SEARCH FOR RVCC FINANCIAL RECORDS LEADS TO ATTORNEY GENERAL'S OFFICE
By Mary Corrado
Editor
Allegations of mismanagement and illegal activity at the Roscoe Village Chamber of Commerce (RVCC) have brought fresh inquiries of its current leadership. Members of the Chamber recently asked the Illinois Attorney General's (AG) office to help untangle the organization's affairs, and state Rep. John Fritchey is scheduling a meeting with the AG's office to keep abreast of the investigation. "The truth will come out, through cooperation or through other avenues," Fritchey told Inside.
Some concerned Chamber members are asking the AG for "a freeze on the assets and property of the Chamber...until an election of a new Board may take place pursuant to the provision of the last valid By-Laws." While the AG's office says it can neither confirm nor deny investigations, spokesperson Melissa Merz said, "If we feel something warrants investigation, we investigate it."
According to frustrated RVCC members, the Chamber's Board is a rogue entity, comprised of unelected officers and directors. It responds with hostility to legitimate requests for information about its operations. "In any organization, public, private or governmental, openness is always a good thing. Opening the books would resolve any questions or concerns. I would think the RVCC would be eager to open the books," said Fritchey. "From a procedural standpoint, what's going on looks troubling. The frustration is, it's impossible to know what's going on without access to the information."
The RVCC has refused offers to help it straighten out its historically fast-and-loose operations and records. Weary members—chief among them Union Insurance Group—are outraged that in October the Board voted to change its By-Laws to erase the past errors of the RVCC's Board and to pardon any offending officers, directors or employees, and to authorize a legal defense fund in the event there have been "accidental or intentional violations of the By-Laws or the [Illinois Not-for-Profit Act of 1986]."
Remarkably, the By-Law changes—which the rogue Board claims were created with the input of the AG's office, a statement the AG's office has denied—do not preclude the compensation of directors. Significantly, the By-Laws also change the way by which businesses may join the RVCC. Businesses may no longer simply fill out a form and pay dues as with other Chambers of Commerce. Instead, the new By-Laws require that businesses must now be elected to membership by the current, unelected Board of Directors. In addition, the By-Law changes allow the Board to terminate Chamber memberships "for cause after an appropriate hearing"—without defining either "cause" or "appropriate hearing."
The current crisis began when the RVCC's long-standing By-Laws were suddenly and mysteriously changed last year following accusations of wrongdoing at the Chamber. (Visit InsideOnLine.com to read related stories of RVCC dated Sept. 22-28, 2004; Nov. 3-9, 2004; and Nov. 24-30, 2004.) When asked last year about the changes, RVCC president Al Johnson claimed the By-Laws were not altered but were instead legally changed five years earlier, in 1999. However, he has been unable to provide any evidence to support this claim.
Recently a third set of By-Laws, which includes some highly questionable provisions, has been proposed—and adopted—by the people who claim to be the RVCC's Board of Directors. The Directors include four Officers: President Al Johnson, Vice-President Gabrielle Sutton, Secretary Guy Grundhoefer, and Treasurer Peggy Lindstrom; as well as Dwan Buetow, Colleen Flood, Mike Green, Kimberly Martorano, Pete Schau, Scott Tucker and Andre Williams. (The RVCC also has a paid, part-time executive director, Terri Brak, whose recently submitted resignation has been accepted by the Board pending the hiring of her replacement.)
The directors have a tenuous claim to the position of directors, since by all three sets of By-Laws the directors' terms are only two years long, and the last election was held in either 1998 or 1999...no one seems able to recall. That means that ever since Dec. 31, 2001, at the latest, there have been no legal directors of the RVCC. During this time of illegal leadership, between Dec. 31, 2001 and the present, over $189,000 in City tax revenue has been given to the Chamber to spend; the Chamber refuses to release records of where that money has been spent or who has been enriched by it.
Inside contacted RVCC's lawyer, Mike McCormick (of McCormick Law Group), by email; he responded to "Please call me" with "What is this regarding?" A detailed outline of this story was then emailed to him last Friday with a request to illuminate the RVCC's behavior. He had not responded as of Monday afternoon. Inside then called RVCC President Al Johnson on Monday, explaining that we had tried to communicate with RVCC's lawyer but that he wasn't talking. Johnson said, "I called him too and he doesn't get back to me either." "That's why we're calling you [to get your input]. Apparently Union Insurance Group—"
Our words were interrupted. "I don't care to comment because you can't get the facts straight. Let the attorney respond to it because that's why everything is at the attorney's," shouted Johnson, hanging up. In other words, he acknowledged that the attorney was uncommunicative and then directed Inside to communicate with him. Notably, he claimed that the facts differ from Inside's investigations but refused to offer any basis for that claim.
