Deflection and Self-Protection

[Ed Note: Header Corrected from Self-Reflection]

There is little left to respect in the carcass of the self-destructed CHCA that the community would just as soon forget as participate with. Were it not for the Local, the newspaper it owns and mismanages, many would find no reason for its existence after its leadership spent the last two years trying to cover the tracks of past executive manipulations and fiscal mismanagement - - and failed.

The final shoe is dropping now as there is one long-unanswered question that clever manipulators have kept in the dark for quite some time - - what about the Trust Fund? That would be the formerly multi-million dollar fund that has been raided, misused, and run largely under the radar for years, but only now are we getting some essential information that the reform board of several years ago tried to convey, but were prevented by a combination of board and public pressure to never speak ill of what goes on in the Hill.

Designed to provide for the community's general welfare, this fund has been a source of insider manipulation since the 1990s and lost hundreds of thousands, maybe millions, needlessly in poor investments, insider deals, and illegal and improper use of principal without trustee approval. The only noticeable gain in recent years was on a piece of real estate that itself lost money each year it was owned, but general market appreciation produced a gain at forced sale two years ago. Not to worry, tax penalties and trustee recent action, or should I say inaction, lost much of those gains in a year and half.

For the few who left who care about how millions are spent or wasted, this Fund is run by trustees who are appointed by the CHCA and serve at the pleasure of the board - - it is not the other way around as current trustee chair Jean Hemphill and others would want you to believe. Covering the tracks of this trust fund (and it is not an endowment) has been the major effort of the recent past CHCA and CHCF leadership. We all should be familiar with the old adage regarding institutional wrongdoing - - follow the money.


Last week's Local finds former board member and Merrill Lynch account manager Mark Nottingham coming out of the dark to answer reform board president Ron Recko's questions that were actually directed at Trustee McGuckin and Treasurer Keintz regarding fund investment performance and CHCA financial issues. McGuckin's accusatory demeaning comments previously made the pages of the local and the CHCA annual meeting in an immature attempt to blame all past CHCA/CHCF failures on a few individuals who won't actively participate in the "three monkey program."

Since the trustees serve at the pleasure of the board, must report to it, and are charged with maintaining value within the fund and overseeing prudent disbursement, one might think that if the board makes recommendations as to how secure the principal is maintained, they just might take that into consideration. The exact opposite has happened as board recommendations on several occasions since early 2007 to move the cash investments from equities to insured bank deposits were rejected out of hand, and the fund has lost nearly 30% of its value. There was no need for high-performance investments in this community fund; stability and earnings were sufficient, and past performance in money-losing accounts and other investments prompted the informed board members to make just those recommendations; but to no avail.

Mr. Nottigham's rambling explanation in hyper-technical terms that mean very little to the average person do not come close to answering Mr. Recko's questions, and who cares what other high risk funds lost - - we did not want our assets in high risk funds - - and we said so!

To the facts. I, as a board member, asked for a copy of the Merrill Lynch statement where all these investments reside and was refused in writing by the Fund President just a short time ago. Let me remind the readers this is the same 50lc3 "public charity" that refused board members financial information that led to mass resignations from the board, as well as the hiring of an attorney to restore some transparency.

Now we are told those records are public as if they had been all along, and that is just not so. Minutes of trustee meetings are never published in the Local and were not even forwarded to the board. Only Ron Recko's request a while back brought them out of the dark cave where all financial records, accurate and inaccurate reside. A read of those minutes themselves is eye-opening and publishing might be in order.

Now Mr. Nottigham did respond two years ago when the legally constituted CHCA Oversight Committee requested information on the operations of his managed account within the trust fund; particularly the fact it provided collateral for loans illegally generated outside of required trustee approval and misused by the affiliated CHCA; again under the radar. The $180,000 draw downs included a loan with fraudulent documents of $50,000, since repaid at a settlement table, but never properly treated in the fund accounting.

Mr. Nottingham, then Financial Advisor to the CHCA Board, and at the same time Merrill Lynch Account Manager for the Fund, went to great pains to inform us that he protested strongly to then trustee president Butler that these loans against trust fund assets were being improperly used, and provided documentation to that effect which still exists. Using his own words, he was told that he should learn to "go along and get along if he wants to keep the account". He told us he was rebuked and then jettisoned as board advisor. However, all non-real estate holdings of the fund were still in his control.

One wonders then, why the same Mr. Nottingham allowed Mr. Butler to take the entire proceeds from the sale of the fund-owned property at 8431 Germantown Avenue and wash it through the Merrill Lynch account rather than deposit it into the fund general account (as he should have) and then hold a meeting of trustees (as required in the Trust Indenture) and get approval of how those funds should be dispersed or invested.

That never happened and Mr. Nottingham has had the benefit of the entire balance of proceeds from that $1.2 million dollar sale ever since. Only a meeting and discussion among trustees could have properly and legally "forgiven" that debt to the CHCA, and determined how it might be invested. That was never done, and the primary effort of the management of the CHCA and the Fund since that time has been to keep these facts and other relative financial data from the board and the public. Attempts to get a qualified auditor to review the books for this period were met with the same dug-in practices. The current auditors are hiding behind the "management letter" which states that as long as management tells them the previous records are accurate, that is all they need.

I think that is what Exxon and Madoff did as well.

Jim Foster
Board Member until Thursday