What’s Up with Pacifica Radio? (Update 11/01/17)

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it is all accurate, but with all the breathless ranting, factionalism, secrecy and problems at Pacifica it may be out-of-date, inaccurate, or might change at any time.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…

 

11/13/17 Last week the program director at KPFA sent out a note that included the following:

Pacifica Needs Our Help

Everybody knows the financial pressure the foundation is under and we’re all hopeful that together we can find a way to turn around the Pacifica foundation’s financial situation.

On November 14th the Pacifica Radio Archive will air their yearly pledge drive and KPFA will host a second day billed as building a bigger and stronger network on Wednesday, November 15th. KPFA has been asked by the National office to host this extra day of fundraising for the upcoming struggle to stay on the air

Additional fundraising is not exactly what any us want to do, but under the dire circumstances, I hope you’ll join in and do your best to raise a $150 thousand dollars all five stations will be working towards. Bill Crosier and Sam Agarwal have informed us the funds raised will be used as a down payment for our bankruptcy lawyers.

That was followed by a note from Pacifica interim Executive Director Bill Crosier:

About the extra fundraising we need (and plan to do on Nov. 15 in a national fund drive, immediately after the Nov. 14 PRA annual fund drive):
I was not there, but apparently things were not reported quite correctly at KPFA’s LSB meeting on Saturday.
It’s true that a few weeks ago, after the judge issued his decision in the ESRT case about the unpaid WBAI tower rental, chapter 11 bankruptcy was looking more likely. We knew that if we had to file ch. 11 in order to prevent ESRT from seizing assets, we would need at least $150K for just paying a retainer to get a bankruptcy filing started.
Since then, Sam Himmelstein has urged us not to panic, and we are hoping to avoid having to file for bankruptcy. Chapter 11 bankruptcy does have certain advantages (including stopping collection activities by ESRT and any other creditors, and giving us more time), but it also brings additional significant costs and difficulties.

We have started the process for applying for a loan, using a building as collateral. It may take a couple of weeks to get the loan approved, and after that the PNB will still have to approve the actual loan. A loan cannot be the whole solution to the ESRT tower lease problem, though, because a loan will have high interest payments because of our bad credit and because it just refinances part of the debt. We need more than just the minimum needed to pay the judgment. The loan will NOT provide enough funds for all this:

* the judgment plus additional unpaid lease amounts that have accrued since May, plus interest and legal fees, and

* the rest of the tower lease, and

* unfunded pension liabilities and penalties that we need to pay in the next few months for all stations, to cover the last several years.

Plus we have several million more of other debt, but just let me address the above for now.

We are looking for frequency swaps, for WBAI or WPFW (not both) to provide funds that won’t have to be paid back. A few Directors have suggested selling buildings to do that, although I don’t think that will provide enough usable net cash unless all buildings are sold, which I don’t see as feasible. But either a frequency swap or selling buildings may take time to finalize, and it became clear that if we don’t have to file for bankruptcy, we are likely to need the loan more for some of the other obligations noted above, so we don’t end up back in court in a few months.
So I think we may need $150K or more soon, whether we use it for a retainer for bankruptcy (again, which I hope we can avoid), or for paying interest on a loan that we may need very soon.
But both Sam Agarwal and I want everyone to know that perhaps the worst thing to do would be to get a loan using a building as collateral without a decision by the PNB on exactly how we’re going to pay back the loan. It would be dangerous to risk losing one of our buildings to foreclosure in a few months when we can’t make the interest payments, or at the end of the loan if we can’t pay back the principal.  If that happens, we’ll probably be in bankruptcy anyway, but with an additional problem that we don’t have now (loan in default).
We’re still waiting on some offers that I think will come soon for frequency swaps, but we don’t have them yet so we can’t decide which one to take until we actually have at least one offer that’s acceptable.
But stay tuned over the next couple of weeks, as we get more information.
In the meantime, today the transcript and judge’s order was posted (and signed by the correct judge this time) on the NY courts web site for the ESRT case.  It will still be at least two weeks before anything else can happen, but we need to remain vigilant about that.
Bill
11/01/17 from Pacifica Radio’s Interim Executive Director:

Some of you may have noticed that yesterday, the judge’s decision in the Empire State Realty Trust vs. Pacifica case (that he read in court on Oct. 3) was posted on the NY courts web site, at:
https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=uaMMUY6yCh6pguddS7CNFg==&display=all
That’s where all the filings are for this case. New ones are at the bottom.

