The Return of Self-Selected Boards or Control At Any Price

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Berkeley – Every January, according to Pacifica’s badly written bylaws, the Pacifica National Board resets itself. This leads to regular chaos and 2018 was no disappointment in that regard. So the business of financial recovery has gone on almost exclusively in closed sessions of the board. We will fill you in on all the craziness below, but in deference to the seriousness of the situation, we are going to cover a few things of more significance first.

Pacifica’s financial audits, the subject of so much suffering for so long, seemed to be within shooting distance of finally getting current in mid-2017, when the FY 2015 audit was completed in August in record time. But 7 months later, the FY 2016 audit, which needed to be done by June 2017 or as soon thereafter as possible, hasn’t gone anywhere. Pacifica in Exile readers will remember that an audit fundraiser was held in March of 2017 to raise funds to pay for the two back audits with great success. Pacifica remains under some pressure to get the FY 2016 audit done with an original deadline from the CA Attorney General of mid-February 2018. Pacifica’s first attempt to get an extension was rejected, and a second attempt is underway. The ability of all the stations to accept charitable donations would be at risk if Pacifica’s tax-exempt status were pulled, a possible consequence of failing to submit timely financial audits. 

In a CFO report from January 8, which is marked confidential all over it, CFO Agarwal provided this audit status report attributing the audit preparation delay to the push for a bankruptcy filing. (The status of financial audits is not a closed session matter).

FY 16 Audit Preparation. We had switched back our attention, around first week of December, to completing preparations for FY 2016 Audit. As you would recall, we had to devote all our resources for preparing “bare bones” filing for Ch. 11 Bankruptcy. This forced us to put on hold preparations for FY 2016 Audit and caused considerable delay. A couple of months back, we had sent out detailed checklists to all Stations and given instructions to complete all reconciliations and schedules as are needed to prepare final statements. We are currently reviewing the information received back from the Stations and making necessary corrections / adjustments. We have also sent the list of incomplete items to the Stations for them to complete and send to the National Office. At this time, KPFA and KPFK are extremely late in completing their schedules. Multiple reminders have been given to them to complete the audit schedules and provide to the National Office. I have asked to shift their other priorities to devote all attention to the audit preparation. National Office is also helping in solving complex issues or reconciliations. We will have to make additional arrangements for both KPFK and KPFA stations as they are not able to meet additional burden for audit preparations and subsequently for conduct of audit itself. I plan to have regular meetings with both GM’s, Business Managers and IED to monitor the progress and speed up the work. General Managers will have to make sure that they do not assign priorities which conflict with audit preparations. National Office has been helping in completing WPFW and WBAI audit schedules.

The audit committee supplemented with information from Pacifica’s new auditor Regalia on January 23 in their first meeting of the year. In this brief snippet, they decide to discuss the status of the audit in open session and then read aloud information received from the audit firm. 

CFO Agarwal explained in a previous email from October 2017 that the institutional push for a bankruptcy filing, at least from his point of view, had been contingent on the planned sale or swap of a broadcast license, because without such an intent, Chapter 11 bankruptcy would be problematic. Agarwal wrote (again marked confidential, although no confidential material is evident),:

“Even if we file for the bankruptcy now, the actual proceedings will not start for at least a few months. By that time, if we can demonstrate that we have a very credible deal in works, everybody will understand. Those sale proceeds can be used to pay off all our debts.  The purpose of Chapter 11 is reorganization. If we are firmly in control of the process, no one can force us to sell our buildings. I do not anticipate this happening if we are serious enough for signal swap or sale of a station. If we are not serious, then we will have to sell our buildings. We have to pay 100 cents on the dollar to our creditors as our assets are more than the liabilities”. 

It should be noted that those not so convinced that Chapter 11 bankruptcy was a great idea regularly refrained that Pacifica would have to pay 100 cents on the dollar to creditors as the assets were more than the liabilities. The extra added value in Chapter 11 bankruptcy, in this assessment, is firm control of the process of deciding which assets would be used to raise sufficient cash to pay down the debts.

