KZYX Board meets in Fort Bragg on March 6

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Death Spiral

Scott M. Peterson March 8 2017

A FEW YEARS BACK, the largest public radio station in Santa Cruz County was KUSP FM. With a $1.1 million operating budget, it was sitting on top of the world. President Kelly O’Brien holds a Masters of Business Administration from Arizona State University. And General Manager Terry Green is a legend in the world of public radio. What could possibly go wrong?

THE INSIDE SCOOP came from a former board member there. ‘Terry Green is a charmer,’ I was told. My source couldn’t go on the record over a severance clause in Green’s contract. But Green reportedly got fired for insubordination. ‘You should talk to Kelly O’Brien,’ my source said. ‘She can tell you more.’ So I did.

O’BRIEN is one of those people who just oozes credibility. Besides the MBA, she holds a Masters from Harvard University in Sustainability and Environmental Management — whatever that is. Along with a Professional Certificate in Hazardous Materials Management from UC Davis. Nonetheless, KUSP closed its doors last September. I wanted to know why. She confirmed being under contract not to disparage Green in any way. So I used a different approach. Asking her, ‘Do you think that a General Manager’s charm can undermine the effectiveness of a governing board?’ O’Brien didn’t hesitate. ‘Yes,’ she said. ‘I’ve seen that happen.’ We chatted for about fifteen minutes or so. Mostly about the charming public radio station here — KZYX.

THAT PROBLEM is laid out in a twenty-five page flip chart I presented to KZYX’s Board of Directors on March 6, 2013. But I only had three minutes to do it after the financial report. That was delivered by KZYX’s treasurer-of-the-moment — Stuart Campbell — who delivered an eight-minute report on KZYX finances. As usual, without a balance sheet, profit and loss report or cash flow statement. The best he could say was that KZYX is living ‘hand-to-mouth’ — both being his. Then it was my turn.

KZYX AIN’T the only public radio station in the area. The KMUD signal from Redway reaches Mendocino too. They share the same business model and policies. But the actual practice of that policy and the financial pictures are like night and day. Suggesting a cause-and-effect relationship between the two.

FINANCIAL INFORMATION for both is available at the National Center for Charitable Statistics for free. It’s filed jointly by the signing officer and the CPA under penalty of perjury every year in something called a Form 990. So I popped the bottom line — net assets — into my spreadsheet program for the past fourteen years for a little look-see.

KMUD ROCKS in that category. Growing its net worth by fifty percent over that time period. At the same time, KZYX has struggled. Particularly over the past eight years. Losing eighty percent of its assets. The biggest single-year drop was under David Hopmann’s presidency. But there were other losses too. Particularly under the gavel of Bob Page and Stuart Campbell — the biggest charmer of them all. So it’s hard to see stability here. Especially compared to KMUD.

THE SIGNING OFFICER for that stretch was GM John Coate. His take was completely different. Calling his tenure ‘a period of unprecedented stability’ in an online resume. Something that’s hard to see with actual data. Especially when policy requires it. Of course, you’d actually have to see that policy. But it was taken off the website in January by the new GM — Jeffrey Parker. Who’s another charmer.

THE WAYBACK MACHINE shows where that policy was. Fortunately, I’d downloaded a copy. And read that section to the KZYX board — word for word. It calls for a line-item review of financial statements for four years. That means fifty separate categories. Policy calls for that information to be provided by the GM to the Treasurer every year. And from there to the board of directors. Just as Campbell hadn’t done.

MEETING MINUTES for that time period reveal no such reviews. Nor do any GM reports. They were all on the KZYX website until January. But they’ve all been taken down as well. That’s okay because I made copies of them before it happened. Just in case. The same policy also calls for an annual audit report. A phrase that also seems to have disappeared from KZYX records over the past eight years.

LEADING BY EXAMPLE, I showed a four-year review of KMUD’s equipment and recorded material. Which was nothing out of the ordinary. $350,000 worth of hardware has lost a hundred grand or so to wear-and-tear over the past four years. Recorded material is valued at around $5,000 and only showed up last year. Then for the shocker — an identical review of KZYX property.

BACK IN 2012, the equipment at KZYX was valued at just over $100,000. In 2014, it shrank to $90,000 — and then vanished. Along with $3,600 in brand new equipment. At the same time, Mary Aigner’s Grateful Dead library — I mean, KZYX’s recorded material —  miraculously quintupled in value. All without adding a single recording. Wow.

