§ 18-4.1-6 - Review process and criteria of the department of attorney general.
SECTION 18-4.1-6
§ 18-4.1-6 Review process and criteria ofthe department of attorney general. – (a) In considering conversions in accordance with this section, the departmentof attorney general shall adhere to the following process:
(1) Within sixty (60) days after receipt of an initialfiling, the department of attorney general shall advise the filer, in writing,whether the filing is complete, and, if not, shall specify all additionalinformation the filer is requested to provide;
(2) The filer shall have thirty (30) working days to submitthe requested information. If the additional information is submitted withinthe thirty (30) day period, the department of attorney general will have thirty(30) working days within which to determine acceptability of the additionalinformation. If the additional information is not submitted by the filer withinthe thirty (30) day period or if the department of the attorney generaldetermines the additional information submitted by the filer is insufficient,the conversion will be deemed not to provide a community benefit and thedepartment of attorney general shall specify a conversion fee to be paid. Ifthe department of attorney general determines the additional information to beas requested, the filer will be notified, in writing, of the date of acceptanceof the filing;
(3) Within sixty (60) working days after acceptance of theinitial filing, the department of attorney general shall render itsdetermination on confidentiality pursuant to § 18-4.1-14 and thedepartment of attorney general shall publish notice of the filing in anewspaper of general circulation in the state and shall notify by United Statesmail any person who has requested notice of the filing. The notice shall:
(i) State that an initial filing has been received andaccepted for review;
(ii) State the names of the transacting parties;
(iii) State the date by which a person may submit writtencomments to the department of attorney general; and
(iv) Provide notice of the date, time and place ofinformational meeting open to the public which shall be conducted within ninety(90) days of the date of the notice.
(4) The department of attorney general shall determinewhether the conversion constitutes a community benefit, and if not, the amountof any applicable payments due, within one hundred and eighty (180) days of thedate of acceptance of the filing.
(b) In considering a conversion pursuant to subsection (a)the department of the attorney general shall consider the following criteria:
(1) Whether the proposed conversion will harm the public'sinterest in property given, devised, or bequeathed to the existing public radiostation for charitable, educational or religious purposes located oradministered in this state;
(2) Whether a trustee or trustees of the acquiree will bedeemed to have exercised reasonable care, diligence, and prudence in performingas a fiduciary in connection with the proposed conversion;
(3) Whether the board established appropriate criteria indeciding to pursue a conversion in relation to carrying out its mission andpurposes;
(4) Whether the board formulated and issued appropriaterequests for proposals in pursuing a conversion;
(5) Whether the board considered the proposed conversion asthe only alternative or as the best alternative in carrying out its mission andpurposes;
(6) Whether any conflict of interest exists concerning theproposed conversion relative to members of the board, officers, directors,senior management, experts or consultants engaged in connection with theproposed conversion including, but not limited to, attorneys, accountants,investment bankers, actuaries, broadcasting experts, or industry analysts;
(7) Whether individuals described in subdivision (b)(6) wereprovided with contracts or consulting agreements or arrangements which includedpecuniary rewards based in whole, or in part on the contingency of thecompletion of the conversion;
(8) Whether the board exercised due care in engagingconsultants with the appropriate level of independence, education, andexperience in similar conversions;
(9) Whether the board exercised due care in acceptingassumptions and conclusions provided by consultants engaged to assist in theproposed conversion;
(10) Whether the board exercised due care in assigning avalue to the existing public radio station and its charitable assets inproceeding to negotiate the proposed conversion;
(11) Whether the board exposed an inappropriate amount ofassets by accepting in exchange for the proposed conversion future orcontingent value based upon success of the new radio station;
(12) Whether officers, directors, board members or seniormanagement will receive future contracts in existing, new, or affiliated publicradio stations or organizations;
(13) Whether any members of the board will retain anyauthority in the new radio station;
(14) Whether the board accepted fair consideration and valuefor any management contracts made part of the proposed conversion;
(15) Whether individual officers, directors, board members orsenior management engaged legal counsel to consider their individual rights orduties in acting in their capacity as a fiduciary in connection with theproposed conversion;
(16) Whether the proposed conversion results in anabandonment of the original purposes of the existing public radio station orwhether a resulting entity will depart from the traditional purposes andmission of the existing public radio station such that a cy pres or comparableproceeding would be necessary in the absence of this statute;
(17) Whether the proposed conversion contemplates theappropriate and reasonable fair market value;
(18) Whether the proposed conversion was based uponappropriate valuation methods including, but not limited to, market approach,third-party report or fairness opinion;
(19) Whether the conversion is proper under the Rhode Islandnonprofit corporation act chapter 6 of title 7;
(20) Whether the conversion is proper under applicable statetax code provisions;
(21) Whether the proposed conversion jeopardizes the taxstatus of the existing public radio station;
(22) Whether the individuals who represented the existingpublic radio station in negotiations avoided conflicts of interest;
(23) Whether officers, board members, directors, or seniormanagement deliberately acted or failed to act in a manner that impactednegatively on the decision to approve the conversion or its terms andconditions;
(24) Whether the formula used in determining the value of theexisting public radio station was appropriate and reasonable which may include,but not be limited to, factors such as: the multiplier factor applied to the"EBITDA" – earnings before interest, taxes, depreciation, andamortization; the time period of the evaluation; price/earnings multiplies; theprojected efficiency differences between the existing public radio station andthe new radio station; and the historic value of any tax exemptions granted tothe existing public radio station;
(25) Whether the proposed conversion appropriately providesfor the disposition of proceeds of the conversion that may include, but notlimited to:
(i) Whether an existing entity or a new entity will receivethe proceeds and whether such recipient serves the public interest of RhodeIslanders;
(ii) Whether appropriate tax status implications of theentity receiving the proceeds have been considered;
(iii) Whether the mission statement and program agenda willbe or should be closely related with the purposes of the mission of theexisting public radio station;
(iv) Whether any conflicts of interest arise in the proposedhandling of the conversion's proceeds;
(v) Whether the bylaws and articles of incorporation havebeen prepared for the new entity;
(vi) Whether the board of any new or continuing entity willbe independent from the new radio station;
(vii) Whether the method for selecting board members, staff,and consultants is appropriate;
(viii) Whether the board will be comprised of an appropriatenumber of individuals with experience in pertinent areas such as foundations,public radio, business, labor, community programs, financial management, legal,accounting, grant making and public members representing diverse ethnicpopulations of the affected communities;
(ix) Whether the size of the board and proposed length ofboard terms are sufficient;
(26) Whether the transacting parties are in compliance withthe Charitable Trust Act, chapter 9 of title 18;
(27) Whether a right of first refusal to repurchase theassets has been retained;
(28) Whether the character, commitment, competence andstanding in the community, or any other communities served by the transactingparties are satisfactory;
(29) Whether a control premium is an appropriate component ofthe proposed conversion;
(30) Whether the value of assets factored in the conversionis based on past performance or future potential performance; and
(31) Whether based on all the facts and circumstances, theattorney general concludes that the acquiree's charitable and educationalmissions are no longer viable absent the conversion.