Pacifica in Exile readers will note that the national board finally decided earlier this month to accept a short-term bridge loan from Pacifica members to pay off the judgment due to Empire State Building and retain a longer-term line of credit for a three year period and not to file for Chapter 11 bankruptcy.

One of the scarier short-term debts with immediate urgency is back pension payments. The exact amount is unclear, due to some dissenting reports about whether the nonpayments began in 2014 or 2015 and what penalties are now due, but it seems safe to estimate liability in the $500-$750K range, since the pensions accrue at about $150K per year between the four stations with 75% or more of that at KPFA and KPFK. All of the stations accrued the expense and seemingly accounted for it in their payroll budgetary provisions, but never paid it out for those years. ERISA law requires payments be made for all eligible employees of the same organization at the same time. Apparently no one saw fit during those years to cover the relatively modest amounts for the struggling East Coast stations to avoid the liability ($8K a year for WBAI and WPFW each. KPFA and KPFK have about $65K in annual pension obligations). It’s almost incomprehensible to default for years on pension payments over $8K-type shortfalls, but that is what the stations were allowed to do, probably incurring larger penalties than the amounts they attempted to save by not helping each other out. And ripping off the employees in the process,

The situation has grown increasingly critical, with the plan administrator withdrawing in frustration and both the executive director and the CFO removing themselves as plan trustees over fears of personal liability. Having pension funds unadminstered and without trustees leaves $800K in employee funds somewhat unprotected. The national board is responsible for assigning new trustees and finding a new plan administrator. It is hoped that the member loan fund may be able to raise sufficient additional funds to bail out the pension mess, which is a creation of the pre-1999 board which somehow managed to secure a replacement 403(b) retirement plan (which is fully funded) without terminating the old fixed pension plan before employee unions at AFTRA and CWA wrote both into their contracts, preventing Pacifica from terminating the duplicate retirement plans. The mistake grows increasingly absurd and expensive as the years go by. Settling for just one retirement plan benefit with an employer match, instead of two at the same time, is one affirmative act Pacifica’s employee unions could take to help the organization survive this difficult period.

And then there was chaos. The guilty party this time was KPFA. Embarking upon the annual election process to send 4 of their members to the national board, KPFA got pretty flummoxed. The first problem they attempted to solve was how to fill a vacancy on their own local board. Normally this is a pretty normal process called “the next runner-up”, but since so many people had already left the KPFA LSB, the “next runner-up” came down to people written in on ballots by voters. There were over a dozen of them, but KPFA’s local board decided not to contact any of them. Instead they asked one person if they wanted an appointed seat and then gave it to them, in an ironic postscript to the ardent revolution against “self-selected boards” that kicked off in the streets in Berkeley in 1999. Then they moved on to choosing national board members, but with a hitch. The newly seated person, who was apparently placed there in order to be sent to the national board, wasn’t eligible because nomnations had to be made by 12/31/2017.

But for every problem, there is a scheme and scheming ensued. But only in closed session. Calling an impromptu closed session to conspire in private, the KPFA LSB came up with their brilliant idea. One person would run, but then “resign” immediately after they were elected and then they could have a “replacement election” to replace them that wouldn’t have the nomination deadline. So 6 seconds after the results were announced (by the clock) Bill Campisi (who had already resigned from the national board 11 months earlier) giggled and said “I resign – have a new election with different rules”, which they proceeded to do. Not less then 5 minutes after the old one. With one rather large problem. The brand new board member on whose behalf the theatrics went on, wasn’t eligible for yet another reason besides not meeting the nomination deadline. She also hadn’t served the required one year on a local board prior to the national board, having only served on a “CAB” back in 2003. (CABs or LABs as Pacifica liked to call them, are CPB-mandated advisory boards that by definition cannot have anything to do with boards of directors and delegates with governance functions).

