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Powell Interest in TV Station Is Targeted

November 02, 1995|SARA FRITZ | TIMES STAFF WRITER

WASHINGTON — As potential rivals begin to size up Colin L. Powell's possible vulnerabilities as a presidential candidate, an item topping their lists is the general's investment a decade ago in a Buffalo, N.Y., television station.

Powell's possible adversaries do not suggest any impropriety on his part. And an examination of the deal does not indicate that Powell's profits--roughly 7% per year over a decade--were out of the ordinary, although he has declined to release the sort of detailed information that would allow a full picture of his finances.

Nonetheless, the investment, and the help Powell received from a wealthy benefactor, does have aspects that contrast with the up-from-the-bootstraps themes of Powell's autobiography.

And because the transaction involved an affirmative action program--one that was somewhat controversial even when Powell began his investment and which has become more controversial in recent years--the deal could allow rivals to draw him into a politically difficult debate over set-asides.

Powell says he supports affirmative action programs, such as the one that benefited him, because they help disadvantaged blacks achieve the American dream and increase minority access to fields such as broadcasting.

Even at the time, however, the minority preference program in broadcasting had many critics who questioned whether the generally wealthy and well-known people able to take advantage of it were the type of persons for whom affirmative action was appropriate. And earlier this year, Congress voted to repeal the program. By that time, the tax subsidies were costing the Treasury an estimated $500 million per year.

The deal to buy station WBKW in Buffalo began in 1986 with Powell's cousin, J. Bruce Llewellyn, owner of the Philadelphia Coca-Cola Bottling Co. who is believed to be one of the richest black men in America.

The deal was structured to take advantage of a government program that provided large tax subsidies to companies that sold broadcast stations to minorities, and the group of investors assembled by Llewellyn included many of the nation's most prominent black celebrities. Among them were basketball stars Julius Erving and Michael Jordan, relatives of pop superstar Michael Jackson, comedian Bill Cosby's wife, former U.N. Ambassador Donald McHenry, O.J. Simpson, Edward Lewis, publisher of Essence magazine and Powell, who, at the time, was little known to the general public.

One unanswered question is precisely how much money Powell put into the purchase. In response to questions submitted by The Times, Powell declined to say how much he invested in WBKW. Llewellyn also declined to discuss the deal's specifics.

Burton R. Rubin, another WKBW investor and Llewellyn's lawyer, said he recalls Powell put in $100,000, which gave him a 1% share of the company that bought the station in January, 1986. By the time Llewellyn and his partners sold their last interest in the station in 1995, Powell would have received about $250,000 in return for his initial investment, according to W. Don Cornwell, who helped arrange the original financing and who now owns the station. Rubin insists Powell's return was somewhat less--closer to $200,000.

Llewellyn's group, known as Queen City Broadcasting, invested $10 million of its own money in the $65-million deal. The purchase was financed primarily by a $45-million sale of junk bonds, and a note of $10 million held by Cap Cities. Meanwhile, Cap Cities got a $30-million tax break for selling to a minority-owned group.

Powell and his fellow investors did not profit as much as they might have hoped from the investment. By the late 1980s, as the economy was moving into a recession, television advertising began a sharp decline. Before long, it was clear that profits would not cover interest on the loans with which the station was purchased.

In 1990, Llewellyn arranged for Prudential Insurance Co., which had bankrolled him in his early career, to buy a 45% ownership share of the station. Cornwell purchased the remaining shares of the company in 1993 and 1995, and Powell no longer has an ownership interest in it.

Times staff writer John M. Broder contributed to this story.

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