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it is all accurate, but with all the breathless ranting, factionalism, secrecy and problems at Pacifica it may be out-of-date, inaccurate, or might change at any time.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 firstname.lastname@example.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…
A few letters from outgoing interim Executive Director Bill Crosier follow.
First my comments:
The loan may or may not be enough to make the Empire State people happy. The judgement last October (and filed almost a year before that.) was for 1.8 million dollars PLUS INTEREST (9%) and LEGAL FEES.
A two million dollar loan may not pay the whole amount – estimated at $2.4 million for judgement, legal and interest. And kicking the can down the road for a year or two trying to pay interest monthly and then a balloon payment for over two million may not do much but extend the agony. If they can’t pay current payables (they aren’t currently paying the $66K a month on the Empire AGAIN) , I don’t know where they get money for the monthly interest payments. And then there is the matter of the Audits for 2016 and 2017 being due the middle of February. Last I heard they haven’t even started yet, and the California Attorney General’s office has said no extensions on getting it done, and they may lose their non-profit status.
The other memo from Crosier (further down the page) is about the new interim Executive Director, Tom Livingston. While Tom’s credentials sound good, I don’t know how well he can deal with downright crazy PNB members, incompetent General Managers, and the screaming, yelling, in your face culture of Pacifica. His credentials are at the very end of this note…
From Bill Crosier, Pacifica iED:
Many people have pretty set positions on the loan vs bankruptcy issue that has faced Pacifica.
The PNB has decided to go the loan route, so that’s what we’re doing. But I still think it’s very likely we’ll be in bankruptcy before the end of the year, whether people want it or not, and I do question whether Pacifica can survive, especially if our boards do not rise to the challenge. I’m determined to do whatever I can to make sure that we not only survive but also get to where we can thrive, and I assume all of you reading this want that, too. But if we keep fighting each other over this issue, in addition to our traditional factional issues, and if we don’t look down the road a bit to see where we are going, then it may not be possible. Read on to see how you can prove me wrong about bankruptcy being in our future this year.
The controversy has people crossing what used to be long-time factional lines in Pacifica. I have friends on both sides of the loan vs. bankruptcy issue. I wish everyone would listen more to each other and consider the points being made on both sides, and not demonize or blame each other. That does not help.
I strongly believe in following the advice of experts. This especially includes our attorneys and our CFO, who know more about the law and finances that probably anyone on the PNB, including me.
Our attorneys, including the two bankruptcy attorneys with whom we’ve consulted, told us months ago that we should avoid bankruptcy if possible, but if and when we lost the NY lawsuit and Empire State Realty Trust filed their judgment in each of our locations, that unless we had a written forbearance agreement, we should declare ch. 11. That’s been my position all along. I’ve also been consistently against getting a loan (especially using our buildings as collateral) without a defined payment plan. Saying that we’ll later decide what signal to swap or what buildings to sell is not a plan.
I realize that some of you think bankruptcy means the end of Pacifica (I don’t think that, obviously), or at least that it will cost too much. But chapter 11 is really made for situations like ours, to stop collections by creditors and give us time to develop and implement a financial restructuring plan – that could continue and enhance our mission. Organizations that don’t make it out of bankruptcy are generally the ones with no assets. We do have assets- substantial ones (our licenses and buildings) that are worth much more than all of our debt – but we are cash poor.
I know many of you feel all we need to do is get some loans, and we’ll have plenty of time to figure out what to do. But look at where we’re headed in the next few months, and do the math. It’s simple, but it’s not pleasant to think about. We hope to have a $2 million loan funded very soon and hope that we can use that to pay off the ESRT judgment. There’s an issue ESRT brought up last week about whether that money can be used to pay the judgment or whether they might force us (under provisions in the lease) to first pay the rest of the unpaid tower lease fees that have been accumulating since May (as the judgment only covers the period up to then). With the lease going up each year, we should be paying around $65K/month this year. Perhaps we can force them to accept the loan money in payment of the lease. That’s something our attorneys will have to work on. But the debt remains, either way – it’s just transferred to the loan.
We also have about 3/4 million dollars that we owe to our employee retirement fund very soon, and we may be hit with a very large penalty (in addition to interest) if we don’t get it paid as soon as possible.
The total of what we owe ESRT now (about $2.6 million, including the judgment & additional accumulated lease fees through Dec. 31), plus the pensions (with some interest but without including penalties) is about $3.4 million. That’s what we owe now, that must be paid very soon. By the end of 2018, we’ll owe about $780K more to ESRT, plus interest and penalties if we continue to not pay anything on that tower lease. Remember we’ve paid zero since May 2017, and were only able to pay $12K/month (for most months) for the three years before that. That’s why they sued us. We should not expect that we can make the ESRT lease payments if we keep doing the same as what we’ve been doing.
So if we don’t change things regarding our finances, by the end of 2018 we’ll need at least $4.2 million to pay for the above, plus whatever penalties we may have for the pensions being so late, and whatever legal fees we’ll incur when ESRT sues us again for not making those tower lease payments. And that $4.2 million does not include any loan payments at all. We can’t ignore them, either, or we’ll lose our buildings to foreclosure.
Note that even the bigger, second loan of 3 to 3.5 million dollars will fall short of the $4.2 million that we’ll need at a minimum to get to the end of 2018, and that’s in addition to all of our regular expenses. Also remember that we have about $4 million more in debt that we’re not even talking about.
The loan route that the PNB has approved has some bad assumptions:
* that a $2 to 2.1 million loan with the KPFK/PRA building as collateral will let us pay off the judgment – that sounded like a good assumption until last week when ESRT told us how they had the right under the lease to apply payments first to other outstanding lease amounts. Maybe we can get around that, but we don’t know.
* that we can get an acceptable $3 to 3.5 million loan this year from another friendly lender to pay off the first loan and to pay the delinquent pensions – the “acceptable” part is what I’m worried about, especially if it uses all of our buildings as collateral. The $2 million loan we looked at last fall had VERY unacceptable terms, that would have put us in default immediately and put us at the mercy of the lender – not a good place to be when we’re using one of our buildings as collateral. We have seen no loan paperwork/conditions yet for the future loan we’re hoping for – and we don’t know if the conditions will be better. With $8M in debt and no cash flow to pay aur current bills, any lender is going to put some guarantees in any loan that they’ll get their money back, so we better watch out for that.
