Criminal Investigators Called into Fort Worden PDA Mess

by Jim Scarantino | Nov 22, 2020 | General, Local Businesses

The following is an mail shared with us anonymously that has been sent from the co-chairs of the Fort Worden Public Development Authority to the Mayor of Port Townsend. Due its anonymous origins it went into our spam box and we did not discover it until this evening. It was sent to us November 18.  The email from the co-chairs to the Mayor, and also all members of City Council, was delivered November 16.

This letter discloses an ongoing criminal investigation and the escalation of other investigations into financial malfeasance that has rendered the Fort Worden PDA’s financial situation a “house of cards.”

The email appears authentic based on the level of detail, and key statements that are confirmed by matters in the public record. The information about the criminal investigation, and the disciplinary action against Dave Robison, who has now left after being CEO for nine years, has not previously been made public.

Here is the letter from the co-chairs of the Fort Worden PDA to Mayor Michelle Sandoval, with copies to the city manager and the Washington State Parks Agency Administration.

Mayor Michelle Sandoval
Port Townsend City Council via Mayor Sandoval
Port Townsend, Washington

Re:  Fort Worden Public Development Authority

SENT BY EMAIL TRANSMISSION

Dear Mayor Sandoval and Members of the City Council:

As Co-Chairs of the Fort Worden Lifelong Learning Center Public Development Authority (PDA), we are acutely aware of the criticisms that have been expressed about the state of the PDA. Because of the financial irregularities that we have uncovered and revealed to the public, it is understandable that some in our community have lost confidence in the PDA and our leadership. We remain devoted to the Authority’s and Fort Worden’s long-term success and believe it will once again become a thriving place of arts, culture, and learning. We believe that we, along with our board members, possess the knowledge and experience required to partner with the new Interim Executive Director to complete the short-term mission critical requirements to secure the Makers Square Historic Tax Credits and mount a fundraising campaign for working capital to keep the Fort running (we received a $200K commitment on Friday).  We both have the commitment to continue in our roles and believe that we have the experience and knowledge to lead the PDA out of this crisis. We are prepared to engage in dialogue about the future of the PDA and its leadership and to identify solutions to very difficult circumstances. Our goal has always been to create a win-win for the PDA, its partners, the City, our community, and State Parks.

We have heard from you and the City Manager that there has been a lack of accountability at the PDA. If by that you mean an unwillingness to accept responsibility or to account for one’s actions, we must respectfully disagree with you. We have devoted ourselves nearly full-time to the PDA, and have acted with due deliberation in responding to net revenue shortfalls and audit findings, rethinking the future business model required for a long-term sustainable operation, confronting personnel problems, addressing financial irregularities that were uncovered, working in the face of impossible odds to find solutions to the collapse of revenue due to COVID shut-downs and restrictions, and collaborating with our Fort Worden partners to re-imagine business and governance models. When a member of our staff uncovered two very serious financial irregularities (totaling just over $10,000 combined), we  immediately reached out to City Manager Mauro, Mayor Sandoval, the Port Townsend Police Department, and the State Auditor’s Office. We also engaged the services of a forensics account, who is also a certified fraud investigator, to verify the PDA’s preliminary findings, and we sought the counsel of a retired assistant district attorney who headed up a white collar crime unit. And just two weeks ago, we cooperated willingly and transparently with the State Auditor’s Office to identify potential risks as part of an upcoming 2018-2019 audit and accompanying Accountability Audit.

We also note that as part of the PDA’s 2016-17 Accountability Audit, which we did not receive until January 2020, the State Auditor’s Office stated that “Independent audits provide essential accountability and transparency for Authority operations. This information is valuable to management, the governing body and public stakeholders when assessing the government’s stewardship of public resources.”  The PDA board as a whole and its co-chairs took very seriously the findings of the Financial Audit and the Accountability Audit. The State Auditor concluded in the Accountability Audit that, “This report describes the overall results and conclusions for the areas we examined. In those selected areas, Authority operations complied, in all material respects with the applicable state laws, regulations, and its own policies, and provided adequate controls over the safeguarding of public resources.”  The State Auditors examined the following areas during this audit period:  1) Cash receipting-timeliness and completeness of deposits at the Café and Taps; 2) Accounts payable-credit card disbursements; 3) Payroll-gross wages and overtime; and 4) Procurement-professional services.  Since that time, the Acting Associate Executive Director, who was given full responsibility for overseeing PDA finances, has discovered that the Authority has not complied in the past year in the area of Accounts Payable and Procurement of Professional Services, the latter where we have discovered alleged fraud. During the exit interview with the State auditors, both Treasurer Jackson and Co-Chair Hutton asked the auditors if there were any areas in which we should be concerned and pay particular attention, or if there were questions they should have asked that they did not. We were not directed beyond the findings of the Financial Audit and the Accountability Audit. The February 17, 2020 memorandum to the PDA and FW Foundation boards of directors, and interested parties and media outlined the PDA’s response to the audits and the actions the PDA would take to correct findings.  The treasurer has worked diligently to ensure that the PDA financial staff followed through with these corrections.

Unfortunately, as our white collar crime counsel has emphasized, individuals intent on nefarious action can usually succeed. Our now Interim Executive Director, then serving as Acting Associate Executive Director with full financial and operational authority since June, discovered that the reports that the PDA Board received during the first and second quarters of 2020 were likely not tied to the general ledger. This possible misrepresentation of the PDA’s finances is now being examined by the State Auditor’s Office and our own contracted certified public accountant. The PDA’s accountability for this potential malfeasance is demonstrated by our engagement of highly respected expert in state and city finance to review our books, a forensic accountant, and two CPAs to restate our finances from GAAP to cash basis and prepare accurate financial reports.

