What’s Up with Pacifica Radio?

WTF Pacifica?

We have been getting quite a bit of interest about what is going on with Pacifica Radio/KPFA and how it might affect KFCF. I have attempted to put together some information. This information is from various sources, and we believe it is all accurate, but with all the breathless ranting, factionalism, secrecy and problems at Pacifica it may be out-of-date, inaccurate, or might change at any time. If you have any corrections, updates, etc, please send them to rwithers@kfcf.org . With your support, KFCF in Fresno can continue as we are NOT owned by Pacifica, but by the Fresno Free College Foundation.   Opinions expressed are not necessarily those of KFCF, KPFA, Pacifica, unless noted. – Rych Withers – KFCF GM

The full description of what’s happening appears further down this page….Latest items are first on this page…

2/2/17

The latest comes from KPFA Local Station Board Chair Carole Travis:

Crises at Pacifica – Overview 

Our Pacifica Radio network is undergoing financial, organizational,  and listenership crises. It’s not clear whether Pacifica will survive  these crises,  but the first step in addressing them is probably to understand  the details and extent of each.

Financial Crisis 

Pacifica is approximately $7 million in debt. That number is only  approximate, because the actual amount is not calculable,  in light of the state of Pacifica’s books and records.
Pacifica has no Chief Financial Officer – the last CFO quit [in 2016?] after only eight months,  because of organizational dysfunction and lack of funds. And there is no unifying bookkeeping system  across the five stations.

Pacifica is a California non-profit corporation, and California law requires annual audits.
Pacifica is in violation of that law. This month (January 2017), we  were finally able to release the audit for 2014.

Because of our history of slow/non-payment,  the auditors will not begin work on the 2015 audit without  a substantial up-front payment, which we do not have.

Pacifica also no longer qualifies for funds from the  Corporation for Public Broadcasting,  which require current audits. In past years, Pacifica received  millions/year in CPB funds.

Without current audits, Directors and Officers Liability Insurance is unavailable.

Without reliable and current books and records,  it has been impossible to address Pacifica’s  financial crisis responsibly. As a result –

•Pacifica was able to negotiate favorable settlements with many of its creditors.  

But in several  cases Pacifica then failed to make payments when due under those settlements.  As a result, many creditors have demanded the immediate  full payment of the original amount due.

•In one case, a New York attorney who had agreed to accept  payments over time sued Pacifica, after Pacifica breached the settlement. The attorney obtained a judgment and, in 2016,  seized $95,000 from a KPFK account to satisfy it.

•The entity that owns the Empire State Building, which houses WBAI’s transmitter, has sued Pacifica for $1.3 million in unpaid rent and other fees. Pacifica’s response is due in court on February 6.

• Pacifica has no cash reserves.

•In the past two years, two $500,000 bequests  from Berkeley supporters enabled KPFA and Pacifica  to cover its operating expenses.

• We understand that,  during their separate fund-raising drives,  several stations promised premiums as thanks for their donations,  but because of a lack of  funds never arrange to send out those premiums.

We are at the end of a long downward slope.  Pacifica is going to end without some drastic conscious steps.  Look at the attached financial charts  (numbers are in millions of dollars) Net Assets 2006-2016

Organizational Crisis
Management.  There are lots of reasons for Pacifica’s difficulties.  For several years, the Pacifica National Office (PNO) has gone without a fulltime paid professional Executive Director,  none have lasted a full year.  The current interim Executive Director is unpaid and has a different full time job, tries her best and has been  mercilessly attached at each meeting for the generous giving of her time.   Two prior EDs left in less than three months.   There is no CFO for the national organization. KPFA has a full-time business manager, but many stations do not even have that.  There is not even a shared accounting program across the stations.  Without a full-time, professional Executive Director, CFO with authority to act,  Pacifica will fail…soon.

Governance Structure.  Pacifica’s structure – expressed in a 45-page set of  By-laws – is in great part responsible.  The governing structure is too big, has too many parts, has station-centric features, attempts to micro-manage the network and shelter their individual  stations at the same time.  It is made up people who often  are not radio or communications professionals.   How that  worked for 75 years is a testament to caring listeners.   Pacifica is not going to continue without addressing the situation in a big way.

