NBC Universal hired Ben Silverman in June to reverse the fading fortunes of its broadcast network. But the biggest winner so far seems to be the 37-year-old TV producer and the production company, Reveille, he is poised to sell for more than $100 million.
Since Silverman became co-chairman of NBC Entertainment, in charge of picking the network's shows, Reveille has become a leading source of programming for NBC. Of the 18 prime-time shows NBC has ordered since Silverman's arrival, Reveille has an ownership interest in five of them. In addition, NBC confirmed Friday that it had bought eight other scripts and concepts from Silverman's 5-year-old company.
Reveille had three projects in the works at NBC before Silverman joined the General Electric Co.-owned network. It now has more projects there than any supplier other than NBC Universal's own TV production studio.
The surge in sales has raised questions among the network's other suppliers and business ethics experts about whether, in his position as programming chief, he has favored Reveille shows, possibly enriching himself at the expense of GE shareholders and other studios.
NBC Universal defends Silverman and said that Chief Executive Jeff Zucker had the final say when it came to approving Reveille projects.
Reveille, which is based on NBC Universal's lot in Universal City, is now in exclusive negotiations to be sold for $100 million to $150 million to a London-based firm owned by Elisabeth Murdoch, the daughter of media mogul Rupert Murdoch, according to three people close to the talks.
Reveille's value comes from its shows on the air such as "The Office" and "The Biggest Loser" on NBC and ABC's "Ugly Betty," its numerous projects in development and the foreign distribution rights for those programs.
"It's a bizarre and troubling situation," said Thomas Donaldson, a professor who specializes in business ethics at the Wharton School of the University of Pennsylvania. "The issue is how much of that enrichment should actually be going to General Electric shareholders."
Silverman declined to be interviewed. He is selling his company to end speculation that he might be profiting inappropriately from his decisions at NBC, said a person familiar with his thinking who requested anonymity because he was not authorized to speak on the record.
"This was the only way to put everyone's sniping to rest," he said, adding that it was unfortunate the pending sale was stirring up complaints.
Overall, NBC Universal's television studio has 85 projects in development for the network. The company typically takes partial ownership in shows from outside suppliers, including Reveille. Longtime provider Warner Bros. Television, which has delivered such colossal hits to NBC as "Friends" and "ER," has just two projects in development. Another major studio, 20th Century Fox Television, has five.
NBC Universal's top management said it anticipated that the network would be buying Reveille shows because they reflected the tastes of the new programming chief. NBC Universal said it did not believe there was any conflict of interest, but recognized that Reveille's complicated structure had created the perception of one.
"Ben is making a recommendation," NBC Universal General Counsel Rick Cotton said in an interview. "The ultimate decision maker when Reveille is involved in any way is not Ben Silverman but Jeff Zucker. And Zucker is not conflicted."
In the ranks of the Fortune 500, General Electric is well regarded for its rigorous standards. The company's internal guidelines for avoiding conflicts state: "On the job or in your free time, nothing you do should conflict with your responsibilities to GE. Even when nothing wrong is intended, the appearance of a conflict can have negative effects. It is crucial to consider how your actions might appear, and to avoid the perception of a conflict of interest."
NBC Universal said it had a system to guard against potential conflicts posed by Silverman's continuing ownership of Reveille. Before Zucker weighs in, the legal and financial departments scrutinize each proposed Reveille project, including the purchase of scripts and the ordering of series, Cotton said. NBC Universal also required Silverman to step away from Reveille's daily management and put profits from Reveille shows into a blind trust. If the Reveille sale goes forward, Silverman would be allowed to cash out.
Some ethics experts said any conflict would have been eliminated had NBC Universal required Silverman to immediately sell his interest in Reveille.
"This sale should have happened before he joined NBC -- before NBC started purchasing programming from Reveille," Donaldson said.
C. Kerry Fields, a professor at the USC Marshall School of Business, described the situation as "tawdry."
"GE would not have permitted him to earn a compensation package that is as much as what he will be getting in any sale of his firm," Fields said. "It's a convenient wink and a nod at the ethics rules."