Peter Franck, ‘Plan B: a “friendly divorce” to save the stations’, 23Sep2018

Peter Franck, lawyer to the stars, has identified two options for Pacifica: “a consensus structural change (Plan A) or enact the ‘Friendly Divorce’, (Plan B)”. He published the proposals on the 10th anniversary of Pacifica Executive Director Nicole Sawaya’s parting shot, an open letter to the deceased Lew Hill. This is Plan B.

Copied, without alteration, from Mr Franck’s work website: https://culturelaw.com/special-information/plan-b/.

Introduction. Six years ago [5Aug2012], Carol Spooner circulated a letter she called ‘Time for an Amicable Divorce at Pacifica?’ Without speaking for her, I believe she saw then, as a very close observer of the Pacifica scene, that attempting to govern and run the five Pacifica Foundation Radio stations under a single corporate umbrella, Pacifica Foundation, was not working, and indeed could be a threat to the survival of at least some of the stations. Observing recent crises, some of us have now come to the same conclusion. This paper will attempt to outline how such a ‘friendly divorce’ could happen. Its goal is the preservation of all of the Pacifica stations in a manner which will enable them to continue carrying out the Pacifica mission.

There are a number of ways in which the ‘friendly divorce’ plan could be initiated. They include; (a) decision by the Pacifica National Board; (b) legal action under California Corporations’ Code Section 6510; (c) the exercise of certain rights which FJC has under the terms of the $3.7 million Loan Agreement of April 2, 2018; (d) a vote of the Pacifica membership. It is not the purpose of this paper to discuss how such a plan may come to be initiated, but to acknowledge it as a possibility and discuss what it would look like.

Outline of a plan.

1. Legal Separation.

a. Establishment of independent 501(c)3 non-profit corporations based in each of the cities in which current Pacifica stations are located, thus establishing local station entities. In most states, any person or legal entity can establish a new non-profit organization by filing Articles of Incorporation with the respective Secretary of State. For all five stations Pacifica Foundation itself would be the Incorporator. As the Incorporator, Pacifica would establish bylaws 1 for the new non-profits and appoint their initial Board of Directors.

b. Appointment of the current members of the stations’ Local Station Board and transfer of the licenses would be conditioned on the agreement of all current board members to suspend intramural fighting during the transition period. They would start with a simplified initial set of by-laws, with a provision that they could be amended by a simple majority of the board during the first 60 days. A simple set of by-laws, providing for a smaller board, with most of its members elected, and some seats with particular competencies to be filled by appointment.

c. In the event that a Local Station Board does not unanimously commit to suspending a factional fighting during the transition period Pacifica would put out a notice to all relevant non profit organizations in the signal area, inviting them to apply for that communities’ license. Who would be the decider would depend on how the process was initiated (see paragraph 2 of the introduction above).

2. Transfer of licenses. License transfer must be approved by the Federal Communications Commission. Pacifica would file with the FCC an application to transfer the current licenses to the new local entities. Filing a Petition for Consent to Transfer does not open the license to third parties. The only action open to the FCC, if there was any properly filed opposition, would be to either grant the transfer or deny the transfer. If granted, the licensee would become the new local non-profit. If denied Pacifica would remain the licenser. The Application to Transfer the licenses would only happen if the local Board has agreed to suspend intramural disputes (as provided in Section 1 b, above). Under FCC regulations, transfer of licenses is subject to the timely filing, by any concerned party of a Petition to Deny. There would have been prior agreement that no such Petition would be filed on or behalf of any present Board Members.

3. Funding. Pacifica will have to engage in a signal swap which could net as much as $15,000,000 (probably reducing the number of people potentially, but not currently listening to one or two of the stations by about 40%). The impact on actual listenership Pacifica will be minimal. Pacifica will use the funds to pay off all current debts and divide the balance (which could be as much as $9,000,000) among the five new non-profit corporations.

4. Reorganization and Revitalizing the New Stations. From the funds left after paying the debt Pacifica would make each newly independent station a a restricted ‘Reorganization and Development grant’ (R&D grant) so they can reorganize and modernize; the terms of the R&D grant will be to conduct a reorganization of programming and operations along the lines outlined in attachment A [it’s missing].

5. The Pacifica Archives will be placed with the University of Santa Barbara or such other entity as has a proven capability of completing the technical preservation work and a commitment to making the contents freely available;

6. The Pacifica Program Service. as the one cash positive entity of Pacifica will continue to operate much as it does at present, under the guidance of a reduced and streamlined Pacifica Board.

Peter Franck, ‘Plan A’, a consensus structural change, 23Sep2018

Peter Franck, lawyer to the stars, has identified two options for Pacifica: “a consensus structural change (Plan A) or enact the ‘Friendly Divorce’, (Plan B)”. He published the proposals on the 10th anniversary of Pacifica Executive Director Nicole Sawaya’s parting shot, an open letter to the deceased Lew Hill. This is Plan A.