* that the second loan will give us 3 years or more to worry about how to pay it off – As I showed above, we need at least $4.2 million more than our regular revenues, to get to the end of the year and pay what we owe to ESRT and to our employee pensions, not even counting anything for loan payment. It will be more if we have to pay penalties.
So you can see why I think we’ll be in bankruptcy by the end of the year, if not sooner. Even with a $3 or 3.5 million loan, we won’t have enough to make hardly any of the tower lease payments for 2018, as the loans will all get used up paying what we already owe to ESRT plus the pensions. If ESRT does not file another lawsuit against us this year, how much longer do you think they’ll wait? Our debt to them will continue to grow again, even if we get current for a short time via the loans. And the monthly payments that we can’t afford get bigger each year. Even if we can find a loan that requires zero payments until the end (unlikely), we’ll owe hundreds of thousands more to ESRT by the end of the year.
Without enough money to keep making Empire State Bldg tower lease payments, ESRT will sue us again before the end of 2018 and win again, and we’ll be in even worse shape then with more debt, and with loans using possibly all of our buildings as collateral.
Here’s how you can prove me wrong about bankruptcy. We must increase revenues substantially, and reduce expenses wherever we can. A little bit won’t be enough. We need to generate a surplus THIS YEAR of at least $1 million, and do even better next year, and the year after that. We will need that so we can pay the increasing ESRT tower lease payments through June of 2020, and to be able to make loan payments so we don’t lose our buildings. We also need to make sure that ALL stations pay their Central Services dues EVERY MONTH to the National Office, so they don’t continue to be so starved for cash that they can’t hire enough people to do the work – that’s why our audits are late, why we have minimal HR support, why our pensions are not funded, and why our debt has been increasing.
This is going to require some changes. No, not in the mission, but in how some of our stations operate, because we have to be able to pay our bills if we want Pacifica and our mission to survive.
Our LSBs and PNB need to stop micro-managing, and especially should not insist on keeping programs that listeners don’t want and will not pay for, no matter how much you personally might like a show. We can make exceptions at times of the day when most people don’t listen to radio. But we must have enough good, quality programs that are consistent with our mission and which listeners will support, to bring in enough money to pay our bills and keep Pacifica operating.
Arguing with, and blaming each other, and having weekly (or more frequent) 3-5 hour PNB meetings that accomplish almost nothing is not going to help. The failure of our boards is scaring away major donors and even small ones.
I know that those of you who’ve been pushing for loans believe that’s best for Pacifica. I hope you will realize that there are are also those of us who believe it’s a band-aid approach that will give us a few months at best, and make matters worse later, and that bankrupcy is best for Pacifica.
Is it possible for us to agree to disagree, at least for a while, so we can work together on how to solve the above problems? We have to stop fighting with and blaming each other, so much so we can decide how we’re going to increase revenue and cut expenses. If we don’t make changes to accomplish this, there won’t be anything left to fight about much longer.
outgoing interim Executive Director
Pacifica Hires Tom Livingston as new Interim Executive Director
Livingston to serve while his firm searches for permanent ED
Berkeley – The Pacifica Foundation is pleased to announce that Tom Livingston will serve as its interim Executive Director, effective immediately. He replaces Bill Crosier, who has served as iED since February 2017. Crosier said “I’m excited that Livingston will be our new iED. When my colleagues on the Pacifica National Board asked me to take on this job last year, I told them I’d be glad to do it as a volunteer until we could find a well-qualified, experienced manager to take the job. We have found such a person with Tom Livingston, and I look forward to having him lead Pacifica until we can find a new regular/permanent ED.” Crosier had encouraged the Pacifica National Board to hire Livingston, and supported the search process done by Pacifica’s Personnel Committee.
Pacifica is also working out details for Tom Livingston’s firm, Livingston Associates, to conduct a search for the next regular Executive Director, while he serves as interim ED. Livingston said “Our organizational and staffing work is driven by the principals of first, to listen deeply to the stakeholders (board, staff, volunteers), to deeply understand the situation and mission of the organization, and using that foundation, collaboratively empower the individuals and organizations to find solutions and become more powerful, as well as identify and help select leaders who will have a profound fit with the needs of the group. We look forward to bringing this approach to Pacifica.”
Livingston said “I’m very much looking forward to working with the Pacifica Board and staffs at our stations and to finding a terrific leader for Pacifica in a permanent Executive Director.”
Nancy Sorden, Chair Pro Tem of the Pacifica National Board, said “Pacifica has so much inherent potential from its history and mission, and diverse base of listeners, supporters, and staff from all around the country and the world. So with Tom’s impressive experience with non-profit media companies and approach that emphasizes open, creative, inclusive, sound decision-making strategies, I am very optimistic we will see our way out of our current financial predicament – intact, stabilized, and on a new course for Pacifica that takes advantage of all of our stations unique contributions and serves our diverse listening communities.”
Crosier will continue as a Director on the Pacifica National Board. He was re-elected to the PNB earlier this month. He plans to work this year with others across Pacifica to make changes to the Pacifica Bylaws, in order to improve functioning of its governance, so that Pacifica can better serve the public in providing news, music, public affairs, and culture that people cannot hear anywhere else. Crosier said “with the increasing assaults on the press and independent media, Pacifica is needed more than ever. I want to concentrate on helping our governance work more effectively to enhance and promote the Pacifica mission.”
Tom Livingston, Founder and CEO
Tom is a public media leader and consultant with nearly four decades of success at the local and national level. Livingston served two terms as Vice Chairman of the National Public Radio Board of Directors, and has managed three different public radio organizations including WETA in Washington, DC. Livingston also was Executive Director for Eastern Public Radio, and Vice President, Executive Search for Transformations Consulting Group. He is currently Past Chair of the Public Media Business Association.
Tom is a certified Myers-Briggs trainer (Otto Kroeger Associates) and a certified coach (Professional Certified Coach, International Coaching Federation).
