A strongly worded letter from Southern Oregon University's law firm threatened the Jefferson Public Radio Foundation board with "expensive" lawsuits in a dispute over ownership and control of the radio stations.
The March 22 letter from the Portland firm of Miller Nash LLP, also attorney for the Oregon University System Chancellor's Office, was obtained by the Mail Tribune this week. It sheds more light on the struggle to break up the current leadership over Jefferson Public Radio's 22 stations.
"It was meant to cast fear across the directorship (of the board)," said Steve Nelson, JPR Foundation board president. "It was designed to frighten us."
In March, the foundation board considered shoring up its interests in the radio station operations and protecting its ventures, including the restoration of the Holly Theatre and plans for Jefferson Square, a project on 10th Street in Medford that would create a new headquarters for JPR.
The board's actions were in response to an OUS audit calling for greater separation between JPR and the foundation, its fundraising arm.
The attorneys sent the letter warning the foundation board that it could be subject to a series of lawsuits by the university system.
"In addition to claims against the foundation, the university may pursue claims directly against the directors of the foundation as well as directly against Ron Kramer (executive director)," the letter states.
Later, the letter continues, "More often than not, in such situations, the attorney fees spent defending the entity exhaust available dollars to defend or protect the individuals."
In more than 12 instances in the six-page letter from SOU, the attorneys suggest or threaten the possibility of legal action. The attorneys also describe in great detail their potential legal strategies against Kramer and the board, with the potential of dissolving the JPR Foundation entirely.
Nelson said the letter describes the kind of threats that are pressing on the foundation board and affecting its ability to make decisions.
"The university put me in a position of being in harm's way," he said. "They have the capacity to harm my family economically and otherwise."
Nelson said he couldn't discuss the outcome of a recent mediation agreement, nor whether the threats of lawsuit had an effect on foundation board representatives' decision to approve the agreement.
He said the foundation board believed that a solution could be worked out that wouldn't harm JPR, but he said the board didn't anticipate the depths of its adversary.
As a result of these threats, Nelson resigned Wednesday as a member of the Jackson County Library Foundation board. Nelson said he is trying to remove himself from being on any public boards because of the potential exposure to personal litigation.
He said he also is considering resigning from the JPR Foundation board.
"The reason I haven't done so is I feel responsible for the Holly," he said. "I stood up publicly and said we will build the Holly. The minute I can deliver the Holly, I'm going to extricate myself and not come back to public service."
OUS spokeswoman Di Saunders said the letter was sent to the JPR Foundation board to stop it from adopting resolutions that the university system thought would put the radio station's assets at risk.
"Ultimately, it is pretty damaging to JPR and the foundation," she said.
The letter requested the resolutions not be adopted, then provided the potential legal steps the university would take if the board chose to adopt them, Saunders said.
She said the university system sought mediation, but said the strong language in the letter is typical of what an attorney would send when a board of directors is heading down a potentially damaging path.
"It was obviously not a good direction for JPR or the JPR Foundation to take," Saunders said.
A tentative agreement between SOU and the JPR Foundation was reached during a mediation session held last week. Details will not be released until the foundation board and the Board of Higher Education approves it.
The JPR Foundation will discuss the agreement at 3:30 p.m. June 22 at Medford's University Club, next to the Holly Theatre.
The discord between OUS and the JPR Foundation erupted after OUS conducted an audit of JPR and the foundation and concluded that Kramer should no longer be executive director of both organizations.
In the audit, the strong fundraising efforts of the JPR Foundation were seen as a threat to the fundraising of the SOU Foundation.
The JPR Foundation, the university system and SOU have had a long relationship that has helped JPR expand its reach from Northern California to Eugene.
Assets needed for operation of JPR's radio stations, including Federal Communications Commission licenses and transmitters, are owned by both the JPR Foundation and the university system.
One JPR Foundation enterprise is the Cascade Theatre in Redding, Calif., which is owned by OUS. The purchase and remodel of this building was approved by the Office of Higher Education.
The attorney's letter claims the foundation misused assets that were restricted for the support of JPR, but were used for other operations, including the Holly and Jefferson Square. SOU President Mary Cullinan in February 2011 had praised the radio station's plans to relocate to Medford as a "strategic move."
The letter warns the foundation board not to take any action affecting the status of six employees who are university employees.
The attorneys' letter also warns that the university might seek to dissolve the foundation if a court found it operating in an oppressive, fraudulent or other manner where assets are misused.
Even though the foundation board has liability insurance, Miller Nash concludes the coverage might not apply in this case because of what the letter claims are actions by the board that caused waste or fraud.
As a further warning, Miller Nash states that even if the board members' insurances covered them, there wouldn't be enough money to handle the extensive legal expenses.
The letter, signed by two attorneys, Bruce Rubin and William Manne, suggests the board members and Kramer each hire their own attorneys to represent themselves.
When details of the agreement between OUS and the JPR Foundation come out, Saunders said many of the questions raised by the attorneys' letter and the ramifications for the future of JPR will be answered.
However, she said both sides are legally obligated not to release any information about the agreement until after it's officially approved.
Saunders said one of the main complaints about JPR was its high debt ratio when it took on the Holly Theatre and Jefferson Square.
With a small marketplace to work with, the fundraising efforts of JPR for these projects would compete with SOU, she said.
JPR officials say the $7 million for the renovation of the Holly and Jefferson Square would come from tax credits, grants and other sources that wouldn't compete with SOU.
JPR said its local fundraising efforts would amount to $2 million, and the type of donors who would contribute to the radio station wouldn't necessarily also contribute to the university.
Kramer said he is essentially operating under a gag order at this point and couldn't speak about anything related to the agreement between SOU and the JPR Foundation.
He said the agreement doesn't necessarily represent his views.
Kramer said the foundation owns eight of JPR's radio stations, which includes five AM and three FM stations.
The university owns 14, including two AM and 12 FM.
He estimated the value of the radio stations at about $20 million.
He said five AM stations and one FM station have commercial FCC licenses, which means they are of more value, Kramer said.
The university has two AM stations and one FM station that have commercial licenses, he said.