However, the clerk for the court had sent the transcript to the wrong judge, who signed it, and there were a few other errors in it. It has since been taken down from the web page above. So we have a little longer before it is corrected and signed by the correct judge, and re-posted.

While it’s possible that starting 2 weeks after it’s re-posted, that ESRT could begin the process to start seizing Pacifica assets, Sam Himmelstein, our attorney in the case, has told us repeatedly that he believes ESRT wants to work out an arrangement with us that will work for both parties, without disrupting things for us.

We are still getting information on possible options and hope we can have something specific that the PNB can agree on soon, and which we can present to ESRT as part of a plan to pay the judgement.

We need a plan to deal with more than the judgement, though, as the tower lease runs until 2020, and everyone knows we have found it impossible to keep up with the lease payments. So we need a plan that addresses those. Pacifica also has other very significant financial issues, including unfunded pension liabilities, the FY2016 and FY2017 audits still to do (with some additional funds needed to complete them),
and other debt. There’s a lot we need to catch up on. We need a plan to handle the cash flow of all that plus our ongoing activities, as we have no extra revenue that can pay for the remaining years of the ever-increasing tower lease, or interest on a bridge loan.

Good news includes that KPFT, KFPK, and WPFW just concluded successful fund drives. KPFA concluded their fall fund drive a day early, last month. WBAI had to add a fifth week to theirs, though, and it’s still continuing.

I want to assure everyone that we will not allow ESRT to seize Pacifica’s assets and clean out our bank accounts. I realize that’s what people are afraid of, but that’s not going to happen. Chapter 11 bankruptcy (which would stop collection efforts while we continue to operate, until we can develop a plan to pay creditors) remains a possibility, but we want to avoid that because there are significant costs to the bankruptcy itself, plus some other issues, even though there are some advantages. A bridge loan is also being considered, but both Sam Agarwal (our CFO) and I feel it should be part of a bigger plan, that includes how to pay off the loan itself as well as other
obligations as noted above, such as the remaining tower lease. The PNB will be reviewing what information we have so far, this Thursday evening, and I think they soon will have enough info so they can make a decision about how to move forward on all of this.

Bill Crosier
Pacifica interim Executive Director

10/13/17 — I met today with some of the people at KPFA, and it doesn’t look good. KPFA, which supplies much of our programming at KFCF, is still at risk because of mismanagement by other stations in the Pacifica Foundation, and The Pacifica National Board. If Pacifica goes under, it will likely take KPFA with it.  KFCF, on the other hand is independently operated and locally owned since 1975, and we can likely survive and continue with your support.  Pacifica lost the recent lawsuit against them by the Empire State Building for back due rent for the New York station’s transmitter and antenna. The total debt at Pacifica is somewhere between 7 and 9 million dollars, but the court finding was for an immediate amount of over $2 million dollars, which Pacifica does not have — unless they sell their buildings or one of their FM stations. Other options include bankruptcy, a high interest mortgage with a balloon payment in a few years or having their bank account seized by the Empire State building real estate trust, along with equipment and assets.  The Pacifica Board is in paralysis, with in-fighting, meeting disruptions, and other tactics making it impossible for the board to take actions to deal with the massive debt.  They have attempted 3 Board meetings in the last week but nothing was accomplished. Here’s an hour of typical meeting obstructionism: https://kpftx.org/archives/pnb/pnb171005/pnb171005a.mp3 

10/04/17 t The Empire State Realty Trust won their lawsuit for $1.8+ million against Pacifica Radio in the judges summary judgment today. Pacifica is mulling whether to declare bankruptcy. Note from Pacifica interim Exec Director Bill Crosier to staff at Pacifica:

From: *Pacifica Executive Director*

Here’s the news from court in NY – not good.

