BY EMILY MIBACH
Daily Post Staff Writer
For months there has been a cloak of secrecy shrouding the botched sale of KCSM-TV by the San Mateo County Community College District, which deprived the district of $140 million.
But now a review of lawsuits filed over the transaction illustrates how the college district was dropped from an FCC spectrum auction that would have allowed the district to collect $140 million for selling the noncommercial station’s bandwidth.
The suits filed in San Mateo County Superior Court all attempt to blame one party or another. One litigant is LocusPoint Networks (LPN), a Wall Street investment firm that gave the district $3.6 million to keep the station on the air until the auction in return for 36.5% of the sale proceeds.
LPN says the district is to blame. The district claims LPN and the international accounting firm PricewaterhouseCoopers (PwC) are to blame.
PricewaterhouseCoopers, the same firm that bungled the Oscar envelopes earlier this year, was hired by LPN to assist the district in participating in the auction, which was conducted on an FCC website. Hundreds of stations from across the country participated in the same auction, selling their unused spectrum space to the FCC, which would then sell it to broadband providers like AT&T, Verizon and DirecTV.
It was between 7 and 8 a.m. on Nov. 15, 2016, when the college district lost out on its chance at $140 million.
The auction was complicated and there had been 22 rounds before Nov. 15.
PricewaterhouseCoopers employee Paul Impullitti went to the college district’s offices to help vice president Jan Roecks correctly click the right boxes on the FCC website at the appointed hour. He had participated in many of the earlier rounds of auctioning.
At 7:13 a.m., Roecks placed the bid and Impullitti watched her do it, according to the district’s complaint. His face was only inches from Roecks’ computer screen. But, according to the district’s complaint against PwC and LocusPoint Networks, Impullitti did not make sure Roecks completed the bid process, and “assumed the bid was submitted.”
According to the district’s lawsuit, Impullitti failed to direct Roecks to actually submit the bid.
“Had he done so, the bidder would have navigated to the submit button (which could be revealed by scrolling the screen to the right) and clicked on it — actions that were readily viewable by Impullitti who sat only a matter of inches from the computer screen,” the complaint says.
At 10 a.m. on Nov. 15, Roecks and Impullitti logged in again to the site and saw that KCSM-TV was listed as “dropped out of bidding,” the complaint says.
Roecks and Impullitti were surprised by this since they believed that she had entered a bid for $114 million only a couple of hours earlier.
The district says in its lawsuit that LocusPoint had hired PwC to avoid an error like this.
LocusPoint wasn’t able to have its people help the district because the FCC felt that would have been a conflict of interest since LocusPoint had an ownership interest in several other stations participating in the spectrum sale.
To avoid any errors, LocusPoint and PwC even created a “playbook” to guide the district through the auction.
“Surprisingly, in spite of the fact that LPN’s and PwC’s most important and ultimate responsibility was to assure that a bid was successfully placed in each round as required and that a FCC bid receipt was the only FCC confirmation of a successfully placed bid, neither PwC’s Playbook nor its bid submission confirmation sheet prompted or advised the district bidder (Roecks) or the PwC consultant (Impullitti) to obtain FCC bid receipts. Nor did the Playbook recognize or even mention the importance of obtaining a FCC bid receipt immediately after placing a bid,” the district’s complaint against LocusPoint and PwC says.
After discovering that KCSM was dropped from the auction, Impullitti and Roecks attempted to contact FCC personnel and were informed that the termination from the auction was “irreversible.” PwC’s response to the district’s complaint claims it was only Roecks, and not Impullitti, who contacted FCC.
Court documents indicate that Roecks told her boss, Chancellor Ron Galatolo, about the botched sale, but Galatolo didn’t inform LocusPoint until February 2017.
Galatolo might have kept the information to himself because the FCC had imposed a “quiet period” on the stations participating in the auction, the stopped them from communicating how much money they had obtained in the auction in order to prevent other stations from taking advantage of that information.
Even though the college district and LPN were partners in the sense that they would be sharing in the proceeds of the sale, Galatolo kept them in the dark and even accepted a payment from LPN to keep the station running after the failed auction.
LPN raises suspicions over sale to KRCB
LPN blames the district and PwC for not telling them that KCSM had been dropped from the auction, causing LocusPoint to lose out on $32 million. It also contends that the district lied about the status of KCSM.
LPN also believes that the district arranged to sell KCSM-TV to KRCB, a public broadcaster in Santa Rosa, behind closed doors for $12 million. LPN contends that no request for proposals for the station was posted on the district’s website or published elsewhere, an apparent violation of state law.
The suit suggests that KCSM-TV would have attracted an offer higher than $12 million had the station’s sale been publicized through a public request for proposals or RFP.
LocusPoint and the district have been in contract together since 2013, when the college district decided to sell Channel 60. The station was put up for sale because it was losing money and administrators felt it didn’t serve an educational purpose any longer.
The lawsuits — two filed by LPN and one by the district — will likely determine who was at fault for blowing the sale and whether any money should be paid to resolve the dispute. One major question that needs to be sorted out is whether the college district simply owes LPN the $3.6 million it contributed to keep the station on the air, or does LPN deserve $32 million, the amount it would have made if the sale had gone through? And the court will have to determine what liability PwC has, since it was hired to make sure the bid was correctly submitted to the FCC.