Pacifica’s Raid on WBAI Stopped in Court

FOR IMMEDIATE RELEASE: From Pacifica in Exile Tuesday October 8, 2019

Supreme Court of New York Stops Pacifica’s Attack on WBAI

Berkeley-In the morning, a crew of Pacifica Foundation board members led by brand new IED John Vernile, locked out the staff at WBAI-FM in New York and then fired them all, told the landlord to rent the space to someone else, and started piping in content from the West Coast over mid-Manhattan. In the night, the Supreme Court of New York told them to stop it and restored WBAI’s facilities, equipment, studio space, employees and control over the airwaves.

If this feels to you like a flashback, well there’s a reason for that. Two decades ago, the Pacifica Foundation locked out employees at Berkeley’s KPFA and started piping in content from Texas. At that time, the nonprofit’s board was united in their desire to teach KPFA a lesson and extract the millions in license value. Not this time. At least half of Pacifica’s elected board wasn’t informed, had no idea. and never consented. That’s probably why Supreme Court judge Frank Nervo (at home and in his pajamas) called a halt to things. This is what he said.

The Supreme Court of the State of New York has issued a stay and temporary restraining order enjoining the Pacifica Foundation from 1. Seizing any property files or equipment from WBAI 2. Terminating any employees of WBAI 3. Preventing WBAI from broadcasting it’s regularly scheduled programming. 4. Interfering in the business or orderly administration of WBAI pursuant to Section 1315 of the NYC Not for Profit Code and the Pacifica Foundation bylaws until a hearing to be held on October 18th.
The WBAI takeover followed immediately upon the collapse of a proposed set of new bylaws presented by the same folks who attempted to lock out WBAI, namely the KPFA board faction formerly known as Concerned Listeners, before they were formerly known as Save KPFA and currently known as United for Independent Radio. For the bylaws amendment petition, the name used was “The Pacifica Restructuring Project”. They were joined by a few board members from Texas and Los Angeles. The petition to the members sought to install six hand-picked people as a new self-selecting board majority that would perpetuate itself indefinitely with broad powers to further change the bylaws. The petition, which aimed to install the six by January of 2020, relied on the existing national board to open a bylaws amendment period and call another election. The board deadlocked at 11-11, blocking the petition until next year, and the proponents resorted to trying to kick one of their opponents off the board, KPFA’s Tom Voorhees (an action which is still scheduled for October 26th at KPFA).

Denied their hand-picked six to rubber stamp their actions, the group simply decided to go ahead in secret with the attack on WBAI with no board sanction. This secrecy meant that a number of things that needed to happen, didn’t: no meet and confer with the union prior to laying off union staff, no advance notice to employees and programmers, no notice to the landlord, and no consultation with the lender who holds as collateral studio buildings in LA, Houston and Berkeley.

Whether it could possibly be considered a sober plan no matter how carefully carried out is another matter. The lockout interrupted a fund drive in process that would normally book around $300,000. Laid off employees get severance pay and failing to meet and confer prior to layoffs results in a trip to arbitration. It probably wasn’t cheap to find a lawyer and dispatch them to Judge Nervo’s house in the middle of the night to argue unsuccessfully against the TRO. A repeater station still needs to transmit and WBAI’s 4 Times Square transmitter costs $12K a month. With no fund drive apparatus or staff and a program schedule of re-runs, where does that money come from? It’s unlikely to be the NYC audience whose programs were all cancelled. An organization so desperately broke that it has to cannibalize its own radio station can’t fly the IED and at least three board members to NYC and put them up in hotels to do the dirty work. It doesn’t really add up. Most WBAI’ers concluded the end game is a sale of the station license for the tens of millions of dollars it will get on the open market as a commercially convertible license.

Besides its role as a cash cow to provide a windfall to other 4 stations, are the finances at WBAI really that bad or that much worse than the other stations? Once the predatory Empire State Building tower lease Pacifica stuck WBAI with was ended, the answer is not really that much worse. You don’t have to take my word for it. Here is a profit and loss statement for 2018-2019.

It shows an operating deficit of -$227,000 including the internal transfers that Pacifica calls “central services” which are not direct costs, but payments to the Pacifica Foundation itself to support the national office. We want to be clear that in the end, all of the Pacifica stations are going to have to find a way to break even or the long-term prognosis is bleak. However, if every Pacifica unit that ran an operating deficit of -$227,000 or more was shut down, all the employees fired and the station turned into a repeater with every single local program cancelled, then the treatment would have happened to:

KPFK in 2007, 2013, 2014 and 2015

WPFW in 2012, 2013, 2014 and 2016

KPFA in 2009, 2010, 2011, 2013 and 2016

Only KPFT in Houston would be left standing.

In another ironic twist, the WBAI signal area in 2019 provided a generous bequest from the estate of a former WBAI fan of $583,500. A nice chunk of change that was left to the national foundation which promptly ratcheted up their annual spending from $1.82 million in 2018 to $2.49 million in 2019, an increase of $670,000 powered by that estate gift. Once it was all spent by national, they moved to shut WBAI down.

So what now? The Pacifica Foundation has been silent since the TRO was issued WBAI staff and programmers are meeting tomorrow to get themselves back up and running. WBAI members should support the station right now and show it with your words, emails and dollars. (Mail them checks. The Pacifica Foundation disabled the online donations system).  In other signal areas, please speak up. Your delegates are elected and you put them there to represent you so can tell them what to do and what not to do in your name. Each station has instructions for contacting the local station board on the website and they meet in public once a month. Democratic Socialists of America, who have a program on WBAI, are mobilizing to support the station in New York. In Berkeley, which is the most responsible for the attack on WBAI, there should be accountability with the listeners who elected these delegates.

Since this all just happened on 10-7-2019, plans are still being developed, but we are told there may be a press conference on October 8 at 9am at KPFA and speakouts are expected at the planned local station board meetings on October 19th and October 26th here in Berkeley. Other signal areas will likely also arrange some events. To be clear, about the last thing in the world our listener dollars should be spent on is Pacifica fighting WBAI in court. None of that makes the stations stronger, better, more engaging, more technically sophisticated, more politically pointed or more culturally rich. It’s our responsibility to back this misguided board up and make them support our stations, not destroy them.

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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.

