Report No. MM-831 MASS MEDIA ACTION June 3, 1994 FCC CONSENTS TO ASSIGN THE LICENSE OF KILU(FM), PAAUILO, HI, SUBJECT TO CONDITIONS The Commission has granted, subject to conditions, the application to assign the license of KILU(FM), Paauilo, HI, from Wyman W.C. Lai to Charles R. Crawford, over the objections of O.D.T. International. Station KILU(FM) was formerly licensed to Hamakua Broadcasting Corporation, a company controlled by Paul Yang. On December 16, 1991, Hamakua filed a pro forma application to assign the KILU license to O.D.T. International, a corporation wholly owned by Paul Yang. Crawford, a creditor of Hamakua's, contested the application and claimed that approval of the sale would enable Hamakua to defraud its creditors. While that application was pending, Crawford instituted bankruptcy proceedings against Hamakua in federal bankruptcy court in Hawaii. The court appointed Lai trustee and on August 14, 1992, an involuntary pro forma application was filed to obtain Commission approval for this appointment. The FCC's Mass Media Bureau granted Lai's application and dismissed the application of ODT, holding that such action reached a fair accommodation between the Court, who presided over contractual matters, and the FCC, which has exclusive authority over broadcast licensing. In its application for review, ODT argued that: 1) the Bankruptcy Court merely appointed a trustee, but did not dictate that the Commission grant the trustee authority to control station KILU; 2) there was at all times a relevant counterclaim against Crawford stemming from his obligations to Hamakua; 3) the only purpose of approving the assignment to a trustee in bankruptcy is based on the theory that the bankrupt party is no longer financially qualified to operate the station, but there is a proper application to assign KILU's license to an "indisputably" financially qualified entity, ODT, and only if that application was denied was the trustee entitled to adjudication of its application. (over) -2- Denying review, the Commission said the Bureau properly took into account the existence of the Bankruptcy Court order and federal policies favoring protection of creditors in granting the Lia application. Additionally, the Commission held that the Bureau properly dismissed the application to assign KILU to ODT. In light of the ongoing bankruptcy proceeding involving the assets of KILU, the Commission does not believe the public interest would be served by permitting a licensee in bankruptcy to assign its license for nominal consideration to a new legal entity, nor does it believe that such a position is contrary or inconsistent with the regulatory interests of the Commission. The Commission also rejected ODT's contention that the pendency of a counterclaim by Hamakua against Crawford should alter this decision. The Commission said the validity of that claim and its effect, if any, on the bankruptcy proceeding are matters best resolved in other fora. The Commission stated that it had examined the uncontested voluntary application for assignment of KILU to Crawford, and found Crawford to be fully qualified to be the licensee of KILU(FM). The Commission granted the assignment application subject to the condition that the assignment will be consummated within 60 days of the date of the grant, and that the Commission will be notified of such consummation within one day thereafter; that the station will resume broadcasting within 60 days after consummation of the grant of the assignment; and that the FCC will be notified of the resumption of broadcasting within one day. Action by the Commission May 27, 1994, by Memorandum Opinion and Order (FCC 94-130). Chairman Hundt, Commissioners Quello and Barrett with Commissioners Ness and Chong not participating. -FCC- News Media contact: Patricia A. Chew at (202) 632-5050. Mass Media Bureau contact: Michael F. Wagner at (202) 632- 3954.