Donor intent: Battle cry for grieving fans
In Minnesota and Florida, want back the stations they supported — both now run by APMG
Grieving former listeners of Twin Cities classical music station WCAL now say they’re several steps closer to getting it back on the air.
Their tenacious listener group, Save WCAL, this month urged Minnesota Attorney General Lori Swanson to overturn the sale of the station by its longtime licensee, St. Olaf College, to Minnesota Public Radio, which now operates it as an eclectic contemporary music outlet called The Current [Save WCAL letter, June12].
“There is no valid legal basis for challenging Minnesota Public Radio’s purchase of the station,” MPR said in a statement.
If a court disagrees with that view, however, it would cause quite an upheaval for MPR — not to mention the little Northfield, Minn., college, if it had to pay back the $10.5 million sales price.
A similar legal challenge also could affect the new Florida branch of American Public Media Group, MPR’s parent. Former listeners of Miami station WMCU are challenging the station’s September 2007 sale to APMG.
In the Twin Cities area, MPR wasn’t shutting down the only classical station. WCAL’s listeners were fighting the takeover because they preferred the programming of the St. Olaf station over MPR’s classical music service.
In Florida, APMG was starting a classical music station, not closing one, but the grieving listeners are the former audience of a Christian radio station. The office of Florida’s Republican attorney general has said it will investigate the transaction.
Donors get feisty
Save WCAL, which has been raising Minnesota heck for four years to get the attention of the state attorney general, describes the cases as part of a national movement by charitable contributors to have nonprofits abide more closely by donor intent.
In perhaps the biggest case — Robertson v. Princeton, which goes to trial in October — the heirs of a very big donor accuse Princeton University of fraudulently diverting more than $200 million from an endowment explicitly earmarked to help prepare grad students for federal careers, especially in foreign affairs.
Givers have always quarreled with their beneficiaries at times, but legal scholars have been giving the disputes more attention in recent years, says Jack B. Siegel, a lawyer and accountant who runs Charity Governance Consulting LLC in Chicago. The public knows more about the formerly secretive world of big-time philanthropy, Siegel says, and more millionaires today are young and eager to micromanage their gifts.
Since the 1950s, Siegel says, courts have developed a common-law notion that gifts are encumbered with a specific purpose if, for example, it’s cited in the solicitations. To change the purpose, a nonprofit must get a court’s permission, he says.
St. Olaf College didn’t seek a court’s blessing to redirect donations until two years after selling WCAL.
“Now that the radio station license has been sold, it’s a little bit unclear how they can unscramble those eggs,” says Siegel.
Nonprofits must realize that they assume obligations when they accept donations and are not free to think of them as ordinary business income, says Michael W. McNabb, a general-practice south-Minnesota attorney who is handling the sprawling case pro bono.
The latest ruling in the WCAL dispute, June 9, didn’t touch the subject of overturning the sale.
But Save WCAL advocates were heartened that Judge Gerald J. Wolf, a state senior district judge in Rice County, criticized the attorney general for permitting the sale. As for the college, he faulted St. Olaf for turning off WCAL after accepting donations for more than 80 years to build and operate it. WCAL, licensed in 1922, prided itself as the first listener-supported station in the country.
In his June 9 ruling, Wolf said he’s “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.”
The WCAL sale occurred before Swanson took office, the judge noted, but he asserted that “the office as an institution has a duty to the people of Minnesota to serve as guardian of all trusts created and operated in this state.” He concludes, “The Minnesota Attorney General’s Office failed in its duty in this case.”
Most attorneys contacted by Current who are familiar with nonprofit law say voiding the sale of WCAL four years after the fact would be a long shot. But Ruth M. Sylte, president of Save WCAL, is encouraged that the judge found that the college had entered into a charitable trust by accepting donations to support classical music broadcasting on WCAL and could not spend the assets for other purposes without court approval.
“The consequence of a sale of assets of a charitable trust without notice and without approval of the court is clear,” Sylte said, pointing to a summary of U.S. law in the legal encyclopedia American Jurisprudence: “Where the trustees of a charitable trust have no power under the trust instrument or under an order of a court of equity to convey such property, a deed made of such property is void and subject to cancellation upon application of proper parties.”
The attorney general’s spokesman did not return calls requesting comment, but he denied to the St. Paul Pioneer Press that donations to WCAL were put in a trust. McNabb produced documents showing that both the attorney general and the college had said the donations had the status of a charitable trust. Under Minnesota law, donors create such trusts automatically without signing a formal trust document, according to McNabb.
Which donations go where?
Questions about WCAL’s sale were beyond the scope of the case, Judge Wolf noted in the order. St. Olaf College petitioned the court in 2006 for guidance in disposing of the station’s endowment and certain other assets.
So Wolf spent most of his June 9 order laying out how he’d divide those assets. The college and Save WCAL see his decisions differently.
The college noted that “four of the six specific recommendations put forward by St. Olaf were approved.” The judge released restrictions on some $460,000 in restricted endowment gifts, accepting the college’s proposal that they would be used for what it calls “core WCAL activities.” Though St. Olaf no longer operates WCAL, the funds could be spent on related services such as live webcasts of the Lutheran college’s daily chapel and worship services, and production and distribution of classical music programs, including traditional Sing For Joy broadcasts. In some cases, the college said it contacted donors or their heirs and got their permission to release restrictions on the gifts.
Save WCAL’s McNabb pointed out that the judge denied parts of St. Olaf’’s petition covering donations totaling more than $1 million. In two categories of donations—restricted nonendowment gifts and undocumented gifts—the judge nixed the college’s request to be released from all restrictions. The college had announced it would spend much of its proceeds from the WCAL sale on three endowed chairs and the repair of its chapel organ.
