KOCE Sale Reversed; Court Cites Favoritism

Calling the deal “the rankest form of favoritism,” a state appeals court reversed the sale of Orange County’s PBS station to the KOCE Foundation, saying the Coast Community College District had agreed to the deal because it was determined not to sell KOCE-TV to televangelists.

The unanimous decision by the three-judge panel Thursday said the district must hold a new sale or, “if the district’s trustees find the prospect of televangelists eventually acquiring KOCE to be too distasteful, no sale at all.”

The opinion by Presiding Judge David Sill, written in an often sarcastic and biting tone, carved up the community college district’s arguments and the April 2004 decision by Superior Court Judge Corey S. Cramin allowing the sale of Channel 50 to go through.

The district violated the law by not selling to the highest bidder, Sill wrote. He said there was a “smoking gun” in the form of a “statement by one of the district’s sales brokers to the effect that the district’s trustees were bound and determined from the beginning to ‘filter out’ any televangelists, whom the trustees foresaw would be making the highest bid.”

The decision puts the Public Broadcasting Service station in something of a no-man’s land, and no one seems certain what will happen next or if the district will take back the station.

The KOCE-TV Foundation, controlled by a group of wealthy business and civic leaders since it bought the station, has been running the station for almost nine months and holds the Federal Communications Commission license.

Milford Dahl, the attorney for the college district, said he sent an e-mail to an FCC attorney raising questions about the legal status of the broadcast license.

“The decision reaffirmed to me that [district trustees] violated the law to accomplish their own personal preferences,” said Richard Sherman, attorney for the Texas-based Daystar Television Network, which had sued the district and the foundation. Daystar is the second-largest Christian broadcaster in the world.

Dahl called the court’s opinion biased and “filled with personal attacks.”

“I thought it was a very unprofessional opinion and very uncalled for,” he said. “I’m surprised they didn’t write a more professional opinion.”

The court decision is the latest bump since the district decided to sell KOCE in 2002. Even after the deal was made, the foundation needed three extensions to come up with the down payment.

The court’s ruling again raises the question of why the foundation, which includes some of the wealthiest men in the county as supporters -- such as drug company executive David Pyott, former baseball commissioner Peter Ueberroth and high-tech executives Henry Samueli, John Tu and Dwight Decker -- had to struggle to raise the money.

On the other hand, Daystar offered $25.1 million cash for the station. It bumped its offer to $40 million in cash a day after the deadline, but it was turned down.

On the last day of bidding, the foundation offered what it said was $32 million for the station, with an $8-million down payment and the rest to be paid over time. When the sale was completed, however, the remainder was to be paid over 30 years at no interest, with no payments for five years. Experts set the sale’s value in current dollars at $12.5 million to $19.5 million.

During negotiations, the trustees cut the price by $4 million, saying that was the amount the district would have to repay in grants and contributions if the station were sold to a non-PBS bidder.

“To assert that a bid from televangelists made the very next day after bidding was closed for an extra $15 million in cash while letting a favored bidder off the hook for $4 million two months after the bidding was closed can only be described as the rankest sort of favoritism,” the appeals court ruled.

Lea Sloan, a PBS spokeswoman, said there had never been an instance where courts had reversed the sale of a PBS station. But an FCC spokeswoman said there had been instances where commercial stations had suffered that fate and applicants have had to file suit to regain their broadcasting licenses.

Dahl said he would recommend that the district appeal Thursday’s decision to the state Supreme Court. The trustees’ next board meeting is July 20.

Trustee Jerry Patterson said in an e-mail that he preferred taking the case to federal court or seeking a change in the law governing the station’s sale. He called complying with the court order “the most obnoxious option and I certainly hope the full board will not choose that action.”

Mel Rogers, KOCE’s president and general manager for eight years, seemed unconcerned by the decision. “We’re pretty confident it’s not going to change anything in the long run,” he said. “We thought the roller-coaster ride was over, but I guess we’re going to have to wait a little longer.”

KOCE, which is based at Golden West College in Huntington Beach, is carried by cable-TV systems throughout Southern California.

Taking back the station would create problems for the community college district and the foundation.

The foundation borrowed $10 million for the down payment and for operating costs and has received commitments from donors to make contributions over several years.

The Thursday decision could make it difficult for the station to raise funds with the uncertainty hanging over it.

The district already has spent the $8 million down payment, Dahl said, and considering budget cuts the district has made, he didn’t know how it could repay the money.

In addition, many station employees -- who worked for the district before the sale -- were given a variety of severance, retirement and transfer packages at a cost of about $350,000. Some continued working at KOCE with reduced benefits.

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(BEGIN TEXT OF INFOBOX)

On hold

A state appeals court has reversed the Coast Community College Distric”s sale of its PBS station to the KOCE-TV Foundation. The Daystar Television Network, a Christian broadcaster, sued, saying it had made the highest bid.

Final bidders

Group: KOCE-TV Foundation

Offer: $32 million total ($8 million cash and rest secured by a note)

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Group: Daystar Television Network

Offer: $25.1 million cash *

* Submitted a $40-million bid after the Oct. 8 deadline that was rejected

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Changes in the KOCE-TV Foundation’s bid

Bid: Cash: $8 million

The Final Deal: $8 million

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Bid: Balance: $24 million, to be paid with interest

The Final Deal: $17.5 million, to be paid without interest over 30 years; no payments for first five years.

$4 million credited to the KOCE Foundation for costs the district says it probably would be paid if the station were sold to another bidder

$2.5 million to the KOCE Foundation for televised courses and promotional spots

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Bid: Total: $32 million

The Final Deal: $32 million

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Source: KOCE-TV; Coast Community College District