Wednesday, December 28, 2016
Secrecy in LACBA: A Look Back, a Look Forward
By ROGER M. GRACE
Who said the following?
“All members of the [Los Angeles County Bar] Association, and not just the officers and trustees, clearly are entitled to know the sources and amounts of the Association’s income and how the Association’s funds are being used.”
□ 2015-16 LACBA President Paul Kiesel
□ Outgoing Chief Executive Officer Sally Suchil
□ 1978-79 LACBA President John D. Taylor
□ 2015-16 LACBA Treasurer Michael Lindsey
If you’ve been following the goings-on at LACBA, you know that those words surely were not uttered by Kiesel, Suchil, or Lindsey.
Will the current president, Margaret P. Stevens, embrace the words quoted above? I posed that question to her in an email last week but have no response.
As the year comes to an end, here follows a look at LACBA when, in relatively recent years, its governance functioned in sunshine, and more recently when it operated in shadows. I’ll point to reforms that have been instituted during the first six months of Stevens’ tenure, as well as those that haven’t been, and need to be.
The declaration that members have a right to know about LACBA’s finances is snatched from John Taylor’s May, 1979 “President’s Page” column in the Los Angeles Lawyer magazine. (Taylor’s recollections of restrictive admissions of lawyers to membership, which he was instrumental in ending, were recounted here last week. He is aligned with the Council of Sections, formed a year ago to protest policies under the Kiesel regime.)
In the same issue as Taylor’s column was the tentative 1980 budget, showing, in pie chart form, the anticipated amounts and sources of revenue, and where the funds would go.
Taylor says in the column that “[i]n July 1978, at the very beginning of this Association year, the officers made three major commitments concerning the financial management of the Los Angeles County Bar Association.” He sets forth those commitments, one of them being “to publish financial information in the Los Angeles Lawyer for the benefit of the members of the Association.”
The Pasadena probate practitioner advises:
“Comparative audited financial statements for the years 1976, 1977 and 1978 will be published in the June or July issue of the Los Angeles Lawyer. All of the officers of your Association also are committed to publishing the annual budgets and financial statements in the future.”
Those financial statements were published in the July issue.
There was, in those days, openness as to finances and operations.
(“Openness”—a term that goes back only to about 1942—is being supplanted by “transparency.” Such usage of “transparency,” in vogue for about five years now, puzzles me. The quest of those seeking disclosure is to see records and other documents; by contrast, “transparency” has long been understood to describe the nature of something that is seen through, like a windshield. While I realize that our language is in constant transition, this new definition of “transparency” strikes me as a queer one, bordering on being an antonym of the term as it has long been defined.)
What a contrast there is between the openness of LACBA under the leadership of Taylor, as well as many of his successors, and the secrecy that prevailed in recent years.
Section treasurers used to deliver reports at section executive committee meetings, telling how much was raised at events and how much was in the section’s kitty. That stopped in 2013, while Patricia Egan Daehnke—who is now Stevens’ law partner (in Daehnke Stevens LLP)—was president. Treasurers could no longer deliver reports because all LACBA revenues were being shoveled into one pot (in contravention of a bylaw—Art. X, Sec. 14—requiring separate accounts for each section) and the treasurers had no inkling as to any aspect of section finances.
During the “oddministration” (to use a term coined by Walter Winchell) of the 2015-16 president, Paul R. Kiesel, a trial lawyer with his own Beverly Hills law firm, financial information continued to be treated as a state secret.
Members’ requests for copies of the bylaws were spurned.
Section leaders would receive courtesy copies of the Board of Trustees’ agendas, but only a day before the meetings and stripped of the attachments, without which there was no real understanding of what was to be discussed.
Trustees did receive attachments but they, too, were provided the agendas only the day before the meeting, and had inadequate time to study the materials, some of which were bulky. But that didn’t matter. If the Executive Committee (the officers) had approved something, the trustees didn’t need to know what it was all about; their job was merely that of rubbing stamping the actions already taken. Or so was the thinking of Kiesel and his band of elitists.
The association’s financial statements were off bounds to all but the inner circle. Last year, former LACBA President John Carson of Lewis Roca Rothgerber, as chair of the Senior Lawyers Section, sought to obtain them from then-Treasurer, who was also senior vice president. Carson was rebuffed, being told that a genuine need had not been established.
It was an era of arrogance and concealment. The bylaws, the Corporations Code, and common concepts of fiduciary duty brazenly were defied.
There was an eagle-eyed trustee whose hue and cry, upon spotting an item on the agenda a few hours before the Oct. 28 meeting last year, resulted in section leaders banding together, precipitating formation of the Council of Sections. That person happens to be my wife, Jo-Ann.
