AG letter of compliance to be signed

The Chestnut Hill Community Association board of directors distributed and accepted a letter from the Pennsylvania Attorney General settling an investigation that has gone on for a little less than two years. By signing the letter, the CHCA and the Chestnut Hill Community Fund -- the CHCA's affiliated 501(c)3 fundraising arm -- have agreed to pay the state $5,481.50. in penalties and expenses. Neither organization admits to wrongdoing in any of the three instances outlined by the AG.

The letter, an "assurance of voluntary compliance" sights three findings by the AG.

1) The letter states that the CHCF "failed to account properly for the use of the Pennsylvania Department of Community and Economic Development grant ... by failing to ensure that $2,900 received by the fund were expended in accordance with grant restrictions." The money referred to was part of a $10,000 grant (detailed well in a post below) that was supposed to be used on workstations for the Chestnut Hill Local, which is owned by the CHCA. $2,900 of that money was used for a separate building owned by the fund, since sold to Bowman Properties, which was not in accordance with the terms of the grant.

2) The AG found fault with members of the CHCA soliciting contributions for the CHCF without a license from the Pennsylvania Department of State, Bureau of Charitable Organizations. That registration has since been obtained by the CHCA, according to CHCA president Walter Sullivan.

3) The AG frowned on the fact that the CHCA and CHCF "temporarily comingled [sic] contributions to the fund with operating assets of the association" by processing those donations made by credit card to with an association credit card processing account. That situation has also, according to Sullivan, been remedied. The CHCF now has a it's own credit card processing account.

That's it. The letter signifies that by signing the letter the CHCA and CHCF will avoid admitting wrongdoing of any kind. In the letter: "the respondents deny the foregoing allegations and voluntarily have taken action to correct the matters alleged."

In addition to the $2,900 to be repaid on the grant, the CHCA and CHCF will pay $500 in civil penalties, $2,000 in AG expenses and $81.50 in filing fees.

We will have a full report of the matter in next week's Local.

A recent recap of AG investigation

Access to a lot of our online articles has been restricted to subscribers, making it difficult for us to link to older stories.

I have no new information on the conclusion of the state AG investigation, but thought it would help to post this recent recap by Joel Hoffmann. In the piece, Joel summarized the facts of the controversial DCED report (also thoroughly explored in an July 2008 report by me) and contains an interview with CHCA president Walter Sullivan).

Still, a this time, I do not have the exact findings of the Assurance of Voluntary Compliance form.

CHCAPledges To Accept Findings Of State Probe

Chestnut Hill Local (Philadelphia, PA) - Thursday, November 12, 2009

Author: Joel Hof fmann

A state probe into the accounting and managerial practices of the Chestnut Hill Community Association and Chestnut Hill Community Fund is close to resolution after 17 months of uncertainty, according to sources familiar with the investigation.

In a letter sent last week to Mark A. Pacella, chief deputy of the Charity and Nonprofit Division of the Office of Attorney General, CHCA board president Walter J. Sullivan wrote that the board and the fund were ready to accept the state's findings and sign off on an Assurance of Voluntary Compliance form.

The precise terms of the settlement were not clear when the Local went to press - Pacella cannot comment until the investigation is officially over - but in an e-mail version of his letter and an interview with the Local, Sullivan previewed the terms of the settlement as he understood them.

Sullivan told Pacella that the fund and the association were committed to correcting the "instances of seriously bad judgment" that tainted the CHCA presidency of Maxine Dornemann.

Though he believes there is no evidence of "wrongdoing" or "personal enrichment," Sullivan said the board and the fund were willing to repay the state $2,400 spent "outside the terms" of a $10,000 grant from the Department of Community and Economic Development.

In July 2008, the Local reported that the grant money had been earmarked for workstation improvements in the newspaper's production and advertising department. Ten former CHCA board members who brought about the investigation, including CHCA pioneer Lloyd Wells, former CHCA president Ron Recko and former CHCA Oversight Committee chairman Jim Foster, first alleged in 2006 that the entire grant had been misspent after Foster found that receipts submitted to the state to close the grant out had been doctored.

In a 2004 letter to State Rep. Rosita Youngblood, who had helped the fund, a 501(c)(3) charitable organization, obtain the grant on behalf of the association and the Local, former CHCA community manager Marie Lachat said the grant would help "accommodate the growth of our weekly newspaper, the Chestnut Hill Local."

She added: "Because advances in technology have increased rapidly, we at the Chestnut Hill Community Fund have struggled to keep up."

The fund had lobbied for a $20,000 grant, but only received $10,000. The total cost of the new workstations in the production and advertising offices was estimated at $46,000.

Department of Community and Economic Development grant regulations require all expenses to be specifically itemized. When Lachat learned that only $10,000 would be made available, she wrote that the $10,000 would be spent as follows: $3,600 for IKEA cabinets, $600 for new data ports, $6,000 for two new workstations in the production department and $320 for design consultation fees.

"Not one dime was spent [that way]," Foster said.

The grant closeout report sent to the DCED's office of audits and compliances in May 2006 itemized the grant expenses like this: $5,293 for carpet installation, $1,342.58 for a fire door, $100 for a leaky drain, $1,340 and $1,000 for paint, $285 for electrical repair, $200 for light and window repair and $439.42 for a kitchen floor.

