Open Acce$$ To Cable Crime
From regulatory missteps to allegations of fraud, the telecom industry eyes Portland, Oregon for the shape of things to come
OPEN ACCE$$ TO CABLE CRIME
Cable regulatory commission, City behavior questioned
From regulatory missteps
to allegations of fraud, the
the telecom industry eyes
Portland, Oregon for the
shape of things to come
By Justin Case
'Secret War' Correspondent 11/30/01
As questions of competency, negligence and breach of fiduciary duty fall at the feet of the Mount Hood Cable Regulatory Commission, the MHCRC, an intergovernmental agency originally set up by the City of Portland, Oregon, as management for the Multnomah County cable franchises, is supplying the character actors in it's own "made for cable movie". Beyond the old adage of "where there's smoke there's fire", there are now allegations of fraud surrounding the activities of The City Cable Office and the MHCRC. With so many problems of such magnitude coming from so many "controllable" areas of city management, if allowed to continue unchecked, there could be a real, not imagined, negative effect on the city's credit rating. The public are now beginning to wonder. At what point does the community say there are enough real and substantive irregularities within the system, that a pattern of mismanagement has clearly emerged? Is there an attempt on the part of the city to cover up missteps or wrongdoing? Or is the city in the process of coming forward, saying they recognize they have a problem, calling for an unbiased investigation from reputable outside sources, locating the source of the problems, then effecting the necessary change to remove the real roadblocks to a fiscal turnaround?
D a v i d a n d G o l i a t h T h e C a b l e F a b l e
In 1998 The Wall Street Journal called The Mount Hood Cable Regulatory Commission, [MHCRC] "the mouse that roared." A cute and endearing review for The City Of Portland's bold cable rendition of "David and Goliath." Three years later the house lights came up and the public looked on in horror as disease infested vermin gnawed away at what was once the remnants of a city budget. The size and quantity of "droppings" left on the stage teases the public imagination to wonder how things might have been. If only the Journal had "smelled a rat" rather than "heard" what they thought was a mouse. But as this dark comedy grinds to the end of a long first act, it is neither cute, nor endearing. As if locked in the crying room of an an abandoned theater, the captive audience is the public.
Today, if someone were to phone "pest control" from a business or residential telephone in Portland, not even a fraction of a cent of revenue from that call would go to the Qwest telephone company's monthly franchise payment. Why is that? Well for now Quest is the spoiler in Portland's telecom horror show.
The curtain rises with a large Troll played by Qwest quietly sleeping as "David", played by David Olson of The City Cable Office of Franchise Management, uses his "slingshot," played by the MHCRC, to shoot a "stone," played by "Open Access", to the toe of "The Giant" played by AT&T. Outraged, AT&T bellows out "I hope you have a big legal budget."
Awakened by all the noise, Qwest the Troll sits up, wipes the sleep from it's eyes and focuses on it's own open access questions. Specifically, why should I, Qwest the telephone company, pay anything more than a nominal administrative fee for "open access" to the City of Portland's telecommunications customers? Qwest poses this now infamous proposition in the form of a lawsuit.
While the suit crawls through the justice system, the City of Portland, as well as other municipalities served by Qwest are left holding the bag for unpaid franchise monies already budgeted for in their city's general fund. I use to wonder what could be more humiliating than a Portland Trailblazers fourth quarter? Now this, it makes Tanya Harding for Mayor seem reasonable.
P a n d o r a ' s C a b l e B o x
Regardless who wins or looses, an appeal is guaranteed. No matter what spin is cooked up by city hall, appeals take time, and when there are bills to be paid now, time is a luxury Portland does not have. Through all of this, the city continues to flex it's ego while operating with what can only best be described as an amateurish understanding of civic fiscal realities. Cue the high cost of tuition for The City and MHCRC's lesson in telecommunication business and regulation 101, and like a rabbit out of a hat pops the Qwest related City Attorney and legal services bill. Add that to the cost of litigating open access with AT&T and you could probably pay at least a part of the city's damages awarded to other plaintiffs in city related legal quagmires.
