A timeline of turmoil surrounding Capital Public Radio. ‘Total financial mismanagement’
Controversy has continued to mount over the past year, after Sacramento State officials discovered what the campus president called “total financial mismanagement” at Capital Public Radio.
It started with news of staff layoffs at CapRadio in response to financial strains and its newly hired interim general manager saying the the nonprofit media organization’s financial problems were severe. Former employees and then managers directed the blame at three costly construction projects, combined with falling revenue.
The bad news got worse only a month later, when Sac State officials announcing they were taking over CapRadio after a California State University audit found huge lapses of accountability in the station’s finances. That was followed a few days later with the campus officials announcing CapRadio would run out of money in a few months if something wasn’t done.
A second audit, by an accounting firm Sacramento State hired, was released this week — months later than university officials initially planned — and included information about hundreds of thousands of dollars in unsupported credit card payments.
Here is a timeline of key events in the turmoil surrounding CapRadio, starting with an announcement five years ago that pointed to a much brighter future — but a decision even CapRadio itself more recently acknowledged as playing an instrumental role in the radio station’s financial downfall.
April 30, 2019: Downtown headquarters
CapRadio announced it had leased property at Eighth and J streets downtown that would become its new headquarters and performance space, bolstered by a $2.25 million investment from Sutter Health.
Rick Eytcheson was then CapRadio’s president and general manager, before he he was named president emeritus in July 2020 to continue fundraising efforts to finance the station’s move to downtown Sacramento.
The station then announced it was leasing a second building at Eighth and I streets to house the headquarters, in a separate location that would provide more security for its journalists.
The station, at the time, also was in the middle of a 15-year, $2 million radio tower relocation project to improve audio quality and reach more listeners.
Sac State owned the central license for CapRadio’s two powerhouse stations — KXJZ-FM (90.9) and KXPR-FM (88.9) — though CapRadio operates a total of seven FM frequencies and six FM translators that repeat the signals for those news and music stations. CapRadio also operated North State Public Radio, two stations owned by Chico State.
Aug. 30, 2023: Staff layoffs
CapRadio management announced staff layoffs, 12% of its workforce, in response to financial strains. Three-quarters of those laid off were part-time employees. CapRadio laid off 15 employees and cut four music shows, according to previous reporting by The Sacramento Bee.
“The finances are pretty severe right now for CapRadio. We owe a lot of money to vendors. We barely have enough cash to keep us going right now,” said Tom Karlo, then interim general manager, in a Sept. 5, 2023, interview on CapRadio. “We are making payroll. It’s just been a very, very tough time. We have no reserves.”
Karlo, a longtime Southern California public broadcasting executive, started at CapRadio eight days before the layoffs. He had been brought in by his friend Luke Wood, the then-new president of Sacramento State.
An Aug. 30 budget presentation to CapRadio’s executive board showed the station owed vendors $3.3 million in unpaid bills from the previous two fiscal years. Not included in that deficit was the rent it owed Sacramento State for its East Sacramento headquarters, which had been unpaid since September 2022.
CapRadio’s revenue had been in a decline since 2021, the station’s financial committee reported. In the fiscal year before the layoffs were announced, corporate fundraising fell short, and the board predicted declining member support in the upcoming fiscal year.
Sept. 27, 2023: Sac State takes over
A 33-page audit of CapRadio released last September found significant financial problems that led Sacramento State’s president to announce the university was assuming operational control of the National Public Radio-affiliated station.
Wood said CapRadio’s accounting, endowment and financial operations would be overseen by the university rather than CapRadio management and its board of directors.
The CSU audit was initiated by former Sacramento State President Robert Nelsen in 2022 after a Sac State official noticed discrepancies in financial statements.
A position of chief content officer would remain to oversee CapRadio’s programming will remain a CapRadio employee, “ensuring CapRadio’s journalistic independence,” university officials said.
In a written statement at the time, Wood said the financial implications of “CapRadio’s mismanagement have significant consequences for Sacramento State.” He also said the operational changes at the station should make donors “feel confident moving forward that their generous contributions will be well stewarded.”
The audit found that more than $1.1 million in studio equipment and furniture loans were taken out by CapRadio’s executive vice president and general manager without written approval by CapRadio’s board.
Credit card charges were not properly reviewed and, in some cases, late fees and charges over the card limit were incurred, the audit found, along with CapRadio accepting gifts without written approval from the campus president” and processing an $85,000 “gift-in-kind” that actually was a discounted purchase of a piano that was then placed in storage.
The audit also found the operation didn’t have written agreements with either of the two entities that handled vehicle donations to CapRadio as a fundraising device, and CapRadio wasn’t doing enough to involve students in its operations, a traditional educational byproduct of campus broadcast operations.
Also, an $8 million loan from the university to CapRadio “was not properly executed,” and CapRadio had fallen behind its repayment schedule by $1.8 million as of July 2023, according to the CSU audit.
Sept. 30, 2023: CapRadio projected to be insolvent
Three days after the CSU released its findings of widespread financial mismanagement, Sacramento State announced CapRadio was expected to be insolvent by January 2024 and was placing a new administrator in charge. Wood appointed Jonathan Bowman, then Sacramento State’s vice president for administration and business affairs and its chief financial officer, to oversee CapRadio.
“As a nonprofit auxiliary, CapRadio cannot file for bankruptcy, and any debt accumulated is the ultimate responsibility of Sacramento State, its fiduciary,” Sac State officials said in a written statement.
