The vote is today at 7PM and this is the last of my three-part series of letters to League Members. Part 1 and Part 2 primarily focused on 10 years of League finances. This letter will first provide a brief summary of what I found in the financials and address the tall tale being thrown around to waste Member's time and distract. Then I will briefly discuss and summarize my thoughts on the lawsuit and the proposed changes to the League's Constitution and Bylaws.
They Do Not Refute My Financial Analysis
I have analyzed the past 10 years of League's financials, and I can summarize my opinions in two paragraphs:
- During the last 10 years the League has been on a path of unsustainable growth in Annual Operating Losses. Operating expenses are growing significantly faster than Operating Revenue. 2015 Annual Operating Expenses were probably around $1,000,000 too high, and 2015 Administration Expenses around $860,000 too high, based on trend analysis starting with 2006. The growth in Administration Expenses in particular is very concerning and is on a path to consume all Tuition Revenue in 8 years. Fundraising has been mediocre during the past 10 years despite Sal and Ira's stated efforts going back to 2007. Every $100,000 in additional Annual Operating Losses will require generally an additional $2,000,000 in investment funds to pay for those losses, using a conservative 5% non-profit return rate.
- I believe the League should not be using $31M of its $82M in cash and investments to add floors and perform other major structural changes to the League building. I feel all of the $82M is needed as investment funds to generate the necessary interest and gains to pay for Operating Losses and other anticipated expenses. The League does have the money, if spent wisely, to make improvements to the League's facilities (e.g. galleries, studios, classrooms) over the next few years.
Sal and the Board, to date, have not challenged or refuted my financial analysis of the League.Hopefully Members can now more clearly see the operational problems at the League. Unfortunately, when things don't look good for those who wish to retain positions of power, they often sow diversions to keep their hands on that power.
They Divert Attention Away from
Financials and Fundraising
There have been repeated emails from Sal and his supporters for many weeks complaining about the cost of the lawsuit. In the next section I will briefly discuss the merits of the lawsuit. Here I'm going to address the tall tale that the lawsuit plaintiffs are spending hundreds of thousands of dollars. The amount of money spent by the plaintiffs has been so dramatized that Susan Lucci would be envious of the performance. Let us compare the costs to date for both the lawsuit plaintiffs and defendants.
ASL2025 (the opposition campaign) has spent approximately $7,000 in total on its 2015 campaign and ASLUnite (primarily lawsuit plaintiffs) has spent approximately $6,000 in total on the lawsuit to date. That is a total of $13,000 to not only organize a plaintiff lawsuit, but to run a campaign as well. The vast majority of the costs of the plaintiff lawsuit (both the initial litigation and the appeal) has been done on a pro bono basis - for free. I think ASL2025 and ASLUnite have done an excellent job in making their donations go a long way, and it is a good indication of how ASL2025 will efficiently manage and conserve Members' money (the $82M) if they get elected. I donated money to ASLUnite, but it is a small amount compared to the value of the 60+ hours of time I have dedicated to reviewing 15 years of League financial statements, preparing financial models, and attempting to write three thoughtful letters to Members.
While ASLUnite has spent $6,000 on legal fees, Sal and his supporters claim that they have spent over $700,000 on the lawsuit (before tonight's election it may hit $1M). I would like to review the tall Venable legal bills. Sal's long-time pal and attorney, Peter Britell, provided his services in the air rights and cantilever transaction. He is a lawyer at Venable. Two other Venable lawyers are working on the lawsuit, and another Venable attorney is working on the proposed Constitutional changes. Sal has Lady League wrapped in veritable Venable vespers. Why stop, when the higher the Venable bill goes, the more heft it will have when he bludgeons "that Caraballo" guy with it? Between floor-adding dreams, it is becoming clear Sal feels he must constantly divert Member's attention away from the financials and fundraising and keep the Members fearful of the "unknown."