The political reality is that civic leaders come and go, but in the end, it's the public whose left to fight the brawl the city was quick to start but too weak to finish. At the end of fiscal 2001 the city is now bruised and beaten. The bleeding has surpassed 6.0 million dollars at a rate of 1.6 million a month. This number is from the lost Qwest revenues alone. It wouldn't be fair to blame all of the city's woes on The City Cable Office and the MHCRC, because before they provided Qwest with at least a temporary solution to the phone company's own fiscal challenges, there were certainly other "controllable" cash flow problems raging like wildfires out of control.
From the Water and Environmental Services Bureaus, to the Transportation department scrambling to "realign" programs and projects in the wake of the City Council's decision to rescind the SMIF, August 29, 2001 found the city admitting things were careening out of control. Then, for fits of giggles, there's always the wild card $ 8.0 million in Business License credits at risk with Business License Refunds anticipated to increase $ 1.0 million above the currently budgeted amount. The post 9-11 economy has the already stumbling budget, stressed to such a geometric level that any chance the city might have had back in August to come even close to conclusively determining the true scope of the fiscal challenges and their impacts is, well...remote.
B l i n d W a i t e r H o t S o u p
Before it's self created notoriety, the MHCRC, was an obscure government agency designed and implemented by the City of Portland. Through an "intergovernmental agreement" the MHCRC would manage as well as govern the projected increase of administrative and economic efficiencies anticipated with the municipal and unincorporated Multnomah County cable franchise areas as they consolidated under one service provider.
The MHCRC board matrix comes from the "butcher, baker, candle stick maker" skill set that includes a program analyst, multimedia producer, consultant, tractor salesman, accountant, a Nike employee, small-business owner, and a lighting designer. These are the people that under the recommendation of David Olson, director of the City Cable Office, put the telecommunications industry on it's ear. Anyone with even a rudimentary study of the open access issue would know that industry analyst long ago took the position that to force "open access" is controversial, litigious, perilous, and ultimately a very disappointing paper tiger. When you have professionals saying effectively, don't go there, because it would be dangerous, unwise, and not within your jurisdiction, why would you do it?
P u b l i c A c c e $ $ N o w R e a d y F o r T h e T a k i n g
A part of the answer to the why do it question may lie with the MHCRC's oversight of Portland Cable Access. PCA is a state of Oregon Non-Profit organization created two decades ago to fulfill the commitment to the public to provide an audio visual forum not available through commercial broadcast systems.
In 1969 the FCC leased access proclamation was the birth of what we know as public access today. In 1972 the FCC adopted rules for PEG access, i.e. local origination public, education, government as well as additional leased access programing, all with no cable company control. In 1982 Portland Cable Access was born. This was just prior to the federal preemption of local controls by the 1984 Cable Act, which was followed by rate re-regulation in the 1992 Cable Act. Deregulation occurred once again, first in a string of FCC decisions beginning in late 1994 and finally by statute in the 1996 Telecommunications Act.
Since deregulation, a rash of claims of first amendment violations, conflict of interest and fiscal funny business on the part of local municipalities has prompted a call for a congressional investigation. Now notorious in this battle, City of Portland has First Amendment advocates hoping Congress will soon intervene and place "a lock on the coke machine" just to keep the honest politicians honest, in an environment where our rights and freedoms, guaranteed by the Constitution of The United States, are being seriously eroded under the catch-all phrase of national security. Franchise fees earmarked for public access are being co-opted as a "slush fund" source of revenue funneled into the general fund to cover budget short-falls and cost overruns resulting from mismanagement and an inability to demand fiscal responsibility by department.
Using the PEG access model, the public's first amendment right to free speech is served through the "town square soapbox" which is public access. Anyone willing to complete PCA's training courses can put a show on the access channel. Partnerships developed with education such as PCA's course study for Portland State University provides the education side of programming. The third leg of the stool is government access, such as the broadcast of City Council meetings and other municipal programming.
