MLT’s director potentially given illegal bonuses
Last month Mammoth Lakes Tourism [MLT] asked its Board Attorney Tim Sanford whether it was allowed to give Executive Director John Urdi a discretionary bonus, meaning a bonus not specified in Urdi’s contract, of $8,765 for his performance in fiscal year 2017-2018.
The organization was wary to offer this bonus. MLT board member Paul Rudder thought that since almost all of MLT’s revenue comes from tax dollars, offering a discretionary bonus could be considered an illegal gift of public funds.
Sanford got back to the MLT board at its Wednesday meeting. He said that the bonus would not be considered a gift of public funds. Once the funds change hands from public to private they are no longer bound to the same restrictions, and MLT is a private, non-governmental organization. Funds flowing to MLT are just like CalTrans money going to Granite Construction.
However, he said, this bonus might be illegal because MLT is incorporated as a non-profit, public benefit corporation, and thus its funds are considered charitable assets.
According to a document published by the California Attorney General’s Office on charitable organizations, a retroactive bonus to an employee that is outside of the compensation specified in that employee’s contract, which is what MLT was considering, may be considered an “illegal distribution of charitable funds.”
The MLT board decided to listen to its attorney’s advice. They approved a bonus of $2,922 in accordance with a winter enplanements metric stipulated in the bonus schedule of Urdi’s contract, and planned to put the other $8,765 in Urdi’s next contract as a signing bonus.
Thus, what could be considered a case of embezzlement was officially and cleanly skirted.
Only one problem: MLT has already given Urdi these illegal (at least in Sanford’s view) bonuses in past years.
“It has been done before,” board member John Morris said at MLT’s January 10 meeting, “Several times.”
Exactly how much money has been given to Urdi during his 8-year tenure is unknown. The Sheet made a public records request of the non-profit to find out how much it had given Urdi in discretionary bonuses, and was told that MLT does not keep a breakdown of discretionary versus contractual bonuses. The non-profit said that it would have to reverse engineer the amount of the discretionary bonuses by looking at Urdi’s total bonuses, finding out which metrics in his contract were achieved, and subtracting the contractual bonuses from the total. Urdi said that he would get that information to The Sheet by next week.
If the Attorney General’s publication is accurate, of which Sanford was uncertain, then the MLT board would be personally liable for returning any funds it has illegally given to Urdi in the past.
Supposing that MLT has been consistent in its giving, that could amount to about a $70,000 cost to board members. (Urdi has been Executive Director for eight years. 8 multiplied by $8,765 equals $70,120.)
Sanford made clear that he was not certain that the opinion he gave to MLT is accurate. He said that he was unable to verify the legal authority of the Attorney General’s document. The cases that this document cites do not have the same wording used by the Attorney General’s office.
Though he couldn’t find the legal backing for its document, Sanford stressed that the Attorney General’s office handles the investigation of this kind of case, and it has punitive powers. In other words, the Attorney General is judge, jury, and executioner for cases of misappropriation of charitable funds, so its document should be heeded.
Urdi’s contract has not been updated since 2014. The contract ran out last June, and since the MLT board did not create a new contract the previous one auto-renewed.
Since then, the board has been working on writing a new contract for Urdi, specifically one with more relevant bonus metrics.
Urdi’s current base salary is $194,800 annually. He can receive bonuses for any of three milestones met: 1) increases in Transient Occupancy Tax [TOT] year-over-year 2) increases in enplanements in the summer and winter 3) Increase in external revenue (non-tax) year-over-year.
The board of MLT has drafted new metrics that it believes are more important measures of Urdi’s performance. It used these metrics to calculate the $8,765 that it planned to give as a discretionary bonus.
The board has not been able to finalize this new contract, but it hopes to do so soon. MLT passed a motion, requesting Sanford look into whether a new contract could retroactively cover Urdi for all of fiscal year 2018-2019, beginning in July, 2018.
Not only has Urdi’s contract not been updated, but MLT has not initiated a new contract with the Town of Mammoth Lakes. The contract between the town and the non-profit ended last June, and MLT, which receives $8 million+ in tax revenue from the town, has simply been operating on good faith for the last 6 months.
If Sanford’s opinion is correct, and it is found that the MLT board has been negligently doling out charitable funds, they could be investigated by the Attorney General.