The Wolf of Sesame Street: Revealing the secret corruption inside PBS's news division

By David Sirota , written on February 12, 2014

From The News Desk

[Update 14th Feb 2014: Following Pando's exposé, PBS has announced it will return John Arnold's $3.5m donation.]

On December 18th, the Public Broadcasting Service's flagship station WNET issued a press release announcing the launch of a new two-year news series entitled "The Pension Peril." The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on  major PBS programs including the PBS News Hour.

However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that "The Pension Peril" is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering.

The Wolf of Sesame Street

In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees' retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country "to stop promising a (retirement) benefit" to public employees.

Despite Arnold's pension-slashing activism and his foundation's ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS's own very clear rules prohibit such blatant conflicts. (note: the term "PBS officials" refers interchangeably to both PBS officials and officials from PBS flagship affiliate WNET who were acting on behalf of the entire PBS system).

To the contrary, the Arnold Foundation spokesperson tells Pando that it was PBS officials who first initiated contact with Arnold in the Spring of 2013. She says those officials actively solicited Arnold to finance the broadcaster's proposal for a new pension-focused series. According to the spokesperson, they solicited Arnold's support based specifically on their knowledge of his push to slash pension benefits for public employees.

The foundation's spokesperson said PBS executives approached Arnold "with the proposal for the series, having become aware of LJAF's interest" in shaping public pension policy, and moving that policy toward cutting retirement benefits for public workers.

According to newly posted disclosures about its 2013 grantmaking, the Laura and John Arnold Foundation responded to PBS's tailored proposal by donating a whopping $3.5 million to WNET, the PBS flagship station that is coordinating the "Pension Peril" series for distribution across the country. The $3.5 million, which is earmarked for "educat(ing) the public about public employees' retirement benefits," is one of the foundation's largest single disclosed expenditures. WNET spokesperson Kellie Specter confirmed to Pando that the huge sum makes Arnold the "anchor/lead funder of the initiative." A single note buried on PBS's website - but not repeated in such explicit terms on PBS airwaves - confirms that the money is directly financing the "Pension Peril" series.

With PBS's "Pension Peril" series echoing many of the same pension-cutting themes that the Arnold Foundation is promoting in the legislative arena, and with the series not explicitly disclosing the Arnold financing to PBS viewers, the foundation's spokesperson says her organization is happy with the segments airing on stations throughout the country. However, she says the foundation reserves "the ability to stop funding" the series at any time "in the event of extraordinary circumstances."

The news of PBS actively soliciting financing from billionaire political activists - and custom tailoring original program proposals for those financiers - follows a wave of damning revelations about the influence of super-wealthy political interests over public broadcasting. Thanks to collusion with PBS executives, those monied interests are increasingly permitted to launder their ideological and self-serving messages through the seeming objectivity of public television.

The stealth Arnold-PBS connection, however, represents a major escalation in the larger trend. In this particular case, PBS seems to be defying its own rules and regulations about conflicts of interest. At the same time, the fact that PBS is obscuring the financial arrangement suggests the network may be deliberately attempting to hide those conflicts from its own viewers.


An affront to PBS rules about "pre-ordained conclusions"

As a taxpayer-funded entity, PBS's official rules clearly prohibit the funding of programming by a benefactor who "has asserted, or has the right to assert, editorial control over a program." Those rules also do not allow programming to be funded by a benefactor who is "pre-ordaining the conclusion the viewer should draw from the materials presented."

The Arnold Foundation refused to share with Pando the details of its PBS agreement, but denied that it has editorial control over the "Pension Peril" series. However, as mentioned, the foundation reiterated that it reserves the right to cut off funding under the "extraordinary circumstances." It is possible that loosely defined phrase may allow the foundation to halt funding if it does not like the ideological tenor of the PBS pension coverage it is financing. Such a hovering threat would seem to represent at least de facto editorial influence.

For PBS's part, WNET officials refused to provide any details of the Arnold Foundation-PBS contract with a spokesperson telling Pando that "such agreements are always confidential."  This refusal came despite PBS being a public institution that watchdog groups insist is subject to Freedom of Information Act regulations.

Whether or not the foundation has direct editorial control of PBS news content, the series still appears to violate PBS's rules against "pre-ordained" conclusions.

