On October 5, 2004, SaveWCAL attorney Michael McNabb sent a letter to Minnesota Attorney General (AG) Mike Hatch urging the AG to intervene to prevent the breach of trust by St. Olaf College, the trustee of the WCAL charitable trust. [PDF, 3 pages]
October 5, 2004
Hon. Michael A. Hatch
Attorney General
102 State Capitol Building
St. Paul, Minnesota 55155Re: Sale of WCAL 89.3 FM
Dear Attorney General Hatch:
We are writing to formally request that you commence an investigation to determine if the proposed sale of WCAL 89.3 FM by St. Olaf College to Minnesota Public Radio constitutes a breach of the charitable trust created by the WCAL member-donors.
There is precedent for such an action. In September, the Rhode Island Attorney General commenced a similar investigation of the proposed sale of two public radio stations in Rhode Island which are owned by Boston University. (See the enclosed New York Times report of September 28, 2004.)
Here is the background information related to this request. On August 5, 2004 the Board of Regents of St. Olaf College voted to approve the sale of WCAL 89.3 FM to Minnesota Public Radio for $10.5 million. No notice of the proposed transaction was given to the WCAL member-donors or to the WCAL board or to the WCAL staff. On August 27, 2004 St. Olaf College and MPR executed an agreement for the sale of the station. Both of the parties to the agreement are Minnesota non-profit corporations subject to the supervision of the Attorney General under Minn. Stat. 317A.813.
WCAL is the first listener-supported radio station in the nation. For over 80 years donors have contributed funds to make the station part of the cultural landscape of our region. It is a creative provider of classical and religious music and of award winning arts programs such as Backstage Pass. WCAL is also a leader in the Association of Minnesota Public Educational Radio Stations (AMPERS), the organization of independent public radio stations in the state.
Each year thousands of donors contribute hundreds of thousands of dollars to provide for the programming and operating costs of the station. The sale of WCAL to MPR would frustrate the intent of the donors. In an interview on MPR on August 19, 2004, Bill Kling, the president of MPR, acknowledged that it was "unlikely" that WCAL would continue with its current type of programming. He also acknowledged that MPR had no definite plans for the new programming for the station, thus suggesting that it was being purchased as an appreciating asset rather than as a service to the member-donors who have provided the funding for the station over the years.
Under Minn. Stat. 501B.35 subd. 3 a charitable trust is defined as:
a fiduciary relationship with respect to property that arises as a result of a manifestation of an intention to create it, and that subjects the person by whom the property is held to equitable duties to deal with the property for a charitable purpose.
A "trustee" under the statute includes a corporation which is vested with the responsibility of administering property held for charitable purposes. Minn. Stat. 501B.35 subd. 4.
The donors have contributed funds to WCAL to continue the programming of WCAL– not to create an asset which the college may sell in order to have funds for other purposes. Through their contributions the donors have created a charitable trust for a specific purpose. St. Olaf College has a fiduciary obligation to use those funds (and the station created by those funds) for that purpose.
Some of the contributions have been used, at the instructions of the donors, to create an endowment for WCAL. Those contributions have been placed in the general St. Olaf College endowment fund and dedicated to the operation of WCAL. In 2004 WCAL received approximately $120,000.00 in income from its endowment. Assuming the draw on the WCAL endowment is based on the same 4% guideline that the college uses for drawing funds out of its own endowment, the WCAL endowment would have assets of approximately $3 million. Taking the charitable gifts to the WCAL endowment and simply appropriating those funds for other uses of the college is not consistent with the fiduciary obligation to the donors of those gifts.
Charitable trusts are subject to the supervision of the Attorney General under Minn. Stat. 501B.34. A failure to administer property held for charitable purposes in a manner consistent with the fiduciary obligation constitutes a breach of trust. Minn. Stat. 501B.41 subd. 6. The Attorney General may obtain injunctive relief against a threatened breach of trust. Minn. Stat. 501B.41 subd. 7. The District Court may require the trustee to pay the expenses incurred by the Attorney General in the investigation and prosecution of a civil action to enforce the trust. Minn. Stat. 501B.43.
SaveWCAL is a Minnesota non-profit corporation which was organized to preserve WCAL 89.3 FM as its donors intended. On behalf of SaveWCAL we make this formal request that you commence an investigation to determine if the proposed sale of WCAL constitutes a breach of the charitable trust created by the WCAL member-donors.
The transfer of the WCAL license is also subject to the approval of the Federal Communications Commission. On October 4, 2004 SaveWCAL filed a petition requesting the FCC to deny the transfer as contrary to the public interest. SaveWCAL is also filing a complaint with the Corporation for Public Broadcasting regarding the failure of St. Olaf College to comply with the open meeting requirements of Section 396(k)(4) of the federal Communications Act. The proceedings before the FCC and the CPB involve the application of federal law and will not provide a forum for a determination of compliance with the provisions of state law on charitable trusts. Therefore, we request that you commence an independent investigation regarding the application of state law to the proposed transaction.
Time is of the essence. The FCC may make its decision on the transfer of the license in October or November. If the FCC consents to the transfer, the closing on the sale is to occur within ten days after the action by the FCC pursuant to Section 1.7 of the purchase agreement.
Sincerely yours,
Michael McNabb
SaveWCAL General CounselP.S. For your convenience we have enclosed a copy of the purchase agreement executed by St. Olaf College and MPR. The purchase agreement incorporates several schedules. See Section 1.1 and Section 5.4. However, those schedules are not in the public file at WCAL, and we have not been able to gain access to those schedules.
SaveWCAL is also aware of a number of letters sent to the Minnesota Attorney General's office in the fall of 2004 specifically raising the issue of WCAL as a charitable trust and asking the Attorney General to intercede. Some of these received letters deflecting the request that the AG could not "represent private citizens", completely ignoring the fact that these "private citizens" were the donors to a charitable trust and that the AG is the chief legal officer of the state who is charged with upholding charitable trusts and the rights of donors.
The Attorney General replied on October 19, 2004.
{ 2 comments… read them below or add one }
The question is…if Mr. McNabb put them on notice (them being the Attorney General's office) in 2004, regarding the issue of charitable trust, and the AG has now voiced their opinion saying that WCAL is a c trust..do we have recourse for lack of action in 2004?
Why didn't they do something then?
I had posted this in answering a similar question on another SaveWCAL blog entry — and when I saw these questions, thought it bears repeating:
The WCAL case seems to be a TOTAL FAILURE of Minnesota's chief legal officer to do his/her job in protecting a charitable trust and the Minnesota citizens who donated and benefited from that trust.
I don't believe that party politics or partisanship played any role in the AG's failure, except to the extent of raising the question/possibility that perhaps the AG was not eager to get involved in an issue that directly involved one of Minnesota's largest radio news networks – especially at a time when Minnesota was heading into an election year when the sitting AG (Hatch) was getting ready to run for governor of the state.
And now the AG is stuck with possibly trying to defend to a court their indefensible choices and inaction.
I've shared this opinion with others and find that many agree. Those that don't seem to be unwilling to entertain the notion that the AG is capable of neglecting his/her job for the sake of political expediency.