Under Pacifica’s By-laws, a 24-member Local Station Board (“LSB”)  governs each station. Each LSB elects four members of the Pacifica National Board (the “PNB”).  (Pacifica’s “affiliate stations” elect two additional PNB members.)   A new PNB is elected every year from a pool of caring  but mostly inexperienced non-professional into a highly charged divided atmosphere.  Many PNB Directors are passionate about Pacifica’s mission, but for years, the PNB has lacked management or financial experience, or familiarity with employee law, the details of operating a national network  of radio stations, or other issues that regularly arise. The possibility of a completely new PNB every year and frequent turnover  (and vacancies)  at critical executive positions , make it difficult to develop in-house experience with the issues that  regularly arise.

The PNB has eight subcommittees, each with up to 20 members. In addition, there are eight PNB workgroups,  with unspecified memberships. On its face, this structure seems unwieldy and unnecessarily complex.

The Executive Director and the Chief Financial Officers have  historically had little authority.   Each move is met with a political outcry.   If a local station fails to fulfill its financial obligations,  no one can do anything about it.  It is no wonder that stations  refused to pay their share to PNO, –why would they?

The PNB and the LSBs are known as places of insane infighting.   We have stopped that at KPFA by assuming that we on the boards,  all have good intentions and they we are all short of facts.

The Attorney General of California has Pacifica under investigation.

Listenership Crisis

Pacifica is the only totally listener-supported, noncommercial radio network in the United States. With five commercial-band FM stations in four  critical media markets, it is a national treasure:

• New York City – WBAI 99.5
• Washington DC – WPFW 89.3
• Los Angeles – KPFK 90.7
• San Francisco Bay Area – KPFA 94.1
• Houston, Texas – KPFT 90.1
• Close to 200 Affiliates across the United States with some stations  in other parts of the world.

Because of the wattage of their licenses (no longer available  from the FCC), the reach of Pacifica’s stations is far beyond  most other stations.  It is a treasure.    Fascism is looming in this world power and we are in charge  of this treasure.  Pacifica’s listenership has dropped  dramatically over the years.   WBAI , once an iconic  go- to radio station in the New York City area ,now has only 2 paid staff and regularly has dead air.   None of the stations are what we once were.

Conclusion

The PNB has to act quickly.  The PNB has to thoroughly understand the timeframe, the dangers and the options.  They need to take care of business.   They should elect a new Chair, hire an Executive Director  and CFO immediately, and direct them to immediately bring a menu of choices to the Board for action.   The packet we forwarded to the Board previously failed to mention Voluntary Bankruptcy.  That too is an option that staves (freezes)  lawsuits and allows for  restructuring.   But it, like all the choices, has some down sides.   There are no good choices.  But unless some choice is made, Pacifica will be gone,  probably before this year is out, and that is a conservative estimate.

Carole Travis KPFA LSB Chair


Another update (1/30/17):

The California Attorney General has requested more information from Pacifica with certain deadlines:

Update (1/31/17): Reports are the following  deadline has been extended until March 12, 2017

December 5, 2016

PACIFICA FOUNDATION INC.
1925 MARTIN LUTHER KING JR WAY
BERKELEY CA  94704

CT FILE NUMBER:   011303
RE:    SECOND NOTICE : WARNING OF ASSESSMENT OF PENALTIES AND LATE FEES, AND SUSPENSION OR REVOCATION OF REGISTERED STATUS

On October 7, 2016 the Registry of Charitable Trusts sent a Warning of Impending Tax Assessment to the captioned organization.  To date, only a part of the  response has been received.  Pursuant to that letter, the following required filings are delinquent:

  1. It appears from our review of Form RRF-1 for the fiscal year ending 09/30/2015 that an independent audit was required, pursuant to the provisions of Government Code section 12586.  We further note that it is stated on the Form RRF-1 that no audit was conducted.  Please either provide a copy of the independent audit conducted for the affected year or explain why the organization was exempt from this requirement.

Failure to timely file required reports violates Government Code section 12586 and may result in the suspension or revocation of your registration.

