Agency executives wrote checks to themselves
04/14/1991 7:24 PM
08/12/2014 2:50 PM
At a time when Miami's oldest inner-city social service agency could not make its payroll, two top executives cashed more than $100,000 in agency checks they wrote to themselves.
For seven months, from last June until January, the president and the chief financial officer of the James E. Scott Community Association cashed at least 96 checks.
Longtime President Archie W. Hardwick and his chief fiscal aide, George Thoroman, deny any wrongdoing. But they could not document how most of the payments to themselves benefited the Liberty City agency that provides day care for poor preschoolers and food for the elderly.
Hardwick said disgruntled employees, bent on destroying the agency, stole most of the paper work that would itemize the expenses. Hardwick gave The Miami Herald several different versions of how the money was spent, then produced backdated memos he said were reconstructed to account for the money.
He said keeping JESCA financially afloat is a demanding, difficult job mirroring all the problems of inner-city life. Trying to help poor street people, soothe youthful passions and quell riots doesn't leave him much time to act like an IBM accountant, Hardwick said.
Often, he said, he was forced to pay JESCA expenses in cash. Although JESCA's bookkeeping and accounting practices may not have been perfect, he said, no money was ever stolen.
"I've tried very hard to operate the agency within the confines of what I consider right, " Hardwick said. "I may be misguided, but I'm not dishonest."
JESCA, a $7 million-a-year agency funded with tax dollars and private donations, has had a troubled financial history. The Internal Revenue Service has filed liens against it, vendors have sued it, auditors have challenged its accounting practices.
The money withdrawn by Hardwick and Thoroman, at the least, raises questions about the agency's controls over its money:
* Hardwick cashed 48 checks totaling $47,400 from June until January. He contended that the money was reimbursement for agency expenses and a tax lien he once paid on JESCA's behalf.
* The checks cashed by Hardwick included $5,100 in advance pay. Hardwick initially said the money was for auto repairs that he eventually repaid. He later said it was an interest-free loan for a personal benefits package that he had not repaid.
* Thoroman cashed 48 checks totaling $54,500 from June until January. He said most of that money -- about $40,000 -- went to Hardwick.
Thoroman kept $12,000 for himself. He said it was an interest-free agency loan for a down payment on a condo, which he never bought. Thoroman also withdrew an additional $11,500 in April 1990. He used it to buy a new Plymouth Sundance, registered in his name. After Herald inquiries, Thoroman said he would return the car to JESCA when he stops working for the agency. Hardwick said both were financial commitments made to Thoroman when he was hired.
* As the agency was laying off workers, Hardwick gave himself a $50,000-a-year pay raise. The September pay hike boosted his annual base salary to about $140,000. He decreased his salary after The Herald began looking into JESCA.
A former assistant fiscal director, Elizabeth Jansson, came to The Herald last month with reports of what she said were thousands of dollars in unsupported spending.
"This is money that should be going to the hungry little kids or the elderly, " she said.
"I've sat back for so long and watched what has gone on, and it's so sad, " she said. "This agency could really work. It could really be something in this community."
The Herald examined more than 150 original checks totaling $165,806 -- including the 96 made payable to either Hardwick or Thoroman -- written between June 1990 and January 1991.
The checks showed that during that time, the agency also paid $30,000 for three executives' American Express card bills. One monthly bill came to $5,956.81. The agency also spent $3,000 to pay for calls Hardwick made on his cellular car phone over a three-month period.
Thoroman conceded those expenses were far too high.
"It's a system where money was fast and loose, a system that's easy to abuse. Our priorities weren't as they should have been, " Thoroman said.
Jansson provided The Herald with the checks days before she resigned from the agency where she had worked for the past year.
Hardwick said Jansson is a white woman who is out to "get me." He said she gave The Herald "only documents which, when taken out of context, would allegedly discredit me."
Another former JESCA assistant fiscal director, Alan Layng, independently came to the same conclusion as Jansson, based on what he saw at the agency. Layng worked at JESCA for four months in 1990 and at an accounting firm where he helped with the JESCA account in 1989.
"From an accountant's point of view, I was surprised at the amount of money withdrawn and the absence of any justification to explain it, " he said.
