Forensic report of CapRadio finds ‘unsupported payments’

Hundreds of thousands of dollars in “unsupported payments” involving an individual whose identity hasn’t been revealed were found in a newly released forensic examination of Sacramento’s CapRadio. 

The July 29 report also found evidence of possible conflicts of interest involving former members of CapRadio’s board. 

The examination originally focused on July 2020 through June 2023, but the timeframe was adjusted due to new information and limits in obtaining documents. 

CliftonLarsonAllen LLP was brought on by Sacramento State, the station’s license holder, to look at “several potential avenues of personal benefit by a former executive and board members of CPR,” the report said. The report notes that CLA is not making legal claims or conclusions of guilt or wrongdoing. 

Names were redacted in the report due to an “ongoing law enforcement investigation and privacy,” according to the university’s website. 

“We are fully cooperating with law enforcement and will pursue all reasonable and appropriate means to ensure the recovery of funds by CapRadio,” Sacramento State said on the website. 

Representatives for CapRadio and Sacramento State did not immediately answer questions from Current about the investigation. The university has posted an FAQ on its website about the examination, and CapRadio has published details of its financial turnaround on its website.  

“Since my arrival at Sac State, I’ve been committed to stabilizing CapRadio’s finances and operations to support its vital mission and future growth,” Sacramento State President Luke Wood said in a news release. “We swiftly implemented new fiscal controls and contracted for this forensic examination to further uncover the roots of CapRadio’s fiscal issues. While the findings are deeply troubling, they guide us to ensure history doesn’t repeat itself.”

Unsupported payments

The report found that more than $460,000 in “unsupported payments” that were either disbursed to a “Subject #1” or paid to a credit card without “corresponding evidence of expense reports and/or receipts.”

Another $307,000 in credit card payments by the station may have been related to purchases by the same person, but the statements and the supporting documents were not available to CLA.  

The unsupported payments discovered during the examination  occurred from 2017 through 2023, the report shows. 

The individual has retained legal counsel and had not provided additional information or documentation, according to the report. In May, their counsel informed CLA the person no longer wanted to be interviewed by CLA and wanted to discuss reimbursing the station instead, the report said. 

“Our conclusions on these transactions are subject to change should Subject #1 provide additional information or documentation related to these transactions,” the report said. 

Potential conflicts of interest

The report also found evidence of possible conflicts of interest because “at the time certain procurement contracts and one property lease were executed, CPR had board members who were either also a President/CEO of the counterparty or had a spousal relationship with an individual acting as a principal of the counterparty.” 

These situations were not included in minutes for board meetings from July 2019 through May 2022, the report said.

One included the lease of a new CapRadio headquarters at 730 I St., a project that the station appears to have terminated. CapRadio now says it plans to continue working from its current headquarters on Sacramento State’s campus. 

“It appears the spouse of a board member at the time held an ownership interest in the property, which, at a minimum, demonstrates at least the appearance of a potential conflict of interest,” the report said. “The spousal relationship was not noted in the Board meeting minutes.”

In another instance, there was evidence of a possible conflict of interest with a furniture contract for the new headquarters. The report said the chief executive of the business was a CapRadio board member while the contract was being negotiated and executed from October 2017 through May 2022. 

The report’s revelations add details to CapRadio’s financial struggles. The station reduced its workforce 12% last September. It has also been at odds with the endowment that supports the station over a possible merger with the local PBS station. 

Seventeen new board members and a new interim GM have been appointed recently, the news release said, after 18 board members resigned in October 2023. 

“With the support of Sac State and our community, CapRadio is in the midst of an inspiring turnaround story that includes stabilizing our finances and operations, improving and expanding audience services and significantly growing listenership and engagement,” said CapRadio interim GM Frank Maranzino in the release. “Membership revenue is up 9% and weekly news listenership has increased by 35%.”