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Coughlin says Pacifica $4.8 million in debt in worst financial crisis ever

February 6, 2002: Pacifica's old administration left the network saddled
with $4.8 million in debt, more than anyone had expected, according to
auditors who have examined the books since dissidents regained control of
the network last December.

Interim executive director Dan Coughlin made the figures public today (Feb.
6) in an interview with Kris Welch on KPFA's Living Room broadcast. Coughlin
said that the full report will be posted on the Pacifica website
(http://www.pacifica.org) within a day or two.

"It's the worst financial situation we have ever faced," Coughlin said.
"Some of the conclusions [reached by the auditors] are shocking. We will
have to hunker down, listeners and staff, because the crisis is deep."

A new budget for the current fiscal year projects a further deficit of $1
million.

Coughlin and KPFA general manager Jim Bennett, who also appeared on the
show, said that the network would conduct national fundraising efforts
attached to individual station drives. KPFA will start a new drive on Feb.
13.

Coughlin also stated that:

o The new Pacifica regime is working to resolve differences peacefully with
station staffs upset over the new direction the network is taking. Except
for the general managers who have been replaced at KPFK, KPFT, WPFW and
WBAI, "we have not fired or banned one person, and we are trying to respect
everyone's rights," he said. "We are going to resolve our differences
peacefully."

o A new general manager, Duane Bradley, has been hired for KPFT in Houston,
in a process that was coordinated by the Houston Local Advisory Board.

o He doubts that members of the former Pacifica National Board majority will
be successful in challenging Pacifica's licenses over changes being made by
the new board.

o He strongly supports moving the national office of Pacifica back to
Berkeley. It was taken to Washington by former executive director Lynn
Chadwick after the KPFA protests against the firing of Nicole Sawaya erupted
three years ago. " I think it's imperative that the national office move
back to Berkeley, its historic home, where Pacifica was born," Coughlin
said.

o No decision has been made on the "hot button" issue of Pacifica Network
News and the former PNN reporters who have reorganized as the Free Speech
Radio Network, mostly because of unresolved financial issues.

o Pacifica is trying to figure out a "bare bones" way of bringing Larry
Bensky back to national programming. Bensky now is heard on Sunday Salon
over KPFA, and is paid by KPFA.

o Pacifica may have to cut back on staff and salaries. "We have to make
tough decisions around the network to restore financial stability," he said.
"That means cutbacks. We are working with staff and unions to identify where
we can pull back and tighten our belts." He has cut his own salary 25
percent, Coughlibn said.

The financial audit was conducted by a team of accountants paid by an
anonymous donor to go over the Pacifica books. They found, Coughlin said,
that where Pacifica had a surplus of $600,000 at the close of its fiscal
year on Sept. 30, 2000, the network was $3.5 million in debt a year later,
on Sept. 30, 2001. Further, he said, another $1.8 million in debt had been
added by Dec. 31, 2001, just after the new interim board took power.

"Our main task is to stop the financial hemorrhaging," Coughlin said. There
are three main sources of debt:

o Around $500,000 for a rash of lavish severance packages handed out by the
old administration to themselves before leaving office.

o $2.5 million in bills from law firms, public relations firms, and security
companies hired over the past year and a half. These bills include $410,000
to Epstein, Becker and Green, the law firm that employs former Pacifica
director John Murdock, in addition to $750,000 already paid to the firm;
$462,000 to Williams and Connolly, another Beltway law firm; $303,000 to
Mitchell, Silberberg and Knupp in Los Angeles, in addition to $250,000
already paid; $214,000 to Decision Strategies, a "litigation intelligence"
firm in Washington; $250,000 to the legal firm of Fulbright and Jaworski;
and $284,000 to Westhill Partners, a public relations firm.

o $2 million in bills for general operations, such as telephones and
electricity, that had not been paid because the money went to lawyers and PR
firms.

Coughlin said that Pacifica is not paying the severance packages, which it
considers improper and possibly illegal. It is also considering challenges
to some of the other bills, such as the ones from EB&G.

Some of the other cases, he said bordered on misfeasance. In one case, he
said, he had been called by a car rental company reporting that a car that
had been rented by a Pacifica executive who had left last year was still
being charged to a Pacifica credit card. The card had been shut down and the
police have been notified to find the car.

"The national office created these problems," Coughlin said. "We have to
'fence off' this old debt and look at the needs of the local stations
first."

Among the most pressing of those needs, he said, was the installation of a
new transmitter for KPFK, which has been limping along on 30 percent of its
rated power for months, the money already raised and earmarked for the
transmitter replacement having been drained off by the old administration
and spent elsewhere.