For example, the series' title - Pension Peril - is the oft-repeated ideological buzzphrase of anti-pension campaigners. It also inherently pre-ordains the Arnold Foundation's conclusion that public pension shortfalls are an imminent emergency ("peril"), even though data prove that is not the case. To the contrary, as the Center for Economic and Policy Research notes, the shortfalls are "less than 0.2 percent of projected gross state product over the next 30 years" and "even in the cases of the states with the largest shortfalls, the gap is less than 0.5 percent of projected state product." That's far less than the amount state and local governments are spending on corporate subsidies. As McClatchy Newspapers has noted: "There’s simply no evidence that state pensions are the current burden to public finances that their critics claim.”

Yet, from the Arnold Foundation's publications to the Arnold-funded "Pension Peril" series, those subsidies are not labeled an emergency by PBS programming, but pensions are.

Similarly, in each episode of the Arnold/PBS series that has aired, the reporting has followed the Arnold Foundation's rhetorical lead by forwarding the idea that pension benefit cuts should be the primary policy solution to public budget problems. It does this by promoting the need for cuts to guaranteed retirement incomes and/or by refusing to mention that pension shortfalls are dwarfed by the amount state and local governments collectively spend each year on corporate subsidies (many of which do not create jobs).

For instance, in the series' debut report in November for the nationally aired NewsHour, PBS trumpeted the Netherlands decision "to make cuts to payments they made to pensioners." The program then contrasted that with American public employees, who the PBS correspondent said "are guaranteed a set payment no matter whether (pension) funds are there or not." That latter statement is belied by various examples of governments reneging on their pension promises to U.S. public employees.

Likewise, in the "Pension Peril" series' follow up report for the NewsHour on Illinois pension cuts, PBS staged a one-on-one interview with an Associated Press reporter who insisted that the state is being bankrupted by pension obligations. AP correspondent Sara Burnett said:

In order to make these payments each year, as you mentioned in the intro, the state is putting about 20 cents of every taxpayer dollar into the pension funds. That’s money that could be going to schools. There are social service agencies that have not been paid what the state owes them for months at a time. They’ve got a multi—I think it’s close to eight billion dollar backlog of unpaid bills sitting in Springfield waiting to be paid because there isn’t money to do it.
Yet, like the Arnold Foundation's pension policy papers, both PBS's "Pension Peril" correspondent and the AP reporter did not mention that according to budget data, pension shortfalls in Illinois are far smaller than the amount the state is spending on expensive taxpayer subsidies to corporations. Indeed, there is - and has been - plenty of money for Illinois to pay its "unpaid bills." The state is just choosing to spend that money on huge subsidies to corporations like Sears and Google rather than paying its bills or making its required pension payments.

Up next was a politically timed "Pension Peril" segment just two weeks before the inauguration of New York mayor Bill de Blasio. In the discussion decrying the New York City's pension shortfall as "unsustainable," PBS did not mention that the city is so flush with cash it spends a stunning $4 billion a year on economic development subsidies. In recent years, it has put taxpayers on the hook for $458 million for professional sports stadiums and hundreds of millions of dollars more for the construction of lavish office towers for Goldman Sachs and Bank of America.

Then came the "Pension Peril" segment that aired on the NewsHour on February 8th. The piece trumpeted a Vallejo, California city councilor who voted to slash pension benefits for her city's public employees.

The piece cited Vallejo's budget deficit as rationale for cutting pensions, but did not mention that California's $45 billion in annual tax expenditures and its $4 billion in annual corporate subsidies (many of them wasteful) are much bigger than the pension shortfalls its state and local governments face. Additionally, the piece did not mention that the state's retirement system this year posted huge gains, helping it continue to recover from losses incurred during the financial collapse of 2008.

But most troubling of all, the report on Vallejo promoted the city councilor's "campaigning to change (state) law to give cities the right to negotiate for pension cuts." PBS's "Pension Peril" correspondent noted that the legislator's coalition is "hoping to get the initiative onto the ballot" so that cities can unilaterally cut public employee pensions. What the PBS "Pension Peril" series omitted is the fact that the "Pension Peril" series' own benefactor, John Arnold, is the major financier of the very California ballot initiative PBS was promoting. Arnold's involvement in that ballot measure follows his earlier funding of pension-cutting advocacy in California, which PBS also did not mention.

Violating regulations about "interests"

Along with barring editorial control and program financing from funders who want to "pre-ordain" conclusions, PBS's rules also state that "when there exists a clear and direct connection between the interests... of a proposed funder and the subject matter of the program, the proposed funding will be deemed unacceptable regardless of the funder's actual compliance with the editorial control provisions."

As one example, PBS says "a series of documentaries, interviews, and commentary on the subject of drug abuse would not be accepted if funded by a special purpose nonprofit corporation whose principal mission is to foster the understanding of drug-related community programs." As another example, PBS says "a nonprofit organization whose mission is to eradicate heart disease or to raise money for leukemia research could not fund a program designed to educate the public about these respective illnesses."

