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Can Radio Stations Be Held Liable for Scam Running Timer Brokers

Rance Butler

Rance Butler

I recently heard of this happening. An unlicensed financial advisor arrested for running a Ponzi scheme, bilking clients out of millions(ala Bernie Madoff). I heard radio stations running his show were fined huge amounts of $$$$.

If the station is unaware that a time broker or advertisers is doing something illegal, how could they be held liable?
 
Kelly A said:
I've seen no NAL's issued to stations who carried the spots. Can you post links?
Click to expand...

https://www.dmagazine.com/publicati...-doctor-william-gallagher-gets-a-bad-checkup/

"Though Gallagher had a documented history of investor complaints during his career as a financial adviser—beginning with A.G. Edwards in 1987—the big trouble began in the fall of 1999. He was “permitted to resign” as an investment adviser with one firm and fired by a second after less than a week. Then the Texas State Securities Board fined him $25,000 after he gave its investigators “re-created” customer-check receipts."

This was apparently brokered time, not commercials. He ran on several stations. If station had prior knowledge(see above paragraph) that the guy was shady, maybe this could make them liable. I believe The Money Doctor is in jail, probably for life.
 
I doubt the radio stations had any idea what was going on. There is a certain level of trust when it comes to clients. In other words you believe what they say until they give you reason to suspect otherwise. Given the fact investors were taken in by the pitch, the average radio station employee likely has much, much less experience in investing and would not understand what was happening anyway.

As is the case always, a disclaimer always says the client is responsible for the content of their program. Yes the stations could be sued but they sure are not going to be found to be a responsible party. If that does not sound reasonable, let's try some similar situations: Should a landlord be responsible for a tenant that breaks the law while conducting business in the space they rented? Should the car salesman be held responsible for selling a car or truck to a person who goes out and gets drunk and kills somebody while driving drunk? Should the car salesman require a driving record before selling? Should a landlord check the criminal and job background of a tenant (some might). Should a radio station require a state license and background check for a potential advertiser? I signed up an insurance agent on a schedule. He says he his an insurance agency. And I trust his word. That is reasonable.
 
b-turner said:
Should a landlord be responsible for a tenant that breaks the law while conducting business in the space they rented?
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That's an interesting question...seems to me someone was trying to push that view with regards to a pirate radio station operating in a rental apartment.
 
Shemp Howard said:
"Though Gallagher had a documented history of investor complaints during his career as a financial adviser—beginning with A.G. Edwards in 1987—the big trouble began in the fall of 1999. He was “permitted to resign” as an investment adviser with one firm and fired by a second after less than a week. Then the Texas State Securities Board fined him $25,000 after he gave its investigators “re-created” customer-check receipts."

This was apparently brokered time, not commercials. He ran on several stations. If station had prior knowledge(see above paragraph) that the guy was shady, maybe this could make them liable. I believe The Money Doctor is in jail, probably for life.
Click to expand...

This isn't the same as a station receiving a Notice of Apparent Liability (NAL) for some sort of violation from the FCC.

Really, this is no different than back in the 90's when the real estate investment scam artists were buying blocks of time on local TV and radio stations with wild claims about how they can teach you the art of buying foreclosed homes and flipping them for pennies on the dollar. Eventually authorities caught up with the scammers and shut them down. No harm, no foul to the stations they purchased blocks of time with.
 
Kelly A said:
This isn't the same as a station receiving a Notice of Apparent Liability (NAL) for some sort of violation from the FCC.
Click to expand...

Exactly. The FCC is federal. It sounds like all this was local Texas law. The station paid no fine, and had no liability.
 
I worked in one market where a new insurance agency popped up and was offering lower down payments and better rates than almost anyone in town. They built a very large list of customers. They advertised heavily on radio and in print. With so many in the town living paycheck to paycheck, they had the right message. One day we had a severe thunderstorm that produced grapefruit sized hail. One person I worked with had pictures of a hailstone that went through her roof, through the attic into the living room (I would't have believed it if there was no photo). There was massive damage throughout town. Come to find out, the agency was writing policies but not turning them in until they collected enough money from customers that came afterwards. There were literally hundreds of claims where there was no policy. The owner went to prison. The print media and radio stations never got sued or was there any talk of the media having some responsibility. At best the agency became the lead local story and front page news.
 
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