P C A N a t i o n a l L e a d e r
Legendary on the national scene, PCA wins awards year after year for it's PEG access programming. Most recently, the station won two Telly awards, the advertising industry's equivalent of an Oscar, for it's public service announcements. In 1999 PCA won a NATOA Programming Award,1st Place in Public Health (Over $500,000) City of Portland, OR "Lead: A Community Fights an Invisible Danger." This means that PCA obtained recognition for the City with a First Place national award from the Government Programming awards competition sponsored by the National Association of Telecommunications Officers and Advisors (NATOA), announced at the Awards Ceremony at the NATOA Annual Conference (Atlanta, Georgia) September 17, 1999.
PCA was awarded First Place in the category "Public Health" programming for government access/PEG organizations with budgets over $500,000 (this is the 'super-heavyweight' category with budget categories being 'under $100,000', $100K-250K', and $250K-$500K'). The award is particularly significant since PCA was competing against the best-funded government access operations in the nation (including New York, LA, and many others).
When PCA's board of directors became concerned about the Executive Director's inability to answer questions about operations, a "review" of the E.D. began to turn up what appeared to be fraud within and around the organization. When one of the board members of the E.D. review committee raised the issue in a May 2001 board meeting, he was met with what resulted in a failed attempt to remove him as a board member at the June meeting. Some board members were stunned by the fact that the MHCRC was effectively overseeing what could only be called a "cover-up" when the commission reneged on their promise to provide help and guidance in what was now an "investigation" of the Executive Director.
L i a r s f i g u r e , b u t f i g u r e s d o n ' t l i e . . .
Oddly enough, PCA's board had been questioning the E.D. about his fiscal practices virtually since his arrival. What concerned the board was the E.D.'s refusal to maintain budget baselines within the PCA budget process. The board needed and wanted the E.D. to require department heads to keep expenses for each board vote within the approved levels. These levels, called baselines, contain amounts for the coming year and the following two years. However, the mix of outputs purchased may be changed so long as the total expenses do not exceed approved baselines.
The baseline system avoids small incremental increases in costs adding up to significant additional spending, which is what was undermining PCA's agreed fiscal and policy objectives. It is these same additional increases in cost from the city of Portland playing loose and fast with management decisions with no regard for probable cost increases that would ultimately have a negative effect on the city budget and resulted in the undermining of the city's current fiscal objectives.
Rather than "robing Peter to pay Paul" when forced to make up for decisions which lack proper fiscal discipline, the use of the baseline system, when adhered to, provides greater certainty for medium-term planning by departments. Department heads may request changes to baselines, and The City considers proposals during the review of the baselines prior to the budget. The circumstances in which baseline changes are agreed are tightly defined. These include changes arising from City Council decisions since the previous fiscal update and forecast revisions to demand-driven expense, such as changes in the projected employee benefit numbers.
The reason the ex-Executive Director of PCA did not want a tightly defined budget was that his own department, administration, would be under the same scrutiny as the rest of the organization. Whereas he was wanting unbridled access to funds for travel, hospitality and non-board approved expenses, he did not want the whole organization under strict fiscal discipline, because he would have to keep his hand out of other department's cookie jars when he mismanaged expenses in one area and needed to move them from one line item to another.
It appears that there is not only a similar line of thought in terms of fiscal management on the part of the city, but the city looks to other areas that are functioning properly and then strips out their budget to cover short-sighted planning or mismanagement. PCA has been in the city's budgetary cross hairs for years because of the size of it's revenue stream. If they could cut-back access they could kill two birds with one stone. They get rid of what they consider a headache, because access is a way for the people to have a voice, and that voice is not always favorable to what is going on in the city council meetings. Then, they can take that nice consistent cash flow and use it to help put a bandage on whatever new mess they have gotten themselves into. It's not a conspiracy, there are no black helicopters, it's a fact. And there are a legion of people who have been signed up to help the city do exactly that. Their payoff? Political appointments, jobs, consulting fees, and management level jobs with the cable company. Both the cable company and the city have an interest in restricting access. The cable company doesn't see any revenue from it and there are expenses involved. The city and the cable company aren't even discrete about it. It's sad, sad and wrong.