This is a very brief summary of the lawsuit and why I support it. The legal briefs and supporting documentation are publicly available to Members. There are two main issues that are going to be decided on appeal:
- What types of Members, and how many, are required to dispose of League real estate? The plaintiffs believe it requires the majority of all Members, both Active and Inactive. The defendants believe that they can sell real estate with the approval of the majority of the League's Active members. The court will interpret, among other things, Amendments 30 and 31.
- Was the vote on the sale of the air rights and cantilever tainted by statements by the League and its Board about how members' abstentions would be counted? E.g. "IF YOU DON"T VOTE IT COUNTS AS A "NO" VOTE!"
I personally believe the plain language of Amendment 30 and 31 support the position that a majority of both active and inactive members are required to sell League real estate assets. The only difference between active and inactive Members is their recent level of engagement in voting. I believe the intention of Bylaws 30 and 31 were to make it very difficult for the President and Board to sell League real estate.
At the time of the vote for the sale of the air rights and cantilever, there were 3,945 Members who paid their dues and were entitled to vote. 2,102 of these 3,945 Members were Active Members. If abstention had been counted as a "No" vote, the transaction should have been disapproved if the majority of both active and inactive members had been counted: There were 1,342 "yes" votes cast, and the remaining 2,603 Members (Active and Inactive) either voted "no" or abstained. The defendants claim that there were 1,342 "Yes" votes and this was more than half the number of the 2,102 Active Members. The defendants acknowledge that abstentions by Active Members must be counted as "no" votes.
I was, and still am, troubled by what I thought were material misleading statements by the League. Attempting to achieve "accomplishments" without legal process is something I watch out for.
I recognize reasonable people may disagree about the merits of the lawsuit. I have never personally supported a lawsuit before this one. The court decisions will determine what approval is required to sell League real estate in the future.
Proposed and Missing Constitutional and
Bylaw Changes are Significant
I've read through the new proposed Constitution and listened to the September 30th Venable presentation twice.
I believe there are too many proposed changes for the Members to reasonably evaluate and discuss. I would like to see a list of what changes, if any, are required by NY non-profit law. Although Sal thinks "there aren't many things that we did change," I disagree. There are at least 6 changes that I feel are fairly significant. I feel any changes to the current Constitution and Bylaws should be done in smaller steps than what is currently proposed, and Members should have an opportunity to debate and consider each significant change. They are planning to have an up or down vote on all of the changes, thus I will vote for no changes.
Here are three of the proposed changes that I think are significant:
- The 3 officers (President and 2 Vice Presidents) will have 1-year terms but the other 12 elected Directors will be divided into four classes with 4-year terms. This is a significant change from the current 1-year term for all Board Members. It would take up to 4 years to replace all the Board members that you may currently disapprove of. After implementation and vote of the first 3 Officers and 3 Directors, there will be 3 years of lingering old Directors. They are saying they are doing this for "continuity" purposes. That argument can cut both ways. Sometimes you don't want continuity - you want to vote them all out.
- "Non-Voting" Members will be excluded from voting on real estate transactions. This provision needs to be debated by the Members. How difficult do the Members want to make it for the Board to sell off more real estate assets? The easier it is to sell off real estate assets, the less incentive the Board and Administration will have to get control of the growing operating losses.
- Three Directors on the Finance committee (President, Treasurer and one other Director) will oversee the League's assets, investments and expenditures. I believe this means less oversight of the $82M.
I would like to see one modification that is missing from the proposed changes: They have not proposed term limits for the President and 2 Vice Presidents. Sal thinks that having a 1-year term and annual vote for the President and the 2 Vice Presidents is "effectively" the same as term limits. I strongly disagree. After a couple of years, the incumbent President can build a powerful machine and it becomes harder to replace him or her. I believe it would be healthy to reset officers and directors every 3 or 4 years. The average term of the past League Presidents has been less than 3 years. I will not be voting "for" any proposed changes without all Officers and Directors being subject to 3 or 4 year term limits. A President that serves for10 years should be a thing of the past.