More from Pacifica/KPFA’s interim Executive Director. The note leaves me wondering if there is any hope for Pacifica/KPFA surviving. With all the internal Pacifica Board infighting, I fear they will fiddle while Rome burns… It also make me appreciate the good Board of Directors here at KFCF/Fresno Free College Foundation. We plan on continuing, even if Pacifica Fails…. – Rych Withers
January 2, 2018
Dear PNB Members,
Sub: Joint and Open statement from IED and CFO on urgent financial matters
We have reached a point where Pacifica’s interests in its assets are in imminent danger of being seriously damaged. After Jan. 8th, 2018, ESRT can record an abstract of judgement any time and perfect their lien on California properties. This will include both the KPFA and KPFK buildings and the National Office building. They can do so anytime in Houston, Washington D.C. and New York, where we have operations. Our bank accounts are already under threat of seizure at ESRT’s discretion. We had earlier provided a legal opinion from bankruptcy attorney, Reno Fernandez for your reference.
Some Directors are still hoping for getting a loan to pay off the ESRT judgement. We have written a separate letter to Marc Hand who was hired to obtain such loans. We have asked him to provide a realistic assessment if a loan is possible soon enough where we may comply with loan covenants. A loan offer that was provided to us earlier by another broker would have put us in default on the very first day and property subject to foreclosure. Some Directors also think that it does not matter if lien is attached. We can secure a loan and pay off ESRT judgement and the lien will be removed. We strongly reject this idea. It will be difficult to get a loan when there is a lien attached. It also seriously weakens our negotiating ability, whatever remaining, with ESRT or lender.
We have strongly advised against taking a loan unless there is an effective repayment plan. So far, none has been offered that could be considered realistic. The CFO has extensive experience in obtaining loans for both for-profit and non-profit organizations in past employments. He has cautioned, for last several months, that our difficult financial situation makes it extremely difficult to obtain loans. We are delinquent in our Audits, both for Financial statements and Retirement Plans. Most lenders require latest audited financial statements as a pre-condition for granting loans. Our book-keeping and reporting is materially deficient where we are not able to produce monthly financial statements in a reliable and accurate manner. We have not produced a Balance Sheet in last two years, which is generally required by the lenders every month when the loan is outstanding. Several stations do not have qualified accounting staff to provide any meaningful information. We cannot meet lenders’ requirements for information and will be in immediate default. We have been incurring losses for the last several years and our business does not produce a cash surplus to service interest or debt repayment. A few stations do not have working capital to sustain their operations or make critical payments in a timely manner. This foreseeable and continued deterioration in our financial situation, may constitute a condition for default and trigger loan recall. Any one of these instances will cause serious business interruption or forced bankruptcy.
We had very specifically cautioned against the loan where a wrong application (Home Mortgage) was used and produced a loan documentation of 129 pages. It would have put us in default on the very first day if we had gone ahead. Both of us had refused to sign that loan application. It will be an eye-opening experience for everyone to see the legal opinion which was obtained on that loan offer, which only confirmed our worst suspicions. We fully understand the sentiment behind taking a quick loan and paying off the ESRT judgement. However, it ignores the financial distress and does not provide solution to multiple issues that we face. Further, such a loan is likely to just trade one problem for more serious problems later this year and which would also likely force us into bankruptcy, but with the added burden of a loan.
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Pacifica has been kicking the can down the road for several years and has accumulated large amount of debts. Following are some noteworthy financial challenges:
a. We have not paid the pension obligations for last three years. We have been out of compliance for our Retirement Plans for mandatory reporting and Third Party Administrators have cancelled their contract. We do not have any plans to make our obligations current and our pension plans are under threat of being disqualified.
b. The ESRT lease runs until June, 2020 and currently requires a monthly payment of approximately $60,000. This amount increases over time. We have not been able to pay even the minimum of $12,000 for last several months and have no means to pay roughly $2 million that will accrue over next three years. Default in these payments will bring us to court again, in an extremely bad shape.
c. The National Office needs money to hire additional staff to bring its audits current and handle compliance matters. The backlog from FY 2015 has crippled its normal functioning. Substantial investment is needed to streamline accounting processes across the Network to generate regular financial statements. It must also have resources to hire a full time Executive Director and a qualified Human Resources Manager. Stations are themselves struggling and not able to provide a steady stream of Central Services. Weakening of the National Office is akin to cutting blood supply to the brain and hoping body parts will survive. It cannot work this way.
There is a long list where we urgently need financial resources to barely keep our head above water. A proposed $2 million loan, without even a repayment plan, would not have accomplished anything, except putting the KPFK/PRA property in a serious risk of foreclosure. We have been strongly against this approach unless the PNB demonstrates a willingness to deal with these problems and is receptive to a comprehensive plan. This was also confirmed by our General Counsel, Ford Greene, that we cannot have a piecemeal approach to solving this crisis.
Pacifica is asset rich but cash poor. It must sell or swap some of its assets, whether real estate or signal license to generate necessary cash that we need. We fully understand that these are very difficult choices. We also understand the dysfunction in the Board and factional interests where each group will not cooperate with the other and decisions will not be made in a timely manner.
After the ESRT court judgement was posted in October, we urged the Board to act decisively and urgently. ESRT does not have any faith that we will pay our financial obligations in a timely manner. We provided extensive recommendations and details and options to the Board to consider and act. But, we soon realized that local station politics will not let the Board decide in any meaningful way. Pacifica missed the opportunity of securing a forbearance agreement from ESRT as it needed a very tangible sacrifice of some assets.
About six weeks back, we made a very forceful case for full scale preparations for Bankruptcy filing. This did not include actual filing and we would have approached the Board again, if there be an imminent danger of assets being seized. There are extensive preparations needed both pre and post filing and that must be done in order to comply with the statutory requirements. We have extreme shortage of staff which is not even sufficient to handle day to day work. It would be absolutely essential to hire and train one or two persons so that they can start collecting the information. We provided to the Board, written details of such requirements some of which were required Day 1 of filing.