But *we will get through this*, and *please continue doing what you are doing.*

Obviously, what happened in court is public, so you can tell everyone you wish. I don’t want to scare away donors in our fund drives with the word bankruptcy, but people need to know what when/if we go into bankruptcy (more likely now), it will be *chapter 11 bankruptcy* (look it up), in order to continue operating. *It will NOT mean that we’d shut down*.

Ch. 11 brings with it additional problems but would stop collection efforts by ESRT and allow us to keep operating while we develop a plan to pay off the debts.  It’s possible we might get some more time from ESRT to come up with money, if they know we’ll declare bankruptcy to stop collection activities, so that might finally give us a little leverage in negotiating with them for more time (a few months perhaps).

The PNB will discuss this tomorrow night, and I’ll keep you updated.

But again, just keep doing what you are doing at your stations, and I hope your fund drives do great.

Bill

9/26/17 Here’s the latest from Bill Crosier, Pacifica’s interim Executive Director:

We’ve talked for months about the lawsuit filed by the Empire State Realty Trust (ESRT) against Pacifica. The judge will hear the case on Oct. 4 and there are some very important things you need to know. I wish I had good news but I don’t, and I want to remind all of you how serious this is. If you think that this does not matter to you because you are involved with other stations than WBAI in NYC, you are wrong. This will dramatically affect EVERY station in Pacifica.

If you’ve forgotten about the details of this case, it’s about unpaid tower rent and fees at the Empire State Building, where WBAI has its transmitter and antenna. The lease was renewed in 2005 with terms that make it unsustainable – including fees that have increased at more than four times the rate of inflation since then. WBAI managed to catch up on those fees in 2014, but has been unable to keep up with the ever-increasing fees since then. So ESRT, the current owner of the Empire State Bldg, filed a lawsuit against Pacifica last fall. More details are at wbai.org if you want more background.

But I want to stress that this is going to affect you, and your station, regardless of where you are in Pacifica. As I’ve been saying for some time, whether we reach a settlement agreement with ESRT for something less than the full amount for which they are suing us, or whether the court decides to award the full amount of the lawsuit to ESRT, Pacifica is going to have to come up with a lot of money in the very near future.

Depending on whether we can get a settlement agreement with ESRT or the judge issues a summary judgement, we’ll probably have to come up with between $1.5 and 2.5 million very soon. All Pacifica stations can be dramatically and adversely affected by this, and we all need to stick together to make sure we can get through it. I’m asking all of our LSBs and the PNB to please focus on this instead of fighting with each other, so that all of our stations and Pacifica can survive. Yes, it’s that serious. Pacifica’s debt is crushing us — all of Pacifica — and we have to deal with the ESRT lawsuit now, as it’s the most immediate part of the financial crisis caused by our debt. But as I’ve been saying for months, unfortunately there’s more.

The amount for which ESRT is suing us goes up each month as the unpaid fees accumulate. It’s currently approximately $2.4 million. In addition, the lease goes until 2020, and there’s an additional $2 million of lease obligations between now and then. We hope to get out of that future obligation, but the ESRT has been unwilling to negotiate (so far) and there’s no assurance we can get out of that.

We don’t know what the judge will decide on Oct. 4, but regardless of the specifics, we’re still going to have to come up with a lot of money soon – we just don’t know yet how much it will be or exactly when. But I think it’s safe to assume that it will be at least $1.5 million.

What makes this even harder to deal with is that the $2.4 million that ESRT says we owe them now is part of a total of $7 to 8 million in debt that Pacifica has accumulated over the years. Frankly, I think this is due to financial neglect, but we need to focus on solutions, not blame. It’s now coming down to the wire and we can’t keep delaying getting that under control. Some stations have made changes this year in programming and personnel and have had some significant improvements in finances, but some others are still struggling, and we don’t have the cash even with all of our bank accounts in all of Pacifica to pay what will be needed for the ESRT lawsuit.