Oops. So the Pacifica National Board said no dice and the foiled attorney Campisi who had his clever plot ruined, decided to spend the listeners money on going to court to try to get his appointee forcibly placed on the national board by the Alameda Superior Court. The court on January 25 said no thanks and left the seat vacant until at least March when, unless sanity prevails, a trial will ensue with your listener pledges. The board had a perfectly viable alternate candidate, Tom Vorhees, an experienced broadcast engineer with a national reputation for helping community radio stations get up and running. Vorhees was given an award from the National Federation of Community Broadcasters (NFCB) for his contributions to community radio and could be of great help on a national board debating signal swap opportunities with little to no technical knowledge. But Campisi was determined to keep him off the national board at any price, citing that he was not as “pro-bankruptcy” as Campisi would like, and pointing to his 4/10 of a vote margin over Vorhees as a mandate for his point of view.

The court order instructed Pacifica to seat no person at all as a station representative director from KPFA.

The contrast between the  work done by members of the KPFK local station board in Southern California to put together a loan fund to pay off the judgment to the Empire State Building and the KPFA local station board in misreporting their $187K operating deficit as a $187K operating surplus and then suing Pacifica to try to shoehorn a self-selected appointee onto the national board, is notable.

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Started in 1946 by conscientious objector Lew Hill, Pacifica’s storied history includes impounded program tapes for a 1954 on-air discussion of marijuana, broadcasting the Seymour Hersh revelations of the My Lai massacre, bombings by the Ku Klux Klan, going to jail rather than turning over the Patty Hearst tapes to the FBI, and Supreme Court cases including the 1984 decision that noncommercial broadcasters have the constitutional right to editorialize, and the Seven Dirty Words ruling following George Carlin’s incendiary performances on WBAI. Pacifica Foundation Radio operates noncommercial radio stations in New York, Washington, Houston, Los Angeles, and the San Francisco Bay Area, and syndicates content to over 180 affiliates. It invented listener-sponsored radio.

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4 thoughts on “The Return of Self-Selected Boards or Control At Any Price”

  1. I understand that that the property at 1925 Martin Luther King Jr Way, Berkeley is on the market — http://norheimyost.com/property.php?listing=82

    Also understand that this is the home, the address of the Pacifica Foundation, and also of the KPFA Foundation.

    I know this property has been mentioned more than a few times, but when was the decision to sell made, and who made it? I generally keep track of such but somehow missed this.

    Also can’t help but wonder what other Pacifica properties are on the market? Seems that if a property is up for sale, it would be hard to be used as loan collateral.

    Also makes me wonder why the asking price for the Berkeley property is way over the market price. As I gather it is ~$1.5m vs ~$600,000.

    1. Hi Jim,

      1925 Martin Luther King Jr is the address of the Pacifica Foundation office (occupied by accounting staff only as the IED and Affiliates Coordinator and the engineering staff all work remotely) and an abandoned Thai restaurant. The KPFA Foundation is domiciled at the Siegel and Yee law office in Downtown Oakland. The Pacifica National Board agreed to place the building up for sale in early 2017. They had been urged to do so for some time, most noticeably by Brian Edwards-Tiekert who made such urging the centerpiece of his August 2016 resignation as Pacifica’s board treasurer after holding the position from 2014-2016. No other Pacifica owned properties have been placed on the market. Pacifica has received an offer close to the asking price. They have not yet decided whether to accept that offer.

  2. This sentence, in the section on why some oppose the bankruptcy option, is not s clear to me:
    “The extra added value in Chapter 11 bankruptcy, in this assessment, is firm control of the process of deciding which assets would be used to raise sufficient cash to pay down the debts.”
    As I understand it bankruptcy could remove our control from the process, but “extra added value” suggests that this is a plus of bankruptcy.

    1. It means that the perceived advantage of bankruptcy by the speaker, who is the CFO, is more control over which broadcast license gets swapped or sold. Outside of bankruptcy, the perception is that the membership would play a larger role in making that decision, which the CFO considers to be the real point of a Chapter 11 filing.

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