>. Their board reps list their political activism as their principal qualifications, not their skills for running a radio station. They hate Brown because he's rich, and made his money off late-night TV ads. He's rough, I'll concede, but he knows how to raise money. But the hyper-pure don't like the idea of raising money, or like anyone who knows how to raise money. Pacifica is now taking out a loan secured by the building housing the LA affiliate, KPFK. This looks like a suicidally stupid move, though Brown sees a logic behind it. If you care at all about Pacifica, check this out.]
From: Steve Brown <steve at stevebrownonboard.org> Date: December 28, 2008 3:17:01 AM EST To: <WBAI-LSB-PUBLIC at yahoogroups.com> Cc: <NewPacifica at yahoogroups.com>, <fulcrumsofchange at pacificana.org>, <freekpfk at yahoogroups.com
> Subject: [News at SteveBrownOnBoard] The loan that ate Pacifica
Dear Powerless Onlooker at Pacifica's Self-Suicide:
It may be that Pacifica's management has perpetrated a deliberate fraud on the members of the national board.
The $1 million loan that Pacifica is seeking was represented to the Pacifica Board by its management as a 30-year mortgage with a relatively small monthly payment. Pacifica CFO Lonnie Hicks further told a member of the board that the loan would be practically all paid off in 9 years.
Those statements are now revealed to be false. Only one member of the board actually took the time to read the loan documents and discovered that this was not as straight 30 year mortgage at all. Nor was the interest low. In fact, it was a balloon mortgage, which is due and payable in full in 9 years. And the interest rate is 7.5% (even though the Federal Reserve Rate is now down to about zero!)
Moreover, contrary to the statement of our CFO, the loan will not be almost all paid off in 9 years. That is because each $7,000 monthly payment (which the CFO called "small") is interest-only. So at the end of 9 years, when the loan is due, Pacifica will still owe approximately $1.1 million dollars (on a $1 million loan!) after already having paid the bank approximately $840,000 in interest.
That is, if the loan ever gets that far. For the bank is entitled to quarterly audits. These will show that Pacifica has no way to pay back this loan, because its income -- instead of rising, is actually falling. Almost certainly, therefore, the bank will call the loan and ask for the $1 million repayment in full.Which Pacifica will not be able to pay. So the bank will seize KPFK's building, probably pushing Pacifica over the edge.
Actually, Pacifica is already almost over the edge. It is in arrears by, I believe, several months on WBAI's rent (possibly $100,000) and several months in arrears on payment to Democracy Now (about $150,000). And its payroll is in jeopardy. Without this loan it will be bankrupt in two months and probably forced involuntarily into Chapter XII by creditors. Even if it applies for voluntary reorganization and protection under Chapter VII, I do not think it has the slightest chance of coming up with a reorganization plan that will satisfy the court and its creditors.
... UNLESS it sells WBAI.
Such a sale would generate at least $100 million. Pacifica could then pay off its paltry $1 million loan and have $99 million left over. But it scares the hell out of me to think of giving Pacifica management $99 million to play around with. Think about giving Dracula the key to a blood bank (or George Bush the key to the White House). I think this is the ultimate game plan of those in charge -- to put Pacifica into Chapter VII, so they can sell off WBAI but still remain in control ... with a big $99 million pot to play around with.
Why else would management (Lonnie Hicks, Dan Siegel, Sherry Gandelman, and a few others) be putting Pacifica's neck on the block with this loan when there are other, faster, less risky ways to raise the money, which have been discussed widely. They are, in order of ease, rapidity, and amount of money:
(1) Phoning donors who over the last 12 months have failed to honor their fund drive pledges. Their outstanding pledges amount to between $3 and $4 million networkwide. Tests have shown that, when called, 10% immediately apologize and provide a credit card number, and the remaining 90% apologize and promise to mail a check right away. Even if only half actually mailed a check, it would still raise from $1.5 to $2 million in cash within 21 days -- risk free. This is twice what Pacifica is seeking as a loan.
(2) Hold a 4-day emergency networkwide on-air fund drive. $1 million is only about $200,000 per station (average). That is not an impossible number. Even if we raised only 2/3 or even half the amount, that would cut the loan requirement in half, and our risk in half as well.
(3) Launch simultaneous email and direct mail fundraising appeals from each station, offering our top $100-$200 fund-drive premiums for only $25 each. (They only cost us from $1 to $5 each). Even a 10% return from Pacifica's approximately 100,000 members would generate 10,000 x $25 = $250,000. If we got a 40% response we might generate the whole $1 million.
One or more of the above options would make the loan unnecessary. Does the refusal of Pacifica management to mandate those options say something significant about its real motives?
Steve Brown
Stephen M Brown sbrown13 at nyc.rr.com
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