Sept. 22 (Bloomberg) -- Viacom Inc.'s CBS television unit was fined a record $550,000 by the U.S. Federal Communications Commission for airing indecent material during the Super Bowl halftime show, when singer Janet Jackson's breast was exposed.

The fine is the biggest ever imposed on television stations for indecency, though it falls short of the $1.75 million levied by the FCC in June against Clear Channel Communications Inc., the largest U.S. radio network. CBS Chairman Leslie Moonves has said he will fight the decision in court.

``The Viacom organization knew, or surely should have known, what was to come,'' FCC Chairman Michael Powell said in a prepared statement. ``Unquestionably, Viacom consciously took the risk and, thus, now bears the responsibility.''

The Jackson incident spurred both the U.S. Senate and House of Representatives to pass bills that raise maximum fines for broadcast indecency to as much as $500,000 per violation from the current $27,500. The differences in the bills are due to be addressed by congressional leaders later this year.

The incident came in a duet at the Feb. 1 Super Bowl halftime show, produced by Viacom's cable network MTV and watched by 90 million viewers. Singer Justin Timberlake reached across Jackson's leather outfit and pulled away a chest covering, exposing her breast. It prompted a record half-million complaints to the FCC.

No Advance Notice

CBS told the FCC it had no advance notice of the singers' stunt, and that they did not perform it in rehearsals monitored by the network. The company apologized for the incident and instituted a five-minute audio and video delay at the Grammy Awards a week after the Super Bowl.

Both Jackson and Timberlake said in statements submitted by CBS that they did not tell the network in advance of any possible ``costume reveal,'' the FCC's case said. Jackson has said publicly that the incident was planned at the last minute. Timberlake called the stunt a ``wardrobe malfunction.''

Four commissioners, led by Powell, voted for maximum $27,500 fines against each of the 20 CBS-owned stations that aired the show. The network's 199 affiliated stations owned by other companies were not fined. Jackson and Timberlake also weren't fined.

CBS said in a statement it's ``extremely disappointed'' in the fine and is ``reviewing all of our options.''

``While we regret that the incident occurred and have apologized to our viewers, we continue to believe that nothing in the Super Bowl broadcast violated indecency laws,'' the network's statement said. ``Furthermore, our investigation proved that no one in our company had any advance knowledge about the incident.''

`Slap on Wrist'

CBS has 30 days to contest the penalty with the FCC. Following that, the agency will make its final determination on the penalty. The network can appeal that decision in court.

The fifth FCC commissioner, Democrat Jonathan Adelstein, supported the finding of indecency against the stations while saying the penalty wasn't large enough.

``After all the bold talk, it's a slap on the wrist that can be paid with just 7 1/2 seconds of Super Bowl ad time,'' Adelstein said. ``I fear that today we're responding to a `wardrobe malfunction' with a regulatory malfunction.''

Adelstein said the FCC shouldn't have let the CBS affiliates that aired the show ``off the hook.''

CBS charged $2.25 million for a 30-second advertising spot on the Super Bowl broadcast, four times the assessed fine. Viacom reported $1.42 billion in profit last year on $26.6 billion in revenue.

Segment Sanctioned?

Spokesmen for Jackson, 38, and Timberlake, 23, could not be reached for comment. The FCC has never fined a performer. Agency rules say a performer can't be fined unless he or she has defied a specific warning from the FCC.

The FCC's 14-page case said that, whether CBS and MTV officials knew in advance of the breast-baring finale, they ``were well aware of the overall sexual nature of the Jackson/Timberlake segment and fully sanctioned it.''

The FCC cited an MTV posting on its Web site the week before the Super Bowl. The news item had a quote from Jackson's choreographer in which he said of the upcoming show: ``There are some shocking moments in there too.''

The case also pointed to some of Timberlake's lyrics to support the FCC allegations. Timberlake rubbed up against Jackson and sang, ``Just let me rock you 'til the break of day.'' In addition, at the end of the number he sang, ``Gonna have you naked by the end of the song'' and pulled off her bustier, the case said.

Clear Channel Fine

In June, Clear Channel agreed to pay a $1.75 million fine, the largest ever for indecency, to settle a series of federal complaints that it aired indecent comments by Howard Stern and other disc jockeys.

The FCC is also investigating whether to fine Infinity Broadcasting Corp. for airing some of the same Stern shows for which Clear Channel was fined.

CBS News today said it hired former U.S. Attorney General Dick Thornburgh and retired Associated Press Chief Executive Officer Louis Boccardi to review its report about President George W. Bush's National Guard service.

CBS on Monday said it couldn't authenticate documents used by ``60 Minutes'' to report that Bush received preferential treatment while in the Texas National Guard.

The two-person panel will start its investigation this week and will have cooperation from CBS News and CBS, according to a statement. The report will be made public, the statement said.

To contact the reporter on this story: Neil Roland in Washington at nroland@bloomberg.net.

Last Updated: September 22, 2004 15:55 EDT