The KPFK and Pacifica Foundation Financial Labyrinth

Update on Management and Financial Issues

by Kim Kaufman

KPFK Building Coming Up For Sale?

Pacifica is the last network of independent non-commercial radio stations operating in five of the largest media markets in the country. They are KPFK, Los Angeles, KPFA, Berkeley, WBAI, New York City, WPFW, Washington D.C. and KPFT, Houston, Texas. Many observers — and listeners — have written Pacifica off as a pathetic in-fighting mess as it has long been irrelevant in the larger media world. But the fact that this organization still owns and operates five very valuable radio licenses in major U.S. markets is worth taking a look at, especially from the financial aspect which is rarely exposed.

Since KPFK (and the other stations) are having another election for their Local Station Boards (LSB), what follows is information for anyone considering running, or voting, from a former KPFK LSB member. I will highlight some of the critical issues facing KPFK and Pacifica to consider.

This is also an update to KPFK and Pacific: A Quiet Coup from October, 2015 which detailed problems with the finances then — the lack of several years of filing annual audits to the CA Attorney General, the lack of adequate bookkeeping, etc. I advocated voting for one faction of new and returning former LSB members (which I had then been aligned with) to replace the other faction. They were elected and have had a majority on the local and national boards for the last three+ years. During this time, however, the financial picture has only gotten worse. Pacifica’s factional infighting is somewhat notorious but is the problem only the factions or is it something else?

As to my qualifications for addressing these issues, I was on KPFK’s LSB from 2009 to 2015 when I was termed out. I was, at different times, Treasurer of KPFK, on the National Finance Committee, Director on the Pacifica National Board (PNB), on the Audit Committee, on a Financial Recovery Audit Task Force, and other committees. I have been involved in and focused on the finances of KPFK and Pacifica for many years and in many capacities. I have written many analyses of budgets and actual income/expenses, been a whistleblower and advocated for transparency and honesty.

The main job of KPFK’s LSB is to approve yearly budgets from management and make quarterly reports on the station’s finances and to make sure the station is on solid financial footing. Good budgets are based on historical data and formulas that are specific to non-commercial radio whose revenue comes largely from on air fund drives. Management has not availed itself of those tools for the last two budgets and produced overly optimistic budgets. Nevertheless, KPFK’s Finance Committee brought the budgets to the LSB, which were approved with little to no discussion. The estimated $500,000 end of year surplus for FY2018 wound up being a ($67,000) deficit. This is a notable “mistake” but to date has never been analyzed by the Finance Committee.

Thus, the FY2019 budget repeated the same errors as were in the FY2018 budget. There have been verbal reports from the Treasurer, such as revenue was “better than the budget and better than the previous year.” But they have never been supported by documentation or actual data and were, in fact, false conclusions. This sort of statement is typical and shows a lack of attention and/or expertise that is needed for the required oversight duties of the board.

Because of decreasing revenue from KPFK’s on air fund drives, there are now various forms of desperate acts to raise money, most of which are forms of underwriting that violate FCC and CPB (Corporation for Public Broadcasting) rules. Underwriting is allowed and the FCC has specific rules that need to be followed but management is not complying with them. The Finance Committee has been made aware of these violations but have thus far not taken any action. Further, KPFK is misleading the public with programmers saying that KPFK takes no underwriting, it’s all “powered by the people,” etc. This is not true and has not been for about two years.

If there are discussions about the finances at KPFK going on, they are being made behind closed doors and not at either the Finance Committee or the LSB meetings.

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This lawsuit of Empire State Realty Trust against Pacifica happened because of lack of oversight by the PNB.

In October 2017, a judge ruled against Pacifica and awarded ESRT [Empire State Realty Trust] a summary judgement of $1.8 million plus attorney’s fees. ESRT sued Pacifica in February 2016 to recover back rent and tower fees, interest and attorney costs. In the years-long dispute, Pacifica accused ESRT of price gouging and “holding the network hostage” with a contract that required WBAI to pay tower rent that increased about 9% per year. . — Inside Radio

Members and programmers from WBAI called ESRT “greedy capitalists” but Empire would not back down. In fairness to all of the involved parties, Pacifica voluntarily entered into the tower rental agreement with ESRT in 2005 with full awareness of all of its provisions for potential future rental increases.

On the PNB, there was dithering and inaction. Many secret and some public meetings were held, arguing between filing for voluntary bankruptcy or taking out a loan to pay off the judgment and the rest of the contract with Empire. The decision was to take out a loan. The argument against bankruptcy was that legal fees would be high — but the loan’s fees, legal fees and interest wound up being, by my calculations, about $900,000 or more, the same or arguably much more than bankruptcy would have been. Time will tell as to the real cost of taking out a loan.

Most elements of the reported 150 page loan agreement are still secret, with claims from the PNB there is a provision in the document that requires it being secret. Requests to provide that particular provision to the public have not been answered. While a press release about the loan is still on KPFK’s website, and easily found elsewhere on the internet, it is now forbidden to name the lender publicly.

This “Summary of the $3.7m Loan” was released to the public by the PNB. The figures offered in the Summary, however, are incorrect. It appears to be an early draft as the actual amountof the three year interest-only loan is $3.265 million and the adjustable interest for the first 18 months is $379,556. Pacifica could not get KPFK’s tower included as collateral because the US Forest Service, on whose land it sits, would not allow it. The tower was supposed to be used as collateral to borrow, and pay interest on, the first 18 months of interest payments.

Thus, two buildings adjacent to Berkeley sister station KPFA were sold to pay part of the ESRT settlement and the rest used for the first 18 months’ interest. One building housed the Pacifica National Office, with offices for the Executive Director, CFO and accounting staff. The other building had been vacant for a decade or so.

The CFO at the time resigned when the loan was signed, claiming the loan was in default because Pacifica could not provide any of the lender’s required financial documents, such as a current audit, profit and loss, etc. In a leaked document, Pacifica’s general counsel also weighed in on problems with the loan.

Pacifica must start paying the interest for the second 18 months starting October, 2019. It’s hard to see how Pacifica can come up with monthly payments of $21,000+, especially since KPFK is unlikely to be able to cover its own basic operating expenses going forward and will need help from the rest of the network, which has no help to give. There’s even less hope for paying off the $3.265 million balloon payment due March, 2021.