Repeated calls to Ald. Ted Matlak (32nd), who has the power to maintain or interrupt the flow of City money to RVCC, have not been returned. He is aware of the history of controversy at RVCC.
As of this summer, the Chamber's By-Laws were those that were allegedly doctored up by its some of its current leadership last year, and retroactively described as being from 1999. A special meeting was called for Sept. 20 to have the current leadership of the Chamber vote on revisions to the altered and apparently illegal By-Laws.
At the Sept. 20 meeting, Chris DeCaigny and other employees of Union Insurance Group (UIG)—which is a member of RVCC—arrived with their company's attorney, Jim Clune (of Garofalo, Schreiber, Hart & Storm), to object to the proposed action. UIG and its attorney advised that, under Illinois law, the Board could not vote on the proposed changes to the By-Laws. Clune told the Chamber Board and their attorney that there must be an election under what all could agree were the applicable By-Laws (the 1996 By-Laws), before the Board could do anything at all, much less change the By-Laws. The Board adjourned the meeting without taking any action on the By-Laws.
At the Oct. 5 meeting, held at the Four Treys, 3333 N. Damen Ave., the rogue Board of the Roscoe Village Chamber of Commerce deleted a few of the proposed changes, claimed they had worked with the Attorney General's Office to draft the new set—and then immediately voted to adopt the new set of By-Laws. That means they went ahead and changed the By-Laws before a new, legal Board could be elected. The approved changes are noteworthy in many respects, including:
* Article II, A. — The By-Laws establish two classes of members, voting and non-voting, with retailers and those with offices on commercial strips having voting rights; all others, including home-based businesses, would not be permitted to vote.
* Article II, Section 2. — A two-thirds vote of the directors shall be required for election of members to the Chamber, making the Chamber a de facto guild that elects its voting members. Such provisions are unheard of among local Chambers of Commerce, most of which are eager to add rather than preclude members.
* Article II, Section 4. — The Board may vote to kick out its paid members.
* Article III, Section 8. — This clause waives the requirement that proxies be in writing. Lack of such a requirement opens proxies for abuse, most often by an organization's officers and directors as they alone have access to the organization's membership list.
* Article IV, Section 1 — The Board may vote to compensate itself and the organization's officers "notwithstanding any director's conflict of interest." Such provisions are unheard of among other neighborhood organizations and Chambers of Commerce. It would allow the Board to compensate itself with Chamber funds, including public tax revenue such as the money that the Chamber would receive were it to become a "Sole Service Provider" of a Special Service Area (SSA)—such as the $3.5 million one it proposed last year. That plan (which would have brought in from local businesses $350,000 per year for 10 years, with the money to be controlled by the RVCC) was blocked following the outcry of Roscoe Village residents after a story in Inside.
* Article IV, Section 3. — Advance notice of Board meetings need not be given to members other than in the form of a once-a-year resolution. Opponents say this will discourage member participation.
* Article V, Section 1. — This clause allows one person to hold more than one office (e.g., president and treasurer, president and secretary, president and vice president). Such a provision is unheard of among local Chambers of Commerce.
* Article V, Section 2. — Officers are elected by the Board and not by the members of the organization — an insular practice contrary to generally accepted principles of good corporate governance.
* Article XIV, Sections 1 and 2. — This provides for future and retroactive indemnification for criminal and civil actions by officers, directors and employees of the RVCC, whether or not those actions were related to activities performed on behalf of the Chamber. This is unheard of among local Chambers
of Commerce.
* Article XIV, Section 3. — This clause grants officers, directors and employees the right to collect from the Chamber payment of their legal expenses, irrespective of the legality of their actions or the outcome of any criminal or civil prosecution suit. Again, such a provision is unheard of among local Chambers of Commerce.
* Article XIV, Section 5. — This section entitles defendant officers, directors and employees to receive payment of their defense costs in advance. Again, such a provision is unheard of among Chambers of Commerce.
* Article XIV, Section 6. — This section extends indemnification to any criminal or civil infractions that an officer, director or employee may have taken in non-Chamber matters, provided the individual(s) was/were an officer, director, or employee of the Chamber at the time he or she took those actions, even if that individual no longer is an officer, director or employee. Such sweeping amnesty is unheard of in corporate governance.
* Article XIV, Section 7. — This section permits the Chamber to purchase retroactive insurance to indemnify any officer, director or employee regardless of whether the Chamber has the power to indemnify a person so charged. Again, this practice is unheard of among local Chambers of Commerce.
* Article XV. — Under this clause, the Board may alter or amend the By-Laws without input from, or ratification by, the Chamber's members. Again, it's unheard
of among local Chambers
of Commerce.
Some RVCC members—including those from UIG—are asking if these By-Laws speak of an inclusive organization or of an organization that seeks to further conceal its operations and to protect itself from being held accountable in courts of law.