We will probably have  to borrow money for this, in order to get enough money fast enough to fund a settlement or summary judgement. But because of our terrible credit, we’ll have to pay sub-prime interest rates. What we do not yet have is a plan to pay off those loans – only some suggestions. Failure to pay the loans would be just as bad as not paying a summary judgement in the lawsuit. This is something else the PNB will have to decide. Whatever it is, there will be some pain for all stations. The debt is a legal obligation of all of Pacifica, regardless of who signed the lease and which facility it’s for. We all have to do our part to get past this, even if it hurts.

To make matters worse, we have unfunded employee pension payments that have also accumulated over recent years that also need to be addressed soon, and that I’ve told the GMs to plan for. We’ve found that the amount is larger than expected. See the FY2015 audit (pages 20-21) that was completed last month for the amounts due for FY2014 and FY2015. Additional amounts we owe for FY2016 and FY2017 are still being determined. This needs to be done in addition to paying whatever very large amount will be needed for the ESRT lawsuit. The total amount for pensions is probably between 3/4 and 1 million dollars, plus there may be additional penalties for late payments for past years.

I’ve asked for an executive session in Thursday’s PNB meeting so that we can talk about strategies to deal with the ESRT lawsuit. It needs to be in closed session because we can’t say things publicly that might interfere with getting a settlement in the lawsuit. I’m hoping that the members of the PNB who have insisted on making so many repeated objections that it takes 60 to 90 minutes in each meeting, just to get through agenda approval and minutes from the last meeting, to please not do that, and let us get on with the extremely important discussions and decisions that need to be made regarding this lawsuit.

I hope all of the fund drives now and in Oct. can surpass their goals, as we’re going to need every bit of extra cash that we can get. I also hope all of you will make additional donations to your station (or directly to Pacifica) in the next few weeks, and ask your friends as well. I know that many KPFT members are dealing with flooded homes and cars because of Hurricane Harvey and won’t be able to donate at all now, but I’m hoping that others can make up for that.

I’ve been telling all the GMs and the National Finance Comm. for many weeks that it’s very important to produce surpluses (by reducing expenses and/or increasing revenues), as every station has debt (including to their own employees with the pension plan) that we have to get under control. One or two of the stations are saving money to pay those pensions, but others have not been able to get their finances under control enough to do that yet. This has to change, and the FY2018 budgets need to plan for the cash flow to fund pensions as well as to pay off loans for the ESRT lawsuit.

Let’s please put aside our internal fighting, at least until we get this very real financial crisis under control, and remember that we are here for a very important reason – to ensure that we have Pacifica stations that can inform people that there are other ways than violence to resolve conflicts, stand up to the powerful political and economic interests, speak up for people who are oppressed because they have little political power, and more. We need to be there for future generations, as well as now, to provide independent news, music, and public affairs that other stations won’t let you hear. Our country, and the world, need our stations to speak truth to power and stand up for peace and for rights guaranteed by the Constitution. But we won’t have those stations to do that critically important work if we spend so much of our energies fighting with each other instead of facing the very real threat that the ESRT lawsuit is to all of us. Let’s stand together for peace, for equal rights for all, for civil rights and the Constitution, for the environment, and for real news rather than fake news. Let’s stand up for our stations and for Pacifica.

But to do all that, we have to do what’s needed for our financial survival, and to make sure that all of our stations can continue providing the invaluable service that our country so badly needs.

Peace,

Bill

William G. (Bill) Crosier

Interim Executive Director

Pacifica Foundation

 

9/2/17   Pacifica has completed its’ 2014-15 audit in time for the California Attorney General, but there is still the overdue 2015-16 audit, and many of the same issues are ahead. They won’t recover the CPB money at this late date and won’t be eligible for quite a while, if at all.

