Money to Burn 

Oakland developer tried to charge city for luxury cars, timeshare in Cabo; Recent portions of KRON's morning news were bought and paid for by advertisers.

The 78-home Palm Villas development in East Oakland has been, to put it mildly, a boondoggle. The city-subsidized project was supposed to take two years to complete; it took five. It went way over-budget, going from $14.5 million to $23.5 million. The developers, a partnership between Baines & Robertson and Em Johnson Interests, came back to the city four separate times asking for more money. And last month the Oakland City Council quietly approved a final $1.23 million bailout grant to keep Baines & Robertson, the project's general contractor, from going bankrupt.

Here's the juicy part that has so far gone unnoticed: Baines & Robertson officials actually wanted $1.4 million — about $170,000 more than they got — to keep their firm afloat. And they almost got it. Last June City Councilman Larry Reid — who represents the district where Palm Villas is located — pushed for the developers to get everything they wanted in a memo to the council's economic development committee. Developer Michael Baines and his partners also submitted an "independent accounting" by a city-approved beancounter that "justified all of the expenditures for the project." But committee members obviously didn't trust those numbers and asked the city auditor Roland Smith to go over their books. Good thing they did.

Among the "overhead" items billed to the project, Smith says, were a vacation timeshare in Cabo San Lucas ($4,784), leases totaling more than $106,000 for "luxury" cars for the firm's principals (a Lexus and a Land Rover) and $14,738 in political donations between July 1999 and July 2005, a good chunk of which appears to have gone to members of the city council.

Smith told Feeder that the firm's records didn't show exactly which politicians got the donations. But a cursory review of campaign finance records from the period show that at least the following folks got money from Baines:

Councilman-at-large Henry Chang ($1,300); Council president Ignacio De La Fuente ($1,100); Councilwoman Jane Brunner ($1,000); ex-Councilman Danny Wan ($250); Vice Mayor Jean Quan ($250); Larry Reid ($100); Assemblyman Mervyn Dymally ($500); Assemblyman Johan Klehs ($200); and state Senate President Don Perata ($100).

After the audit, wise city housing officials deducted nearly $170,000 in disallowed expenses like the luxury cars, the time-share and the political donations from the bailout total. The remaining $1.23 million will be used to pay off vendors, union dues, and the IRS.

Messages left for Baines and his firm went unreturned. In a letter to the city, though, the developers blamed onerous conditions placed on their private construction loan from Bank of America for causing delays that led to major cost increases. Councilwoman Desley Brooks agreed. She also noted that the $9 million subsidy in this case — even with the bailout — was in line with what the city had ponied up for other projects. As for the luxury cars and whatnot, Brooks said, "That was such an insignificant amount in the grand scheme of things."

KRON Sells the News

Anyone watching the morning news show on KRON-TV (Channel 4) recently may have wondered: Why the hell is a San Francisco station devoting a whole week of coverage to Australia? KRON's intrepid video journalists braved jetlag to produce penetrating news reports like Darya Folsom's pieces on shopping and koalas. Or maybe you caught her and weatherman Mark Danon's hard-hitting sailboat tour of the gorgeous Sydney Harbor. The entire "Australia Week" coverage was so fluffy, viewers might easily have taken the segments for paid programming.

Actually, KRON viewers were watching paid programming. Tourism Australia, a government entity promoting travel to the land Down Under, paid the TV station to run the featured spots on its morning broadcasts, according to a story by the Hollywood Reporter last week. In fact, Tourism Australia picked up the travel tab for a five-member news crew and two lucky contest winners.

In late January and early February, KRON's morning newscasts also aired a so-called "spa spectacular" featuring several local spas that paid for airtime, according to the report.

John McManus, head of Bay Area's media watchdog Grade the News, questions whether KRON would have done the stories if the station hadn't been paid off. "I think it's a desperate attempt on their part to boost revenues that crosses a clear ethical line," McManus says.

KRON isn't the nation's only station selling news slots — that's part of an industry trend stressing the bottom-line at the expense of journalistic credibility. For KRON, though, it's only the latest indication of tough economic times. The de Young family sold the station to the unrelated Young Broadcasting in 1999; two years later KRON lost its NBC affiliation.

Cost-cutting hasn't helped the station's bona fides. In January, 33-year KRON reporter Vic Lee bolted for rival KGO when his bosses started pushing for its reporters to film and edit their own stories. Before Lee, veteran KRON newsman Greg Lyon had decided to call it quits after consistently being asked to do "more with less." Lyon tells Feeder that KRON bosses wanted each reporter to do two or three stories a day — something he described as nearly impossible. Lyon views the news about KRON's advertorials as the latest indication of the station's lowered standards. "It's blurring a very firm barrier that always existed between news and advertising," Lyon said. "It's one more reason for the public not to trust journalists."

KRON general manager Mark Antonitis did not return Feeder's telephone call. But the KRON boss told the Hollywood Reporter that indie stations like his need to do what they can to survive. He told the wire service that before the spa stories aired, an anchor announced that the spas were paying for airtime. "If it's in the newscast," Antonitis was quoted as saying, "it has to be clearly identified either by an anchor, an announcement, or even both that these people paid to be part of this segment or are providing products in exchange for the segment." (In the Tourism Australia case, the relationship was reportedly disclosed in the closing credits, which, as we all know, are the most avidly watched portion of any newscast.)

McManus calls disclosure a step in the right direction, but adds, "It's selling the news, and even if you admit it's selling the news, it's still selling the news."

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