Coming to C-SPAN this summer: a new version of reality TV. Last week lawmakers approved a bill — in the face of a veto threat from the Bush Administration — that would block a new Federal Communications Commission rule allowing broadcast companies to own television stations that reach a greater percentage of the national audience.
The controversial provision — which was included in a $37.9 billion bill funding the FCC and the Commerce, Justice and State departments next year — passed the House of Representatives by a vote of 400 to 21.
The House bill would block a June ruling by the FCC that allows a single company to own television stations that reach 45 percent of the nation’s households; the House would return that figure to 35 percent. Opponents of the FCC ruling maintain that it gives too much clout to big broadcasters, reducing local reporting and the diversity of viewpoints. Viacom Inc., which owns the CBS and UPN networks, and News Corp., owner of Fox, already exceed the 35 percent limit, say some reports.
The bill may yet face a tough battle on Capitol Hill. According to the Associated Press, the White House budget office believes that the new FCC rules “more accurately reflect the changing media landscape and the current state of network station ownership, while still guarding against undue concentration in the marketplace.” Should the FCC provision remain in the final House-Senate compromise bill, the White House has threatened a veto, which would be the first for President Bush. Republicans are already seeking House members’ signatures on a pledge to sustain a veto, GOP aides tell the AP; 145 votes, or one-third of the House, would be needed.
Rep. David Obey (D-Wisc.), the chief sponsor of the provision to derail the FCC decision, noted that keeping it intact will be a challenge, but he is encouraged by the 400-21 House vote. “It’s extremely rare to be able to reverse a regulatory decision that gives away the store to the big boys,” said Obey in a statement to the AP.
Some lawmakers in the House also tried but failed to ban a company from owning a newspaper, a television station, and radio outlets in a single market, and to a ban a company from owning two television stations in most markets, according to Reuters. The FCC voted 3-2 last month to lift those limits.
Conflict-of-Interest Rules Should Be Simpler, Says SEC Chairman
The Securities and Exchange Commission is planning conflict-of-interest safeguards for financial services that would be less complicated than those in the so-called global settlement with Wall Street, reports the Financial Times.
SEC Chairman William Donaldson said that he hoped the rules would be simpler than the remedies announced this April. In that settlement, 10 of the world’s largest financial institutions agreed to pay $1.4 billion and to implement internal reforms to settle allegations that they wrote positive equity research reports in exchange for investment banking business. The SEC now has the responsibility to write rules for the whole financial services industry, based on those remedies.
One issue that Donaldson plans to address, reports the FT, concerns smaller brokerages, and he intends to consider size or revenue thresholds below which there would be different structural requirements.
The SEC hopes to propose the rules by the end of the year or in early 2004. As for a house bill that would strengthen SEC enforcement powers — but that would prevent local authorities from imposing structural reforms on investment banks — there is no suggestion that the SEC will lighten the rules on the banks in the settlement, notes the FT.
SEC Can’t Hire Fast Enough
The Securities and Exchange Commission said that it would not spend $103 million of its record $716 million budget this fiscal year because it “could not hire accountants and investigators fast enough,” according to Bloomberg News.
Congress boosted the SEC budget 63 percent for the fiscal year ending on September 30 to help the agency combat fraud and restore investor confidence. “A lot of the [$103 million] was for additional staff,” said Peter Derby, a managing executive at the SEC, told the news service. “We didn’t pay those people because they didn’t exist.”
The House Appropriations Committee has proposed using the $103 million in the SEC’s budget for the upcoming fiscal year. That bill provides $841.5 million for the commission in fiscal 2004, reports Bloomberg, which is the amount the agency was previously projected to receive.
Air Force Grounds Boeing
In our April article “War Dance,” CFO.com wondered whether “defense contractors will get an easier ride from the SEC.” Boeing, it turns out, should have been more concerned with a branch of the government closer to home.
The U.S. Air Force has announced that it will shift about $1 billion in satellite launch contracts from Boeing Co. to its rival Lockheed Martin, and suspend three Boeing units from future government contracts, as penalty for the company’ theft of proprietary documents from Lockheed during a 1998 contract competition.
Boeing would lose to Lockheed seven rocket contracts it won under the Evolved Expendable Launch Vehicle (EELV) program in 1998, as well as a separate set of three satellite launches, according to Air Force Undersecretary Peter Teets, cited in a Reuters report.
“Boeing has committed serious and substantial violations of federal law,” Teets told reporters. “As a matter of policy, we do not tolerate breaches of procurement integrity and we hold industry accountable for the actions of their employees.”
Teets added, however, that Boeing could be reinstated as an approved contractor within 60 to 90 days, in time for the company to bid for 15 to 20 additional launches to be awarded late this year, reported Reuters.
Two former Boeing executives, Kenneth Branch and William Erskine, were charged with conspiracy, theft of trade secrets, and violating federal procurement laws in federal court in Los Angeles, according to the Associated Press. Branch, who is also a former employee of Lockheed Martin, reportedly provided Boeing with thousands of pages of documents that included financial and technical details of Lockheed Martin’s planned bid for the satellite launch contract.
The Associated Press notes that Larry Satchell — a former Boeing official who was responsible for making sure that the company underbid Lockheed Martin — has not been criminally charged.
Lockheed is suing Boeing over the document theft, and the Justice Department has opened a criminal probe into the matter.
“We are extremely disappointed by the circumstances that prompted our customer’s action, but we understand the U.S. Air Force’s position that unethical behavior will not be tolerated,” said Boeing chief executive Phil Condit in a statement. “We apologize for our actions.”
Condit has called for a “stand-down” of the 78,000 employees in the Integrated Defense Systems business unit on July 30, so they can be briefed on the Air Force suspension and the events that caused it, and so they can participate in ethics and procurement integrity training.
SEC Eyes Video-Game Industry Accounting
Regulators are examining how publishers accounted for revenue from video-game sales from the late 1990s until about 2002, reports Reuters, citing an unidentified person familiar with the probe.
Industry analysts say that the investigation probably involves the timing of revenue recognition and whether reserves were being used to smooth out revenues.
Acclaim Entertainment, Activision, THQ, and Midway Games have reportedly acknowledged that they are involved in the inquiry, though no violations of the law have been implied.
Analysts expect that the probe will lead to more-conservative revenue recognition policies. “For example, some video game publishers book software revenue on the day the product is shipped,” said Tony Gikas, an analyst for U.S. Bancorp Piper Jaffray, in a statement. “A more conservative approach could be to book revenue the day a retailer takes possession of the goods, which is likely two-plus days later.”
The wire service also notes that Tim Mulligan of Forensic Advisors, who publishes reports on accounting red flags, also questions the industry’s practice of writing off the costs of game development over time, rather than recognizing them all at once as an income statement expense.
A spokesman for the SEC declined to comment on the probe, adds Reuters.