Tuesday, December 1, 2015
LACBA Sections Need More Information Than They’ve Been Promised
Association Must Be Compelled to Explain How, if It Has Severe Financial Woes, It Can Justify Continuing to Subsidize Public Interest Programs
By ROGER M. GRACE
So, the Los Angeles County Bar Association’s sections will receive financial information from “LACBA Central”—as Appellate Law Section Chair Bradley S. Pauley playfully terms the association’s hierarchy—but each section will receive information only relating to itself.
That was pledged Nov. 19 by LACBA President Paul L. Kiesel during a teleconference with section leaders.
It is some concession, at least. There has been, in recent years, a virtual blackout on financial information of any kind.
Members are expected to accept the broad statement that LACBA is eating into its reserves, with expenses each year exceeding revenues by $1 million. At least that’s the figure bandied by Kiesel, at one point, during the previous night’s Board of Trustees meeting…but he later said he didn’t know the precise figure, prompting a trustee to query why he didn’t.
The sections must receive approval for any events they wish to hold, setting forth how much vendors will charge, and then (generally after a considerable delay) LACBA Central dictates what the prices of the tickets are to be. There’s been no information provided, of late, as to how much revenue a given program has generated, as there was just a few years ago when I went on the Executive Committee of the Senior Lawyers Section. (I do need to disclose that my wife and I are members of that committee, and she’s a member of the LACBA Board of Trustees.)
LACBA Vice President and Treasurer Michael Lindsey did provide some barebones figures at the Nov. 18 meeting, attended by several section representatives (who were present in connection with a proposed bylaw change relating to section financing). He said that over the past year, revenues from the sections have amounted to $1,147,848; expenses in connection with section activities have been $1,569,865—amounting, so far, to a $422,017 loss; and with $1,313,492 in overhead allocated to the sections, the total loss has been $1,735,509.
But why are the overhead costs what they are?
Just how much is LACBA, headquartered on the 26th and 27th floors of an office building at Seventh and Bixel, paying in rent? Does it actually need two full floors of space? Could it find adequate space elswhere for less?
How much are the executive salaries? What benefits are being provided to upper echelon employees?
There is no pledge to provide that sort of information, and it is not apt to be wrested from whatever few possess it without considerable hellraising, if not litigation.
Anthony De Los Reyes, a member of the Senior Lawyers Section Executive Committee, speaking as an individual, well states the reasons why full financial information should be provided. He ascribes significance to “the notion that dues-paying members, as well as Section program planners, have no idea as to how their dues are being used.”
De Los Reyes, a former LACBA trustee, tells this column he discerns “a total lack of transparency which is incomprehensible and inconsistent with trustworthiness,” adding:
“In my opinion, LACBA members are stakeholders in the organization who are entitled to know how their dues are being spent, as with any corporation or partnership.”
An excellent question was raised at the trustees’ meeting by a spokesperson for the Antitrust Section, Brian McMahon, a past chair of it. He wanted to know whether revenues generated by sections’ programs are being diverted to the support of pro bono projects.
That warrants an answer, which McMahon didn’t receive.
The old Los Angeles County Bar Foundation, which was separate from the bar association, last year was morphed into the Counsel for Justice, which is now intertwined with LACBA Central. The projects that are supported are admirable. According to the LACBA website (as improvidently redesigned recently to accentuate powder blue, more appropriate to the décor of a baby boy’s room):
“Counsel for Justice supports the Los Angeles County Bar Association’s legal services projects. Each year, more than 18,000 people come to our projects for legal services because they have nowhere else to turn.”
Well and good, but how can LACBA justify its support of these projects in the current economic climate? Any person whose expenses grossly exceed his or her revenues and who makes donations to causes is a spendthrift, begging for bankruptcy or a conservatorship. The County Bar, an entity, is no less reckless in squandering its resources, no matter how worthy the beneficiary of its largesse nor the public relations value in lawyers being seen as good guys.
While LACBA’s financial statements are not posted on its website, those of the Counsel for Justice are. The statement for the period ending Dec. 31, 2014, shows a “Forgiveness of Debt from Los Angeles County Bar Association” amounting to $546,375. This is insanity. A person or entity that is losing money does not, cannot, rationally, forgive collectable debts.
Near the bottom of the “Notes to Financial Statement” is this:
“Counsel for Justice reimburses the [Los Angeles County Bar] Association for certain administrative expenses incurred by the Association on its behalf. For the year ended December 31, 2014, these administrative expenses amounted to $552,302, of which $546,375 was forgiven by the Association. In addition, as of December 31, 2014, Counsel for Justice owes the Association $2,301,061.
“The Association has represented that it will continue to support Counsel for Justice for the foreseeable future.”
Is a $2.3 million debt to LACBA destined to be forgiven by it when it is wailing over its annual losses? Or has it already been forgiven? It will be interesting to view the statement for the period ending Dec. 31, 2015.
The solution to LACBA’s financial woes is simple: 1.) do not further forgive existing indebtedness; 2.) sever Counsel for Justice from LACBA, enabling Counsel for Justice to confer such grants as it’s in a position to make on the basis of donations received, after payment of obligations and deduction of expenses.
Promotional materials on LACBA’s website relating to Consel for Justice, including click-throughs, would cost LACBA virtually nothing, and would promote the making of donations. Touting the group would constitute a public service. But during this long recession, subsidizing any part of the Counsel for Justice operations at the expense of serving its members’ needs, defies reason.
