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public TV and radio in the United States

Extreme audit outcomes:
3 guilty pleas in court

Originally published in Current, Jan. 13, 2003
By Dan Odenwald

Not every audit conducted by the office of CPB Inspector General Kenneth Konz stems from a harmless goof or careless error.

The IG's office has conducted investigations over the past two years looking into fraud at KHSU-FM in Arcata, Calif., theft of CPB funds at the former National Latino Communications Center and vendor kickbacks at WHYY in Philadelphia. The perpetrators in each case pleaded guilty of various charges.

KHSU, Arcata, Calif.: One of the most audacious involves John L. Sterns, former overseer of the station licensed to Humboldt State University. In April, Sterns pleaded guilty to nine felony counts of fraud. At least three of those counts included false statements made to CPB, according to the IG's office.

As executive director of university advancement, Sterns exaggerated claims of charitable contributions and falsified expense reports to pad his own wallet, according to press reports. While supervising the public radio station, he fabricated certified audits to CPB in 1999 and 2000. He dreamt up an accounting firm and signed off on fictitious financial statements and exaggerated station revenue, says David Tanner, CPB's deputy inspector general.

When campus police contacted CPB in April 2001 to alert them of Sterns' misdeeds, the corporation immediately suspended grants to the station. In June 2002, a California court sentenced Sterns to time already spent in jail and five years of supervised probation. The court also ordered him to give back $125,000 to the university. After its own audit of station financial records, the IG recommended reducing KHSU's grant by $12,000. The IG wasn't able to determine whether Sterns ever stole money from the station itself, says Tanner.

National Latino Communications Center, Los Angeles: In October, Jose Luis Ruiz, former executive director of NLCC, pleaded guilty to federal income tax violations and will be sentenced Feb. 24, according to Thomas Middleton, assistant U.S. attorney in Los Angeles.

As part of Ruiz's plea agreement, the prosecutors will drop a separate charge of theft of federal funds. A federal grand jury indicted Ruiz in April for misappropriating CPB funds awarded in fiscal year 1996 to the now-defunct center that CPB recognized for years as its liaison with Hispanic producers and audiences. In the tax charges, prosecutors said he failed to report more than $80,000 of the misappropriated funds in his taxable personal income. The IG worked with the U.S. Attorney's office, the FBI and the IRS in the investigation.

The tumult surrounding Ruiz brought down NLCC in 1998 and disrupted a number of Latino productions for public TV. CPB later established a relationship with a new group called Latino Public Broadcasting.

WHYY, Philadelphia: Harold M. Parsons, a former production manager at the station, pleaded guilty to mail fraud and was sentenced to a year of house arrest Jan. 7, according to the Associated Press.

Federal prosecutors said Parsons received kickbacks for authorizing $221,000 in station payments to a telemarketing firm for bogus equipment bills. Nine people pleaded guilty in the scheme, in which employees at three companies, including WHYY, received money orders, gift certificates and other kickbacks paid to them at their homes. Parsons, who retired in 1999, worked at WHYY for 26 years.

In its audit of the station released in May, CPB's IG concluded the lack of internal controls over purchasing and invoice payments, plus the lack of management oversight, provided the opportunity for embezzlement. But the IG's report also said WHYY has made the necessary changes to prevent further problems.

"There will always be people who try to cheat the system," Tanner says. "If stations are lax about security, there may be a greater opportunity to do that."

There tends to be less malfeasance in public broadcasting than in other businesses he's observed, Tanner says. Pubcasters tend to have a moral commitment to the enterprise that doesn't jibe with stealing from it. Besides, he notes wryly, "there's not a tremendous amount of money to steal."

Web page posted Jan. 16, 2003
Current: the newspaper about public TV and radio
in the United States
Current Publishing Committee, Takoma Park, Md.


CPB finds fiscal problems at National Latino Communications Center, 1998.


Related news: Accounting quarrels rather than criminal intent underlie most CPB audits.


Humboldt State University's KHSU and IG report, October 2001, and report on the John Sterns affair by The North Coast Journal.