Yet, despite these rules, PBS has solicited and accepted millions of dollars specifically for pension-focused reporting from the Arnold Foundation, whose core mission is about "work(ing) actively in the area of public employee benefits reform" and convincing the public that "the way to create a sound, sustainable and fair retirement savings program is to stop promising a benefit" to public workers.

When asked about these clear violations of PBS's own rules, WNET's spokesperson would only say: "WNET and other PBS producers approach some foundations, and not others, for support of particular projects. We follow PBS rules in every particular."


Obscuring the Arnold connection

On its website, PBS notes that both its own rules and Federal Communications Commission regulations require full disclosure of all funding sources for programming on the public's airwaves. For all content, "All underwriters must be identified in video by their name and/or logo," says PBS guidelines. Additionally, for programs dealing specifically with "controversial issues" like pension cuts, PBS notes that its own rules and FCC regulations require more explicit disclosure.

Despite those rules and regulations, though, Pando could find no explicit disclosure in any PBS "Pension Peril" episodes that the series is directly financed by the Laura and John Arnold Foundation, much less that the foundation's benefactor, John Arnold, is one of the nation's biggest financiers of the ongoing legislative push to slash public pension benefits.

Likewise, while the PBS News Hour has occasionally mentioned the Arnold Foundation in a long list of funders at the very end of its show, it has not mentioned the foundation's specific financing of pension-related content or the "Pension Peril" segments; it has not mentioned the Arnold Foundation in introducing or concluding those particular segments; and it has not disclosed the Arnold Foundation's ongoing legislative advocacy in the national debate over pension policy.

Additionally, WNET did list the Laura and John Arnold Foundation as one of scores of annual donors, but did not indicate that, according to the Arnold Foundation itself, the money is for programming to "educate the public about public employees' retirement benefits." PBS's only mention of the Arnold Foundation in connection with the "Pension Peril" series appears to be a single line at the bottom of one PBS website transcript, but that line was not mentioned on air, where most of PBS's viewers are exposed to PBS content. Beyond that one mention, searches for mentions of the Arnold Foundation and John Arnold on both PBS's website and WNET's website turn up no results.

Responding to Pando’s inquiries, PBS officials could provide no evidence that PBS explicitly disclosed to its television viewers that the Arnold Foundation is financing the “Pension Peril” series.

The decision to not explicitly tell PBS viewers that the "Pension Peril" series is  financed by the nation's leading anti-pension political activist may not be a mere oversight, considering one PBS official's private comments' about the project. According to a source who met with PBS about an unrelated initiative two months after the launch of the Arnold-financed "Pension Peril" series, an executive at the network said PBS was deliberately concealing details of the Arnold/PBS funding arrangement.

"We were sitting in a meeting talking about another issue and (PBS officials) were drawing examples of how they were working with other campaigns, and one of their executives said they've got a series called pension peril coming up talking about the threat of pensions at the state and local level," said the source. "I asked who was funding that project, and the executive said that at this point they are not disclosing who their funders are, and everybody sitting around the room kind of paused."

The source said another PBS official later privately confirmed that the "Pension Peril" series is being funded by the Arnold Foundation.

A stealth takeover of the public airwaves

A billionaire political activist like Arnold exerting financial - and thus ideological - control over PBS news programming is the culmination of a larger campaign by ideological and corporate interests to politicize public broadcasting. As Pando's Yasha Levine and others have documented, on National Public Radio that campaign has involved the radio network promoting politically skewed coverage of political front groups and corporate interests that are now permitted to finance NPR's journalism. That trend shows no sign of abating under NPR's new CEO, who came to the job after a career as a financial-industry lobbyist, Republican Party benefactor and board member of corporate-financed conservative think tanks.

On PBS, the campaign has been even more intense. During fights over funding for public broadcasting during the Bush era, one FCC official told the Washington Post that under withering pressure from conservative ideologues and corporate special interests, the Corporation for Public Broadcasting became "engaged in a systematic effort not just to sanitize the truth, but to impose a right-wing agenda on PBS."

In recent years, this campaign has seen public television stations ignore PBS's own rules about editorial control and pre-ordained conclusions. Indeed, stations across the country have started airing programming from wealthy ultraconservative foundations and corporate interests looking to promote their political messages through the PBS brand.