Union Insurance Group has been asking for financial records and meeting minutes for over a year from RVCC. At the special meeting Sept. 20, UIG's attorney Jim Clune asked the Chamber's attorney, Mike McCormick, to meet with him to provide financials and the status of the current Directors, and to discuss how to move the Chamber forward for the whole community. Clune told Inside that, though McCormick agreed to do this, McCormick did not show up for either the promised meeting or a promised conference call. He said he would fax the relevant documents but failed to do so. "We have seen no evidence that this is a properly constituted Board," Clune told Inside.
At this point UIG felt it was time to call in Barry Goldberg, an Assistant Attorney General in Lisa Madigan's office.
In a letter to Goldberg, Chris DeCaigny of UIG wrote: "[W]ho should comprise the current Board and how can the current [Board] members, claiming to be Directors, actually be the legally elected Directors? It would appear that they are acting outside of any authority to do so and certainly beyond what the corporate By-Laws would allow. The fact that no election has been held for six years should require that your office step in, investigate, and at the very least, supervise a proper election of Board members pursuant to the By-Laws you deem to be applicable.
"I have requested access to the Corporate Minutes and Meeting Notes, including, but not limited to, election results, if any, Board appointments, acquisition documents, and the applicable By-Laws (all versions). I have been told by the individuals claiming to be the properly appointed Officers, and by the Chamber's attorney at that time, that there are no minutes or documents; that they lost them and they were in the process of rewriting them!...
"[I have asked] to review all financial documents to which all contributing members are entitled. I have been told by the individuals who should have been in control of these documents that they did not keep any financial records. I have offered to pay for a CPA to set up an accounting system and to get the Chamber financial records into compliance with State and Federal law, to the extent that we could. My offer has been refused. I was told that contributing members did not have the right to see the financial records, per the Chamber attorney at the time. I differ with this explanation, noting that not only may contributing members review the financial records pursuant to Article XI of the 1996 By-Laws, but also public officials, such as yourself, may review such records at any reasonable time for any reasonable purpose."
DeCaigny argues that based on the By-Laws (1996 or 1999) and the Illinois Not-for-Profit Act of 1986 (referenced in the 1996 By-Laws), the officers are in violation of the Chamber's By-Laws and of provisions of the Not-for-Profit Act. On behalf of the frustrated members of the Chamber, he urges "a freeze on all property and assets of the Chamber...until an election of a new Board may take place pursuant to the provisions of last valid By-Laws."
He continues: "All operations of the RVCC should be suspended, and this can be easily accomplished as there are no outstanding events planned for six months. There is no need for the people in control of the assets to resign their positions, as I do not believe they have a valid claim to those positions. A full audit should be conducted and all information shared with the members and your office for a future plan of action."
WHICH SHOULD COME FIRST, ELECTIONS OR BYLAW CHANGES?
In March 2005, the current leadership attempted to hold an election for officers and directors. However, it soon hit a roadblock. Among last year's mysterious alterations to the RVCC By-Laws, was creation of a new requirement that only a person who had been a director for two years could become an officer. When RVCC's long-time Executive Director, Terri Brak, attempted to run unopposed for the office of President, a resident of Roscoe Village (not related to Union Insurance Group) contacted the Attorney General's office to protest. The AG's office, in turn, told the RVCC that Brak could not run because she had not been a director for two years. Similarly, Brad Spiess of UIG was precluded from running for the office of Treasurer (which had been allowed to sit vacant for many years while the financial affairs of the RVCC spun out of control).
The RVCC cited the mysteriously-appearing restriction as its reason to cancel the election altogether—rather than restructure it to elect new directors-at-large who are not officers. Such a step would have allowed a new Board to then correct the conflicts and deficiencies in the RVCC By-Laws and begin to put the organization on a sound management and financial footing.
According to DeCaigny, by canceling the elections entirely, RVCC avoided the possibility of an outsider like Spiess interfering with the current management of the RVCC. Also, by pushing through the most recent changes to the By-Laws before holding new elections, the current leadership was able to do with them whatever it liked (read: able to pass a sweeping indemnification of directors, including the payment of future defense costs—even for criminal activities); it avoided having any opposition to the changes by shutting out any new directors who might have been unhappy with "business as usual" at RVCC.
Under regulations governing the grants that funneled City tax funds to the RVCC, the Chamber is required to file quarterly reports about the management and expenditure of those funds. Inside arranged for Freedom of Information Act requests to be filed on Monday, Oct. 31, at Chicago's Department of Planning and Development (DPD). The requested documents include all minutes, financial reports and expense reports that were submitted to DPD by Roscoe Village Chamber of Commerce for the period of 1999-2005. The DPD promised delivery of these records within seven working days. |