We must mention that we do not take Bankruptcy lightly. We are fully aware of the costs involved and burdensome reporting. However, we balance these disadvantages with an overriding interest of protecting
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Pacifica’s assets and its ability to continue business in an orderly manner. We have repeatedly said that Bankruptcy is not our preferred option but a forced choice. It is an outcome of PNB dysfunction and paralysis. It is also forced upon us as no decisions have been made to resolve our huge and growing debt problem for the last several years. Instead, again a Band-Aid solution is being proposed for taking out loans which will make problems worse. We have to find the means to pay down our pension obligations, make arrangements for future ESRT lease payments and provide some working capital to the National Office and stations to function. We realized that these are all tough decisions and need time and will-power to resolve. Hence we considered Ch. 11 Bankruptcy and Reorganization to be the feasible option. It will provide us time and necessary force to make hard decisions.
We have now tried, on multiple occasions, for over a month for the Board to give us authorization to prepare full scale Bankruptcy preparations. We have not received one. Some Directors are confusing “bare bones” preparation to be sufficient and we have repeatedly told that it is not enough. We have now cautioned the Board, that at this late stage, even our Bankruptcy petition may fail as we may not comply with the reporting and other requirements.
We find it extremely disturbing that the Board has chosen to conduct these deliberations in Closed Session, meaning in secret. This gives them cover to move resolutions and insert their own priorities so that our view points are not considered. This also gives them an excuse to avoid any responsibility or accountability for their own actions and delays in making decisions. There is a reason for confidentiality but there is no reason for ignoring advice from professionals, including three attorneys, who are uniform and consistent in demanding immediate action.
We have been very alarmed and concerned, for quite some time, about the dysfunction and paralysis. On Dec. 11, 2017, some officers met with deputy California Attorneys General Elizabeth Kim and Julianne Mossler, to express our views with regards to PNB dysfunction and its inability to make decisions. We provided extensive documentation in support of our statements and concerns. This consists of various recommendations that we have provided to the PNB and information and explanation that was relevant for their consideration. The Deputy AG’s fully understood the gravity of the situation. As a result, Julianne Mossler, spoke with PNB Directors on Dec. 14 to remind them of their fiduciary responsibilities and act in the best interest of the Foundation.
Still, the PNB has not taken any action so far to protect Pacifica’s assets. We have now concluded that we will remain on the sidelines and let Directors take ownership of their actions. Delay or inaction is also their responsibility. We could take it only so far. Time has run out and filing for bankruptcy is the only option available to prevent Pacifica’s interest from being damaged, especially with no written forbearance agreement from ESRT and no assurance that they will provide one with a partial payment of the judgment.
We will leave the Bankruptcy motion in the Agenda. The Directors may vote on it or defer it to another meeting. All the attorneys have told us that January 8, 2018 is the final date before which the bankruptcy petition should be filed if Pacifica wants to keep a free and clear title to its California properties and to prevent very significant risks and expenses if it is necessary to file bankruptcy later. If such a filing is not made before January 8, we believe that Pacifica is in danger of heading towards a very destructive and chaotic series of events. We do not have confidence in the PNB that it will make right and timely decisions to reverse course once ESRT starts seizing assets. The situation will spiral out of control and Chapter 7 liquidation may become a real possibility.
We have a profound responsibility to let Local Station Boards and all employees know as they are seriously and adversely impacted by PNB decisions. More than 120 employees and their families will be affected if Pacifica is
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not able to recover from the present crisis. PNB indecision has created considerable uncertainty. We are being asked some tough questions regarding Pacifica’s future, during leadership calls, but have no answers. We also intend to inform them of our complaint to Attorney General after we redact the Confidential section, if any. We can do as much as we can, but decisions are not within our control.
This is the reason why we are compelled to write this joint and open letter to a wider group so that they are fully aware of the facts. They have a right to demand answers from their chosen representatives if they are working in their own interest or in the best interest of the Foundation. There is considerable misinformation, conjectures and speculation of various options and proposals in the wider Pacifica population. We hope to provide some perspective to these discussions from our experience and knowledge as we see the events unfold day by day.
Bill Crosier, Interim Executive Director
Sam Agarwal, Chief Financial Officer
a. National Finance Committee
b. Audit Committee
c. Local Station Boards
d. General Managers and Business Managers
e. Ford Greene, General Counsel
12/29/17 gives us this brief note from Pacifica’s iED Bill Crosier:
Many of you have asked what happened with the Pacifica bankruptcy motion last night.
The PNB majority moved it to executive session. I can’t give details publicly about the executive session, but I’ll just say that the PNB did not get to that motion in exec. session, so took no action on it.
A last ditch effort is scheduled to be voted upon by Pacifca’s National Board tonight 12/28 , authorizing Pacifica to file for Bankruptcy. The meeting can be heard at www.kpftx.org
Here is the email from Pacifica interim Executive Director Bill Crosier:
Here is a very important motion that I’ve asked to be put on tomorrow’s PNB agenda. If you have comments or suggestions, please send them to email@example.com
But please read all of the motion first, so you’ll understand why this is necessary and why we can’t wait. I’ve appended it below, rather than attaching it, as some lists don’t allow attachments.
——– Original Message ——–
Subject: Bankruptcy motion – It’s time
Date: Wed, 27 Dec 2017 21:45:43 -0600
From: Pacifica Executive Director <firstname.lastname@example.org>
Dear PNB Directors,
Attached is a resolution for authorizing to file for Chapter 11 Bankruptcy and Reorganization. As is clear, we have exhausted all options at this time to secure a loan or to pay the ESRT judgement or to secure a forbearance agreement. Three attorneys have told us, in very clear terms, that Pacifica’s assets are in imminent danger of being liened or seized, some of which may happen today.
We have no written forbearance agreement of any kind with ESRT. They have a judgment against us and have filed in every state where we operate. Now that we are at this point, we must file chapter 11 to protect Pacifica’s assets, so we can continue operations.
All directors have a fiduciary responsibility to protect the Foundation’s assets. This decision has been blocked and delayed for a long time and cannot be delayed any further. Time has run out. Various delinquencies and financial distresses cannot be ignored. So, I urge my colleagues to do the right thing. Still, we can salvage and come out of this crisis. But later, we will not be able to do so. Waiting until Jan. 8 will be too late, as that’s when all the California properties will be at risk. Our other assets, including our bank accounts, are already at great risk of seizure.
As this issue is of critical importance to Pacifica, I am copying all Local Station Boards, the National Finance Committee, Audit Committee, and General Managers and Business Managers to keep them informed.