What has now unfolded is a scenario where the MHCRC, who was entrusted to manage access provider contracts with Portland Cable Access and Multnomah Community Television as well as allocate capital funds for Portland Cable Access and Multnomah Community Television seems to have a hidden agenda. That agenda is whatever the city of Portland through the City Cable Office of Franchise Management desires with no regard for PCA or the public's best interest.
This effectively co-opted and compromised not only the PCA board of director's duty to manage the Executive Director, but this also had the executive director thinking his boss was David Olson, not the board. More questions of serious conflicts of interest involving the city, the City Cable Office and the MHCRC's supposed arms length, good faith negotiations of PCA's contract, as well as the allocation of capital funds paid by the cable viewing public. At a sum of $1.3 million a year, this with other funds, such as improvements to accommodate for over builders, etc., raises more and more questions about the management of this money which is entrusted to the MHCRC and the city.
W h e n T h e W h i p C o m e s D o w n
In what could only be described as another bizarre event in this cable t.v. soap opera, PCA's Secretary for the board of directors served notice to a board member that his removal would be on the agenda for the November meeting. The same director had raised the issue of "budget baselines" and "fraud" at the May meeting to be met with a failed coup to remove him in June. Considering what was coming out of the continuing investigation of the then Executive Director, as well as the MHCRC and the City Cable Office's botched attempt to cover up, this may not seem that strange. The problem is the November meeting was to be the targeted director's last meeting. His term was up. Again, so why would the PCA board do it?
Here was now another element of a pattern, forming around the behavior of the MHCRC. It turns out the reason the PCA board was removing a director who had been investigating fraud on the eve of the last board meeting of his final term, was because the MHCRC made it clear they not only wanted it done, but made the request in such a way the Portland Cable Access Board President admitted PCA's contracts and capital funding payments were placed at risk.
What does this mean exactly? On the one hand, the MHCRC had walked away from their commitment to helping with the events surrounding allegations involving the Executive Director, but were "squeezing" the PCA board of directors under the duress of their continued payments and funding if they didn't remove a director who they felt was a "problem"? The whole idea was so fantastic and unbelievable that The Portland Cable Access Board President and Chair Kohel Haver, when asked to explain why they were removing a director on the last night of board service, he said he was "stunned". Haver, also a practicing entertainment and copyright attorney in the state of Oregon had this to say:
"It sounded like for some reason the cable reg people wanted us to do this."
"I didn't realize until, um "the good fairy" comes to Exec Com the next day with a $355,000 [three hundred and fifty five thousand dollar check] that, that was the trial to see whether they needed to give or withhold our quarterly payment under the contract. I'm calling the board [the MHCRC] the good fairy, the cabal, the "good fairy cabal" wrote us the check. I did not look at the check, so I can't tell you exactly where it came...[from] I'm guessing The City of Portland, through The Cable Office, but I didn't look, I was just, I was stunned. Cause if someone said Kohel we need you to go to this meeting because they might not give us $350,000 dollars, I would have been a little more anxious."
When asked to explain what his thoughts on the subject of his removal were, former PCA director [he was removed at the November board meeting per the MHCRC's instructions] Rod Pitman had this to say:
"Back in May of 2001, initially what appeared to be a case of gross-mismanagement on the part of the Executive Director of Portland Cable Access, began to look like fraud. There were also questions surrounding "plausible deniability" as opposed to a wanton willful enabling of the director's actions on the part of The Mount Hood Cable Regulatory Commission and The City Cable Office. What initially seemed like a rather isolated and relatively insignificant employee problem, suddenly mushroomed into a battle. Why would so many people endanger their real or imagined political careers as well as their reputation's within the community to protect the Executive Director of Portland Cable Access?"
"If this was just a 'tempest in a teapot' why would there, at last count, be 23 lawyers involved, including such firms as Perkins Coie, Garvery Schubert, Barer, et. al, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, The City Attorney's Office, as well as eleven (11) lawyers from Stoel, Rives, alone?"