The agenda did not arrive, by email, until after 5 p.m. the previous day, and that evening she was busy hosting, at our office, a meeting of the LACBA delegation (of which she was immediate past chair) to the Conference of California Bar Associations. Jo-Ann didn’t look over the Board of Trustees agenda until shortly after noon on the day of the 5:30 meeting. One item on the agenda was a proposed amendment to the bylaw mentioned above, Art. X, Sec. 14, stripping the sections of any say, whatsoever, over their own finances.
She sent out emails marked “URGENT,” informing members of the Executive Committee of the Senior Lawyers Section, which she represents, and others, of the proposal. The information was widely forwarded, resulting in considerable distress, with plans being made to present opposition at the meeting.
A bit before 4 p.m., Bradley S. Pauley of Horvitz & Levy, chair of the Appellate Courts Section, dispatched an email assuring leaders of 17 sections:
“I just spoke with [then-President-Elect] Margaret Stevens, who very graciously agreed to put this proposed Bylaw Amendment over to a future meeting in order to allow the Section Leaders to provide any comments.”
The following day, Stevens—apparently viewing a trustee’s disclosure of what’s on an agenda to be an act of treachery—made inquiries in an effort to ascertain the identity of the culprit.
There was, of course, no wrong in Jo-Ann conveying the information she did (and she asked no one to keep her identity confidential). The wrong was in LACBA seeking no input from the sections on a matter relating to the sections, and the association’s leadership undertaking to bring about a change in the bylaws in a clandestine manner.
The next board meeting took place on Nov. 18, 2015. Six section leaders showed up to speak against the measure and to seek a delay in any action on it to permit widespread consideration and comment on it. What they could not have anticipated was that Kiesel would seek to have them silenced.
Here was a twist. LACBA Central (as Pauley has termed the hierarchy) had generally sought to deny the general membership access to information. Now the president was seeking to deny trustees access to information from section leaders.
Kiesel has a propensity for ramrodding. Example: as president-elect, he showed up at the meeting of the Nominating Committee on March 31, 2015 with the list of persons he wanted for trustee and officer positions, declared, “You’re either with me or you’re against me,” and got the concurrence he sought.
The LACBA president chairs trustee meetings. It was Kiesel’s aim at that November meeting to push through the bylaw change. He proclaimed that the trustees were holding the meeting, so others should not be heard. This was despite the fact that the sections had a direct stake in the matter. Rendering his stance all the more audacious was that two of those who had shown up to protest were past presidents of the organization: Carson (1994-95) and Charles E. Michaels (2006-07).
Sentiment of the trustees was against denying an audience to the section leaders; they were heard; some of Kiesel’s statements were debunked by them; they won the postponement of action that they sought, with the sly Kiesel seeking to make it seem as if the delay had been his idea.
Consideration of the matter was postponed for 60 days. However, the Council of Sections, presided over by Carson, meanwhile came into existence; it has become clear that the sections will no longer put up with being bullied; and the proposal has appeared on no further agenda. On the other hand, sections’ separate accounts, required under Art. X, Sec. 14, have not been restored.
(Rules imposed in recent years require a 20 percent profit on each event a section stages, except MCLE programs, which are to realize a 25 percent gain. Most all of the sections want to retain some autonomy, including an ability to stage showcase events to attract—and retain—members, although such events might run in the red, just so the section makes an overall annual profit. If the sections, which are concerned with particular areas of practice—and which provide the primary inducement of lawyers to join LACBA—are caused to stagnate, as many are doing, the association’s increasing loss of membership is inevitable.)
Two days after the Nov. 15, 2015 board meeting, Kiesel officiated over a teleconference with section leaders in an effort to placate them. He pledged to provide information on section finances. Then-Treasurer Lindsey, of Steinbrecher & Span LLP, insisted that that each section should learn only of its own finances—declaring that it would be “tremendously damaging” otherwise—and Kiesel responded, “That’s fine,” to which Lindsey responded: “Super.”
Each LACBA member is surely entitled to see the full financial picture for the organization.
The information Kiesel pledged on section finances never came.
It was clear that Lindsey, who, progressing up the ladder, became the 2016 Nominating Committee’s choice for president-elect, had to be defeated. Through efforts of the Council of Sections, reform candidate Michael Meyer, who chairs the Los Angeles office of DLA Piper, prevailed by a vote of 1,273 to 448. The reform candidates for the other two officer positions won by similar margins, and the five candidates the council put up for trustee positions, along with the two Nominating Committee choices it backed, were the only ones to gain in excess of 1,000 votes, each gaining election.
Kiesel might be effective with juries, but lawyers are not so easily swayed. He apparently thought he could win over LACBA section leaders with what he perceives to be his charm. Meeting with section leaders, at various junctures during his presidency, Kiesel came across as disingenuous and patronizing.
Fancying himself as something akin to a headmaster, Kiesel convened on Dec. 17 of last year what he termed a “study hall.” It was designed to enlighten (or mislead?) section leaders as to LACBA finances.
Charts were flashed on a screen. The “pupils” attending were forbidden to take notes and were sworn to secrecy as to what they learned.