OFFICE EXPENSES were next for my little dog-and-pony show. Revealing that KZYX’s costs doubled in that category to nearly $200,000 in 2015. While KMUD’s office expenses only ran $15,000 for that year. And like all the missing equipment, this’d be impossible to see without a four-year review. Something that’s absolutely required by KZYX policy. But has never been practiced. My three minutes were up at that point. With half the presentation to go. So I sat down and waited another twenty minutes for my next turn.

WHEN THAT TIME ARRIVED I talked about four different practice areas. Where all the differences were. First, in the Form 990 review area for KMUD. The signing officer reviews them before the form is filed. Next, for the audited financial statements. KMUD has them. Then for the signing officer. For KMUD, it’s the president. And finally for the board of directors. At KMUD there are four officers on the board. The president, the vice president, the secretary and the treasurer. But no manager.

AT KZYX things are different. Nobody reviews the Form 990 here. It says so right on the form. ‘No review was or will be conducted.’ It’s been like that for six years running. No audited financial statements have been prepared either. That’s gone on for eight years. The signing officer at KZYX is a manager. And the only officer on the board of directors is another manager. There’s a vice president, a secretary and a treasurer. But no president.

PAYROLL was next. KMUD had a paid GM for only two of its fourteen most recent years. At less than fifty grand a year. While KZYX had a paid GM for the last ten years in a row. For seven of those years, the pay was identical at $54,000. That’s where the unprecedented stability was. But for 2015, that amount went up to nearly $60,000. The same year that all of KZYX’s equipment disappeared. I also showed that in the first four years on my chart, there was no pay for the GM. Then flipped to the net assets chart to show how KZYX’s financial picture had actually improved during that time period.

A PASSAGE from John Coate’s website followed. Where he admitted that for fifteen years before working at KZYX, his average reported income was only $200 a year. Making the financial outcome at KZYX under his management more or less inevitable.

PAYROLL TAXES came after that. Over the past eight years, KZYX’s payroll was a quarter million dollars or so. Yet no payroll taxes were reported. Ditto for employee benefits. It’s all on the Form 990s. Filed under penalty of perjury. What came next was a spreadsheet from the GM report. Showing that annual expense to be $55,000 and change. Which multiplied by eight years could push KZYX into bankruptcy. Even more remarkably, the spreadsheet proved that Coate had the exact tool he needed to produce four-year reviews. But never used it.

THE FINAL IMAGE was a photocopy of my presentation bill. It ran $157 and change. So I passed around a jar for donations and went away with thirteen dollars in my pocket. By then my time was up.

CAMPBELL responded toward the end of the meeting. Insisting that the six-year practice of not reviewing the Form 990s was an error made by a previous accountant — but then copied by the current accountant. Which is a big fat lie. The current accountant is Frank X. Gloeggler. That statement — word for word — first appears on the 2010 Form 990 that Gloeggler himself had prepared.

THAT WAS A BANNER YEAR for Gloeggler. He was a very busy man in Humboldt County then. Working for Humboldt Creamery to exaggerate its value by $70 million+. Until he got busted for it, and had to cough up a million dollar settlement. Nice.

AUDITS WERE ALWAYS prepared at KZYX. At least according to Campbell. That was another teensy-weensy mistake on the Form 990. So I spoke up to correct him. If an audit had been done, there’d be a reconciliation in the Form 990. Like there was for KMUD. Campbell had no idea what I was talking about. Obviously because he’d never seen one. I also mentioned a problem between the so-called audit and Gloeggler’s Form 990. They were off by $17,000 in the property category. Where all of KZYX’s equipment had disappeared. I’d been in contact with Gloeggler about that. Who admitted that the amount on his Form 990 was wrong. Something hard to imagine if he’d actually seen that so-called audit. And since that document predates Gloeggler’s Form 990 by six months, it’s unlikely he didn’t have access to it. Especially since the so-called auditor’s office is less than twenty miles away from Gloeggler’s office.

CAMPBELL just didn’t seem to get it. Neither did any of the other board members. Everybody was just whistling past the graveyard — oblivious to any danger. So I brought up my conversation with Kelly O’Brien. And what’d happened to KUSP. That got their attention. I told Campbell that I’d shown the last eight years of Form 990s and so-called audits to O’Brien. Followed by her email response. ‘Looks like a death spiral to me, and rather deeply into it.’ Those were her exact words. Campbell responded, ‘That’s her opinion.’ Then adding, ‘I disagree.’ Which is funny, coming from someone with Campbell’s background.