Unless the above-described report(s) are filed with the Registry of Charitable Trusts within thirty (30) days of the date of this letter, the following will occur:

  1. The California Franchise Tax Board will be notified to disallow the tax exemption of the abovenamed entity.  The Franchise Tax Board may revoke the organization’s tax exempt status at which point the organization will be treated as a taxable corporation (See Revenue and Taxation Code section 23703) and may be subject to the minimum tax penalty.
  1. Late fees will be imposed by the Registry of Charitable Trusts for each month or partial month for which the report(s) are delinquent.  Directors, trustees, officers and return preparers responsible for failure to timely file these reports are also personally liable for payment of all late fees.

PLEASE NOTE:  Charitable assets cannot be used to pay these avoidable costs.  Accordingly, directors, trustees, officers and return preparers responsible for failure to timely file the above-described report(s) are personally liable for payment of all penalties, interest and other costs incurred to restore exempt status.

A delinquent organization may not engage in any activity for which registration is required, including solicitation of charitable assets.

If you believe the above-described report(s) were timely filed, they were not received by the Registry and another copy must be filed within thirty (30) days of the date of this letter.  In addition, if the address of the above-named entity differs from that shown above, the current address must be provided to the Registry prior to or at the time the past-due reports are filed.

In order to avoid the above-described actions, please send all delinquent reports to the address set forth above, within thirty (30) days of the date of this letter.

Thank you for your attention to this correspondence.

Sincerely,     Registry of Charitable Trusts
For KAMALA D. HARRIS   Attorney General

(Updated 1/26/17)

The rundown on what’s happening:

What’s happening with KPFA/Pacifica?

Pacifica is a 501c3 non-profit. They started out as just KPFA, and Pacifica was the legal name for KPFA’s non-profit corporation. Then someone gave them WBAI in New York, and they put stations on the air in Los Angeles (KPFK), Washington, D.C. (WPFW), and Houston (KPFT).  Since the stations in NY, DC and LA are having severe financial issues, it is impacting Pacifica. They have a National Office that handles legal, payroll, health care, FCC stuff and such for all the Pacifica stations.

Can KPFA be separated from Pacifica?

The process to sell KPFA to another organization is very difficult and not very likely. Unfortunately, the bylaws adopted after the 1999 shake-up in governance, were designed to make it almost impossible to sell, trade, or separate any one of the stations from Pacifica.  Each station has a Local Board of about 25 members, who elect members to the national board of 26 directors. The groups on the National Board (and local in some cases) spend much of their time trying to take over the organization, filing lawsuits against the board, and tying up the meetings in procedural minutiae, so nothing meaningful can happen. Often the first hour of a two-hour meeting is tied up with both sides jockeying to change and control the agenda. Once that is settled, items are delayed with countless points of order, interruptions and arguing.  If a motion is brought forward to continue an item for another 10 minutes, it will often be argued over for 20 or 30 minutes. Soon, the meeting is adjourned and little, if anything, is accomplished.

Separating KPFA from Pacifica would require approval by the Local Boards of all 5 stations, a vote by the listeners in each area and the National Board. Trying to get the groups to agree to sell or spin off any one station brings cries of favoritism, unreasonable demands for maximizing cash to the remaining stations and unholy alliances. WBAI in New York is losing money like crazy, but suggestions to sell it bring cries of “It’s the most important station”. “Not our station—your station!” and the like.  If it were to be proposed to separate KPFA, the other stations could gang up and want to put it up for bid to maximize the amount of money they would get as KPFA is worth the most money of the five stations. They could then continue to play their money-losing games. Since KPFA is on a commercial frequency (94.1), it is worth a lot more than most non-commercial stations (who now are assigned frequencies between 88.1 and 91.9 FM) and raising money to buy one of the best radio signals in Northern California would put the costs beyond almost any local non-profit community group. This means KPFA’s channel would likely end up in the corporate hands of a CBS, ClearChannel/IHeart or Cumulus, or a religious broadcaster.

KPFA seems to have successful pledge drives, so what is the matter?

