In a previous article, I wrote about some possible conflicts of interest related to the Verizon Wireless Amphitheatre. The land was purchased from Cousins Properties and Duke Realty and, I’ve since discovered, Duke Realty also was contracted to build it (see note). It is worrisome when the leaders of a non-profit benefit financially from the non-profit organization that they are charged to lead. Donors and grantors do not like to think that they are paying to line a private individual’s pockets when they are trying to support the mission of an organization. That’s why I was so disappointed in what I found when I took a closer look at the Woodruff Arts Center’s (WAC) Forms 990.
Since 2008, non-profits have been required to disclose any business transactions involving interested persons (i.e. people in the organization that may face a conflict of interest in performing their duties). This would include any of the trustees and would absolutely include anyone on the Board of Governors. The WAC’s 2012 Form 990 lists four such business transactions with trustees.
Unfortunately, this list is incomplete. Contained within the form 990 itself is another major business transaction: $461,494 paid out to Coxe Curry & Associates for consulting services on fundraising campaigns. Phil Jacobs, the Nominating and Governance Committee Chair of the WAC Governing Board, is a senior consultant at Coxe Curry & Associates. That’s a pretty glaring omission that left me wondering if there could be any others.
Douglas Hertz, the chair of the Board of Governors, is also the CEO of United Distributors, which is an alcoholic beverage distribution company. Is that where the WAC gets their alcohol? I’ve noticed that a lot of the new programming at the WAC has involved alcohol, such as the Friday Night Lates at the High Museum of Art or the Atlanta Symphony Orchestra’s Soundstage Lounge. Does this benefit Hertz? Similarly, Paul R. Garcia, the board’s Vice Chair, is the president of Global Payment Systems. Which payment system does the WAC use? I’d normally assume that the WAC uses other vendors since neither of these potential conflicts of interest are listed on the form 990 Schedule L but, because the Coxe Curry & Associates relationship wasn’t disclosed, I now have my doubts.
As I was looking into the affiliations of the WAC Board of Governors, I stumbled over the fact that there is a second person on the Board of Governors who had connections to Cousins Properties. I mentioned before that Larry Gellerstadt, III is the CEO of Cousins Properties. It turns out that Lynda Courts, an at-large member of the Board of Governors, is the wife of Richard Courts, II, who formerly served on the board of Cousins Properties and who, along with other members of his family, is a major stock holder in the company.
Of course, this wouldn’t count as a conflict of interest since the WAC bought the land for the VWA back in 2007, before this kind of transaction would need to be listed on a form 990. And maybe we could just assume that something that far in the past wouldn’t matter to decisions regarding the VWA now, right? But that’s not the whole story.
Cousins Properties owns a little under 20 acres of land across the street from the VWA. Interestingly, they sold it in 2008 but then bought it back in 2010. As of the time that this story was published, if you look at the VWA website then you will see that it mentions plans for a phase II development of Encore Park. Do you think that it would be a safe bet that this phase II would find its home on the 20 acres of land across the street from Phase I?
Making things look even worse is that the WAC seems to have formed a shell corporation to purchase the property for the VWA in the first place. The actual deeds for the land show that it was purchased from a company called Encore Park for the Arts, Inc rather than directly from Cousins Properties. Encore Park for the Arts bought the property from Cousins Properties in 2003. It is worth noting that Thomas Cousins, himself, was on the board of trustees of the WAC at that time. I took the liberty of looking into the State corporate filings for this company and it turns out that its principle address is 1280 Peachtree St, the same address as the WAC. Further, the officers of the company are all officers of the WAC. Indeed, Hepner is CEO of both organizations. This company was incorporated in 2002 for the express purposes of developing Encore Park and has always been in the control of the WAC and its board. Until 2010 it was registered as a 501(c)3 and, in its last form 990 from 2008, it lists an advisory board made up solely of people with the WAC as their address. Oddly, it is still registered as a not-for-profit with the State of GA even though the IRS revoked its 501(c)3 status in 2010 for failing to submit forms 990 for three consecutive years. That means that they stopped filing forms 990 after Cousins Properties initially sold off the plot of land across the street.
Why does the WAC have a shell company that bought the land for the Verizon Wireless Amphitheatre (VWA) three years before it was officially acquired by the Woodruff Arts Center (WAC)? Is it just a coincidence that the ASO started running deficits when it was incorporated? If it existed solely to raise funds for the project, why does it still exist? And why is it still registered with the State of Georgia as a non-profit even though its 501(c)3 status was revoked by the IRS in 2010 due to failure to submit forms 990? Is it just a coincidence that the WAC’s board began reorganizing to put substantial power of governance into the hands of the CEO of Cousins Properties around the same time that they repurchased the property across from the VWA?
There may be a good explanation for all of this and I’d love to see the WAC release information that explains what is going on. Unfortunately, despite stating on their Forms 990 that financial statements and their conflict of interest policy will be made available upon request, they do not seem to be responding to any requests for this information. I said in my previous post that the optics were bad; this time, I’m saying that something smells rotten. The WAC Board of Governors is made up of 18 members, of which 4 have definite conflicts of interest and there are 2 others who might also benefit from WAC expenditures. It seems almost as though having a potential conflict of interest is considered a positive thing when the Board of Trustees elect the Board of Governors. The WAC has a lot of questions to answer and donors, grantors, and any public entity who has underwritten their bonds need to demand answers.
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*NOTE* The Woodruff Arts Center has removed the original presentation to which I had linked. Click HERE for more information.