While it is manifest that any meaningful dialogue between LACBA Central and the sections requires a full disclosure of the association’s finances, that’s not what’s in the offing. Kiesel only pledged information to sections as to their own finances, and invited sections to tell him what information they want.
Pauley, a partner in Horvitz & Levy, sent a response setting forth, incisively, what the Appellate Law Section seeks…and he was not too shy to request information beyond that Kiesel vowed to provide. His communique says:
(1) For each section to assess its own profitability, it needs financial data for the past two to three years that shows the amount of revenue it has generated and the costs (both direct and indirect) attributed to the section. Each section needs an itemization for both revenue and costs and an associated dollar amount for each item. For example, on the revenue side, how much was generated from section dues and how much was earned from CLE program registrations? On the cost side, what is the value for each item of direct and indirect cost? (We are interested to view a breakdown of the indirect costs attributed to the sections, and the formula by which such costs are allocated.)
(2) In order to assess the profitability of all of the sections as a group, we would like financial data for the past two to three years that shows the amount of revenue generated by the sections as a whole and the costs (both direct and indirect) attributed to them. As with item (1) above, we would like to see a breakdown for each item included in both cost and revenue.
(3) In order to assess what portion of LACBA’s overall operating expenses have been allocated to the sections, we need financial data that shows how these expenses have been allotted among LACBA’s various sections, departments, and initiatives (e.g., LACBA’s headquarters operations, the Counsel for Justice, LACBA’s various legal services projects, and the Lawyer Referral Service). In other words, we need to know how the sections fit into LACBA’s overall financial picture, in terms of both cost and revenue.
“We don’t need to run a profit,” Kiesel said during the Nov. 19 conference, “but we need to break even.”
The purpose of the electronic meeting was for Kiesel to set forth proposed MCLE/Events Standards, the key component of which is pricing. Joined by LACBA President-Elect Margaret P. Stevens, and Senior Vice President and Treasurer Michael K. Lindsey, he pointed to slight changes from 2012 standards which were not distributed in advance of implementation.
Under the proposed standards, as under those now in effect, every MCLE program must make a 25 percent profit, and other events must show a 20 percent profit, unless an exception is applied for and granted.
An indignant Kirk D. Dillman, chair of the Litigation Section, protested, with reference to MCLE programs:
“I understand ‘break even.’ You’re not asking for ‘break even.’ You’re asking for 25 percent [mark-]up, What’s your rationale?”
“It really is ‘break even.’ The cost of the program doesn’t reflect the true cost of the organization to put that program on.”
No, it’s not a matter of breaking even. The proposed guidelines say that MCLE programs “must be priced such that gross revenue exceeds estimated total expenses, including direct and indirect costs, by a minimum of 25%” and other events “must be priced such that gross revenue exceeds estimated total expenses, including direct and indirect costs, by a minimum of 20%.”
If the direct costs of a non-MCLE dinner plus the indirect costs allocated to the event amounted to $80, LACBA would “break even” by charging $80. Contrary to Kiesel’s representation, that’s not the goal. Rather, LACBA would charge at least $100 to attend the dinner ($20 being 20 percent of the gross).
Thus, LACBA is turning section members who plan programs into fund-raisers for the organization.
“Diversity”—a cousin of “affirmative action”—is a goal of the proposed rules. Included is this provision:
“Diversity: Program planners should seek to reflect the diversity of LACBA’s membership in planning program speakers, moderators, panels, and attendees, including individuals of different races, colors, sexes, gender identities, religions, ages, abilities, sexual orientations, and points of view. Diversity should also be considered when selecting program topics.”
During the teleconference, Lindsey said:
“We …are expressly encouraging diversity on panels.
“The days when you could have three, old white males conducting a program are long gone.”
So, if the proposal goes into effect, there couldn’t be a program moderated by “old white male” John Van de Kamp, a former State Bar president and former state attorney general, on “Key Gubernatorial Prerogatives: Vetoes and Pardons,” with panelists, former governors and “old white males” George Deukmejian, Pete Wilson, and Gray Davis.
Going beyond the comment by “old white male” Lindsey, there are other implications.
I’m a member of the Senior Lawyers Section. Why, when what binds us together is old age, should the section be obliged to include persons of ages divergent from ours?
If persons of varying “abilities” must be included in programs, and if the Appellate Law Section had as a speaker Court of Appeal Presiding Justice Norman Epstein, commonly regarded as one of the state’s ablest jurists, would the section then be obliged to include one of the court’s least competent members? (There are various candidates for that distinction.)
If that section had three Court of Appeal presiding justices speak, would a proposed program be vetoed if the three persons it lined up were Frances Rothschild, Lee Edmon, and Tricia Bigelow?
The Criminal Law Section, I gather, could not hold a panel discussion featuring U.S. Attorney General Loretta E. Lynch, California Attorney General Kamala Harris and Los Angeles County District Attorney Jackie Lacey. No diversity.
The Enviromental Law Section has a program slated for Thursday on “The CEQA Guidelines: Proposed Amendments and the Potential Impact on Environmental Review.” Members of the Trusts & Estates Section on Dec. 10 will hear a “2015 Legislative Update.” Just how would such topics be re-shaped to reflect diversity?
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