SaveWCAL was frankly suprised at the Minneapolis StarTribune's interest in and eventual coverage of the refusal of St. Olaf College President David Anderson '74 to allow members of the SaveWCAL board of directors attend the Christmas Festival, which was then picked up and distributed by the Associated Press. The article has brought literally hundreds of new readers to our site.
Yes, it's nice to get press — but we note that the Christmas Festival ticket decision is such a tangential story! There are issues of far greater national significance involved in the WCAL case that few seem to "get".
Public broadcasting radio and televisions stations, higher education institutions and non-profit organizations across the nation are constantly soliciting charitable donations for specific purposes. They have a fiduciary duty to honor the intent of the donors. The courts are being asked to determine the extent to which donors may enforce their intent in making such donations.
Why are these issues important?
We draw your attention to the April 1, 2006 article by Bruce Collins, the general counsel of C-SPAN in InsideCounsel Magazine, titled "Charitable Intent". This article was attached to the first Letter Memorandum that SaveWCAL filed in Rice County District Court on February 27, 2007 in response to St. Olaf's Original Petition.
The WCAL case is not the only case that is dealing with these and similar issues.
On June 23, 2008 the premiere publication in public radio and television broadcasting, Current (not to be confused with a radio station with a similar name), published an article by editor Steve Behrens titled "Donor intent: Battle cry for grieving fans". In the on-line version of his report Behrens included information (in a sidebar to the article) involving the same issue that have drawn national attention. Two of the most prominent include:
- The Fisk University case involving the donation of art to the University by renowned artist Georgia O'Keeffe and a defense of the trust by the Tennessee Attorney General. The Chancery Court in Tennessee issued a permanent injunction against Fisk [PDF] that prohibits the University from selling the art collection. Fisk had planned to use the proceeds from the sale to increase its endowment and to pay for campus improvements. (This was the same plan St. Olaf had in selling WCAL.) There were numerous reports in the national press, including in Time Magazine on April 27, 2007 ("The Impermanent Collection") and in The New York Times on February 11, 2008 ("Court Rebuffs Fisk University") and March 8, 2007 ("Fisk University Keeps Its O'Keeffes").
- The Princeton University case involving a challenge since 2002 by the heirs of donors Charles and Marie Robertson to the use by the University of the large donation that was used to establish the Woodrow Wilson School of Public and International Affairs. It has been the subject of numerous reports in the press. The donors have set up a FAQ regarding their efforts and a list of a number of other important donor intent cases.
So how does this relate to the WCAL case?
In the case of WCAL, these issues specifically include the breach of the fiduciary duty of a trustee, the breach of duty of loyalty of a director, and the abdication of the statutory responsibility of the state's Attorney General to enforce a charitable trust.
In the fall of 2003 St. Olaf College claims that Minnesota Public Radio (MPR) submitted an unsolicited offer to Christopher Thomforde, then president of St. Olaf College, to acquire the broadcast license for WCAL and other assets of the station. Thomforde first discussed the offer with Vice President of College Relations Jan McDaniel and then turned it over to St. Olaf Regent Chair Jerrol Tostrud and St. Olaf College Regent (and Regent's Finance Committee Chair) Tad Piper for evaluation and action.
Piper clearly had conflicts of interest in the matter because, while a St. Olaf Regent, he also was a member of the MPR Board of Trustees, and a member of the Board of Directors of Piper Jaffray, the investment firm that would eventually serve as the underwriter for (and, therefore profit from) the bonds to be used by MPR to finance the acquisition. St. Olaf Regent B. Kristine Olson Johnson '73 was also on the Piper Jaffray board and two other Piper Jaffray board members, Michael Francis and Frank Sims, were on the MPR Board of Trustees along with Piper. Piper is also on the American Public Media Group (APMG) Board of Trustees, the parent organization of MPR.
McDaniel was a member of the Board of Directors of WCAL. She had a duty of loyalty to the WCAL board, but she did not inform her fellow directors of the MPR offer until August 9, 2004, four days after the Regents had accepted the MPR offer. St. Olaf Regent Walter "Joe" Ringer also served on the WCAL board at the time and had a director's duty of loyalty to the WCAL board.