Pacifica took the money for the transmitter from a federal agency, Coughlin
said. "We have to finish the project or the FCC [Federal Communications
Commission] will get involved." The FCC could put a "hold" on the KPFK
license, Coughlin said, because the station is not reaching the audience it
is licensed for. That would not take the station off the air, but would give
outsiders a say in how it is run.

About $100,000 is needed to complete the transmitter project, Coughlin said.

Coughlin devoted considerable time to discussing the new regime's efforts to
restore stability to local stations that had been shaken by the network's
sudden change in direction.

"We are trying to make changes that are needed in the net as fast as we can.
We understand pressures we are getting from all across country," he said.

"We have new leadership - we need a decisive break with the past policies
that failed Pacifica over the past three years. New general managers are in
place working hard to rebuild the network. In addition, we managed to
reintegrate the old fired and banned staff at WBAI - more than two dozen
staff were fired and banned last year arbitrarily. We are trying to restore
that station to stability," he said.

"The new manager at WBAI is the old manager - Valerie Van Isler. She and
program director Bernard White have both been reinstated." Van Isler, he
said, would be evaluated according to the iPNB's resolution on WBAI. "We'll
move ahead with respect for her and others," Coughlin said.

Houston station manager Garland Ganter - who presided over the shutdown of
KPFA in 19998 - and six others at KPFT have stepped aside voluntarily,
Coughlin said. Some of these are looking for spots elsewhere in Pacifica.

In Washington, he said, there was "consternation in the listener community"
about the direction the station had been taking. The new interim general
manager, Tony Regusters, is well known in the capital and has been welcomed
by the staff. Regusters has worked as a producer with Bensky and Amy
Goodman, and is experienced in television and radio. He is a former press
secretary to Rep. Maxine Waters (D-L.A.).

In both Houston and Washington, he said, the big issues concern what kind of
public affairs programs will be broadcast.

"We are letting local communities organize and develop their own
programming; there will be local control in terms of finances and local
policy decisions," Coughlin said.

In Los Angeles, where Steven Starr of Indy Media has been named general
manager of KPFK, staff and community are sharply divided, Coughlin said.
"The station's paid staff is divided from the LAB and from the community
that has supported the station for decades. We are working with station
staff to reintroduce the LAB into the life of station. Many staff sealed
themselves off from the LAB, because the LAB and the local community were
launching lawsuits," Coughlin said.

"We are trying to bring about reconciliation and healing. The LAB's - which
will be elected - will be directly involved in station daily life. Lot of
critics of reform come from station staff; the KPFK staff was very
critical - it's a difficult situation there. We are trying to be inclusive
and participatory - no one at KPFK has been fired, there is no bloodbath, we
are working with staff."

Mark Schubb, the former station manager, and Marc Cooper, KPFK programmer
and producer of Radio Nation for the Nation magazine, "have been vociferous
advocates of their position," Coughlin said. "They have caused controversy.
We are working with Cooper and Schubb -- Schubb has been replaced but is
still in the Pacifica system. We are looking to resolve our differences
peacefully."

The need for general belt-tightening makes it difficult to resolve issues
such as returning Bensky to national programming, Coughlin said. "We have to
figure out a way to maintain national programming visibility. Right now,
Bensky is being employed by KPFA to do Salon, with the idea that with that
as a base he can volunteer to do some national programming and be an analyst
on hearings."

"We have to give back to Larry after him hanging in there," Bennett added.
"There is a commitment from national to use Larry's great skills nationally,
with help from KPFK."

Bennett also indicated that KPFK might be able to assist other , weaker
stations in the network during the crisis. "KPFA can help stations along,
because we have more control over our finances - we can pay our bills and
help rest of network," Bennett said.

Although Pacifica is deeply in debt, it is not penniless, Coughlin said.

"If we sold all our assets except the licenses, we would have a $1 million
surplus," he said.

Although he professed to be unworried about possible legal challenges from
disgruntled members of the new board minority, Coughlin warned that the
network still faces serious political challenges.

Both current iPNB member James Ferguson, in a broadcast on NPR, and former
board member John Murdock, quoted in Newsday, have threatened challenges to
Pacifica licenses because of the changes being made by Coughlin and the new
board

"They are free to do whatever they want," Coughlin said. "I don't think they
will be particularly successful. They can sue colleagues on the board, mount
challenges in any way they see fit. I don't know if this is just big talk or
if they will really take any action."

However, he said, "We all have to remember that there are serious forces
opposed to restoring Pacifica to the community. This is not a game we are
playing. There are five key licenses [at stake]" as the country struggles
with the aftermath of the World Trade Center bombings and the Afghanistan
war. "We have to understand we will be challenged as we try to democratize
net and restore to original mission."