SACRAMENTO, Calif. — Editor's note: Video in this article is from previous coverage of CapRadio.
The results of an in-depth forensic review requested by Sacramento State into Capital Public Radio (CPR) were released Monday. It details evidence of potential conflicts of interest by multiple now-former board members.
It was put together by accounting firm CliftonLarsonAllen (CLA) and sought to review expenditures and disbursements that may have personally benefited a former executive; contracts, loans and credit agreements for possible conflicts of interest; and card activity for evidence of inappropriate use.
It’s worth noting that the review does not determine if there’s fraud or criminal activity, nor does it determine if someone is guilty or innocent of a crime.
CLA was asked to review July 1, 2020, through June 30, 2023.
EXPENDITURES AND DISBURSEMENTS
Ultimately the review found a total of $460,831.93 in payments disbursed to Subject #1 – whose name is fully redacted – or purchases made by them via credit card that were paid by CPR without evidence of expense reports or receipts.
The review found CPR paid an additional $307,493.41 to AMEX for purchases that may have been made by Subject #1 but supporting documents weren’t available or found.
CLA says it reached out to Subject #1 in February 2024 to ask about the transactions and to get additional information. The next month CLA provided Subject #1's legal counsel with a list of possible questions and a schedule of transactions they were investigating.
CLA says an interview with Subject #1 was scheduled for May 24. On May 23, CLA emailed counsel to confirm the interview at which time they were notified Subject #1 no longer wanted to participate in the review and wanted to speak about reimbursement with CPR.
CLA says, that as of the report released Monday, no more information or documentation has been provided by Subject #1. Therefore, the firm’s findings could change if it becomes available.
LEASES AND CONTRACTS
Another component of the forensic examination was an examination of leases and contracts, including those with furniture companies, for evidence of possible conflicts of interest with now-former CPR board members.
The exam found there’s evidence of possible conflicts of interest at the time certain contracts and a property lease were executed. CLA found Capital Public Radio had board members who were either President/CEO of the counterparty or had a spousal relationship with someone acting as a principal of the counterparty. Those cases were not noted in the board meeting minutes CLA reviewed.
The exam also found evidence of a possible conflict of interest in the process of leasing one of CPR’s new headquarters locations at 730 I Street. They said, “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 spousal relationship was not mentioned in the board meeting minutes, nor did they mention whether the board member was recused from those discussions. The audit says there was one documented vote related to the property in which the board member was present, but the minutes don’t detail the votes – just that the motion passed.
“Board Member #1 benefitted from the execution of this lease as their spouse is a partial owner in the 730 I St. property,” says the review.
CLA found evidence of a possible conflict of interest in a furniture contract to furnish the new headquarters location. The review says the contract was entered into without evidence of a competitive bid process, despite the board being told otherwise. The president of the furniture business, Board Member #2, was a CPR board member at the time the contract was being negotiated and executed, the audit says.
In three other contracts, CLA found a board member was either a founder or partner at the vendor and as such may have provided them a financial benefit. Discussion about potential conflicts of interest was not found in the meeting minutes.
LOOKING AHEAD
Sacramento State sent an email Monday about the release of the independent forensic examination, which was requested after a California State University audit of CapRadio in September 2023.
The email does not contain a discussion of the findings, simply that it was available for review.
Sacramento State President Luke Wood, who took office two months before the release of the CSU audit requested by former president Robert Nelsen, released a plan upon its release.
“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,” Wood said. “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. I’m proud of CapRadio’s progress, achieved thanks to the dedication of so many across our campus and community. CapRadio is a public asset and regional treasure that will continue to thrive.”
Sacramento State’s release highlights the appointment of 17 new board members and a new interim general manager. Wood praised CPR’s turnaround in the last year.
Both Sacramento State and CapRadio are cooperating with law enforcement in an ongoing investigation.
Tune into ABC10 News at 5 and 6 for more with President Wood.
WATCH MORE ON ABC10: Sacramento State takes over Capitol Public Radio after audit finds financial mismanagement