In a series of interviews, Hardwick gave conflicting accounts of why JESCA funds were withdrawn in his name and what that money was used for. He also had several explanations for the decision to boost his pay by $50,000 annually. Throughout, Hardwick strongly denied any misappropriation of money.
"I have not stolen any money from JESCA, but through the years JESCA has always owed me money, " he said.
Hardwick has worked 22 years at JESCA, the past 20 as executive director.
His pay hike, he said, was based on complicated factors.
According to Hardwick:
For 22 years, he has worked frenetically on JESCA's behalf -- raising donations, pleading for public funds, creating programs for the community's young and old, digging into his own pocket to help the needy.
He said he hadn't taken a sick day or vacation day in 20 years.
Last year, he said, the demanding pace caught up with him, and his health suffered.
Unlike most private companies, JESCA offers no medical or retirement benefits for its executives. So, at age 56, he said, he had little to show for all the hard work: no medical coverage, no insurance coverage, no pension.
"For 10 years, I was being paid at least 15 to 25 percent less than what I should have been paid, " Hardwick said. "I received no benefits whatsoever.
"I was bringing in $6 million to $7 million a year to the community, and yet there was nothing for me. So I was trying to figure out a way I could develop a retirement package, " Hardwick said of his decision to increase his annual salary from $89,250 to about $140,000.
When first asked about the pay increase, Hardwick said it had been approved by JESCA's board of directors.
Current board Chairman Charles W. George said he had no knowledge of any increase given to Hardwick. "I have not approved any salary increases or decreases since I became chairman last July."
George's predecessor, William H. Allen, said he didn't approve any salary increase, either. Allen said there was an informal conversation several years ago about a retirement package for Hardwick, "but I don't recall the board taking any action."
Told that neither the current nor past board chairman had approved his salary hike, Hardwick then said it had been approved in principle at a board meeting in October 1985.
Asked which board members specifically approved the salary increase, Hardwick named two: James Lamar and Glenda Harris.
The minutes of that meeting, supplied by Hardwick, state that the board agreed to pay him "$100,000 to $115,000 along with Health Insurance, Retirement, and a Revolving Expense Account of $5,000."
"At that time, Mr. Hardwick was not paid according to the other leaders of the various agencies that are similar to James E. Scott, " Lamar said. "So we tried to make an adjustment at that time. I do remember that very well."
Harris said she recalled the board approving a salary hike in 1985 but did not remember details. "That was six years ago, " she said.
Former board member Arthur King, who also attended the October 1985 meeting, said he did not remember any discussion of a pay raise. He had no idea that Hardwick's salary ever reached the $140,000-a-year level.
"I can't see how he could receive a salary like that with a struggling organization like that's been, " King said.
Hardwick did not take the raise for the next five years. Instead, he gave himself the $50,000 pay hike last year, saying he was making up for the years he hadn't taken the money.
Hardwick now calls the decision to take the salary increase "a mistake." He said he voluntarily decided to cut his salary to $70,000 a few months ago.
However, Thoroman, JESCA's fiscal director, said that Hardwick asked for the salary cut a few weeks ago -- hours before a scheduled Herald interview.
In the taped, two-hour interview, Hardwick explained why he wrote and cashed JESCA checks to himself.
He initially said he withdrew "about $35,000 to $40,000" last year from JESCA bank accounts. This, he said, was money JESCA owed him for bailing the agency out of a tax problem several years ago.
In initial interviews, Hardwick gave this account:
In 1986, JESCA owed $75,000 in back taxes. He said the IRS filed a $65,000 levy against him personally because he was the agency's president.
"I had to pay the taxes or suffer serious consequences, " Hardwick said. "I was borrowing the money on behalf of JESCA so it wouldn't hurt the agency."
He said he scraped and borrowed from relatives and eventually satisfied the tax lien. Last year, when relatives started pressuring him, Hardwick decided to begin reimbursing himself for the $65,000.
He declined to provide the name of any relative who had loaned him money.
Other documentation to support his account is among the paper work recently stolen from JESCA, he said.