Those supporting the loan have made repeated claims that Pacifica can easily refinance for a better loan, that “a loan is not in default until a judge says it is,” and that the loan is secured by real estate only. This paragraph #4 from the Summary, however, shows this is false:

“[i]n addition [to the real property: buildings & land, three buildings housing radio stations KPFK, KPFA (Berkeley) and KPFT (Texas)], the Collateral includes accounts receivable, tangible goods, equipment, rental income, sales proceeds, contracts, intellectual property, furniture, cash and proceeds of insurance or sales — in short, virtually every real, tangible and intellectual property right in which Pacifica has an interest.”

This provision also includes the Pacifica Radio Archives. It’s much more than just real estate. Whatever the outcome of a potential default on the loan, lawyers will be involved — and Pacifica is required to pay legal fees for both sides.

It’s hard seeing a way to a refinance since Pacifica has not complied with requirements for the loan and has no way of paying the balloon payment in March, 2021 — unless they sell or swap one of the five licenses (which are under the jurisdiction of the FCC andcannot be used as collateral). The lender did not do its due diligence according to its own website. The mystery is: why did they lend to the obviously deadbeat Pacifica? The loan broker, Marc Hand, made at least $50,000 on the deal. Some speculate the loan has already been sold to a third party, see comment 3 of 3.

The idea of refinancing this loan they cannot pay back or pay the interest on, while adding more fees, interest, legal and brokers’ fees, seems like little more than a distraction to divert and delay the board from dealing with the realities of its insolvency and failing operations.

Some on the PNB imagined they could save money by outsourcing Pacifica’s accounting and not replacing the CFO. The new outsourced accountants have, as of this writing, produced nothing since their hire almost a year ago. Supposedly, an interim CFO was hired for three months in January but he produced nothing. The PNB just hired a new part-time interim CFO, an employee of the outsourced accountant firm. KPFK’s Finance Committee was told she was being paid “a small amount.” She was supposed to produce financial reports for the last two years by June but now it might be July.

Pacifica is also under investigation by the Department of Labor for violating ERISA laws, which has to do with pensions promised to employees of the five stations. This has been a problem for over two years and, as far as anyone in the public knows, is still unresolved and unpaid. Including penalties, this could amount to a large sum to be paid out.

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Pacifica has been trying to catch up on its late audits since 2014 for which Pacifica has been under investigation by the CA Attorney General. The current auditor has been working to complete the FY2017 audit since last fall (originally estimated to take three weeks). It was due to the CA Registry of Charitable Trusts June, 2018. The auditor finally told the audit committee he’s only been able to get about 50% of the documentation he requested and suggested they stop searching for more. He will finish what he has but it will be “qualified” which is auditor-speak for: there are serious problems. In this case, he can only audit what he has and the rest is undocumented and unknown. The FY2018 audit, due June 2019, will miss this deadline and will also be “qualified” for the same reason. Two qualified audits that say your organization is too messed up to audit is not likely to persuade donors, foundation grantors or the Corporation for Public Broadcasting to give funds to Pacifica. It’s unknown whether the CA Attorney General or the lender will accept them.

There was some anticipation that Pacifica would get current on its audits by this June and would again be eligible for CPB grants. That is not to be as CPB’s deadline for qualification is June. When Pacifica last received those grants, in 2012, it received about $1 million a year. Pacifica needs to get current on its financial reporting and compliant with other CPB requirements in order to be eligible for the 2020 cycle in order to receive funds in 2021.

Why the secrecy and obfuscation? Why the complete lack of financial oversight and fiduciary responsibility? Is it only incompetence?

In my earlier article, I wrote about the KPFA Foundation, a shadow corporation formed for the purpose of taking over the assets of Pacifica. Before that, in 2009, there was another secret 501(c)(3) formed for the Pacifica Radio Archives, supposedly to raise money (which never happened) but rumored that “in case” something happened to Pacifica, i.e., bankruptcy, the Archives could be moved into this non-profit. It was created by former PNB Chair/Interim Executive Director Sherry Gendelman with Matthew Lasar as Secretary. Lasar, a Pacifica historian of sorts, has advocated for breaking up the Pacifica network in alliance with the KPFA Foundation people.

After that came another secret effort from Berkeley by then-KPFA LSB chair Carole Travis who had been soliciting celebrities to join the board of “Big Tent Radio,” a nonprofit she claimed to be starting to acquire Pacifica’s assets after it “collapsed.” Attempts were made to get her to resign as she was clearly working against the best interests of Pacifica but no bad deed goes unrewarded at Pacifica and she remained on the local board, soon to be on the PNB.

There is presently another plan to break up the network from Berkeley, reports of a similar plan from Los Angeles, plus a long-time plan from one faction in New York. None of the breakup and takeover plans seem particularly viable but the absence of any other plan or even a discussion on how to pay back the loan, or interest payments, seems puzzling considering Pacifica’s precarious financial situation. Are they waiting for a sudden “shocked” awareness of financial problems and an orchestrated rush to “reorganize,” creating the opportunity for the licenses going to current favored board members with waiting 501(c)(3)s?

You can hear PNB Director Donald Goldmacher in this clip at a recent Strategic Planning Committee meeting suggesting selling off Pacifica’s assets (possibly to him and his allies around the network). He was recently re-elected to the KPFA LSB and is a long-time member of the Berkeley faction which created the KPFA Foundation, above.

Thus the sale of the Berkeley buildings and elimination of the Pacifica National Office and its accounting staff, which become unnecessary if the organization is going to dissolve, or privatize, itself into board members’ hands, and makes complete sense in this context. There’s no need for a permanent in-house CFO if there’s no intention of Pacifica continuing as a network. Further evidence of short-term planning: the outsourced accountants have a two-year contract.

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Pacifica just had another election for the LSB which ended in March. Those running for re-election were micro-managing their own election. It was delayed, disorganized, over-budget, and the public and members were not properly informed. A 10% quorum of membership is required and KPFK had an 11% quorum — but 9% of the ballots were blank ballots. There was a quiet campaign advising voters that if they didn’t want to vote or if they didn’t know who to vote for, to send in a blank ballot to help reach a pseudo quorum. Those who were asking the membership for election or reelection received so few votes that they amounted to a vote of no confidence. They did not earn even the 10% required votes from the membership.