Please note that any attempt to block or unnecessarily delay this motion will be taken very seriously. As a follow up to our meeting with the California Attorney General Charitable Trusts Division, the officers would forward the outcome of this motion to their office with voting results. Directors may be held personally responsible for conscious disregard of their duties. Damages now can be very clearly specified and it will be the loss of property, interest and legal costs.
I’m sorry to have to put this so bluntly, but this is very important – perhaps the most important thing the PNB has had to do, to protect Pacifica.
Now is the time. We cannot wait any longer.
William G. (Bill) Crosier
Interim Executive Director
Pacifica Bankruptcy Motion
WHEREAS, on October 4, 2017, the Honorable Gerald Lebovits of the Supreme Court of the State of New York, granted summary judgment in the amount of $1,819,687.52 with interest and reserving attorney’s fees and court costs, in favor of plaintiff, in ESRT Empire State Building (Empire State) L.L.C. v. Pacifica Foundation, Inc., Case No. 656145/16, for the failure of Station WBAI to stay current on its lease payments for its broadcast antennae located on the Empire State Building in New York, New York;
WHEREAS, on November 16, 2017, the Clerk issued Judgment (“Judgment”) in the amount of $1,839,586.19 in ESRT Empire State Building L.L.C. v. Pacifica Foundation, Inc., reserving attorney’s fees and interest;
WHEREAS, on December 7, 2017, Empire State filed its Application for Entry of Judgment on Sister State Judgment in Los Angeles County Superior Court, Case No. BS 171750 and on December 12, 2017, personally served the same on Pacifica Foundation’s National Office, 1925 Martin Luther King Way, Berkeley, California (“National Office”);
WHEREAS, on December 7, 2017, Empire State served on the National Office and filed its Request to File Foreign Judgment in Superior Court of the District of Columbia, Case No. 17-0008138, in the amount of $1,839,586.19 at the rate of 9% interest;
WHEREAS, on December 11, 2017, Empire State served on the National Office and filed the Notice of Filing of Foreign Judgment in the District Court of Harris County, State of Texas, Case No. 2017-80997, in the amount of $1,839,586.19;
WHEREAS, Empire State has taken the steps necessary to start to execute its $1,839,586.19 Judgment in the states of New York, California, Texas and Washington D.C.;
WHEREAS, Pacifica Foundation owns real property free and clear and five broadcast licenses, but does not have sufficient operating capital and reserves to pay the Judgment;
WHEREAS, Pacifica Foundation maintains real property and bank accounts in the states of New York, California, Texas and Washington D.C. which are at risk for being levied upon, liened against and seized;
WHEREAS, Empire State may execute its Judgment on bank accounts owned by Pacifica Foundation at any time;
WHEREAS, Empire State can record an Abstract of Judgment in California on Monday, January 8, 2018, which will become effective against real property in California;
WHEREAS, if Pacifica Foundation fails to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018, in California, and Empire State records an Abstract of Judgment on Monday, January 8, 2018, it will create a Judgment Lien which will become effective as against real property Pacifica Foundation owns and unnecessarily and unduly compromise Pacifica Foundation’s position in bankruptcy court;
WHEREAS, the recordation of an Abstract of Judgment in California will trigger the creation of a Judgment Lien that will entitle Empire State to add interest and attorney’s fees to its Judgment Lien and otherwise improve its position and damage Pacifica’s assets;
WHEREAS, for close to six months Pacifica Foundation has requested Empire State to sign a Forbearance Agreement in writing whereby Empire State would promise for a time certain not to execute its judgment and otherwise increase its legal advantage over the Pacifica Foundation by promising not to record an Abstract of Judgment or take any other steps to perfect a Judgment Lien or enforce the Judgment for the forbearance period, and Empire State has refused and continues to refuse to do so;
WHEREAS, Pacifica Foundation has failed to make any further monthly antennae lease payments to Empire State since May 2017 and will continue such failure into the foreseeable future;
WHEREAS, as of December 1, 2017, Pacifica Foundation’s monthly payment to Empire State is $60,991.16 and will continue to increase in amount every month thereafter until the lease expires in 2020;
WHEREAS, Pacifica Foundation cannot afford to make the ongoing and continuing monthly Empire State lease payments for the location of the WBAI broadcast antennae;
WHEREAS, Pacifica Foundation has failed to fund the retirement plan for its employees since FY2015 and owes said plan approximately $750,000
WHEREAS, due to Pacifica Foundation’s lack of compliance in funding its retirement plan for its employees, on December 12, 2017, the Newport Group, Inc., the manager of the plan “disengaged” effective immediately;
WHEREAS, Pacifica Foundation has mismanaged its fiscal responsibilities for a period of many years that has resulted in the accumulation of millions of dollars of debt;
WHEREAS, Pacifica’s Foundation’s credit rating is damaged, flawed and poor such that it can become eligible for cash loans only on the riskiest and most harsh terms for which it has no articulated plan for repayment and which necessarily would be secured by real property that Pacifica owns;
WHEREAS, the Pacifica Foundation has an ongoing duty to submit yearly independent financial audits to the California Attorney General Charitable Trusts Division on a timely basis;
WHEREAS, the failure of Pacifica Foundation to timely submit yearly independent financial audits to the California Attorney General Charitable Trusts Division will result in the revocation of its tax-exempt status;
WHEREAS, the Pacifica Foundation cannot operate without remaining a non-profit corporation with a valid tax-exemption in good standing in the State of California;
WHEREAS, on May 22, 2017, the California Franchise Tax Board revoked the Pacifica Foundation’s tax exemption for failing to timely submit yearly independent financial audits, which status was subsequently reinstated when Pacifica Foundation submitted its independent financial audit for FY2015 to the California Attorney General Charitable Trusts Division in August 2017;
WHEREAS, Pacifica Foundation has a fiduciary duty to protect its assets, not to expose its assets to undue and unnecessary risk and to exercise sound fiscal management looking into the future;
WHEREAS, the Pacifica Foundation has no other present means by which to protect its assets from imminent levy, lien and seizure;
WHEREAS, the most effective way for the Pacifica Foundation to effectively protect its assets is by filing a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
WHEREAS, in order to file a petition in bankruptcy and to successfully do the work that is necessary to a successful use of bankruptcy protection, the National Office in Berkeley, California must gather information from the member radio stations in New York, Washington D.C., Texas and California;
WHEREAS, the National Office and bankruptcy counsel will have to work in close and continuing cooperation and that physical proximity best facilitates such ongoing cooperation;
WHEREAS, bankruptcy specialists, Reno F.R. Fernandez III, Philip E. Strok, and Pacifica General Counsel Ford Greene continue to advise and recommend Pacifica Foundation to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
WHEREAS, in order to accomplish the continuing work that submitting yearly independent financial audits requires, to continue to exercise accountable fiscal responsibility across the Pacifica Foundation’s radio network and to gather the foundational documents, records and financial data that maintaining a bankruptcy filing will require, Pacifica Foundation must authorize the hiring of additional employees to assist CFO Sam Agarwal;
NOW THEREFORE, it is hereby moved that the Pacifica National Board authorize its Executive Director William G. Crosier and/or Chief Financial Officer Sam Agarwal to employ the law firm of MacDonald Fernandez LLP to file a petition for bankruptcy reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code on or before Friday, January 5, 2018;
NOW THEREFORE, it is hereby moved that the Pacifica National Board authorizes Chief Financial Officer Sam Agarwal to employ two contractors to assist in discharging the tasks set forth hereinabove.