KPFA and the station in Houston do OK. However on-going deficit operation in New York and Washington DC has bled any reserves at the National Office and the other stations. Los Angeles is having financial problems too.  Recently, they have had problems with making payroll and health care payments at the stations in LA, NY and DC.  In their un-audited Profit and Loss Statement for FY 2015 Pacifica has shown a loss of $75,000 and FY 2016 has had a loss of $750,000.  The 2015 loss would have been much larger if KPFA had not received two major bequests when donors left them $900,000 in their wills.  KPFA spent some of the money on doing building repairs that were legally needed, and loaned money to Houston to replace their transmitter. Then Pacifica came in and grabbed the entire $900,000, wiping out KPFA’s reserves, and leaving them broke. [Pacifica managed this as a technicality- even though the wills specified KPFA, the lawyers made the checks out to Pacifica, the legal name of the entire organization. Pacifica used that to claim it wasn’t a “restricted” fund.] That money was quickly spent, and recently the National Office reported they had $250,000 in bills due and only $1,800 in their account. The National Office is funded by a 12% levy on all pledge drive money at each station. However, KPFA is the only station current on those payments.  Other stations have quit paying National and have amassed massive amounts due to the national office, and with poorly performing pledge drives, are unlikely to be able to pay those amounts.

Is the money KPFA raises during their pledge drives safely theirs?

The checking account at KPFA has the General Manager and a couple of other station officials as signatories. However, Pacifica’s National Board has ordered KPFA to add the interim Executive Director to the signature card. The GM at KPFA resisted, but finally sent the paperwork to the iED, who is in Los Angeles.  Since the credit union has required that she appear in person in Berkeley at the branch with legal ID and other signatories to be added, it has been delayed. However, should this happen, Pacifica will be able to raid KPFA’s checking account at will. (UPDATE: This happened on Jan. 24th but an attempt to withdraw funds that day was stopped when they forgot a document needed by the bank, but it expected they will be doing this shortly, if not already)

What type of debt does Pacifica National and the other Pacifica stations have?

In addition to ongoing current unpaid bills, Pacifica National and the other stations have accrued a large amount of debt. They have been sued a number of times and lost, and have arranged payment plans on those lawsuits. However, if they should falter on those payments, the debtors can close facilities or seize equipment. The station in New York owes about $1,000,000.00 in back rent to the Empire State Building for rent on their transmitter/antenna site. (UPDATE: In November , the Empire State Building Trust sued Pacifica for payment of 1.5 million dollars in back rent. It is expected that judgement will be sometime in the next few months.)

New York had their phones shut off for a couple of months due to $30,000 in unpaid phone bills. They have been raising less than half their goals during fund drives, which are often extended for weeks past their original time frame. During recent fund drives New York is getting about $10,000 a day in pledges (how much is fulfilled is uncertain.) KPFA, in contrast, raises $30,000 -$50,000 a day during their pledge drives.  Pacifica owes millions of dollars to Democracy Now! (I doubt that Amy will sue, but it is accrued debt on the books.) The station in Washington DC has gotten eviction notices for studios and offices for unpaid rent and is looking at the costs of relocating, finding anew landlord who will accept them. They are doing poorly with their pledge drives.

KPFK in Los Angeles laid off and reduced hours of many of the staff without any union negotiations, and a union arbitration has ordered them to pay over $200,000 in back wages/severances, etc. KPFK’s General Manager has stated she will not pay it, and thinks the broke National Office should cover it. She has also announced that listeners will not be sent their premiums in order to save money. New York has also withheld sending out promised premiums. This angers listeners, and will likely create fewer donors in future drives. (New York, in addition has been charging a Shipping and Handling Fee for non-existent premiums, which led to so many credit card charge backs that the processor cancelled taking Credit Cards at all 5 stations, leading KPFA to scramble in finding another provider.)

 

What about applying for grants or federal money?