But like Trump losing the popular vote or George Bush, arguably never legitimately elected either time, that will not stop these illegitimately seated LSB members from acting as if they have a mandate. They are planning a big rewrite of the bylaws. The Pacifica bylaws are terrible, complicated and, in places, contradictory. They were written by a “listeners” after the lawsuits of 1999–2002 were settled. A rewrite by another group of “listeners” will not be better. The problem is not the bylaws, or Robert’s Rules of Order, the problem is electing “listeners” without skills or knowledge of broadcasting, basic finance, management or anything related, and no record of success in anything except getting elected and becoming board members of a multi-million dollar media organization which has only shown consistent decline for the last 20 years under their stewardship. Some of these people have been in and out of Pacifica’s governance for two decades or more. Due to Pacifica’s current structure, it’s impossible to replace them in favor of competent people. Bylaws rewritten by them will only entrench them further.

The first line of The Pacifica Foundation Mission Statement is:

To establish a Foundation organized and operated exclusively for educational purposes no part of the net earnings of which inures to the benefit of any member of the Foundation.

Insiders love to toss the Mission Statement around but never remember that first sentence. The reason the federal government mandates that non-profits have outside, independent boards, and also why they’re under the jurisdiction of Attorneys General is that they are funded by public money. Boards are supposed to make sure the public’s money goes where donorsthink it goes. The main job of a board is to report to the public about its financial operations. Pacifica’s board cannot or simply will not do that. The idea of public service appears long forgotten within Pacifica. One might assume this is just run of the mill incompetencebut it seems way past the time we can blame the chaos only on that.

It’s no wonder the members of KPFK’s Finance Committee refuse to answer awkward questions dealing with the financial realities of the operations. The board members paint rosy pictures of how well they’re doing to “save Pacifica” but, in reality, KPFK is in extremely bad shape and declining. You can hear it in the increasing fund drive days which are not bringing in enough to cover their expenses. Nor is Pacifica, as a whole, faring any better under the present PNB than it was under the previous PNB.

Instead of focusing on finances and complying with federal and state regulatory agencies the favored subject of discussion by board members has always been programming. The ultimate prize for aggressive board members is to be able to control programming to suit their tastes and ideologies — from expected old guard Trotskyism/Marxism/Revolutionary Communist Party/anarchism (etc.) to Scientology with a few progressive Democrats and black or Latino nationalists in the mix. The boards hire weak managers who they can then micromanage and work to create their own patronage system by giving program slots or jobs to their friends and allies. The resulting mediocrity and lack of cohesion of the program grid is the result. It obviously drives away listeners and extends fund drive which only turn off more listeners. Now those PNB members making decisions are actually proposingprograms for the sole purpose of enticing funders. This shows a lack of imagination and any pretense of journalistic integrity. This is only the latest of ideas thought up by amateurs who have done little more than master the byzantine governance system of Pacifica to get themselves into these undeserved positions of authority. Look for sketchy health programs, celebrities and other unimaginative pandering unlikely to excite funders or listeners.

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For anyone still considering running for KPFK’s board, or any of the other stations, these are some of the bigger problems KPFK and Pacifica are facing. You will need to be a fighter with an independent mind because the entrenched board members of both factions are not really open to questions or open discussions, especially about financial matters.

The election information is here and the nominating deadline is June 30. If

you have skills, Pacifica needs you. But Pacifica doesn’t have a history of treating talented people well.

The sad irony is that just at the time this country needs a vibrant non-corporate media, Pacifica continues to make itself even more insolvent, unlistenable and irrelevant.

Kim Kaufman can be reached at kim.kaufman@att.net

The Financial Mess Continues at Pacifica

Millions Lost to Mismanagement

by Uncle Paulie

Dateline: Los Angeles

The incredible financial mess continues at Pacifica.  Because they have blown the audit dates for 2 years and have lost about 2 million dollars in funding from the Corporation for Public Broadcasting, the network is danger of financial failure.  The new June 2016 deadline for filing looks like a repeat disaster, possibly blowing close to another million, despite hiring a new Chief Financial Officer, Sam Agarwal, who is facing an uphill battle to literally pry basic financial information from the stations.  Some of the Pacifica stations, like KPFK, do not even have regular bookkeepers at this point, and Agarwal has taken the financial records away from at least 2 stations, it was revealed by Fred Blair in his first KPFK financial report as the treasurer of the Listener Board.

Some serious financial information came out at the recent National Finance Committee, WBAI’s report, and the KPFK Listener Board meeting. Here’s a few bullet points:

—Only 2 of Pacifica’s 5 stations have full-time business managers.  This in itself is insane behavior of management.  They have been unable or unwilling to commit to straighten out the chaotic financial situation.

—Neither WPFW, Washington, D.C., nor WBAI, New York have had their draft FY16 budgets approved yet.  FY16 began on October 1, 2015. 

—The CFO said that cash flow is a major concern now, some stations can’t even meet the National Office’s payroll deadline and are critically behind on health care insurance payments, Central Services fees, and other expenses.

Empire State Building—The Auditors have concerns about WBAI’s rental agreement obligations to the Empire State Building.  This is for transmission antennae and is said to be around $50,000 per month.

—The CFO said that Pacifica should not count on getting Corporation for Public Broadcasting (CPB) grants for four to six months because of the lateness of the audit. He said that meeting the short range cash needs for those four to six months would be a challenge. (And this may not happen if the auditors cannot get the information.)

—The CFO has not been able to even access all the bank accounts, meaning a lot of information is not available.

—WBAI winter fund drive after the entire month of February and an additional week is only 65% of projected budget.

—CFO has not been able to get ANY information from WPFW.  Financially he doesn’t know what is going on there.

—Pacifica has not sent the financial statements to the stations that were due in February.

—The amount of information that has been demanded from the auditors

is “overwhelming”.

Click on Box to view KPFK Treasurer’s Report.  Keep watching entire video as last part is a Supplemental Report by former Treasurer Kim Kaufman.