"After the board failed to remove me as a director the first time, they authorized another 'investigation of the E.D.' with a special attorney hired to co-ordinate his 'employment review' in an attempt to avoid any legal complications and insure that the review was done fairly and properly. There was also a group of 'consultants' who had worked with the FBI, that were hired to do what we were told was a 'fraud investigation' on the organization. Two computer consulting firms, the first hired to "reconfigure" the company intranet as the former E.D. was holding the system hostage at the time, with a second firm, who works with the CIA and the NSA, hired to do computer forensics as a part of evidence gathering for the investigation. As the investigation began to point up-lines, because PCA is overseen by the MHCRC, that's when the heat on me was turned up a notch."
Pitman's allegations span from the possible jeopardizing of the Portland Cable Access tax exempt status, bribery, commercial bribery, illegal gratuity, conflict of interest, false statements and false claims, extortion, breach of fiduciary duty, employee double dipping, failure to report a federal felony to appropriate U.S. Law Enforcement Authorities, insurance fraud and payroll fraud, to possible conspiracy, mail and wire fraud.
Portland Cable Access is an unlikely place to find what may be the cause of the City of Portland's financial woes, however, Pitman believes there is a pattern that reflects not only a seriously flawed business culture, but a very viable pattern of gross mismanagement and ineptness on the part of the MHCRC that can be directly traced to major city fiscal problems which loomed well before the 9-11 catastrophe.
Pitman says, "You have five new controllers in five years, four of which left under suspicious circumstances." You have board Treasurers who were either asking the E.D. hard questions, or fled in in the wake of fiscal improprieties. And now we have what is best called a 'fraudulent fraud investigation.' It just goes on and on and on....."
"David Olson, the director of the Portland City Cable Office said that my allegation the MHCRC would withhold our cable payment if I was not removed was 'nonsense'. Yet, I asked Royal Harshman, the MHCRC representative who was present at the November board meeting, where I was removed from the board, if they asked for my removal by name. He said yes.
Then you have a lawyer who said that he felt pressured by the commission to 'do something' and he was 'stunned' when he figured out that it was 'a trial' to see whether to give or withhold our quarterly payment under the contract,' which he obviously passed, and the organization subsequently received the $355,000 ? Being an attorney he knows what extortion is. Extortion occurs when a person or organization obtains something from another individual or organization under the color of official office and/or through the use of actual or threatened force or fear, including fear of economic or fiscal loss. It seems like all the elements are here to me. At least enough where a reasonable person might believe that a crime is being committed. I think Kohel needs to call the Oregon State Bar Ethics division and report the incident. The evidence is all there. Just go to the MHCRC meeting tapes for September or October and the November meeting tapes of the PCA board. Haver won't lie, his license to practice law is on the line."
Pitman poses a final question; "Go to the City Cable Office Of Franchise Management Web site, then click on the MHCRC web-site link, then check out the 'Intergovernmental Agreement' and ask yourself; Are the client's of the MHCRC best interest really being served here? What is the price? Then go to 'Cable Franchises' Paragon, City of Portland (Now AT&T East) Section 14.5 Alternative Franchise Compensation reads;
'In the event the obligation of Grantee to compensate the City through franchise fees or the utility license fee is lawfully suspended or eliminated, in whole or in part, then the Grantee shall pay to the City compensation equivalent to the compensation paid to the City by other similarly situated users of the streets for Grantee's use of the Streets, to the extent the City has the legal right to require such compensation.'
What does that mean exactly and why is it there? Then you have to ask yourself. Do you feel lucky?"
Pitman also claims that it is going to get worse before it gets better. But he describes it like a splinter in your finger, 'It will hurt for a while, especially when you go to take it out. But then your body has a chance to heal. We just need to get some splinters out of our civic corporate culture. Then we can get back on the right road to a healthy city budget.'
A few days ago an officer of the MHCRC came into PCA with city auditors for a tour for undisclosed reasons. If Pitman's allegations are true, and there is a plan to co-opt and compromise the management and fiscal health of Portland Cable Access, maybe this is the end of the first act of a very dark cable t.v. drama.
c 2001 Justin Case
phone: leave msg. @ (503) 9
address: Justin Case, General Delivery Jerome, AZ
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