Here is part of the email that KPFA General Manager Quincy McCoy just sent out to KPFA staff:
I’ve held off writing this depressing message as long as I could in an effort to gather as much information and analysis possible while working with current and former LSB members in trying to protect KPFA’s interests in this grim situation we find ourselves in.
Because of Pacifica’s critical financial condition and the PNB’s lack of strategic action or courage the prognosis for the network’s future is shadowy.
*The Imminent Threat*
Come *January 12th *KPFA’s money and property may be seized by the Empire State Realty Trust because of a 1.8 million dollar debt of our sister station WBAI.
If this happens we will cease broadcasting because we will be unable to operate the station. At that point, our building and our bank account will no longer be under our control. Needless to say, this is a terrible position to be in, especially for management when there is *still* no plan of action to articulate from the National leadership to the staff.
*How Did This Happen?*
WBAI owes the Empire State Realty Trust 1.8 million dollars in delinquent transmitter rent. [Plus more delinquent rent since April, not covered in the suit.] ESRT filed in court against Pacifica on November 23rd, 2016. Their monthly rent is currently at $53K per month escalating each month.
On October 4 a judge found in favor of ESRT making it possible forthem to file in all states where Pacifica has properties, allowing them to seize money and property.
The idea of a signal swap for WBAI was ignited and brokers were hired.
The PNB voted to give IED the authority to begin preparation for
Chapter 11 bankruptcy protection, but he and many others on the PNB thought to sell properties (like our two adjacent buildings) and others could cover the debt. The other idea was a high-interest loan that so far has never been secured. All of these instead of the signal swap in New York.
Then the PNB rescinded the bankruptcy resolution. Also, KPFA and KPFK signals were added for signal swaps.
ESRT judgment filed in California on December 6th to seize property and money from KPFA and K. It is a 30-day waiting period that ends January 12h.
Then the PNB voted to allow some prep for Bankruptcy.
At PNB meeting 2 weeks ago California’s Deputy Attorney General, Julianne Mossier spoke at the meeting and made it clear that the board needed to vote to take action immediately and that anyone who obstructs for any personal reasons were liable for not carrying out their fiduciary duties.
The board ignored her plea, but set up an emergency meeting about moving ahead with bankruptcy the following Monday but no action was taken.
The clock is ticking…
*What is Being Done?*
I want to thank all the LSB members who have worked so diligently this year negotiating with the PNB in good faith to move the network in a positive direction while also protecting KPFA’s interests.
Because of the imminent threat of a lien on KPFA’s bank account, we have disbursed in advance (what is legally allowed) our payroll account to Dec 31 st., medical benefits till February and all of our essential bills are paid. In the first week of January, we will process advance payroll for January and pay another month of medical. I’m sorry to say that is all management can do. There still is no playbook for a month or two months down the road.
What is the PNB doing? The governance structure of Pacifica, our historic culture of the usual political infighting, etc., has led to disagreement and paralysis. Unless action is taken pretty immediately we may cease to
exist. You deserve to understand where things stand. I could wait no longer.
The news from Pacifica is frightening, gloomy and a bit depressing. I’d say that I need to buckle down and get KFCF ready to be on our own. I’d like to thank everyone for your support, and say it’s really going to be important to us. I listened to the Pacifica Board meeting last night and the rep from the California Attorney General’s office told them to quit fighting, get off their butts and do something or Pacifica will be in ashes around their feet. Here is that audio (about 6 minutes)
Then they sprung into in-action and kept fighting, and putting off taking any action. If anything saves them, it will be a miracle as far as I can tell. –Rych
Here’s the latest from their interim Executive Director:
Empire State Realty Trust has filed their judgment in California. This means that after 30 days from then (on Jan. 12) that they can start seizing Pacifica assets in California, if the PNB does not come up with a way to pay the judgment before then.
We learned yesterday afternoon that ESRT also filed in Texas, which does NOT have a similar 30-day waiting period. I assume we may learn soon about NY and DC.
I’ve uploaded the official notices that we got to a shared folder on Dropbox:
Those are public so you can share with anyone. If/when similar filings are made in NY or DC, I’ll upload them to that folder, too.
Some Directors have arranged for a broker, Marc Hand, to try to help get us a loan, to provide money to pay ESRT until we can get money from a signal swap to pay off the loan. Theoretically, we might be able to get money to pay off a loan and other critical financial needs from elsewhere, although an option like selling buildings is unlikely to generate enough funds. We got all of our buildings appraised, and the two for which we were hoping might be more valuable turned out not to be so. The Nakapon/National Office building, next door to KPFA, appraised at only $770K, but I have signed documents with a broker to list it for $1.5 million. The real estate broker has said there probably won’t be much interest until January and of course we may have to wait a long time to get an offer for as much as we’d want. The KPFT property was appraised at only $1.2 million and if it was sold, there would not be much money left over after paying for a new location, building out, and moving.