Former KPFK Treasurer Outlines Dire Conditions

Kim Kaufman, former KPFK LSB Treasurer issued the following report

This is a supplemental report to what you’ve just seen on the video

Kim Kaufman, former KPFK - LSB Treasurer
Kim Kaufman, former KPFK – LSB Treasurer

I have written elsewhere how Lydia Brazon’s majority has approved deficit budgets for KPFK totaling approximately $1 million dollars the last two years. But what’s really telling about this year’s KPFK budget is that the majority of fund drive days – almost 2/3s – come in the first half of the year. There’s mostly smoke and mirrors in the second half. I wonder if they intend for KPFK to be in business in the second half of this fiscal year which starts April 1.

As Fred said, there is a new CFO. His last job was at a San Francisco non-profit. It was largely funded by various state department and law enforcement agencies that are usually associated with regime change in foreign countries. It’s an unusual choice for Pacifica one would think.

The CFO has been at Pacifica for less than two months and said he hasn’t reviewed most of the station’s budgets – but suggested they may be unnecessary and can be replaced by “innovative thinking.” He can’t possibly be familiar with all our operations in this short time and yet he’s decided our business model is no good. And that he and Lydia, without informing the board, have put out proposals for alternate funding. But he’s not prepared to get into specifics yet.

Such “innovative thinking” may be underwriting as was discussed at the last National Finance meeting. This seems to me to be a straw man – a sham argument set up to be defeated. It seems odd that after two years of the national board majority claiming how fantastic they were doing because they were in charge, now suddenly, there’s a financial disaster with the only choice being presented is to take underwriting. And the board saying nothing while the CFO says publicly that listener support should be dismissed as reliable or even desirable.

The majority on the national board have already forfeited $2 million dollars in lost funding because of two late audits filed to the State of CA and the Corporation for Public Broadcasting. The CFO seems really fuzzy about the next CPB deadline which he seems likely to miss which will cost Pacifica another one million dollars in lost grants. It seems odd that making that deadline in June to make sure we get that $1 million dollars isn’t his highest priority.

This is a straw man because first of all, our audience is simply too low to be attractive for any serious underwriting. Any business that would be aligned with our programming is not likely to provide much financial support relative to our low listenership. It won’t bring in significant funding and in exchange, it will upset our listeners at the mere idea of this. But perhaps that is the point. Say no to this scary underwriting and the alternative is… wind up in bankruptcy court? Sell off a license?

But why is no one talking about the real choices? What real management and leadership would do with a radio network would be to improve the programming, which is what we do to serve the public which is why we have non-profit radio licenses in the first place. We would get a plan to do appropriate marketing. And we would clean up the sloppy or outright fraudulent accounting and business practices.

In KPFK’s case, we would ask why is there unqualified management making obviously bad decisions… like taking off KPFK’s most popular programs and replacing them with cronies? Or why did the GM fire the webmaster and allow KPFK’s website to degenerate to a non-functional mess? That has cost us thousands, if not tens of thousands of listeners who used to listen on-line, download shows – and donate through the website. Rather than underwriting, how about re-hiring the webmaster and getting back those listeners?

Lew Hill, the founder of the Pacifica Foundation, which owns the five radio licenses, was very clear in his writings. Popular programs would get listener support. Unpopular ones wouldn’t. This the integrity of listener sponsor radio. That’s why it’s a public service not a private broadcasting club. Why is the national board majority so allergic to talking about this? Why are they allowing management to drive away KPFK’s listeners? Who benefits?

Kim Kaufman

March, 2016

Supplemental Finance Report

Fund drives

As of Wednesday, the February fund drive total was: $261,469 after 15 days/ $17,431 per day. The budgeted goal is $600,000 for 22 days/ $27,272 per day. To reach the goal, the drive would have to be extended to 34 days (assuming per day doesn’t decline).

The budgeted goal for December was $400,000 at 15 days/ $26,666 per day. Two days were added. The pledged amount was $316,752 for 17 days/ $18,632 per day. Novick and the GM assumed in the budget the rest of the days of December would be “quiet drive days” to achieve the goal. That leaves the “quiet drive” magic dust to make up the $83,248 difference.

This February drive is the last drive in this half of the year. 102 fund drive days were budgeted for FY2016, 63 in the first half of the fiscal year (October-March). With the addition of 8 days already added, the total drive days are now up to 110 days with 71 in the first half, assuming no more days are added to the February drive (a not-likely assumption).

There are only 39 budgeted fund drive days in the second half of the year (April-September) at an average of $23,111 per day (an overly rosy number based on actuals). The rest of the listener support comes from 92 budgeted “quiet drive” days at $5,400 per day to raise about $500,000 in the months of April, June, August and September.

The LSB or Treasurer should ask management for the results of the quiet drive days in December. How many days did it run and how much was pledged/ paid per day? This was supposed to all go through the website. It does not show up in MEMSYS.

It’s important to see how realistic these quiet drive number are going forward. My estimate is the December quiet drive brought in something over $1,000 per day which falls far short of the $5,400 per day budget. December is historically the best month for this kind of pitch

This appears to leave a $400,000+/- gap in fundraising for the second half of the year for the quiet drive days, plus the much lower than budget per day $ in these first three drives.

The NFC approved FY2016 budget was created entirely by Treasurer Novick, iED/Chair/NFC rep Brazon and GM Radford on the NFC. An earlier draft was approved by the LSB majority with a $1 million deficit. This draft is an improvement but is still a severely deficit budget.

While I would not preclude a severe financial crisis before the end of March, it appears extremely likely after March.

Kim Kaufman

Secretary, Finance Committee

Former KPFK LSB Treasurer

February 19, 2016

Feds May Move-In on Pacifica Foundation

Pacifica Whistleblower Charges Ruling Board Withheld Gary Null’s Offer of Settlement Terms

Lawsuit To Be Turned Over To Feds

by Ed Murray

The clock has been ticking on the Pacifica Foundation legal front, but for them there are clocks ticking in every room of the building.  First, there are matters under investigation by the State of California, Attorney General, including the fraud charges filed by Pacifica Board member and whistleblower Steve Brown.  Then there is allegedly an investigation of Pacifica’s long-time attorney Dan Siegel that is at the California Bar Association, although a quick check on their website does not reveal any pending case.  Thirdly is a lawsuit filed by Gary Null, charging fraud, and violations of the F.T.C. Mail Order Rule, Intellectual Property Theft, Trademark Infringement, Trademark Counterfeiting, Copyright Infringement, and False Advertising.

