CapRadio sues former GM for $900,000; Claims theft

[Y2kTheNewOldies]

When I first read that the house in West Sacramento was $1.37 Million I thought something was off at first when you see that house value one would think at first it's a house in the Bay Area where that's normal there. But when there's documents saying he went to Dubai for personal reasons and other questionable purchases not tied to paying news staff and NPR Programming then it calls into question how previous Cap Radio board members and CPB didn't stop the questionable spending part.

 

[michael hagerty]

A few comments, Mike. A partner and I used to own a rental house in WestSac that we sold a decade ago, so I'm somewhat familiar with WestSac. Reina's house is a couple of miles away, in a development that looks a good deal more upscale. But all the lots on his street seem to be the same size (9365 sq ft), and his house is only slightly larger than the other similarly-sized houses there. It has an additional half bath -- or a half bath was converted into a full bath. But they're all 5 bedrooms, and the houses are adjacent to smaller (4/3 or 5/3) homes on the same sized lots. However, Reina's house was listed for $200K more than the closest-in-size nearby house, and much more (half a Mill) than the values of the immediately adjacent houses. That says to me he's greedy *and* unrealistic about what a house like that, in a community like that, is likely to sell for.

Zillow shows the two closest houses, both in terms of proximity and size (though both are slightly smaller) are listed at $1.25 and $1.15 million. Both lack the private lake access Reina's house has.

Zillow's estimate for Reina's house is $1.336 million is actually a little higher than the $1.3 million the house was listed for.

As you wrote, he has since yanked the listing, maybe because he wasn't able to find a sucker to make a quick killing on. But since the Fed rate cuts appear to have stalled, and since many of the houses are owned or rented by state government employees or contractors, I think he's unlikely to find that bigger sucker anytime soon.

We don't know that Reina yanked the listing. The CapRadio lawsuit asked that the house be placed in a trust, and it's possible a judge issued a TRO on the sale.

 

[ILOVERADIO]

Well that seems like a bad idea that could go wrong many different ways, even without hindsight.

Doesn’t Cap Radio have annual independent CPA audits that search for potential fraud, inefficiency, and proper accounting? I’ve worked for 3 medium sized nonprofits. They all had these annual agency audits.

 

[michael hagerty]

Doesn’t Cap Radio have annual independent CPA audits that search for potential fraud, inefficiency, and proper accounting? I’ve worked for 3 medium sized nonprofits. They all had these annual agency audits.

All of this is covered in the audit, the forensic report and the lawsuit, as well as attendant news coverage, but that's a LOT, so let me try to summarize:

Until last year, Sac State had a fairly hands-off approach to CapRadio, first creating and then empowering a Board of Directors to run the stations. The board was responsible for the annual budget (based on requests from department heads and top management), major projects and expenditures outside the scope of a yearly operating budget, and hiring and firing the Chief Executive Officer (CEO)/General Manager, who would then hire department heads, who would hire and fire their team members.

There were two other top-level managers, the Chief Operating Officer (COO) and the Chief Financial Officer (CFO). Having these three positions is considered a best business practice.

How it worked for the first couple of decades was that the CFO would prepare an annual financial report with the help of an independent accounting firm that was supposed to change each year (you could go back to the same one every four years), the COO would examine it, approve it and it would go to the
Board of Directors.

In a lot of organizations, the CEO would get the final look and approval before the Board, but as Michael Rivers Kramer told us above, the CEO prior to Jun Reina (Rick Eytcheson) was fairly hands-off.

The Board would examine and approve the report. After that, auditors from the University would come to the station, spend a day and a half in the conference room, go over the report, ask for any documentation that might answer questions they'd have and that was that.

So there was an annual audit.

Here's where it went wrong:

Jun Reina was hired as CFO in 2006. In 2013, the COO left. Instead of hiring a new COO, or promoting Jun and hiring a CFO to replace him, the CEO combined the jobs of COO and CFO.

In 2020, the CEO retired and the board promoted Jun, who did not hire a COO and/or CFO, but held all three titles.

Over time, through lack of oversight, Jun was able to wall finance off from scrutiny. Nobody under him got to see the financials. Their job was to make sure the power bill and the employees got paid.

There was nobody above him who wanted to see the financials. The CEO just wanted to know the bottom line.'

It was three years between Jun getting the COO position added to his CFO title and responsibilites and the beginnings of misconduct (2016).

What Jun did, according to the audit, the forensic report and the CapRadio lawsuit filed this week, was to open new American Express cards without informing the CEO (when his predecessor was still there) or the board.

Those were set up to auto-pay from the CapRadio bank account (which only he could see).

One part of the audit says he even had his own personal card set up to auto-pay from the CapRadio bank account for a period of time.

Jun, having no oversight, then drew up the annual report, and instead of rotating independent accounting firms, used the same one (only time will tell if they have any culpability or were simply duped) over and over.

And then Jun took that report to the board, which approved it.

The University auditors showed up as usual, for their day and a half, went over the report, asked their usual questions, made their usual requests for documentation, which Jun apparently had.

And that's what happened in 2017, 2018, 2019, 2020, 2021 and 2022.

There were audits.

What we don't know, and won't know until the criminal trial (and there damn well better be one) is what misrepresentations and falsifications Jun used to produce reports that didn't raise red flags at the independent accounting firm and documents that would satisfy the annual university audit.

It's also possible that Jun could have gotten away with this for a lot longer, but on a parallel track, the massive construction project for new downtown studios, offices and performance spaces were going way over budget.

For a while, it appears Jun tried smoke and mirrors to make it look like that was okay, too.

It could be that he finally just tried to spin one too many plates and got sloppy.

What we now know is that someone saw something, went to the university and in 2023, the auditors were there for FIVE days. Jun couldn't answer most questions or produce the right documents and the first business day after the auditors left, Jun had an "emergency", left the building, never came back and resigned a few weeks later.

The University has accepted the resignation of the entire board of directors, appointed new board members and taken full control of CapRadio. Management of the radio station now reports to the University. The University approves expenses and hires/fires the General Manager. The CFO and COO positions responsibilities are now with University employees, not the radio station. There is no scenario under which this could happen again.

 

[radio11]

A normal, independent audit is not designed to detect fraud. It is designed to review the adequacy of internal controls.

 

[michael hagerty]

Yesterday's Sacramento Bee interviewed three of the people let go in the initial layoffs for their reactions to the Reina story:

Ex-CapRadio employees react to lavish spending linked to former GM. ‘We all trusted him’

“There’s no words for it,” said Mick Martin, a nearly 40-year fixture on the capital region’s music scene, and former host of a blues show on CapRadio.

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