Why won't PBS release details of its $3.5m deal with a billionaire? Here's a possible answer.

By David Sirota , written on February 14, 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.]

Pando's big scoop this week about billionaire anti-pension activist John Arnold secretly funding PBS's anti-pension series has generated plenty of headlines, and it has also raised many serious questions - not the least of which is why PBS appears to have so brazenly violated its own rules about conflicts of interest. Of all those questions, though, one is the most significant: why are public broadcasting officials and the Arnold Foundation still refusing to release the entire grant agreement they signed?

In their initial pre-publication response to our inquiries, and now in their responses to our story, both WNET officials and the Arnold Foundation have insisted their agreement is above board. They admit the contract gives Arnold the right to cut off funding for the series for "extraordinary circumstances." However, they deny the agreement gives the Arnold Foundation any ability to influence PBS news coverage. Yes, public broadcasting officials insist the politically active "lead/anchor" sponsor of the series has no ability to push the series to support his current legislative campaign aimed at slashing retirement benefits for police officers, firefighters, teachers and other public workers.

Yet, while offering up such assurances, both WNET and the Arnold Foundation are still categorically unwilling to release all -- or any -- of the documents which would, presumably prove their side of the story. Why?

What may be motivating public broadcasting officials and the Arnold foundation to try to keep this deal secret?

Now Yves Smith, a high-profile management consultant, economic analysts and financial journalist is offering up a compelling explanation - one that has everything to do with the kind of editorial control that makes a deal like this so troubling.

Citing how grant agreements are typically structured, Smith suggests this on her widely read website Naked Capitalism:

The fact that the money was given in the form of a grant means it was expressly to further the objectives of the foundation. And most grants are structured to provide for periodic payments, based on progress of the grantee in fulfilling the statement of work. Thus, while Sirota was originally told that the the foundation had the right to halt funding in the event of extraordinary circumstances such as fraud, it’s almost certain that the grant itself contains provisions that allow funding to be halted for nonperformance.

Given that the purpose of the grant was narrow, to “educate…..on the implications of looming debt and the tough choices ahead as these unfunded liabilities threaten to crowd out funding for education, public safety and other essential public services” deviation from this message would count as nonperformance.

No wonder PBS and the foundation are continuing to refuse to release the text of the agreement. No wonder, indeed. It is also worth noting that when the Arnold Foundation originally told Pando it only can cut off funding in "extraordinary circumstances," the foundation's spokeswoman defined "extraordinary circumstances" as , among other things, a "change of leadership of a grantee." So, if, say, the team heading up the Arnold-funded "Pension Peril" series was replaced with people who didn't want to so loyally echo Arnold's cut-the-pensions message (as the "Pension Peril" series has in the past), the Arnold Foundation categorically reserves the right to cut off funding.

As we noted in our original report: All of "this 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." And, as Smith so aptly shows, our characterization may actually be understating the situation. What's going on here may, in fact, be far more than mere "influence." To that end, in the coming weeks, we will be examining the potential to use the Freedom of Information Act to force the parties involved to fully disclose all of the documents involved in this deal.

Other questions about bias, transparency and John Arnold himself

There are plenty of other questions swirling around this story. Some coming late to it are now asking questions about who exactly John Arnold is beyond a billionaire anti-pension activist? This was detailed at length in my September report for the Campaign for America's Future, a progressive think tank. You can find that on page 14 of that report by clicking here. You can also read more about Arnold in Institutional Investor magazine, in Rolling Stone, and in various books referencing his time at Enron.

Another set of queries to come out of this story is about the way pensions are covered in America. Is it really "objective" for pension-related reporting to portray pension shortfalls as an emergency, while not portraying far bigger corporate subsidies as an emergency? Is it acceptable for reporters to omit mention of the fact that public pension shortfalls are dwarfed by those corporate subsidies? Or by doing that, are reporters promoting a decidedly biased budget storyline - one that downplays the idea of tax increases or cuts to corporate subsidies and priorities cuts to retirement benefits?

The PBS-Arnold scandal also raises serious questions about journalism, transparency and even the basic definition of news.  Should any news broadcast, much less an allegedly "public" one, present special-interest sponsored segments as native content? Should they do it without explicit disclosure?  Should news organizations permit politically active billionaires - aka those with, say, a vested self-interest in thwarting high-income tax increases to replenish pension shortfalls - to specifically fund "news" programming about budget policies? And will PBS - a taxpayer-funded entity regulated by the government - be permitted to brazenly violate its own stated rules and regulations about conflicts of interest?

But again, while these are critical queries, the most pressing questions right now are about whether the public even has the most basic right to know what financial arrangements are being made in the public's own name. This is, after all, a story about public broadcasting. Are WNET officials - and thus the whole PBS system - really arguing that the public has no right to know? And if they are arguing that, are they deliberately trying to hide a deal that confirms viewers' worst fears about stealth propaganda being promoted on public airwaves?