The serious charges do not end there.  Pacifica in Exile reported recently that the new Chief Financial Officer had discovered the possibility of internal fraud.  Here’s the text:  Berkeley-While Pacifica waits and waits and waits for an audit of the 2014 fiscal year, which ended 17 months ago, new CFO Sam Agarwal informed the national finance committee that “fraud was a major concern of the auditor”, which is currently Armanino LLP.  In fact, he said it twice in a minute and a half.  Agarwal added that “we don’t know if all the donations have been accounted for” and that “it would be very easy for anyone to open up a bank account and deposit the donations and that would not be recorded in the Pacifica books”.

Steve Brown, Whiostleblower
Steve Brown, Whiostleblower

As whistleblower Steve Brown points out in his recent document sent to Pacifica Board members and the entire Pacifica community, Gary Null’s offer has been withheld from the greater board by the ruling clique, so it will be turned over to the FTC and possibly the FBI.  The Pacifica Board has not even bothered to launch an internal investigation, or offer an apology to Null, or even to acknowledge the lawsuit.  This could mean serious consequences for members of the Board.

Here’s the document sent by whistleblower Steve Brown:

Attached is a letter that was sent by Gary Null’s attorney to Dan Siegel (Pacifica’s attorney) on March 2. It concerns Gary Null’s lawsuit against Pacifica management (civil action no: 1:16-cv-241, united states district court, eastern district of new york).

The letter offered a settlement that might help Pacifica’s officers, station management, and national board members avoid facing federal prosecution, paying thousands of dollars in fines, and serving prison sentences of up to 5 years.

Because the letter affects not only the welfare of Pacifica (which could face multi-million-dollar fines), but also the welfare of at least 12 members of the Pacifica National Board (who could be fined personally for refusing to stop criminal activities of which it had been made aware), every board member has a legal right to read this letter – and, as Pacifica’s ultimate governing body, a legal duty to decide how to respond to it.

Gary Null
Gary Null

But you were not allowed to exercise that right. That is because Gary Null’s letter (along with other important information about the risk to Pacifica and its board members) was not shared with you as board members. Ooops, sorry. That is too mild a description. What I meant to say is that this information was deliberatelywithheld from you as board members. This means that decisions that only the board is legally empowered to make, in the open, are being made, in secret, by Dan Siegel, Lydia Brazon, and their tiny “inner circle,” who have been making fools out of you for the past three years. And may soon make you defendants in a federal prosecution as well.

Dan Siegel, Pacifica's Attorney
Dan Siegel, Pacifica’s Attorney

In addition, Dan Siegel, the foundation’s attorney, has issued (either knowingly or stupidly) dangerously incorrect and misleading information about the federal statutes that Pacifica has violated. He says that those statutes do not apply to Pacifica. As an attorney, he ought to know better, and I suspect that he does. Nevertheless, he is telling Pacifica staff members to go right on committing more of the same illegal actions.

Because Gary Null has received no response to this or prior letters, let alone assurances that Pacifica management will agree to stop the commission of criminal acts and fire those responsible (regardless of whose friends they are or whose factions they belong to), this matter will be turned over to the federal government for prosecution.

When that happens, none of the members of this board will be shielded from personal liability, since you were all put on notice, multiple times, about the nature and scope of the criminal activities at Pacifica, and urged to stop them – which you would not do. Moreover, a majority of this board, whose names are on record, also deliberately voted to defeat a board motion that would have compelled an investigation into these criminal activities.

Why is Gary Null suing Pacifica and its management?

Although Gary Null has suffered financial and related damages as a result of the illegal activities that were condoned and apparently deliberately committed by members of management, he is not seeking monetary gain from this lawsuit (even though  his statutory reimbursement for compensatory and punitive damages could be at least $600,000 and possibly as much as $3 million). Instead, as he has told me (and as his letter clearly states in Item 9), his only purpose is to bring about a cessation of illegal activities at Pacifica and the dismissal of those responsible — who have by their actions shamed and dishonored the foundation to which he has devoted more than 40 years of his life.

However, because the settlement offer in his letter has not been accepted (that is, because Pacifica management refused to stop the illegal activities or dismiss those responsible), this matter will be turned over to the federal authorities. At that point, Gary Null will no longer have control over the prosecution or the penalties, which will be in government hands. Federal statutes dictate fines of up to $16,000 per violation by the FTC, and since there are at least 5,000 violations already in evidence — and perhaps 25,000 more that could be added in discovery – well, do the math; your calculator probably can’t even count that high. There are also fines of up to $250,000 per violation for the criminal intellectual property thefts committed by management, which carry prison terms of 5 years (even for first offenders).

But I guess none of you board members give a damn. Or maybe you feel bullet proof. In any case, it looks like you will continue to twiddle your thumbs, evade your responsibility to guide the foundation, and let Siegel, Brazon, Wilkinson & Co. drag you and the Pacifica down with them.

That is why I am distributing this message along with Gary Null’s letter to the entire Pacifica community, so that they will know whom to blame for whatever fines are levied on Pacifica – and whom to sue, in a shareholder’s derivative suit, in order to recover those fines for Pacifica, out of your pockets and those of management. Which is likely, because a quick search on Google reveals that, in such lawsuits, the courts are being increasingly attentive to the claims of shareholders seeking reimbursement from negligent and/or lawbreaking management and boards of directors. Especially in non-profit corporations.

In fact, the wheels are already turning. For the past 11 months or more, Dan Siegel has been under investigation by the California Bar Association for professional misconduct in this and other matters (Case No. 15-0-15488); and Pacifica management is also under investigation, for this and other matters, by the Office of the Attorney General of California (Case Filename: Pacifica Foundation Radio CT011303). Soon, it appears, the federal government may join them.

So sleep soundly, Dan Siegel, Lydia Brazon, Margy Wilkinson, and the majority board members who voted down the motion to investigate the criminal behavior in Pacifica. You may soon be trying to cover your faces with a hat as you are “perp-walked” out of Pacifica headquarters in handcuffs by an FBI SWAT team.

