks by Jared Kushner, Trump's son-in-law and now a White House senior adviser, that Trump's campaign had struck a deal with Sinclair to try to secure better media coverage.

The Inspector General's report cited an email from Kushner to Pai on May 5, 2017, with the message, "Just tried you - had a quick thing to run by you" and indicated that phone records for that date showed a call from a blocked number at 10:03 a.m. The message was sent three days before the Sinclair deal was announced.

The Inspector General's report said that Pai had said he could not recall that conversation.

The White House did not have an immediate comment on the report.

The report also said that White House Counsel Don McGahn called Pai in July 2018 to make a "status inquiry" regarding the Sinclair deal.

Pai disclosed the call from McGahn in testimony earlier this month before a U.S. Senate panel. He said it came around the same time he issued a July 16 statement that said he had "serious concerns" about the proposed takeover and proposed referring the matter to an administrative law judge.

Pai said McGahn did not express a view on the merger, but had seen a news report "and wanted to know what ... the action was."

The Inspector General's report also said that days before taking office, President-Elect Trump discussed with Pai the "legal framework" of AT&T Inc's proposal to buy media company Time-Warner.

The report said Pai told the Inspector General that the purpose of the meeting was to discuss Pai's possible appointment to the SEC chairmanship.

AT&T, which successfully fought off an effort by the Justice Department to kill the deal, declined to comment.

(Reporting by Chris Sanders, Ginger Gibson and David Shepardson; Editing by Dan Grebler, G Crosse, Toni Reinhold)