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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.
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.
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