Stephen M Brown

sbrown13@nyc.rr.com

Director, Pacifica National Board

 

 

New Charges Filed Against Pacifica with California Attorney General

Whistleblower on Pacifica National Board Exposes Years of Fraud and Violations of FTC  Rules at Pacifica Stations Across the Country.

by Ed Murray

 

Dateline: Sacramento, California

 

Steve Brown, Whiostleblower
Steve Brown, Whiostleblower

On February 20, 2016, Steve Brown, a member of the Pacifica National Board, filed a very serious complaint with the State of California Registry of Charitable Trusts.  In his complaint, Mr. Brown asserts that there has been ” a continuing pattern of serious criminal activities at Pacifica (still going on) that has been condoned, abetted, and/or committed by members of Pacifica management and its board of directors during (at least) the past three years.”

Mr. Brown, after much agonizing, has decided to become a whistleblower, and expose the mail – order practices of several of the Pacifica radio stations and its management, who have chosen to look the other way and ignore Mr. Brown’s frequent demands that the practices stop.  He outlines a consistant pattern of fraud at Los Angeles station KPFK,  station WPFW in Washington D.C., and at WBAI in New York City.

The charges put forth by Mr. Brown relate to the millions of dollars these stations took in while promising the donors they would receive “premiums” in the mail, often they would be DVDs, or CDs.  These charges have been ongoing in the internet media for some time.  Other websites, such as www.PacificaInExile.com have also reported the anger of donors who did not receive product that they had ordered.  These violations have amounted to thousands of dollars over the years, leaving angry donors.

Here is the complete text of the charges filed with the California Attorney General’s Office. 

Julianne Mossler

Deputy Attorney General

State of California

Department of Justice

Registry of Charitable Trusts

P.O. Box 903447

Sacramento CA 94203-4470

February 20, 2016

Re: Pacifica Foundation Radio Complaint # CT011303

 

Dear Ms. Mossler:

I write to inform you of new and even more serious violations of civil and criminal statutes by the persons originally named in Complaint # CT011303. They make intervention by your office more critical than ever. It may be the last chance to save the Pacifica Foundation.

Complaint # CT011303 was filed by 8 former Pacifica board directors (with my approval and support as a current director) because the foundation’s executive director, Margy Wilkinson (and her successors) – together with the foundation’s corporate counsel, Dan Siegel, and the board majority faction they control – had been colluding in a pattern of illegal activities that could not be blocked by normal internal controls.

However, now the situation has worsened. Because your office has not yet taken action (perhaps because our foundation is too small?), those persons have been emboldened to behave even more recklessly – and illegally – thereby placing the assets and safety of the Pacifica Foundation at even greater risk.

For example, a lawsuit (civil action no: 1:16-cv-241, united states district court, eastern district of new york) has just been filed by Gary Null against the foundation and three of its executive directors for violations of the FTC Mail Order Rule (16 CFR Part 435) and violations of federal criminal statutes dealing with intellectual property theft.

Although the current and former executive director, and the majority board members of their faction, had been put on notice, numerous times, by myself and other minority directors, that illegal violations were occurring (and had been occurring for at least 2 years), they refused to stop these activities or fire those responsible, apparently because the violations increased foundation revenue. If the above-referenced lawsuit against the foundation and its officers and directors prevails (as I believe it will, because its causes of action are valid), the statutory fines and penalties that can be imposed on the foundation – especially by the FTC, Justice Department, and US Postal Service – could amount to tens of millions of dollars. This would absolutely destroy the foundation. That it is why it is so important that your office intervene.

Here are only a few recent violations of law that have been abetted and/or committed by Pacifica’s management and controlling board faction, which neither I nor the foundation’s minority directors have been able to block or roll back.

1. Violations of the FTC Mail Order Rule (16 CFR Part 435)

by Pacifica Radio Station KPFK

In a recent fund drive, Pacifica Radio Station KPFK solicited on-air donations of approximately $800,000 from about 7,500 California residents by promising to send them a variety of merchandise (value: $50 to $300) in return for their donations. The FTC Mail Order Rule https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/mail-internet-or-telephone-order requires that such merchandise be delivered within 30 days of receiving payment, unless otherwise stated in the solicitation; or, if it is known that delivery will take longer (but not more than 60 days), a specifically worded notice specifying when delivery will take place, or offering a refund, must be sent to each recipient.

However, the station did not deliver any of the merchandise within 30 or 60 days, nor did it send the required delay notices. Instead, the station manager privately informed her staff – and also let it be known to the foundation’s executive director and board – that she had already spent the money intended for acquisition of the promised (and paid-for) merchandise, and therefore would not deliver that merchandise until a year(!) past the order date (with a good chance that it would not be delivered at all). This violates 16 CFR Part 435 in numerous ways, for which the station can be fined as much as $16,000 per violation. These statutory fines apply even if the merchandise is eventually delivered. And each late and/or undelivered item of merchandise counts as a single violation, making Pacifica’s possible exposure $16,000 x 7,500 = $120,000,000.)

2. Violation of the FTC Mail Order Rule (16 CFR Part 435)

by Pacifica Radio Station WPFW

In a recent fund drive, Pacifica Radio Station WPFW solicited on-air donations of between $300-$400,000 from approximately 4,000 Washington, DC, resident by promising to deliver a variety of merchandise (value $50-$300) in return for their donations. In this case, it is my understanding that — not only was no merchandise delivered and no notices sent — but station management knew, in advance of solicitation, that it did not have the money to acquire that merchandise, and would probably never deliver it to any of those who had paid for it. Because this is a “knowing violation,” in addition to the statutory fines (of up to $64,000,000), the matter could be referred to the Justice Department for further prosecution and penalties.

3. Violation of the FTC Mail Order Rule (16 CFR Part 435)

by Pacifica Radio Station WBAI

In a recent fund drive, Pacifica Radio Station WBAI solicited approximately $500,000 in donations by promising to deliver a variety of merchandise (value $50-$300) to approximately 5,000 New York City Metro Area residents in return for their donations. However, only a fraction this merchandise was delivered, and that was long after the 30- or 60-day limit allowed by the FTC. Moreover, no FTC-mandated delay notices were sent, and the balance of the merchandise has not, to my knowledge, been delivered, and may not ever be.

Hundreds of complaints about non-delivery of merchandise by this station have been received personally by me and others, after the donors were unable to elicit a response from the station. To verify for myself the station’s illegal delivery practices, I sent $200 to WBAI on February 2, 2015, in response to one of its numerous on-air fundraising solicitations; in return for my donation it was promised that I would receive a book and a DVD by Webster Tarpley (approximate value $50). It is now one year later, but I have not received this merchandise, nor do I expect that I ever will.

