Pilfered Funds & The Fcc's Online Political Public File Rule:

Gregg Skall
Womble Carlyle Sandridge & Rice, LLP

Co-Author: James Kahl

The Law Of Unintended Consequences

In recent months, a number of media buyers have had funds stolen from their bank accounts. Even after repeatedly opening and closing accounts to stop the theft, tens of thousands of dollars have been diverted to accounts across the country and across the world. Unfortunately, it would appear that the thieves are obtaining the media buyers' account information from none other than the U.S. government through the FCC's online political files. While we understand that the FCC may soon address this problem, there are steps that broadcasters and media buyers can take to minimize these risks.

First, here's how the evil-doers are apparently accessing the bank accounts. As nearly every broadcaster knows, last year the FCC concluded its long-running effort to have television stations place their local public file on the Internet. As a part of the new rules, broadcasters affiliated with the top-four national television broadcast networks in the top 50 DMAs are required to upload their political files to an FCC-maintained website. All other TV broadcasters must begin to upload new political files on July 1st, 2014.

FCC rules require the following materials to be placed in the political public inspection file, and therefore on the Commission's website:

• Requests for broadcast time made by or on behalf of a candidate for public office,
• An appropriate notation showing the disposition made by the licensee of the requests, and...
• The charges made, if any, if the request is granted.

To show the disposition of the request, the file must among other things, include a schedule of the time purchased, the rates charged, and the classes of time purchased.

In the past, many broadcasters complied with these requirements by simply putting copies of the ad buy order and the payment check in their local public file. This minimized the time required for compliance and, in a pre-Internet world, presented few risks.

When the new rule was under consideration, many broadcasters feared that they would have to spend precious time and resources inputting information into new electronic forms and performing other new tasks. The Commission assured these broadcasters that they would only have to post online the same materials they had previously maintained in the hard-copy local public file. To facilitate the process, the Commission website allows materials to be uploaded in PDF format without any filter or FCC review.

And with that, 20th century practices ran head-long into 21st century technology. Predictably, many broadcasters have taken the Commission at its word, and are uploading exact copies of the bank checks used for payment without any redaction. Thus, bank account numbers, routing numbers, and signatures are freely available online to the unscrupulous.

To be clear, the FCC has never taken the position that this type of sensitive financial information must or should be placed in the political file to comply with the Commission's rule. We understand that the FCC will soon be posting an FAQ on its website highlighting this point. And we hope that the Commission disseminates this information widely among the broadcast community.

As a result of these recent events, we anticipate that broadcasters may see new provisions in their order placements and their agreements with media time buyers prohibiting them from posting buyers' checks to the public file. Even without a specific request or contractual provision, broadcasters should refrain from including bank information in the political file as a general liability mitigation strategy. While it may require the expenditure of some time, a better practice is for broadcasters to provide a short summary of the information necessary to comply with the Commission's political file rules.

Radio should take note as well. While the online public file requirement does not apply to radio, at least not yet, the lesson learned here is appropriate for their local public file as well. Since visitors to the station are entitled to have copies made of materials in the file, it is good policy for radio to follow the same practice of providing a short summary of the required information and to cleanse the file of checks used to pay for political advertising.

If you have any questions, please contact Gregg Skall and Jim Kahl of Womble Carlyle's Broadcast and Political Law Teams.

For further information on political broadcasting requirements, you can download the Womble Carlyle political broadcasting manual at: http://www.wcsr.com/resources/pdfs/politicalbroadcastmanual.pdf .

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.