Sac State president Luke Wood cites ‘total financial mismanagement’ at Capital Public Radio

As Sacramento State officials begin poring over financial documents involving Capital Public Radio, university President Luke Wood says Sac State has spent $12 million so far propping up the troubled operation and that it’s future is still uncertain.

“The future of CapRadio, I think, is unclear,” Wood said in an interview Wednesday with The Sacramento Bee in his first media interview on the financially troubled radio operation. “We’ve had a chance to look at their finances and come the first quarter of next year they’re going to run out of fiscal resources.

“So I think the future is unclear unless there is immediate action that’s taken place. ... I have only been here since July 16, and this has been 70 to 75 percent of my time as president, working with my team, addressing CapRadio.

“And I’m all in to do everything we can to save CapRadio. I think it is a beloved media institution. I think it’s important. I believe in public media, and I think particularly in going into next year where we’re going to have a presidential election, it’s absolutely critically important that we have groups like Capital Public Radio reporting and providing an unbiased view about what’s happening in the world.”

CapRadio owns Tahoe timeshare: ‘That’s a red flag’

Wood added that university officials are discovering troubling details of CapRadio’s situation, including:

▪ CapRadio reported it had $3 million in reserves while it actually had $85,000;

▪ The fact that an unauthorized CapRadio endowment fund includes a Lake Tahoe-area timeshare;

▪ And potential conflicts of interest among CapRadio board members.

“When you see a report of a $3 million reserve and there’s $85,000, that’s a red flag,” Wood said. “When you find out an endowment owns a timeshare, that’s a red flag.

“When you find out board members have potential conflicts of interest, that’s a red flag. When you find out that they have taken out millions of dollars of loans without informing the university and sometimes even their own board, that’s a red flag.

“And, so, I’m not a lawyer and I’m not an accountant, but I can do basic math, and that math ain’t math.”

So what happened at the operation?

“What happened is total financial mismanagement, lacks accountability, no protocols and procedures,” he said.

Wood’s comments come a week after a California State University audit found lax financial controls and mismanagement inside the operation, which broadcasts signals from Eureka to Redding to Modesto to Truckee on radio stations that are licensed to or operated by Sac State.

“I’ve read it many, many times, it’s the thickest audit I’ve ever seen,” Wood said. “And I was told by numerous individuals at this institution, at the state level, that this is the worst audit they’ve ever seen in their careers.

“And so when you walk into this situation as a new president, you have a lot of choices about what you could do. We could pull back and see this important media institution go down. Or we could charge head-on and do what we can to try to save CapRadio.

“And so I’m all in to try to save it.”

14 CapRadio board members resign

CapRadio board members had not spoken publicly since the release of the audit, but 14 of them resigned Wednesday night, the majority of whom released a letter decrying “a failure of Sac State to inform and engage with the board in good faith to resolve CapRadio’s financial issues.”

“Through all of this we have continued to believe that the station is best served through a true partnership of Sac State and the Board of Directors,” 13 resigning members wrote in a letter to Wood. “Accordingly, we have made multiple requests to meet with you to better understand the decisions that were made.

“All of those requests have been rejected.”

A CapRadio spokeswoman who was asked for comment about Wood’s statements on CapRadio’s finances referred questions back to university officials.

But Shirlee Tully, CapRadio’s chief development and brand officer, offered an explanation of the timeshare in an email to Sac State communications officials, who provided it to The Bee.

“The CapRadio Endowment was gifted a timeshare in 2016 by a donor,” Tully wrote “After determining that it was not of any real benefit to CapRadio, we have been in the process of trying to sell it in a difficult market.

“We have recently explored with the timeshare’s management company entering into an arrangement where they will rent the place and split revenue with us.”

CapRadio board, Sac State at odds over GM’s hiring

Wood’s comments came at a time of tensions between university officials and members of the nonprofit CapRadio board, who voted in a closed meeting Tuesday to offer a job to a new general manager for what Sac State says is a roughly half-million dollar package.

That vote came over the objections of university officials, and Wood noted that there already is an interim general manager in place.

Longtime public broadcasting executive Tom Karlo, who was brought in Aug. 15 at Wood’s urging, is expected to stay through March and is an executive Wood called “the absolute best in the industry.”

Wood noted that Karlo’s salary — which is $301,000 annually, although he is not expected to stay long enough to collect the entire amount — is being paid for by university funds, not CapRadio’s.