Other assets beyond the scope of the case would raise the stakes enormously. The station’s broadcast tower, now worth $2.5 million, was listed as an asset by a retired judge appointed by the court last year to examine WCAL’s assets and recommend disposition.
Also at stake is the most valuable asset associated with WCAL — the broadcast license for which (tower included) MPR paid $10.5 million.
Checks “diverted” to licensee
In Miami, the Christian station WMCU, or Spirit FM, signed off in October—replaced at 89.7 MHz by WKCP/Classical South Florida—but Save WMCU is campaigning to bring it back.
The group is not satisfied that the big religious radio chain Salem Communications rushed to buy an AM station and launch “the new WMCU” in October to fill the market gap.
Save WMCU, like its Minnesota counterpart, failed to stop the FCC license transfer, so it is appealing to a higher authority, suggesting in an e-mail that supporters pray and fast to bring back Spirit FM.
The group is also supporting the suit by two former listener/donors that has moved through several stages, including a switch from state court to U.S. District Court in Miami and, on May 12, the court’s dismissal of the complaint against American Public Media.
The donors’ ire and their suit were directed largely against the remaining defendants, the perceived betrayer, former licensee Trinity International University and its parent denomination, the Evangelical Free Church of America. Trinity, the Illinois-based successor to WMCU’s founder, the defunct Miami Christian University, was accused of soliciting donations for Christian radio “while secretly and deceptively” planning to sell the station and its translator in West Palm Beach. For those APMG paid the school $20 million.
To the plaintiffs’ pro bono attorney, Alexander J. Alfano, it’s a case of deceptive solicitation. Donations to WMCU, its sole income source, were “diverted” into the pockets of a school in Illinois.
Save WMCU meanwhile has begun urging its supporters to enlist elected officials, and got at least a polite expression of interest from Florida Attorney General Bill McCollum.
“The attorney general’s concern is that the intent of donors to charitable causes—including charitable donations made for qualified radio programming, regardless of its format—be honored and followed to the extent practicable,” Assistant AG Blaine H. Winship wrote to Trinity International in April.
McCollum’s bio says he worked against terrorism when he was in the U.S. House of Representatives and that he is now opposing child pornography. His bio also lists consumer protection among his interests.
Save WCAL’s request to Minnesota attorney general
June 12, 2008
BY COURIER
Hon. Lori R. Swanson
Minnesota Attorney General
102 State CapitSt. Paul, Minnesota 55155 [sic]
Re: Petition of St. Olaf College
No. 66-CV-06-2518
Dear Attorney General Swanson:
In light of the Order issued in this matter SaveWCAL hereby renews its demand, first made in correspondence on October 5, 2004, that the Attorney General honor her statutory duty to enforce the WCAL charitable trust. Judge Wolf does not mince words in his Order:
"The 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."
Order at 5 (emphasis added). The consequence of a sale of assets of a charitable trust without notice and without approval of the Court is clear:
"Where the trustees of a charitable trust have no power under the trust instrument or under an order of a court of equity to convey such property, a deed made of such property is void and subject to cancellation upon application of proper parties."
15 Am. Jur. 2d Charities § 95 (emphasis added). Therefore, the Attorney General has a legal responsibility to the 80,000 listeners-beneficiaries of the WCAL trust to commence a proceeding requesting the Court to declare that the sale of the assets of the charitable trust to Minnesota Public Radio is void.
The doctrine of unclean hands prevents St. Olaf College from asserting the equitable defense of laches (timeliness) due to its breach of its fiduciary duty to the beneficiaries of the trust and due to its failure to seek the approval of the District Court to terminate the charitable trust. Gully v. Gully, 599 N.W.2d at 825 (Minn. 1999). The doctrine of collateral estoppel prevents St. Olaf from attempting to re-litigate the judicial finding of a charitable trust.
The same legal principles apply to Minnesota Public Radio. MPR induced St. Olaf's breach of trust with its multi-million dollar offer, and MPR was (obviously) in privity of contract with St. Olaf. Crossman v. Lockwood, 713 N.W.2d at 62 (Minn. App. 2006). (In addition, SaveWCAL served the Order appointing the Special Master upon the president and the vice president-general counsel of MPR and upon the chairman of its Board of Trustees together with a formal Notice that MPR had the opportunity to intervene in the proceeding. See the enclosed Notice.)
As Judge Wolf observes about your office:
"The office as an institution has a duty to the people of Minnesota to serve as guardian of all trusts created and operated in this state. The Minnesota Attorney General's Office failed in its duty in this case."
Order at 5 (emphasis added). This is your opportunity to redeem your office and to honor your duty to serve the people of our state.
This year we are celebrating the Minnesota sesquicentennial. WCAL, the first listener-supported station in the nation, is Item No. 141 in Minnesota 150--the People, Places and Things that Shape Our State, the main exhibit now showing at the Minnesota History Center. The Order in this case provides the legal basis (the existence of a charitable trust) for the restoration of this Minnesota treasure. What is required now is your action.
Sincerely yours,
Ruth M. Sylte
President, SaveWCAL
encl.: Correspondence to Minnesota Attorney General (October 5, 2004), Notice of Filing Orders and Affidavit of Service by Mail (October 23, 2007)
Posted June 25, 2008
This article from the print edition is based on Current's web report posted June 16, 2008 and revised June 20.
Copyright 2008 by Current LLC