The lawsuit from the Empire State Realty Trust for over $2.4 million in back rent for WBAI’s transmitter is about to land hard on Pacifica. The recent filings in the lawsuit had Pacifica saying they shouldn’t have to honor the contract they signed years ago because it’s too much money and just because they’re Pacifica and it is too much money compared to what other sites are charging. The Empire State folks say that Pacifica agreed to the increase when Pacifica and 11 other broadcaster wanted a new master antenna system and transmitter rooms, and everyone agreed, and the other stations are paying comparable amounts.  If you like deciphering legal arguements in the documents, you can see it all at http://iapps.courts.state.ny.us/iscroll/SQLData.jsp?IndexNo=656145-2016&Submit2=Search 

While Pacifica has had some financial recovery, I suspect that Hurricane Harvey will have a dramatic affect on  the fundraising at their station KPFT in Houston, TX.  KPFT has been struggling financially and having a lot of internal political struggles over new interim general managers and claims of racism. Plus controversial programming changes. Get an eyeful on that http://www.chron.com/houston/article/Police-called-to-KPFT-as-tempers-flare-11297336.php

WPFW in Washington DC still has on-going financial issues.

My understanding is that when the lawsuit over WBAI is finished, and if Pacifica loses, they’ll be faced with coming up with the money to pay things off , and may be forced to sell off buildings, maybe even a broadcast license. Expect even more infighting over that between stations, the Pacifica National Board and others. The station licenses worth the most are KPFA, Berkeley and WBAI in New York, because they are on commercial broadcast channels and could be sold to a commercial broadcaster.  In the past, the other stations have tended to gang up against KPFA, Berkeley – if that happens they could sell off Berkeley and have the proceeds to keep the stations that are losing money going for a few more years.

Pacifica also has an option of filing for bankruptcy, but creditors would need to agree to any such plan and there is probably another 3 to 5 million dollars in unpaid bills.  If a plan can’t be put together which the creditors agree to, (along with a judge), creditors could begin seizing bank accounts, equipment and other assets. I’m hoping that Pacifica can pull out of this mess, but I don’t see a sugar daddy showing up, and it truly looks bad. –Rych

7/26/17

Pacifica is making progress on the 2014-15 audit, which is due in a month.  The situation with Pacifica/WBAI, New York being sued by the Empire State Building Realty Trust for over 2.4 million dollars in unpaid rent is still awaiting a final decision by the judge, expected shortly.  Attempts to negotiate a settlement have fallen through.  A decision against Pacifica could mean the ESRT could begin seizing assets, attaching bank accounts, etc.  One option I have heard floated is Pacifica could sell stations, or buildings, but whether this could be done quick enough is not known. Another options, supposedly, is Pacifica could file for Chapter 11 bankruptcy. I’m not a lawyer, so whether this would work, I don’t know.

5/5/17

Things with Pacifica may be a little better, but it still looks daunting to me.  KPFA, is doing OK, but since it is only a part of Pacifica, it is still at high risk. KFCF is NOT owned by Pacifica, so if they should fail, KFCF still exists, just likely without programming from Pacifica Radio/KPFA.

The Good News: KPFK in Los Angeles is recovering financially, but the station in New York, DC, and Houston are still running deficits.  The election of Trump has spurred some additional giving to the stations,.

The not-so-good News: The Empire State Building Realty Trust lawsuit is still pending for over $2 million in unpaid transmitter site rent in New York for WBAI.  There is an attempt underway to negotiate a deal, but if that is done, the amount liable will have to paid very quickly, along with staying current with ongoing rent.  Whether Pacifica will have the funds to make such a payment is unknown, but not likely at this point in time.

The California Attorney General’s office has given Pacifica an extension until August 27th to complete and file their 2015 Audit.
Pacifica did a fundraiser at the five stations to pay for the audit, which raised about $200K.  $50K of that was used to finish paying the accountants 2014 audit. At that point they resigned and quit.

The Pacifica Board now has to  request bids for an audit, select an auditor, and allow the auditor time to figure out Pacifica’s books. According to the Chief Financial Officer of Pacifica the financial books at many of the stations are in disarray, and Pacifica’s National Office staff does not have anyone qualified to put them in order and attempts to hire people, have had people quit after a day or two of looking at the mess, and that finding qualified applicants at a pay level Pacifica can afford is problematic.  Typically an audit for an organization the size of Pacifica can take two to three months if everything is in order.  The timeline for having an auditor selected, books whipped into shape, and an audit completed by the deadline does not look hopeful.

Here is the recent report from Pacifica’s Chief Financial Officer:

CFO Report April 18 2017

 

 

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.