It has also come to our attention recently that the PDA is being criticized for refusing this winter a significant gift in the $1 million range. Let us be clear that the PDA does not accept gifts, no matter their size, that are accompanied by conditions that are contrary to our long-erm viability. One of our longest serving directors strongly counseled against accepting this gift, and the co-chairs fully concurred. Despite the fact that the gift would have provided a much needed short-term benefit, it would have seriously compromised the PDA’s financial stewardship and established an untenable precedent.

As co-chairs, we have kept the PDA Board of Directors closely apprised of all issues and actions by staff, along with our own actions, and have been transparent in our decision making and financial reporting—well beyond what is required by statute. The one exception is that we had been asked by the Port Townsend Police Department and the State Auditor’s Office not to reveal publicly that we had reported information that suggested alleged fraud due to possible negative impact on an active ongoing  investigation and potential future litigation. The situation in which the PDA now finds itself requires that its stakeholders understand more fully the full range of financial challenges confronting the Authority.

We are well aware that we have been criticized for not taking more decisive action regarding the now retired Executive Director’s apparent lack of oversight of key staff.  Actually, we did take decisive action about which you are aware. As a result of our investigation and performance review, the former Executive Director was relieved of personnel and financial management responsibilities. We did not, however, show our Executive Director the door, which is what some in the community wanted and

expected. Neither one of us is unfamiliar with terminating executive staff. It is much more difficult sometimes not to take such action, and in this case we wanted to respect an individual’s intention to retire within a few months after a more than 30-year career serving Port Townsend in various capacities. Additionally, we made the decision that it was critical to utilize the knowledge and expertise the former Executive Director possessed to complete the Makers Square project and secure very complicated Historic Tax Credits, without which the PDA and the Makers Square project would be at serious risk. These two responsibilities are critical to giving Fort Worden a fighting chance.  And it should be noted that we have discovered zero evidence that the former Executive Director had knowledge of or participated in the alleged fraud incidents. In retrospect, we would make the same humanitarian and business logic decision, even though we have experienced scorn for that decision.

The PDA has a remarkably committed and talented Board. They have demonstrated their  commitment, devotion, and caring, as well as hard-nosed oversight and decision making for  many years. A recent example of the extent to which they care for Fort Worden and its people was funding $80,000 out of their own pockets to cover three months of health insurance for all employees who were placed on standby status or furloughed. Individual board members have also covered expenses such as converting our existing GAAP financials to BARS accounting to facilitate the upcoming audit and paying delinquent insurance expenses. The range of experience and talent among the Board members is remarkable. The Board has experience in finance and accounting; hospitality management; business development; corporate and nonprofit leadership; construction management; education; public relations and strategic communications; publishing and reporting; and social and economic entrepreneurship. We trust that you appreciate all that the Board has done to build the Fort Worden enterprise and its commitment to sustaining a State Park’s campus that is home to a thriving lifelong learning center—one which has more room to grow, prosper, and become more coordinated and diverse in post-COVID times.

Finally, we would like to express a deep disappointment and a regret. It is public knowledge that the Fort Worden did not qualify for any federal, state, or county relief dollars. While other organizations—for profit and nonprofit—received Paycheck Protection Program and Personal Protection Equipment funding, the Fort Worden PDA received nothing. We know of nonprofit organizations in our area with much smaller budgets and much smaller staff that received $250,000 to $400,000 in relief aid. Fort Worden qualified for and received zero aid by virtue of being a quasi-public entity. This in the face of losing upwards of 90 percent of our revenue, leaving insufficient funds to cover even fixed costs like utilities, internet service, and insurance. The City knew this to be the case, yet has not offer any assistance to the PDA. The City leadership has always professed to the importance of Fort Worden—the PDA and all of its partner organizations—as a cultural and economic driver for the City.  The original effort to create the PDA nearly a decade ago came out of this belief. We know full well that the City has its own enormous financial challenges. We hold out hope that the City would offer some tangible assistance to an organization that has grown from a $1 million to a $7 million enterprise in six years, and from just over 14 full-time employees to 85 full-time year-round employees, and 175 employees during the summer season (pre-COVID).  We feel it is important to stress, contrary to some people’s beliefs, the reason the PDA is in this financial situation is due to COVID and our adherence to the necessary State restrictions that are still ongoing.  As a result of the closure of Fort Worden State Parks in March and the ongoing restrictions, the PDA has lost upwards of 90% of its 2020 revenue.  The financial irregularities that we uncovered have exacerbated the situation, to be sure. As co-chairs, our regret—our mea culpa—is that we have not advocated with the City more forcefully for the PDA during this crisis.

Undoubtedly, there are decisions and actions that we could have made differently or better. Yet, we have been absolutely devoted to “doing the right things, and doing things right” on behalf of Fort Worden. We remain committed to the future success of Fort Worden and have appreciated the opportunity to serve Fort Worden and Port Townsend in our capacity as PDA Board members and, recently, as co-chairs. We stand ready to engage in dialogue with the hopes of finding solutions to the crisis that has impacted the PDA, and every organization, every family, and every individual in our community and the nation.

Sincerely,

Norm Tonina                                                     Todd Hutton
Co-Chair                                                        Co-Chair

Cc:     John Mauro, City Manager
Fort Worden PDA Board of Directors
David Timmons, Interim PDA Executive Director
Peter Herzog, Assistant Director, Parks Development, WA States Parks Agency Administration