Pacifica was receiving money from the Corporation for Public Broadcasting, but since they have not completed their 2014 or 2015 audits, that money is unlikely to continue. The 2014 audit is seriously past due and since the CPB penalizes 1/365th of the money for each day it is late, they have lost the money from 2014. They have spent over $100,000 on the audit since the books were in major disarray at many of the stations, and the 2014 audit is still not complete. They haven’t even begun 2015, and are losing money each day. (UPDATE: Pacifica has finished the 2014 Audit in late December 2016—However they have no idea how to fund the 2015 and 2016 audits , which could cost upwards of $200,000 – depending on the condition of the books at the various parts of Pacifica.) he next few months.) payment of 1.5 million dollars in back rent.  they will Without audits they are unlikely to be funded by any foundations, or major donors. They also risk actions/sanctions from the California Attorney General’s Office. There are also many legal issues that could undermine Pacifica.  Without the audits, Pacifica’s Liability/Directors and Officers insurance has notified the national office their insurance would be cancelled in August 2016. The insurance company had already increased the deductible to $250,000 for any lawsuits, meaning Pacifica has to pay for the first 250,000 in legal costs and settlements. (UPDATE: It has been reported that the California Attorney General called in the leaders of the Pacifica Foundation for a meeting in mid-January and that they reprimanded the Pacifica National Board on a number of issues – using restricted funds for purposes the funds were not designated, hostile and untenable National Board Meetings, not shipping thousands of premiums for New York and Los Angeles, plus  poor management and fiduciary duties. A letter with details and the  outcome of the AG investigation will be will be sent to Pacifica in late January.)

What about KFCF – how is this affecting us financially?

KPFA’s cash flow problems affect how soon we, KFCF, receive the money that is due us.  Currently, KPFA owes us for December , and we might not see that money until the February pledge drive, when KPFA’s cash flow allows a payment. KPFA’s bookkeeping department has also been overwhelmed as they attempt to help the other stations and the National Office’s financial staff on Audit materials. This has delayed KFCF and KPFA reconciling the payments, since we owe them an administrative fee, costs of premiums, costs of billing, phone costs, and our share of the satellite bill to get the KPFA signal to Fresno. These fees are deducted from what KPFA owes KFCF. That too has at times delayed KFCF being paid promptly.

Could KPFA go away?

Yes. It is a possibility. If Pacifica goes bankrupt, that means all 5 stations and their archives could go away. They might be put up for auction. Since New York and Berkeley are on commercial frequencies, bidders would likely be looking at buying them at commercial rates (75-100 million each?)  It is doubtful a local listener group would be able to raise enough funds to compete in the bidding process.  Recently a non-commercial station in Santa Cruz, KUSP, went bankrupt and was auctioned off to a religious broadcaster.  (see http://kusp.org/  Pacifica’s Chief Financial Officer recently resigned saying he didn’t feel he could work with the National Board as they were doing nothing to resolve the problems and didn’t see any answer other than bankruptcy.  The last Executive Director also left in quite a hurry, feeling that Pacifica was unmanageable.

What would happen to KFCF?

We are NOT owned by Pacifica, but by The Fresno Free College Foundation. We could continue to operate, even though it might be rough in terms of fund-raising and finding 140+ hours a week of programming to replace KPFA’s programming. Democracy Now! will still be available, along with a number of other programs syndicated outside of Pacifica.

You will likely hear a number of local shows, and we are working on identifying other programs that might be available. It is also possible that some KPFA programmers might do a show for KFCF, but uncertain at this time. There also might be some repeats of old shows, if available, and not with dated material.

The sound of KFCF will be different, but we are likely to find new favorites, and explore a number of programming ideas. We still plan on speaking truth to power and remaining Free Speech Radio. We also want to have music, arts, and culture. Support from local pledge drives will still be needed along with other sources of income. KFCF has had over 40 years of keeping the station on the air with dynamic, exciting programming- both local and syndicated. We plan on making KFCF strong enough to withstand the sands of time, but change is challenging and we risk that will mean some of the changes will work, and some might not. If they don’t, we’ll make some more changes. Let’s make KFCF important, fun and intellectually interesting.   KFCF thanks you for your support and hope you’ll stay with us as we move forward.

Updates:

12/2/16 Pacifica has now defaulted on the payment of their pension for employees for 2015.

  • The Pacifica National Board has changed the structure of the levy on the stations that is used to support the National Office in a manner that increases the burden on KPFA by $100K a year. Many of the other stations have not been paying their levy for the National Office.