COLLEGE PROFESSORS usually make out okay. But not Campbell. At Santa Rosa Junior College, he earned a modest $26,126 salary in 2015. The last time he taught at College of the Redwoods was 2014. Earning a whopping $439 there. And unlike Kelly O’Brien, he’s got no Linkedin resume. Meaning he can’t exactly pull rank on her. One of the subjects Campbell claims to teach is critical reasoning. Something he’d failed by the end of our little meeting.

POLICY is Campbell’s Waterloo. He can’t practice existing policy — obviously — so he wants to make up something he can follow. But like goalposts on a trolley, that’ll take some doing.

Which Campbell now says he hasn’t the time for. When asked if he planned to resign from the policy committee, Campbell said that’d be up the chair. Until an audience member reminded him that he was the chair. Then Campbell changed his mind and said he might get around to it four months down the road. Thereby exempting himself from any accountability whatsoever. And leaving fellow board members with something he’s got plenty of — charm.

ED KELLER is one of the board members at KZYX. He seems nice enough. But said something odd. After Campbell dismissed eight years worth of bad filings as inconsequential, I chimed in. ‘Major donors won’t take a second look at these,’ I said. ‘They’ll just pull the staples so they don’t damage the shredder.’ That’s when Keller spoke up. ‘Do you guarantee that?’ he asked. Yes, Ed. I absolutely guarantee it. Which is why you haven’t had any major donors over the past eight years. Except for that big fat welfare check from Uncle Sugar. The one that Paul Ryan will be taking away from you. To lower Donald Trump’s taxes.

OTHER BOARD MEMBERS said nothing about my presentation. That included Jonathan Middlebrook, Jenness Hartley and Meg Courtney. The three stooges who published an editorial in the Ukiah Daily Journal last year broadcasting their own stupidity. By lauding the GM who cratered KZYX. And excoriating the one board member who tried to save it — John Sakowicz.

SAKO WAS TREASURER on the KZYX’s board of directors for two years. Until he crossed the line by asking the GM — John Coate — for the financial information he was entitled to by KZYX policy. Coate wouldn’t play ball. And ever the charmer, he got all the other board members to back him. So instead of firing Coate — like they should have done — they gave him a big fat raise.

DIRECTOR CLAY EUBANK didn’t bother showing up this time. Neither did Director John Azzaro. Director Benj Thomas was absent too. After resigning in the same way that Stuart Campbell delivers his financial reports — by word of mouth. Who could blame them? The new GM is just like the old GM. And the one before that. Now the cupboard is bare with another hungry mouth to feed. That world famous Chinese journalist — Jeffrey Parker.

JANE FUTCHER was the only board member to express any gratitude for my presentation. But then asked a very strange question. Would it be possible for me to email it to her? Futcher made that request sitting perhaps fifteen feet away from cameraman Terry Vaughn. Who was shooting the whole fucking meeting for Mendocino TV. And then always posts the videos to his website. I’ve emailed things to Futcher before. But never got a response. She also asked for a copy of my research. After I’d already told her where I’d gotten it. From the National Center for Charitable Statistics. Who’d gotten it straight from the horse’s mouth — KZYX. WTF???

IN MY WORLD we call people like Futcher dolphins. They’re politically correct — yet passive aggressive Coastal Mendocino women who drink green tea and listen to NPR. They can be relied on for two things — spectacular leaps. Just like dolphins. As diversions for hungry sharks. Such as — oh, say — John Coate, Stuart Campbell and Jeffrey Parker. Who gorge themselves on distracted prey during the dolphin’s fascinating little performances. And also for asking incredibly stupid questions. To buy time for their partners to feed — the sharks. And then to dine on whatever’s left. Like vultures, only worse.

WITH MORE time to speak, I would have mentioned my primary purpose there. I don’t want a job. Or a radio show. Or a seat on the KZYX board of directors. And I don’t want anyone else’s job either. All I want is to tell the tragic tale of what happened to KZYX. How it happened. And how it all could have been avoided. For the benefit of my readers. Who might someday find themselves on the boards of other nonprofits. And might learn from KZYX’s mistakes. To recognize the dolphins. And how to avoid the sharks. Not that Campbell and company would have listened to me. But I’d have said it anyway. If I’d only had more time.

KUSP FM PASSED AWAY at the ripe old age of 45. Proving once and for all that Public Radio Stations don’t live forever. With board members who can follow existing policy, KZYX might be able to celebrate its forty-fifth birthday too. That’ll be on January 12, 2030. Otherwise, it’ll perish during the Trump administration.

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Scott M. Peterson