For instance, on the political front, there has been the "Free Markets Series" promoting right-wing icons like scion Steve Forbes, Cato scholar John Allison, and author Ayn Rand. Championing archconservative economic ideology, the show is financed by the John Templeton Foundation, whose namesake was a billionaire Wall Street investor and which is run by a financier of right-wing political causes. According to the program's website, in 2012 alone the Free Market Series "was telecast on PBS affiliates 20,722 times, over 249 stations, across 43 states and 129 markets, including nine of the top ten Nielsen markets."

Similarly, American University's annual survey of public television notes that in 2014, there will be "an extended slate of documentaries from Bob Chitester, the producer who introduced Milton Friedman to public TV viewers in 1980." According to the survey, Chitester "will bring libertarian perspectives on contemporary issues to public TV stations with "eight new programs in the works." Those include the programs "Unintended Consequences: Evils of the Welfare System" and "Money and Morality" - the latter described as designed to show "that the accumulation of wealth does not necessarily lead to corruption and cronyism." Chitester's work is produced by the "Free to Choose Network." That organization is funded in part by the Koch Family Foundations; is headed by a board comprised of corporate and financial executives; and lists a panoply of right-wing media voices as its official "fellows."

On the corporate front it has been a similar trend. Back in 2002, PBS promoted an economic series funded in part by John Arnold's old employer, Enron. In 2012, PBS's own ombudsman Michael Getler slammed the network for "flunking the perception test" when it aired a series sponsored by Dow Chemical that conveniently promoted Dow's business interests. A year later, Getler similarly criticized PBS for airing a documentary about drones that was funded by drone manufacturer Lockheed Martin.

Then came high-profile revelations about WNET's relationship with New York Senator Charles Schumer (D) and the station's then-board-member, David Koch of Koch Industries. As reported by the New Yorker, WNET executives went out of their way to appease the conservative Koch in advance of the airing of Academy Award winner Alex Gibney's documentary, "Park Avenue," which raised critical questions about wealth inequality and political corruption in America. Though both Koch and Schumer rejected requests to be interviewed by Gibney for the film and though both of them hadn't even seen the film, WNET made a heretofore unprecedented move by allowing the pair to append their own personal criticism to the end of the film.

"It was akin to someone calling the New York Times and being allowed to put a big ad at the end of an article claiming the whole article is bunk even though they hadn't read the article," Gibney said in an interview with Pando. "If the Kochs had made a movie and I was angry, would PBS have run my statement at the end the film? Probably not."

According to the New Yorker, WNET also invited Koch to appear on an on-air roundtable to discuss the film yet refused to invite Gibney to the same roundtable (Koch declined, but the network had a representative from the Koch-funded Manhattan Institute on). The magazine also reported that the blowback from Koch about Gibney's film ultimately ended up prompting WNET to help spike an already-in-the-pipeline public television documentary about the Koch Brothers themselves.

Now comes news that PBS is actively shaping program proposals in order to solicit a billionaire activist's financing for his ideological campaign to slash public employee pensions. Not only that, PBS is airing the content financed by that billionaire without explicit disclosure - and worse, camouflaged in PBS's ostensibly objective news programs.

A move toward native advertising

In its presentation and integration, the "Pension Peril" series represents a significant evolution beyond even these aforementioned stealth infiltrations. Unlike the other examples which do not necessarily cover breaking news in recurring fashion, the "Pension Peril" series is an ongoing real-time program on an active and evolving political campaign that its own benefactor is shaping. Additionally, unlike the other examples, it represents an insidious kind of disclosure-free native advertising.

Whereas PBS's standalone series like POV openly admit that the content viewers are about to see is a subjective point of view, the "Pension Peril" series has been broadcast as a part of PBS's allegedly objective news programming. That, along with the lack of explicit disclosure, has served to obscure the content's financial, political and ideological links to Arnold and his pension-cutting crusade.

Strategy-wise, this technique mimics the Bush administration's most controversial television propaganda. As the New York Times reported in 2005, the administration spent public resources to produce "prepackaged, ready-to-serve news reports" that "were subsequently broadcast on local stations across the country without any acknowledgement of the government's role in their production." In PBS's current iteration of the scheme, private special-interest money is now financing prepackaged news reports. Public resources are then used to promote those reports on publicly owned stations across the country - and with little disclosure of the original funding source.

That leaves millions of unsuspecting viewers wholly unaware that the PBS "reporting" they are watching is not objective news, but instead an ideological advertisement funded by a billionaire trying to manipulate public policy.

Update: The Wolf of Sesame Street responds to Pando – much bark, no bite, still stonewalling

[Illustrations by Hallie Bateman]