Stolen documents include "bank reconciliation statements, bank checks, ledgers, monthly files on reimbursements for expenditures, correspondence regarding fiscal matters and supporting documentation of agency expenditures (including my own), " said Hardwick.
But JESCA's board of directors knew the agency had owed him the money and had authorized him to reimburse himself, Hardwick said in the initial interview.
Current board Chairman George, who has served on the board of directors for the past five years, said he was unaware of Hardwick paying taxes on the agency's behalf.
Asked if he was aware of a board-approved plan to reimburse Hardwick, George replied: "I don't even know what you're talking about. I've never heard of it before."
Allen, chief executive officer of Atico Bank and the previous board chairman, said he, too, was unaware of Hardwick paying off a tax lien and having board approval to be reimbursed for it.
Said Allen: "There were never any discussions about any reimbursement for a tax lien. There was nothing ever in writing about Archie Hardwick getting reimbursed."
Told that neither board chairman knew about the tax reimbursement, Hardwick said he could provide documentation to prove his claim if given some time.
In a subsequent taped interview, Hardwick supplied a memo he said proved his point.
The memo was from Hardwick to fiscal director Thoroman.
The subject: "Procedure for Cash Reimbursement for loan for $75,000.00 IRS."
It read in part:
"At the present time with the establishment of the Fiscal Department, I would like to start reimbursement of this amount. This has Board approval.
"The procedure I wish to establish is the following:
1) "Write checks to me (Archie W. Hardwick) when asked for reimbursement and code checks as "Miscellaneous Expense."
2) "Write checks to yourself (George Thoroman) when asked for reimbursement and code these checks also as "Miscellaneous Expense, " and please cash and return cash to me.
". . . and I request you keep these transactions and matter simply between yourself and the President."
The memo was dated March 25, 1990 -- a Sunday.
It was printed on a laser printer -- which the agency didn't have until August.
And it purportedly was typed by Michelle E. Brownlee -- a secretary who didn't work at JESCA in March.
Confronted with these facts, Hardwick conceded that the memo had been typed only a few days before the interview. It wasn't meant to be a photostat of the original memo, he said. It had been typed "from memory, " he said, because the original is among the stolen documents.
A few minutes after admitting that the memo was a "reconstruction, " Hardwick also said it was inaccurate: The $50,000 he withdrew from JESCA bank accounts last year was not just for paying off a tax lien after all.
Instead, it was reimbursement for agency expenses that he had to pay out of his own pocket, Hardwick said.
In the past four years, Hardwick said in that interview, he has accumulated about $90,000 in JESCA-related expenses. These include: about $58,000 in business expenses, about $25,000 in tax refunds garnished by the IRS and an additional $6,850 to pay off an agency tax lien. He did not substantiate the business expenses.
And tax records later supplied by Hardwick show that at least $12,600 of the $25,000 garnished by the IRS is now listed as a personal credit to be given back to Hardwick.
Hardwick said he wasn't aware of the credit when he wrote the JESCA checks to himself. "If they send me the money, I will give it back to JESCA, " he said.
Asked why he initially said all $50,000 he recently withdrew was solely for the tax lien, Hardwick said that during the initial interview, he was rattled and afraid and not thinking clearly.
On Aug. 7, Hardwick withdrew $2,500 from a JESCA bank account reserved for United Way funds. On Dec. 5, he withdrew an additional $2,600 from the same account. Both checks were marked advance pay. Computer payroll records show that Hardwick received his full pay both months -- plus the $5,100 in advances.
In the two interviews, Hardwick gave two different explanations for the $5,100 withdrawal.
In the first interview he said the money most likely went for car-repair bills. "Somehow or another, I paid it back."
In a second interview, he said it was a board-authorized loan to enable him to purchase a benefits package and was repayable by December 1991.
Hardwick provided another memo to document the $5,100 loan. He later admitted it, too, had been "reconstructed." It was dated Dec. 10, months after one of the advances and five days after the second.
From the memo to Thoroman:
"Please make note of this in our promissory note file, and contact me in the Spring of 1991 for repayment schedule."
Thoroman said he inherited a porous system when he began as fiscal director a year ago and has labored hard to plug the holes.