Just to remind everyone – Pacifica has about $8 million in debt overall, plus we owe about $2 million more to ESRT for the remainder of the tower lease on the Empire State Building. ESRT’s judgment only covers what we owe up to last May, when they filed for summary judgment, and legal fees will have to be added to the $1.8 million you know about. Also, because we’ve paid nothing to ESRT since June, we have been accumulating another $60K in debt each month, with the amount going up each January. Including what we need to pay ESRT, plus unfunded pension liabilities and other near-term obligations, we need $5-6 million very soon. And even with that, we’d have at least $4 million in other debt. Remember we don’t have the cash flow to pay anything on the ESB tower lease, and we are struggling to pay other bills.
Marc Hand has experience getting loans for non-profit stations, and he seems to be working hard to help us. But we don’t have a specific loan or even lender confirmed yet, and I don’t know if we’ll find one soon enough, or if the terms would be acceptable. Some Directors (independently of Marc Hand) found another loan previously, with an interest rate that was not too awful (9%), but when we got the loan documents they were terrible, and signing them would have put us into default immediately and would have allowed the lender to foreclose and take the collateral (which would have been the KPFK/PRA building). So nothing happened with that loan.
Perhaps Marc Hand can get us something better. He thinks he can, possibly using all of our properties as collateral, but most of the stations he’s worked with in the past have better credit than us and don’t have $8 million in debt with inadequate cash flow to pay all the bills. ESRT knows we are looking for such a loan and are waiting to see if we can do that, as it will be the quickest and easiest way for them to get money from their judgement. But we may not find an acceptable loan in time. And now ESRT could move to seize assets almost immediately in Texas, if they get tired of waiting, and they can file similarly in NY and DC (and might already have done so, as it takes a few days for us to find out). While ESRT attorneys have told our attorney that they’ll warn us before collecting on their judgement, we still have no written forbearance agreement with them, and we don’t know if the warning will be a month, or a week, or a day.
We’ve also learned from our attorneys that getting a loan before filing for bankruptcy could be very bad, as bankruptcy would then not protect the collateral of the loan.
This week, I, CFO Sam Agarwal, PNB chair Jonathan Alexander, and vice-chair Sabrina Jacobs spoke with Elizabeth Kim and Julianne Mossler, Deputy Attorneys General for California in the Office of Charitable Trusts. Ms. Kim asked if Ms. Mossler could speak to the PNB about their fiduciary responsibilities, and of course we said yes, and she did call into the PNB meeting last night and talk to the PNB for about 9 minutes. If you want to hear it, it’s about 10 min. after the start of the meeting, and you can listen to or download the audio from https://kpftx.org/archive.php
In last night’s PNB meeting, Sabrina Jacobs (PNB vice-chair) and I presented a motion (see below) about preparing for filing chapter 11 bankruptcy. Similar motions have been presented to the PNB twice before but were not approved. We both feel it’s more urgent now that ESRT has filed their judgment in both California and Texas so they’ll be ready to seize assets. An earlier authorization (in Oct.) to prepare for bankruptcy was rescinded a few weeks after it had been approved. Some preparations were made (some of which are also useful in preparing for the FY2016 audit), but other work would be needed so that we’d be able to file all the information required for bankruptcy within the required 2 weeks after filing for bankruptcy itself. The PNB last night voted to postpone consideration of the motion, until they talk again with a bankruptcy attorney.
We are having an emergency PNB meeting on Monday night with two bankruptcy attorneys, and I hope the PNB will take necessary actions then to deal with the situation.
I’m worried because we are depending on ESRT being nice to us and giving us time, while they are clearly making preparations to seize our assets. I do not know how long they will wait for us to come up with the money for the judgment.
– – – –
Motion to Prepare for Bankruptcy by Sabrina Jacobs and Bill Crosier
Whereas, the posting of the judge’s decision in the Empire State Realty Trust lawsuit means that Pacifica (“we”) has limited time before ESRT will commence execution of its judgment by levying against Pacifica bank accounts and real property, and
Whereas, on Dec. 14, 2017, ESRT filed a Notice of Entry of Judgment for $1,839,586 in California, which means that after 30 days from then, the court may order that a writ of execution or other enforcement may issue, and Pacifica’s money and property in California could then be taken from us without further notice from the court, and
Whereas, similar action may be taken in New York, the District of Columbia, and Texas without the 30-day waiting period required in California, and
Whereas, on Dec. 11, 2017, ESRT filed the ESRT judgement in Texas, which could allow ESRT to begin enforcement of the judgement in Texas and seize Pacifica assets there, and
Whereas, getting a loan with lien(s) on real estate means that even bankruptcy would not protect such real estate, if Pacifica failed to fulfill all the terms of the loan, including making timely interest payments, thus making it imperative NOT to get such a loan before filing bankruptcy, and
Whereas, we already owe several hundred thousand dollars more to ESRT for attorney’s fees and additional unpaid tower lease fees since May, with the amount increasing each month, and
Whereas, we do not have adequate funds for other critical near-term obligations, including employee pensions from the last few years (estimated at $750K to $1 million), ESB tower lease payments from now until June 2020 (approx. $2 million), and
Whereas, we owe an additional $3-5 million to other creditors, and
Whereas, we do not have adequate cash flow to pay for more than a small amount of the above, and
Whereas, we had hoped to get a forbearance agreement with ESRT, to give us time before they move to seize assets to satisfy the judgment, but we still have no such agreement, and
Whereas, efforts have been made and are still being made to secure a loan to allow payment of the judgement and other near-term financial obligations, for which Pacifica does not have adequate cash flow to pay them, but we have no such loan yet and do not know if or when we might be able to get one and do not know if the loan terms would be acceptable, and
Whereas, it will take significant time to finish the advance preparations needed in case we have to file for chapter 11 bankruptcy to stop collection activities by ESRT, and
Whereas, the December holidays mean that Pacifica staff will not be as readily available to work on this and their regular duties later this month, while further delays in preparing for chapter 11 filing may mean that we might not be ready in time to prevent seizure of assets in some of our areas, therefore be it
Resolved, that the Pacifica National Board (PNB) authorizes IED Bill Crosier and CFO Sam Agarwal to complete advance preparations for filing for Ch. 11 bankruptcy and reorganization, including advance preparations for 7 and 14 day reporting requirements that are due after the actual filing, and be it further
Resolved, that the PNB further authorizes IED Bill Crosier and CFO Sam Agarwal to file for Ch. 11 bankruptcy and reorganization, if seizure of assets appears imminent and there is not enough time to have a PNB meeting to authorize such filing.