The representation was made that LACBA had 24,000 members. That was an inflated figure, as Stevens now acknowledges, saying was put forth based on perpetuating a figure used over the years which had become outmoded.
At the study hall, where the objective was to portray all as being hunky-dory with respect to finances, Kiesel represented that LACBA was just about breaking even. This was in contrast to what he had said at the Nov. 18 trustees’ meeting, where he sought to gain a blind acceptance of what LACBA was doing in regulating section activities by revealing that the association was losing about $1 million a year. Although that was accurate—as it later emerged, once bare-bones financials were exacted from LACBA—he backed down on that figure, under questioning by trustees, saying he really wasn’t sure. This was not an administration marked by candor.
With the resounding repudiation by LACBA’s voting membership of the way things were being run by Kiesel and Suchil, there was a mandate for change.
Since Stevens took office July 1, has secrecy diminished?
Yes—markedly. But not enough.
•As John Taylor observes in his 1979 column: “All members of the Association, and not just the officers and trustees, clearly are entitled to know the sources and amounts of the Association’s income and how the Association’s funds are being used.”
Financial statements are now available on the LACBA website providing even broader information than that supplied when Taylor was president. On the surface, the cause has been won.
The information supplied during Taylor’s tenure undoubtedly satisfied the need for information then existing. Those, however, were days when LACBA was not losing money. The proposed budget for 1980, published in the issue containing the column I’ve quoted from, was balanced; the next year, the proposed budget for 1981 projected a surplus of $11,500.
LACBA’s audited statement for the year ending Dec. 31, 2015, shows that assets at the start of the year amounted to $3,561,132; at the end of the year, they totaled $2,360.612—amounting to a loss of $1,266,335. Losses this year are expected to exceed $1 million.
Spending is exceeding income; the reserves are dwindling; there is a crisis.
The financial information that has been made available sets forth spending allocations in broad categories. Detailed information is lacking. Without it, sections and individuals are unable to analyze the figures, in any meaningful way, and put forth concrete suggestions for adjustments in spending.
•The association’s bylaws ought to be available on LACBA’s website.
Posting them was, initially, disfavored by this year’s Executive Committee—a body which, with frequency, acts under its emergency powers, without later seeking ratification by the trustees, and in the absence of anything resembling an emergency.
Bylaws did become available to LACBA members if they would contact General Counsel Clark Brown and make a request for them, which Brown was without discretion to deny. However, the availability of the bylaws and the process for obtaining them could not be ascertained by going to the LACBA website and typing “bylaws” in the search block. It was necessary to type in “governance documents.” (Of course! What else would you possibly input?) That would bring up the message :
“For members who have inquiries about corporate governance documents, please contact LACBA General Counsel at firstname.lastname@example.org or (213) 627-2727.”
A reform has occurred in this area. The bylaws are now—hallelujah!—online.
However, they are still not accessible from the main page by typing “bylaws” in the search block. If you type that, you’ll get links to section bylaws.
If you happen to go to the “About Us” page or the page with the roster of officers and Board of Trustees members, you’ll find, if you scroll to the bottom, these words: “Click here for Board of Trustees Reference Materials (Including meeting schedules, rosters, bylaws, articles of incorporation, policies, and other similar documents).”
Why would anyone who is not a trustee click to go to a page with “Trustee Reference Materials” when the reasonable expectation is that access would be restricted to trustees—as, indeed, it was up until a few weeks ago?
Now, every member does, in fact, have access by clicking through and inserting his or her user name and password. However, the availability of the bylaws and other materials on the website needs to be made conspicuous, rather than remaining a semi-secret.
•In the “old days,” a notice of a proposed bylaw change was published in LACBA’s monthly magazine and comment was sought. Kiesel, however, tried to slip through a bylaw change with no more notification than supplying an agenda to trustees barely 24 hours before a meeting.
Stevens is presently proposing a bylaw change, applicable only to the 2017 election of trustees and officers (on a trial basis), altering deadlines. There’s no sneakiness here. A large headline on the LACBA website heralds the existence of the proposal, to be voted on by trustees in a telephone conference next Tuesday, and comments are solicited.
Whether through enlightenment or coming to grips with the fact that secrecy in LACBA is just not going to continue to be tolerated, Stevens has changed in conduct, if not outlook, from the time she sought to ferret out what trustee had dared to divulge to outsiders an item on an agenda.
Agendas are being released about a week before the meetings. Section leaders are receiving courtesy copies which include attachments. Most significantly, agendas appear on the website, though without attachments.
A bylaw change is needed to mandate notice of proposed bylaw changes and the posting of agendas
LACBA has opened venetian blinds part way, allowing streaks of sunshine to enter a once darkened room. It has not yet provided full illumination.
It’s time for Stevens—the second half of whose term as president begins Sunday—to flick on the light switch.
Copyright 2016, Metropolitan News Company