Sac State said Bowman was the official who noticed “inconsistencies” in CapRadio’s financial reports and operations in 2021, a discovery that led to the audit. Bowman’s accounting and financial team assumed control of CapRadio’s finances in August 2023.
“What happened is total financial mismanagement,” Wood told The Bee in an Oct. 4 interview.
Oct. 4, 2023: Mass board resignation
A week after the CSU released the scathing audit of CapRadio’s finances, more than half of its board of directors resigned over what they said was a failure by Sacramento State leadership to “engage with the board in good faith.”
In a brief resignation letter addressed to Wood, 13 of the board members — including prominent business leaders and lawyers — said they were leaving over disagreements on how to respond to CapRadio’s financial woes.
Sacramento attorney Roger Dreyer, one of the 13, said in an interview that he believed the radio operation could have been saved if the university had worked collaboratively with the board. He said efforts to do so were rejected.
A 14th board member, treasurer Bena Arao, resigned in a separate letter.
Oct. 24, 2023: CapRadio website goes down
CapRadio’s website went down temporarily because of difficulties finding a way to pay its domain fee to GoDaddy.com. Sacramento State officials said the website was back online after quickly resolving a payment authorization issue that caused website and content streaming to go down.
The missed payment was not caused by a lack of funds. Sac State has said GoDaddy required payment by credit card and, as CapRadio worked to recover its financial health, it did not use credit cards to make payments.
The Sacramento State president responded with a note to the members who resigned, thanking them for their service and dedication to public broadcasting and accepting their resignation.
“The university looks forward to working to ensure a stable future for Capital Public Radio,” Wood wrote in the note.
Those who resigned claimed that any financial inconsistencies were not shared with the Board of Directors, and had they been, they could’ve acted immediately to avoid the financial crisis.
Feb. 15: Interim general manager leaves
In a closed emergency board of directors meeting, Karlo abruptly announced he was stepping down from his interim role as CapRadio’s president and general manager. CapRadio’s director of technology, Frank Maranzino, was announced to take over as interim leader.
“This moment is bittersweet for me,” Karlo said in the statement. “CapRadio is in a much better place than it was six months ago, but there is still a long road ahead for the organization.”
CapRadio’s announcement that Karlo was leaving lauded his progress in “stabilizing core business operations,” but added that “CapRadio is still in a precarious financial position due to its debt obligations and two 15-year leases at the yet-to-be-occupied new headquarters and events venue in downtown Sacramento.”
Karlo, who had been summoned by Wood to stabilize CapRadio days before the August 2023 layoffs, replaced Jun Reina, who had served as general manager and vice president since July 2020 as the operation continued its expansion efforts.
Before then, Reina had worked as CapRadio’s chief operating officer and chief financial officer. Reina left the station in March 2023 after 15 years with CapRadio.
When he took over at CapRadio, Reina replaced Eytcheson, who had led the station since 2006.
March 29: CapRadio tower donated to KVIE
The Capital Public Radio Endowment, a group seeking to have KVIE public television take over control of CapRadio, announced that it donated a tower it owns — and that CapRadio uses to transmit its signals — to the PBS affiliate.
A resolution from the endowment board said the action was being made in part because of a resolution from the board stating that it “has been recently advised that CapRadio desires to terminate its relationship with CPRE.”
A letter from the endowment to Sac State says it allows CapRadio to use the transmission tower without charge, something it values at $65,000 annually, and that CapRadio is allowed to collect rental income of $126,000 each year from other tenants using the tower in Elverta. The endowment group has asked Sac State to sell its broadcast license to KVIE and allow the PBS affiliate to take over the radio operation.
KVIE General Manager and President David Lowe said at the time the donation would have no immediate effect on CapRadio’s ability to transmit its radio signals.
Sac State’s president has continually said he wants CapRadio to remain with Sac State and continue to offer news and programming to Northern California. Sac State has said the tower that is used to broadcast CapRadio news over KXJX-FM is owned by CapRadio, an auxiliary of California State University, Sacramento.
“We do not believe it could be gifted because it wasn’t the endowment’s to give,” Sac State spokesman Brian Blomster said in April. “That’s the position of CapRadio, the CapRadio board and the advice of our attorney.”
KVIE General Manager and President David Lowe said at the time the donation would have no immediate effect on CapRadio’s ability to transmit its radio signals. A few weeks later, Lowe said in a statement that KVIE is “aware that CapRadio has made a claim that it owns the tower only.” “We are conducting our own due diligence on the claim,” Lowe added.
Aug. 5: Forensic report on CapRadio released
A new forensic review of CapRadio’s finances found over $774,000 in spending — including at least $460,800 linked to an individual “without corresponding evidence of expense reports and/or receipts.” That person, who was not identified in the report, had at least some influence over the station’s finances, according to the review conducted the accounting firm CliftonLarsonAllen.
A report on the forensic review’s findings also offered additional details on potential conflicts of interest surrounding contracts and the lease of a downtown Sacramento headquarters. The names of individuals identified in the firm’s report were redacted.
The Bee was able to determine the identities of all five board members noted in the audit as having “possible conflicts of interest,” two of whom were identified in The Bee’s reporting from 2023.
Wood said in a Sac State campus email the names in Monday’s audit were redacted to “avoid jeopardizing a related investigation by the Sacramento County Sheriff’s Office.”
Deputies began investigating “financial improprieties” months ago, said Sgt. Amar Gandhi, a spokesman for the Sheriff’s Office. He declined to say who was included within the scope of the investigation.