In an August 2006 report, the Oversight Committee found that the address line on some of the receipts had been changed from 8431 Germantown Ave., which was owned by the fund at the time, to 8434 Germantown Ave., where the Local and the association have their offices. The committee concluded that the grant had been closed out improperly and suggested that the grant had been misused on the whole.

In January 2007, the DCED sent the association a letter rejecting the closeout report because the invoices for carpet installation were inadequate. In March of that year, the DCED sent a notice of noncompliance. But the DCED accepted the closeout report after former community manager Ed Budnick faxed the original invoices for the carpet.

Still, Foster and others believed the grant was spent illegally. In December 2007, he and his fellow challengers hired Karl E. Emerson and Donald W. Kramer, attorneys from the law firm of Montgomery, McCracken, Walker and Rhoads, to review financial statements for the fund and the association covering the fiscal year that ended March 31, 2006.

In May 2008, Kramer and Emerson submitted their findings to the Local in an open letter addressed to former CHCA president Tolis Vardakis and fund president Jean Hemphill.

"It is clear that certain financial and administrative practices were sloppy and were not adequately reported," they wrote.

Following an internal investigation at the fund, Hemphill found that $2,400 had been spent on renovations at 8431 Germantown Ave. The invoices for $1,800 and $600 came from Legacy Construction, a subsidiary of Legacy Real Estate, which is owned by former board member and officer Sanjiv Jain.

Hemphill apologized for "improper and inappropriate" behavior by staffers at the fund and the association in a letter dated July 3, 2008.

"We ask you to determine if there is any further action necessary on the part of the CHCF to obtain a proper, full and complete closure of the grant," she wrote.

Paying back DCED funds that had been misspent was at the core of the challengers' request for corrective action. They also alleged that Dornemann had acted improperly by leveraging a $50,000 line of credit against a fund-owned building. Dornemann signed her name on the line reserved for the fund president at the time, Thomas E. "Chip" Butler Jr. (Butler was found guilty last year of failing to file his personal income taxes from 2001-2005.)

Sullivan said the fund and the association are eager to move forward and come into full compliance with the law.

"No one did anything criminal, and use of the word fraud was an overstatement," Sullivan said of the challengers' criticisms. "If in the minds of a few people there is and kind of a tiny little cloud, lets resolve it," he said.

Although it wasn't clear whether the attorney general's office would call for anything beyond the scope of what Sullivan laid out, Sullivan said he believes there will be no further controversy.

"Maybe there will be a kicker in what they send, but I don't think that's very likely," he said.

AG Investigation

In this morning's Local, I filed a brief report on the end of the Attorney General office's investigation of the Chestnut Hill Community Fund and the Chestnut Hill Community Association.

Here's that report:

Attorney General query of CHCA/CHCF closed

By PETE MAZZACCARO

An investigation of the Chestnut Hill Community Association and the Chestnut Hill Community Fund by the state Attorney General’s office that began in mid-2008 appears to have concluded.

A final agreement between the Attorney General’s office, the fund and association will be discussed in detail at the next meeting of the association’s board of directors on Thursday, March 25.

CHCA president Walter Sullivan acknowledged that the investigation had drawn to a close and explained that the CHCA and CHCF had received a document called an Assurance of Voluntary Compliance that would settle the matter between the Attorney General’s office and the two community organizations.

Sullivan said he could not discuss the particulars of the document but promised a full public disclosure at the board meeting. Several messages left with the Attorney General’s office for details went unreturned at press time.

The investigation stemmed from a dispute between CHCA board members over a number of matters, including a Department of Community and Economic Development grant that several board members said was misspent in 2005.

Those same board members tried to have the CHCA undergo a forensic audit, which a majority of the board declined. After that attempt failed the group, which included former CHCA president Ron Recko, former board member Jim Foster and CHCA founder Lloyd Wells, retained an attorney and turned a complaint in to the Attorney General’s office leading to the investigation.

I hope to report further details soon, before next week's issue. I've spoken with someone in the AG's office, but await the return call of a "spokesperson." The office may not be willing to discuss particulars with me until the CHCA/CHCF sign off on the agreement letter.

Power back on

PECO just restored power to the 8500 block. A PECO worker at the scene said it looked like antifreeze had been poured into a grated area that contains transformers for the block. (The photo, left, shows the location: Evergreen and Germantown in front of Clear Wireless.)

I peeked into the hole and saw an awful lot of green liquid that looked like antifreeze.

All stores on the block appeared to be open. I'll check in with PECO to see if antifreeze was the culprit. The location has been a problem for PECO in the past, including one time, perhaps two years ago, in which an underground fire there knocked off power for the block for hours.

Power out in 8500 block of Avenue

The east side of the 8500 block of Germantown Avenue is without power.

Dan Weiss and Adam Serfass of the Chestnut Hill Cheese Shop said they came in this morning to open and had only limited power. That power has been out since at least 10 a.m. forcing the shop to close. Paperia and the Chestnut Hill Bootery are also closed.

Starbucks and the pretzel shop next door still have power.

PECO workers are busy trying to restore power to the block.