"I think Mr. Hardwick has the agency's best interests at heart; he's just lived with the agency so long he presumes he can do anything he wants, " Thoroman said. "You're dealing with someone who's in complete control and not responsible to anybody."
He said he will demand changes when he addresses new board members this month.
"This has to be rectified, or they can have my resignation. I will not continue to have a hemorrhaging like this, " said Thoroman.
Thoroman himself received a pay raise last year that doubled his salary: from $35,000 to $70,000.
And on April 23 of last year, Thoroman withdrew $11,500 from a JESCA bank account reserved exclusively for United Way funds. The check is marked "for car for agency."
But the car, a 1990 Plymouth Sundance, is registered in Thoroman's name.
Getting his own car was part of the agreement that brought him to the agency, Thoroman said. He said Hardwick and Allen both approved using United Way funds to buy him a personal car.
"The board said, 'That's fine, ' " Thoroman recalled.
Board Chairman George, however, recalled no such agreement.
"Are you kidding?" said George. "I'm sure I wasn't at that meeting or any other like it and was not aware that this had occurred."
Said Allen: "I have no recollection of that."
On April 2 of this year, after a series of Herald interviews, Thoroman signed a sworn statement agreeing to give the car to JESCA "upon termination of employment" from the agency.
Last Aug. 8, Thoroman cashed a JESCA account check for $3,500 labeled "advance upon condo."
This, he said, was part of a $12,000 loan he got from JESCA "for possible down payment" on a condominium. He said he decided not to buy because "of the instability of the agency."
The loan, according to another "reconstructed" memo, is to be repaid to JESCA "in equal installments of $1,000" beginning in June 1991.
Of the $55,000 he recently withdrew from JESCA accounts, Thoroman said most of it went to Hardwick.
According to Thoroman:
Hardwick would ask if Thoroman was going to the bank that day. If he said "yes, " Hardwick would say: "Well, write a check to yourself, and give me the money."
"I'd do it, " Thoroman said.
In August alone Thoroman cashed more than $30,000 drawn from JESCA accounts -- the bulk, he said, ending up in Hardwick's hands.
He said he became frightened of walking through poor neighborhoods with so much cash.
The chronic withdrawals on Hardwick's behalf got so bad, Thoroman said, that he demanded a letter of protection from Hardwick.
"I told Hardwick he was putting the onus on me. That I'm the one being put behind the eight ball, " Thoroman said. "I said, 'My God, this looks ridiculous.' He said, 'OK, I'll just write a memo that protects you.' "
Dated Sept. 12, the memo authorized Thoroman to withdraw money on Hardwick's behalf, Thoroman said.
JESCA has a projected budget of almost $7 million this year. Most of it comes from public funds: federal, state, county and city. United Way also has been generous.
But the 66-year-old community association currently has its share of financial woes. JESCA has been hard pressed to make payroll some weeks, and it owes $206,000 in delinquent payroll taxes, which the IRS intends to collect.
Last month, many of the association's 200 employees -- some of whom earn as little as $7,800 annually -- went without paychecks because the bank accounts were empty.
"If this agency were run right, we'd make it, " said Jansson, the former assistant fiscal director who recently resigned. "If we had all the money that's been taken, we could meet our tax liability."
Rayford Taylor, who had worked at JESCA for 12 years, was let go last October. "They said they didn't have the funds to pay."
At the time, the retired Army officer had to take care of a family of four. Two weeks later, he had a stroke. "I think it was related to the termination."
He said JESCA still owes him more than $5,000 in back pay.
Rose Moore, who worked at JESCA for 13 years, also left the agency last October. She said she and a number of others left because they frequently didn't get paid. She said JESCA still owes her $3,000.
"I had to go on food stamps and welfare while I worked there, " Moore said. "I'd walk away on Friday with tears in my eyes because another week had gone by and still no paycheck.
"And I had worked like a dog all week because I believed in the program."
JESCA, she said, is the only local program representing black people and the community. But, she said, something has gone wrong.
Said Moore: "Have you ever heard of directors of an anti- poverty program making more than $100,000 a year with cellular phones in their cars?"
Herald staff writers Lisa Getter and Jeff Leen contributed to this report.
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