The federal Communications Act requires a public broadcast station to have a community advisory board. 47 U.S.C. 396(k)(8). Compliance with this requirement is a condition to the receipt of federal funds. The purpose of this statutory requirement is to provide the public the opportunity to be heard on major policy decisions affecting the station. The WCAL Board of Directors, established in 1979, was intended to be the advisory board by which St. Olaf could certify compliance with this requirement of federal law.
A decision to assign the broadcasting license of a station to third party is obviously a major policy decision. Yet St. Olaf negotiated the assignment of the broadcast license to MPR in the utmost of secrecy. Not only did it fail to ask the WCAL board to review the proposed assignment, it also kept in the dark the WCAL management, the staff, and the WCAL listener-beneficiaries.
Then, on August 5, 2004, the Regents met in executive (closed) session without any public notice of the proposed assignment, listened in secret to a one-sided presentation, and voted in secret without any participation by any member of the public. Piper attended the meeting, but at the conclusion of the presentation, he abstained from the formal vote.
Note the following from the Findings of Fact issued on March 7, 2008 by the Rice County District Court-appointed Special Master Report and confirmed by Judge Wolf's June 10, 2008 Order:
"No. 33. . . . The Board of Regents approved the sale on August 5, 2004 at an executive session of the Board at the Minneapolis Club. . . ."
and
"No. 34. The WCAL Board, which had been appointed by the Board of Regents, was disbanded immediately after the Board of Regents meeting approving the sale of WCAL. The WCAL Board did not have notice of the proposed sale before the Board of Regents' approval of the sale, and the WCAL Board did not approve of the sale." [Emphasis added by SaveWCAL]
After violating the federal law intended to protect the public interest, St. Olaf then proceeded to violate the state law intended to protect the beneficiaries of charitable trusts.
A charitable trust is created when donors entrust their funds to a third party for a charitable purpose. Minn. Stat. 501B.35 subd. 3. Here the WCAL donors entrusted their funds to St. Olaf for the operation and perpetuation of WCAL, a public, educational radio station. By making donations to St. Olaf for such a charitable purpose the WCAL donors created a charitable trust.
The trustee of a charitable trust must notify the Attorney General of all proceedings in court to terminate a charitable trust. Minn. Stat. 501B.41 subd. 2. It is implicit in the statute that the trustee must obtain an order from the court to terminate a charitable trust.
The assignment of the broadcast license and the sale of the other WCAL assets to Minnesota Public Radio (MPR) were the operative acts in the attempted termination of the WCAL charitable trust. Yet St. Olaf never obtained an order from the court authorizing the assignment of the license and the sale of the assets of the charitable trust as required by state law.
Over the 80+ years of WCAL's existence an endowment for the WCAL radio station was created with contributions from WCAL donors. In 2004 the value of the endowment was approximately $2.96 million.
Between the closing on the St. Olaf-MPR transaction in November 2004 and the Original Petition filed by St. Olaf College in December 2006, the College withdrew approximately $1.6 million from the endowment.
St. Olaf later represented to the court that it had obtained the consent of living donors to withdraw the $1.6 million. The donor of $1 million of that amount was Senior Regent Leonard Hoeft. He submitted a letter to the Rice County District Court during the Special Master Investigation in which he declared that St. Olaf had never contacted him about withdrawing his contribution to the endowment, much less obtained his consent.
In a Minnesota Post.com report on September 25, 2008, St. Olaf Director of Marketing and Communications Steve Blodgett stated that "St. Olaf from Day One has maintained that there was not a charitable trust." Not so. Apparently Blodgett has never read St. Olaf College's Original Petition to the Rice County District Court.
In December 2006 St. Olaf filed a Petition in Rice County District Court requesting approval of the court for its plans to use the funds remaining in the endowment, all of which had been contributed by donors who were then deceased. In paragraph 26 of its original Petition St. Olaf acknowledged that the contributions of the WCAL donors had created a charitable trust. (At that time of the filing of the Petition, the St. Olaf attorneys were not aware of SaveWCAL's October 4, 2004 correspondence imploring the Minnesota Attorney General to intervene on the basis that the transaction involved a charitable trust.)
SaveWCAL filed a February 27, 2007 response to the Petition that pointed out that there is a straight line in the legal analysis from the starting point of a charitable trust to the conclusion that St. Olaf breached its fiduciary duty as trustee by creating the circumstances that rendered it impossible to honor the intent of the WCAL donors.