[Consideration of the above motion was postponed on Dec. 14 by the PNB until the PNB can confer again with a bankruptcy attorney.]
I skimmed through last week’s Pacifica National Board meeting audio this weekend and it was more of the same – nothing accomplished due to a disrupted meeting. You can listen, if you want to torture yourself, at:
This morning I see a note from Pacifica’s interim Executive Director:
From Bill Crosier, Pacifica interim Executive Director
Bullying, Harassment, Fiduciary Duties – Open letter to PNB and KPFT’s LSB
It’s time that reasonable people in Pacifica agree to stand up to the bullying, harassment, intimidation, sabotage of meetings, and neglect of fiduciary responsibilities on the part of the PNB and KPFT’s LSB. I have personal knowledge of what’s going on there, but I’d like to hear from those of you from other stations who may want to talk about similar problems with your LSBs.
Pacifica is facing its biggest crisis ever, caused by years of financial neglect and the failure to get our deficits under control and take effective action to reverse the decline in listeners and members and revenue, so that we can pay our bills and keep Pacifica alive. Our mission is seriously threatened by our financial problems and our failure to get the boards to do what’s needed to correct the problems. Management, both nationally and at each station, are trying, but we need help if Pacifica and its mission are going to survive.
Empire State Realty Trust has a judgment against us, our debt to them keeps increasing every month, we have other creditors who may take us to court to get similar judgments (and some already have – those have been for substantial but smaller amounts), we have several years of unfunded pension liabilities, and we have no PNB-approved plan for how to pay for any of this.
Some PNB Directors are trying to help us find a way to pay ESRT, but we can’t ignore our other serious financial obligations. Getting a loan may be necessary in the short term, both for paying the ESRT judgment and some of the other immediate financial needs, but we MUST identify a way of paying off the loan. It can’t come from regular operations – we don’t have the cash flow to do that. We’ve obtained appraisals of all of our buildings – showing that they are worth less than many had hoped – and it’s clear that selling them would not be enough to take care of our financial crisis.
But in spite of all this, and the clear need for our boards to work together to come up with plans to get more listeners and members and donors, and to pay our debts, we are paralyzed by dysfunction on our boards.
In almost every PNB meeting this year, it’s taken an hour or more just to get through approval of the agenda and minutes from the last meeting. Some times we can’t even do that in an hour and a half. Objections brought up often have nothing to do with the agenda or minutes or whatever else happens to be on the floor. Some Directors repeatedly talk without being recognized, interrupt, and often yell so that their voice is so loud and distorted that no one can understand what anyone is saying. Because of this, it took over two months this spring just to get members chosen for national committees, including the Audit committee which urgently needed to get the auditor chosen (they did). The PNB started using a different conferencing system this year, that allows the chair to mute people who disrupt meetings. He does so only after repeated disruptions and warnings, and he does not eject them from meetings even though Roberts Rules allows this. They are also allowed to vote on all motions. Yet they repeatedly make points of order about using an “illegal” conference system and play the victim role, claiming that their right to disrupt meetings is equivalent to censorship.
In last week’s meeting, as in the one before, the PNB never even got to discuss nor vote on any of the proposed Bylaws amendments. Some of those amendments, if approved, would have helped make our LSBs and PNBs less dysfunctional. None of them would discriminate against one faction in favor of another. But it was clear that a very vocal minority of the PNB was determined to not allow those amendments to even be discussed.
The bullying behavior from certain Directors has made PNB meetings this year even worse than in the past. While we have a majority of Directors who do want our financial problems addressed, and who want more functional boards, a determined minority has made that impossible. This is contrary to what our members want, and it’s contrary to the interests of Pacifica. It’s also a serious failure of fiduciary duty on the part of some of the PNB Directors.
KPFT’s LSB has accomplished nothing this year other than raise the level of anger, hate, and frustration to unprecedented levels. I realize some people are unhappy that I replaced the previous interim GM with someone else, but the finances of the station have improved substantially, and KPFT has been paying Central Services and transmitter loan payments every month since August. But even before that, the LSB there was doing little more than frustrating LSB members who wanted to get things done to help the station.
This year, KPFT’s LSB has experienced intense levels of bullying, harassment, false accusations, personal attacks, minor incidents turned into major ones, multiple improperly called meetings, and more. One week, KPFT’s LSB had three meetings and a Town Hall Meeting in which LSB members were asked to come – all in a period of six days. A number of KPFT LSB members have resigned this year because of the time wasting, lack of accomplishments, and the harassment and intimidation that has occurred during and between meetings. Others have privately told me they had felt physically ill to the point of nausea in some of the meetings, because of the way they were conducted, and because the insults and harassment and efforts of intimidation were encouraged rather than discouraged. One KPFT LSB member who missed two of the improperly-called LSB meetings was removed due to excessive absences, and the LSB chair would not allow me or another LSB member to make motions to excuse his absences, calling our motions “out of order” and “dilatory”. Yet the chair asked the LSB to excuse a friend of his (Adriana Casanave), who had missed the same meetings, and they did so.
This is no way to run a so-called democratic governance, and is a great disservice to our members and to the Pacifica mission. Remember, we’re supposed to be for peace, right?
I realize some of our board members don’t like the results of last year’s Delegate elections, but you need to live with that instead of circumventing the clear wishes of the membership – to get our finances under control – by driving off board members you don’t like and ignoring the Bylaws, and making it almost impossible to get work done in our board meetings.
I appreciate all of you who have stayed on our boards and who are trying to help at your station and to make our boards work, but I realize it’s somewhat like being in an abusive family. I hope you stay on and not let the bullies prevail, as they have too often already.
Let’s all stand up to the bullies and concentrate on working to save Pacifica.
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.
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:
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.
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.
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.
William G. (Bill) Crosier
Interim Executive Director
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
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.
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:
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.
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
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.
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.
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:
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:
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.
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
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.
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.