Wood also said he expected a number of investigations to be launched into CapRadio’s finances, and that Sac State already was working on a deeper “forensic audit” that is expected to be released early next year.

“We were just informed as a courtesy heads up that (CapRadio) will likely be under Investigation by the Corporation for Public Broadcasting from their Inspector General,” Wood said.

That stems from the audit finding that, in reporting the value of a vehicle donation, CapRadio reported a higher value to the CPB than in its own system.

“By recording the gross amount in the donor system, CPR received higher funding from the Corporation for Public Broadcasting (CPB), which provides matching funds for gifts raised by CPR,” the audit found.

“I cannot tell you how many people have called to give us heads up that there is going to be forthcoming investigations and audits regarding this,” Wood said. “There’s even state lawmakers — I’m not going to say who — who have also given us a courtesy heads-up that more action is forthcoming.”

Was ambitious downtown plan to blame?

Wood said much of CapRadio’s financial problems stem from its expansion plans to move into two downtown Sacramento buildings from its campus headquarters, a move designed to raise the operation’s visibility, provide more space and parking to employees and bolster downtown’s vitality.

“The expansion was certainly part of it,” Wood said. “In fact, I would say it’s probably the biggest part of it.

“But, you know, they’re moving into a headquarters downtown. I invite everyone to go take a look at it. It is opulent. I wish that my students had classrooms that looked as nice as the facility that they’re moving into, I wish they had that.”

He said he does not believe the operation can make the move because of its finances, and that the university is looking at options to get out of the leases or use the space in other ways.

“I don’t see how they can afford it,” he said. “Based upon our projections, they’re going to be out of financial resources by January.

“They just voted yesterday to hire a GM that’s going to cost them about half a million dollars a year with salary and benefits. They’re moving into a place that’s going to cost them, my understanding, is around $70,000 a month.”

At the time CapRadio announced its expansion plans in 2019 — before the pandemic hit fundraising hard — Sac State officials were enthusiastic about the move.

Rick Eytcheson, the former president and general manager of CapRadio, said this week it is “grossly unfair” for Sac State officials to now turn around and blame CapRadio alone for trying to expand, and that the situation “just breaks my heart.”

“I think it’s a bit ingenuous,” he said in a phone interview. “The chancellor’s office and the university were completely in agreement of the plans for the moves downtown.”

At the time, he said, CapRadio’s campus building was overcrowded and had limited parking.

“We didn’t have space for all our employees,” he said. “The vision was to become more visible downtown at the time that downtown was booming.

“It just made a lot of sense.”

COVID pandemic ‘changed a lot of things’

But the pandemic hit the operation hard just after CapRadio made its expansion plans, he said.

“The pandemic changed a lot of things,” he said. “It became very difficult to raise money.

“It’s hard to ask someone for $1 million over a Zoom call. You have to be face-to-face. It wasn’t an act of a rogue manager acting beyond his authority. The chancellor knew what was going on.”

He noted that there were monthly meetings to review finances and that CapRadio’s board included five university officials.

“If they don’t know what’s going on, shame on them,” Eytcheson said.

Wood pushed back on that notion.

“I think that all those facts would be true if we hadn’t been told that they had a $3 million reserve and they had only $85,000,” he said. “It would be true if they hadn’t taken loans out and lines of credit without ever even telling the university, millions of dollars worth.

“That would be true if what we were being told about their finances in terms of them paying their bills and properly stewarding dollars from their donors was true.”

Wood: Sac State may spend $17M to bail out CapRadio

Wood said he also was disturbed by the audit’s finding that CapRadio lacked opportunities for Sac State students.

“That is their mission,” he said. “Every single auxiliary that we have serves the students at this university.

“They recognize that it’s not about the auxiliary itself, but about making sure that every single student we have here has the ability to walk across that stage of graduation and has the experiences that they need to be professionals in the fields that they’re going into.”

Wood also said the university likely will spend another $5 million on top of the $12 million already spent to prop CapRadio up.

“My understanding is if the university had not come in they would not have made payroll...,” he said. “If it wasn’t for Sacramento State, Capital Public Radio would already be gone. That’s how big this is.”

And, he noted the irony of a recent fundraising letter CapRadio sent out seeking donations, reading one passage aloud during the interview:

“We run the tightest ship possible with maximum accountability,” the letter read. “And you can be sure we squeeze every decibel out of the dollars we have.”