Just seven days later — and a mere two days before the scheduled March 8 hearing – St. Olaf suddenly filed an Amended Petition on March 6, 2007 in which it removed all previous language referring to WCAL as a charitable trust and now declared that the contributions of the WCAL donors had "not literally" created a charitable trust.
On June 20, 2007 the Attorney General filed a memorandum of law in which she expressed her official position to the court:
"In its April memorandum St. Olaf attempts to circumvent charitable trust requirements for lifting restrictions on its assets by characterizing certain of its assets as not "literally" being charitable trusts and thus not subject to charitable trust principles. St. Olaf's assets, however, are undoubtedly either charitable trusts or held in charitable trust and thus subject to charitable trust principles. Interestingly, St. Olaf's charitable trust arguments in its April memorandum are directly at odds with the charitable trust principles it sets forth in its original Petition . . . ."
When Judge Wolf issued his Order on June 9, 2008, he strongly chastised the Minnesota Attorney General at paragraphs 4-5:
"The Minnesota Attorney General is the watchdog of all trusts throughout the state of Minnesota. Deplorably, when St. Olaf made the decision to sell WCAL, no one from the Attorney General's Office intervened to safeguard the trust. The Attorney General's Office was notified by SaveWCAL of the pending sale yet they failed to do anything. The undersigned is absolutely mystified as to why the State Attorney General did not become involved in a sale of trust assets valued at $12 million when it is its statutory obligation to do so. Let's hope this type of activity never happens again. . .
Now the Court is faced with a plethora of issues to unravel in the aftermath of St. Olaf's unapproved sale of WCAL and the Minnesota Attorney General's Office breach of its duties in this case." [Emphasis added by SaveWCAL]
In the wake of Judge Wolf's Order, SaveWCAL renewed its demand on the Attorney General to enforce the WCAL charitable trust. The Attorney General has again refused to act. This is a breach of her oath of office to enforce the law — and the citizens of Minnesota should be informed of her "lapse of duty" (the words of Judge Wolf).
In the Star Tribune report on October 15, 2008 Blodgett refers to the "litany of actions" by SaveWCAL. Not so. It was St. Olaf (not SaveWCAL) that filed the Petition in December 2006 when it finally recognized that the law requires the trustee of a charitable trust to obtain the approval of the court for a plan to use assets of a charitable trust for purposes other than those intended by the donors. SaveWCAL attorney Michael McNabb was given permission by the court to participate in the proceedings at the March 8, 2007 hearing – where fireworks ensued.
The Petition filed by SaveWCAL on September 24, 2008 is, therefore, the first action that SaveWCAL has commenced — and it did so only after obtaining a judicial determination in the previous proceeding that WCAL was a charitable trust.
If SaveWCAL prevails in its arduous quest over institutions with far superior resources (both St. Olaf and MPR are currently fielding teams of three attorneys each for the upcoming hearings), the donors of public, listener-supported broadcasting radio and television stations across the country will have the tools necessary to successfully oppose takeovers and other actions that threaten to use their donations for purposes unrelated to the intent of the donors. Institutions of higher education and listener-supported radio stations will also have to implement policies to safeguard the use of funds contributed by donors.
How can SaveWCAL supporters help to make people aware of the WCAL case and issues?
Your assistance in spreading the story of WCAL and SaveWCAL's efforts is critical. St. Olaf College students, faculty, staff, alumni, parents and friends need to know the truth of the story of the WCAL trust.
Just as importantly, the facts about WCAL and SaveWCAL's efforts provide an ample and rich basis for local, regional and national news outlets to report on the serious issues raised by the case.
If you know of any individuals — including reporters / journalists / writers — that you think should know about this story, please feel free to send this posting on to them and encourage them to check out http://SaveWCAL.net
{ 2 comments… read them below or add one }
More and more this is a David and Goliath story! They must be taking us seriously . . . I continue to be amazed at SaveWCAL's output and zeal.
Just read your latest summary announcement. Well done, although it might be useful to add in a few words regarding MPR's complete lack of news coverage of the WCAL ownership controversy when it reported on the [December 9, 2004] FCC public comment forum held in Minnesota [http://savewcal.net/2004/12/09/fcc-forum-held-at-hamline-university/]. This omission was glaring confirmation of the strong hand behind the scenes of the WCAL acquistion.