Copied, without alteration, from Mr Franck’s work website: https://culturelaw.com/special-information/plan-a/.

~~~~~~~~~~~~~~~~~~~~~

PACIFICA AT A CROSSROADS

Pacifica will have to drastically revise its structure and by-laws in order to survive as a single organization: It will be necessary to develop a strong consensus around the Pacifica system around a plan. If there is substantial consensus on a new structure there are several routes to a By-Law replacement which are briefly discussed below. A simplified, more centralized plan with community input on programming could look like this:

1. We would roll the local Boards into the Community Advisory Boards (CABs, which are required by the Public Broadcasting Act);

2. Pacifica national board should be no more than eleven (11) people, nine (9) of whom would be elected by vote of the entire membership. They would serve no more than two three year terms before rotating off. In addition, there would be three (3) at large seats to be filled by the elected board to round out its skill set;

3. The board would appoint an Executive Director under an employment agreement whereby the board sets forth clear priorities and objectives, the employment of the Executive Director to be reviewed by the board annually measuring performance against stated objectives and goals.

4. Under the Executive Director’s contract, the board would not directly intervene in decisions, appointments, etc., made by the Executive Director or his staff except through a careful and stepped grievance/appeal process.

5. The CABs would appoint for each station, a Program Council. The Executive Director would be responsible for implementing recommendations of the Program council, so long as they are made by a 2/3 vote.

6. Under her/his contract, the Executive Director, would appoint station managers, but would also have direct personnel responsibility with respect to hiring, firing and disciplining of station staff, paid or unpaid.

** There could be several routes to enacting the new plan once there is system wide consensus, include:
A. Vote of the membership;
B. Action by the California Attorney General in Superior Court supported by Listener and Staff as amicus or as co-counsel by concerned listeners;
C. A planned voluntary Court appointed Trusteeship or bankruptcy with a pre-arranged trustee empowered to and agreeing to implement the consensus plan.

Peter Franck, ‘Pacifica at a crossroads’, 23Sep2018

Peter Franck, lawyer to the stars, has identified two options for Pacifica: “a consensus structural change (Plan A) or enact the ‘Friendly Divorce’, (Plan B)”. He published the proposals on the 10th anniversary of Pacifica Executive Director Nicole Sawaya’s parting shot, an open letter to the deceased Lew Hill. This is his preamble, ‘Pacifica at a crossroads’. The plans are posted here separately.

Copied, with the addition of a paragraph-break at the end, from Mr Franck’s work website, https://culturelaw.com/special-information/pacifica-at-a-crossroads/.

~~~~~~~~~~~~~~~~~~~

“Without conflict, quite simply, there would be no learning, growth, or change…. The more desperately a given change is required, the greater the risk that it will threaten the balance of power within a system, making both its continued existence and precise resolution uncertain. This uncertainty can provoke fears that change will become chaotic or necessitate higher levels of skill than may currently be available to successfully resolve the underlying problem, thereby promoting increased resistance, defensiveness, and calculated impasse.

“Thus, breakdowns inevitably precede breakthroughs, and chronic conflict is the first sign that fundamental shifts are taking place within a person, relationship, organization, or system.”

Ken Cloke, The Crossroads of Conflict, 2006

Pacifica is clearly at a major crossroads. In two and a half years, it will have to come up with almost $ 4 Million dollars ($3,986,000 to be precise) [no: the loan agreement states $3.7m, & it’s now reduced to $3.265m], to pay off its loan from FJC. All of Pacifica’s physical assets – its buildings and all the property inside of them are mortgaged as security for this payment (the licenses themselves, under FCC rules cannot be security for loans, but the proceeds of a forced sale of the licenses can be). The paralysis of the present system to deal with Pacifica’s problems in a world very different from that of its 1947 founders was eloquently expressed by the late Nicole Sawaya, in her letter of resignation exactly ten years ago [no: it’s her letter to the deceased Lew Hill], it could have been written yesterday. A copy is posted here [no longer there – but it’s available on this blog], but in part she says:

“Sadly, it [Pacifica – original interjection] is no longer focused on service to the listeners but absorbed with itself and the inhabitants therein. I call it Planet Pacifica, a term I coined during my hiring process. There is an underlying culture of grievance coupled with entitlement, and its governance structure is dysfunctional. The by-laws of the organization have opened it up to tremendous abuse, creating the opportunity for cronyism, factionalism, and faux democracy, with the result of challenging all yet helping nothing. Pacifica has been made so flat, that it is concave – no leadership is possible without an enormous struggle through the inertia that committees and collectives and STV’s … single transferable votes can engender.”

Nothing has changed in ten years except that Pacifica has blown more than $13,000,000 dollars. Imagine what we could do today to advance the founders’ dream, if we had that money, and were not going into deeper debt every day!

There seems to be some magical thinking going around that this loan really doesn’t have to be paid, that the lender (according to Pacifica’s former lawyer) “has never foreclosed,” etc. While there is always some possibility of some extension of time that comes at considerable extra cost in terms of interest payments at the rate of 7.5% (and as the loan and unpaid interest grows, so does the size of the actual quarterly interest payment).

Fundamentally, Pacifica has been living on borrowed time and kicking the can down the road time and again with short term solutions. According to Pacifica’s independent auditor’s reports, Pacifica’s expenses exceeded its income by an average of $1,632,588 per year for the eight (8) years from 9/30/08 through 9/30/16, for total losses over that period of $13,060,703. That can’t continue, and is a sign of a dying organization.

While people talk about factions and look to blame one personality or another, the fundamental truth is that Pacifica, at present, has no way of making the hard decisions forced on it by a drastically changed media environment. We should be looking at these changes even more so as required by the times. Regardless of how the recent election may have turned out, there has been a poisoning of the atmosphere internationally which is going to be difficult to reverse. The five Pacifica stations, the Pacifica program service and the 200 affiliates could be an important instrument in that reversal. Most of the stations are really hardly scratching the surface of that task today.

Pacifica has a choice of having its gradual dissolution forced upon it by lenders and creditors, or making some tough decisions itself. [paragraph-break added]

In this writer’s view, in order to save either the network or, if that is not possible save all of the five stations, Pacifica will have to take drastic action. This writer feels that we have to either adopt a consensus structural change (Plan A) or enact the “Friendly Divorce,” (Plan B). Both are discussed in separate papers attached.