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Failed KCSM-TV sale forces lawsuits: College district and contractor point fingers over who dropped the ball on auction
April 12, 2017, 05:00 AM By Austin Walsh Daily Journal

Who should take the blame for the failed sale of the College of San Mateo’s television station is the source of a legal battle, as school officials and a company hired to negotiate the acquisition are locking horns over which side muffed a lucrative deal.

Opposing civil lawsuits filed in county Superior Court indicate San Mateo County Community College District officials and LocusPoint Networks representatives disagree on why KCSM-TV was excluded from a $114 million auction sale.

LocusPoint Networks, hired by the district to sell the station, claim school officials dropped the ball on their most basic duty to culminate the deal while district employees believe the responsibility fell to the contractor.

The unperformed move inviting the legal finger-pointing was a failure to formally enter the station into bundled auction of stations holding broadcast licenses from the Federal Communications Commission.

District officials believe all steps tied to the station’s sale were the responsibility of LocusPoint Networks, which also hired accounting firm PricewaterhouseCoopers to assist in the process.

“We filed suit last week because we believe that LocusPoint and [PricewaterhouseCoopers] failed in multiple ways including multiple negligent failures and breaches of contract,” said district spokesman Mitch Bailey in an email. “We are confident the court will agree with the college district.”

Alternatively, LocusPoint Networks’ attorneys claim district officials are to blame for the sale falling through, according to their lawsuit.

“The district failed to take the most fundamental ‘action necessary’ to successfully participate in the auction — placing a bid,” according to the LocusPoint Networks’ court filing.

Work began to sell KCSM-TV in 2011, under an effort to eliminate a nearly $1 million annual deficit. It was launched in 1964 and broadcasts a variety of programs, some of which were used for educational purposes before online courses came into favor.

Under an agreement struck nearly four years ago, the district and contractor had agreed the sum from any pending sale of the financially troubled station would be divvied up with LocusPoint Networks receiving 36.5 percent of the auction proceeds and the district keeping the rest.

As part of the deal, LocusPoint Networks offered the district payments to keep the station running. The company’s lawsuit alleges officials knew of the failure to participate in the auction last November but kept taking operation payments, amounting to a breach of contract.

Bailey acknowledged the station was excluded from the sale, and said despite the best effort of officials, the station could not be reinstated in the process.

In its lawsuit, LocusPoint Networks is seeking an undetermined amount, but wants value commiserate to the money it would have received had the purchase gone through, plus the more than $3 million paid in operating expenses and interest. Final sales prices from the auction have not yet been published, and are expected to be available later this month.

District officials counter with claims LocusPoint Networks and its associates were contractually solely obligated to assure the sale was completed.

“LocusPoint was responsible to take ‘all such other actions as may be reasonably required by the college district as its bidding consultant and agent to achieve its successful participation in the auction,” noted Bailey in an email, including a passage from the agreement suggesting LocusPoint Networks was responsible to “submit all bids in the auction for the college district.”

He added after the station was excluded from the sale, PricewaterhouseCoopers representatives failed to assure the auction process was navigated correctly, and admitted to the error.

The outcome left the school district no choice but to file a lawsuit, said Bailey.

“In exchange for a substantial part of the sale proceeds (i.e., 36.5 percent), [LocusPoint Networks] and its agent [PricewaterhouseCoopers], promised the college district that it would successfully handle the auction process for KCSM-TV,” he said. “However, it failed to fulfill its duties and obligations to the college district, our students and community. For this reason, we have filed suit and are seeking damages.”

Looking forward, Bailey said officials are in the process of determining the fate of the station amidst the legal battle.

“The district’s board is still reviewing next steps,” said Bailey. “When they have made decisions, I will be happy to share them.”

austin@smdailyjournal.com

(650) 344-5200 ext. 105

 

 

Tags: district, locuspoint, auction, networks, officials, station,


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