KCSM-TV: A public asset squandered and a cover-up

OPINION

BY DAVE PRICE
Daily Post Editor

Imagine how you’d feel if you missed out on an opportunity to collect $114 million?

Now imagine a government agency that missed out on that kind of money because an employee had made a mistake? An agency that you fund with your taxes? An agency that has come to you for approval of bond measures over the years?

And what if they engaged in a cover-up of that mistake?

It was painful to read about the botched sale of KCSM-TV by the San Mateo County Community College District. Here’s a district that needs money for teachers and students. It had a chance at an incredible windfall, and it blew it.

If a city government or a K-12 school district had made such a blunder, the public’s anger would be palpable. As residents, we’re closer to our cities and schools than the college district, which operates in almost a detached way from the day to day activities in our communities. Unless you’re a student or an employee at Canada College, the College of San Mateo or Skyline College, you don’t think about the college district.

But blowing an opportunity to collect $114 million shouldn’t be ignored even if it was by the college district.

An opportunity for a windfall

You probably saw our story Tuesday that first reported this botched sale. The FCC held an auction for broadcasters to sell off their spectrum space to companies like T-Mobile, Dish Network, Comcast and AT&T. Of the 1,774 full-power TV stations in the U.S., 175 of them agreed to sell off their airwaves including 11 in the Bay Area.

The college district’s board of trustees wanted to sell off KCSM-TV Channel 43 (Cable 60), which had been losing money. The college district once used the station to train future broadcasters, such as Giants announcer Jon Miller. But by 2012, the district wanted out of the broadcasting business.

Six entities stepped forward with bids for the channel, but the board pushed those offers away and decided to team up with an investment company, LocusPoint Networks, which floated an intriguing idea. It would pay to keep KCSM running until the FCC auction a couple of years later. KCSM would sell its frequencies in the auction, and when the money comes rolling in, LocusPoint would get $36.5% and the college district would keep the rest. LocusPoint said it was a no-risk deal for the district.

At the time, LocusPoint, owned by the Wall Street hedge fund Blackstone Group, was making similar deals with 45 other noncommercial broadcasters across the country.

Back in 2012, the college district suggested the station might be worth $10 million. They had no idea what a bonanza the auction would be for broadcasters.

Ten stations in the Bay Area sold off their frequencies in the auction for a combined $825.6 million.

The mistake

But KCSM-TV didn’t get a cent because it fumbled the ball on Nov. 15, 2016 when a college administrator — vice president Jan Roecks — failed to click the “bid” button at the appointed hour on an FCC website set up for the auction, according to a lawsuit filed Monday by LocusPoint. At that point, the FCC was offering $114,494,613 for KCSM.

Due to the failure to bid, the FCC dropped KCSM from the auction.

Roecks told Chancellor Ron Galatolo what had happened, but he decided to keep it secret. The lawsuit said he didn’t tell LocusPoint, which sent him another check to keep KCSM running. He could have called LocusPoint when the got the check and said, “Hey, we were dropped from the auction so we’re returning your money.” But he didn’t.

When the auction ended, the FCC imposed a “quiet period” on all broadcasters who participated to keep them from talking about how much they made until Feb. 6. When the period ended, I started seeing stories from other parts of the country about how much stations had made in the auction. One that caught my eye was a college-run station in Flint, Mich., which got $14 million. I thought if a TV channel in Flint was worth $14 million, KCSM probably fetched a lot more than the $10 million the college district thought it was worth.

Then I read about a PBS station in Vermont that sold for $56 million and another in Tampa, Fla., that went for $18.7 million.

I asked Post reporter Emily Mibach to find out how much money the college district got for KCSM.

District stonewalls

The college district’s spokesman, Mitchell Bailey, refused to give her an interview. He wouldn’t return any calls, but he sent a short email saying, “Nothing has changed with regards to the ownership of KCSM.”

Nothing in his email indicated the sale had been botched.

Then she called the five elected members of the college district’s board of trustees. Only Dave Mandelkern called her back. He said he hadn’t been told anything, and this was on March 15, four months after the botched sale. He admitted that he was “curious” about it too.

Galatolo wasn’t just keeping Locus-Point in the dark, he also hadn’t told his bosses on the board of trustees.

It would appear that LocusPoint found out about the botched sale earlier this month, and began preparing a lawsuit to get back the $3.4 million it had fronted the district for the past four years to keep KCSM on the air.

But the college district got to court first, filing an unusual lawsuit against LocusPoint and PricewaterhouseCoopers on April 7. The suit was 33 pages and almost all of it was blacked out.

District officials planned to give LocusPoint and the judge a non-redacted copy, but they didn’t want the public to see what the suit was about.
Remember, at this point the botched sale was still a secret. And the blacked-out lawsuit continued to keep that secret.

Three days later, LocusPoint filed its lawsuit. None of it was redacted. It revealed the botched bid and the cover-up.

The college district claims it redacted its suit because it was concerned it contained proprietary information about LocusPoint. But since Blackstone Group created LocusPoint for the sole purpose of speculating on the FCC auction, and the auction was completed, it’s hard to imagine what proprietary information had to be kept secret. It’s not like there was going to be another auction. And LocusPoint didn’t feel the need to redact its lawsuit. In my opinion, the district was trying to keep the public from learning how it had screwed up and lost out on a windfall of tens of millions of dollars.

$100 bottles of wine

This episode is pathetic on so many levels. On one level, you have a college administration that squandered a publicly-owned asset. Think of all the good things that money could have been used for — maybe scholarships for poor students or new programs to help make our youth more competitive in the job market.

Then you have Chancellor Galatolo, who didn’t come clean when the botched sale took place and kept the bad news from LocusPoint, his board and the public. CEOs get fired for that sort of thing. This is the same guy who was caught by NBC Bay Area last year charging $100 bottles of wine to the district to entertain college donors.

And now the district is facing a lawsuit from LocusPoint, which at a minimum wants back the $3.4 million it gave the district to subsidize KCSM-TV. It’s also asking for the $41.6 million it would have received if the sale had gone through. Where will the district get that kind of money? Another bond measure?

Finally, you have a college district that is back where it was a few years ago with a money-losing TV station it doesn’t want. Back then, it told the other bidders to get lost. Now, the district will probably try to sell the station at a fire sale price.

This situation is ridiculous. Heads ought to roll.

Editor Dave Price’s column appears on Mondays. His email address is price@padailypost.com.