I estimate that, in the last 12 months, at least 5,000 orders have been unfulfilled by this station, and many more fulfilled late, in violation of FTC regulations. Those 5,000 orders alone risk statutory fines of up to $16,000 x 5,000 = $80,000,000. If solicitations from the past 36 months are included, the number of unfilled orders – merely at WBAI alone — could rise to 15,000 or more, risking statutory fines of up to $240,000,000.

 

The only way to determine the exact number of delinquent orders is to examine the records at all 5 Pacifica stations. However, when I requested these records at WBAI – and by law, as a director, I am entitled to examine all foundation records without exception – my requests were ignored and the records withheld. Absent action by your office, these records will remain hidden, and the defrauding of tens of thousands of residents in the foundation’s five broadcasting areas – Los Angeles, San Francisco, Houston, Washington DC, and New York – will continue.

4. Violation of federal criminal statutes against intellectual

property theft by Pacifica Radio Station WBAI

Much of the merchandise used by Pacifica radio stations to solicit donations consists of commercially produced CDs and DVDs, mostly feature-length films, documentaries, and self-help videos. Normally, the stations would purchase these items from reputable vendors at wholesale prices ranging from about $10-$20 each, and then deliver them to donors. But at Radio Station WBAI, in some cases (I do not know how many, because records have been withheld) the station manager would purchase only a few copies from vendors, then illegally duplicate tens or hundreds or thousands more to fulfill the balance of orders. This has been going on at WBAI and other Pacifica stations for many years. Because the practice can save the foundation up to $100,000 or more a year, it is not stopped by the foundation’s officers or the board faction in control, no matter how often the practice is brought to their notice and protested. Not only does this break the law; it also cheats the donors by sending them fraudulent substandard copies instead of the genuine merchandise they were promised in return for their money.

I and two other minority directors have first-hand personal knowledge of illegal CD and DVD duplication at WBAI. I collected some of these fraudulent copies myself, and know of two specific vendors whose copyrighted products have been illegally duplicated in this way. One of them, Gary Null (whose lawsuit I referenced at the beginning of this letter), has acquired some of these illegal copies on his own and identified them as fakes. Intellectual property theft is one of the causes of action in his lawsuit. I understand that statutory fines for theft of intellectual property are $250,000 per violation, and include prison terms of 5 years for first offenders.

I do not know how many vendors have been defrauded, or how many illegal copies have been made. The documents and records that would reveal these numbers have, as I noted, been withheld from me — either with the acquiescence of foundation officers and board members, or their active cooperation.

5. Pacifica’s attorney provides deceptive and destructive

advice to management and staff members

In response to one of my frequent protests against Pacifica’s ongoing FTC violations and illegal duplication of copyrighted material, a staff member at KPFK said she would cease to solicit donations for the station because of the risk of civil or criminal penalties against her and/or the foundation. In response, the foundation’s attorney, Dan Siegel, issued an email announcement saying that she should continue her solicitations, because Pacifica was exempt from punishment under the FTC Mail Order Rule. This was false and misleading advice, which Siegel had reason to know – as an attorney – since the statute explicitly states that non-profits and charities such as Pacifica are not exempt.

Siegel is not an FTC lawyer; he is an employment lawyer. Had he exercised reasonable fiduciary diligence and called the FTC for a Staff Opinion, he would have quickly been told that Pacifica is not exempt, and that its practices are indeed actionable violations of FTC law. Nor is there any exemption for Pacifica from federal criminal statutes that prohibit the theft of copyrighted material.

Sadly, Dan Siegel’s deceptive and (what I must regard as) self-serving advice to foundation staff members carried great weight, because Siegel, in addition to being the foundation’s attorney, has also served as its executive director. This willingness to wink at or deliberately violate state and federal law seems to be just one example of the recklessness with which Siegel and his faction have been running (and running down) the foundation.

In the earlier filing of this complaint, it was noted that the goal of Dan Siegel and his faction was apparently to bankrupt the foundation, so that its licenses and assets (estimated to be worth $100 million or more) could be acquired by a shadow corporation named “KPFA Foundation,” which Siegel and another board member had created for this purpose 27 months ago. This shadow corporation, I might add, was created in secret, its existence deliberately withheld from the foundation’s executive director and board of directors. However, as our corporate attorney, was not Siegel legally obligated to disclose to the board (1) the existence of that corporation, (2) its purpose, which was inherently antithetical to the welfare of Pacifica, and (3) his controlling interest in that corporation? But he never did so, until its existence was uncovered, accidentally, 4 months ago, by the secretary of the Pacifica board, to her great astonishment.

After its discovery, Siegel then admitted that the purpose of his shadow corporation, whose legal address is that of the law firm he owns, was indeed to acquire the licenses and assets of the Pacifica Foundation, in the event that it went bankrupt (an event that he and his faction were uniquely placed to engineer, and towards which they have apparently been working). Therefore, the only way Siegel’s secret corporation could succeed, is if Pacifica were to fail. Is this not an unacceptable conflict of interest for Pacifica’s attorney, and a reason for him to be severed from the foundation? Yet because his faction controls the board, he is impossible to remove, and therefore continues to exert what seems to be a deliberately destabilizing influence on the health of the foundation.

Summary

Although I am not an attorney, I would think that if a corporation’s officers and board of directors are made aware of illegal activities under their control, but refuse to use their authority to stop those activities, they are in effect abetting those activities – and are therefore accessories after the fact. As such, do you think they are appropriate custodians in whom to entrust the care of such a valued public asset as Pacifica?

The fines and penalties that Pacifica might suffer due to the reckless and illegal behavior of its management would be a number with so many zeroes that it could not fit on the output screen of my calculator. It would mean the death of Pacifica. I hope your office will not stand by and allow the current management faction to wreck our foundation. I hope, as well, that if you decide to act, it will not be too late.

Sincerely,

Stephen M Brown

sbrown13@nyc.rr.com

Director, Pacifica National Board

*************

When contacted about this story Rachele Huennekens, Press Secretary of the Office of Attorney General Kamala D. Harris stated “We don’t comment on any potential or ongoing investigation, as a matter of law and policy.”

edmurray1955@aol.com