Friday, March 30, 2018
Page 3
LACBA Forgives $4.5 Million in CJF’s Indebtedness
By a MetNews Staff Writer
The Los Angeles County Bar Association Board of Trustees has voted to forgive a debt of $4.5 million owed by the group’s charitable arm, Counsel for Justice, while at the same time making clear that the unit needs to be self-sufficient by the end of the calendar year because there will be no further subsidies.
There was a unanimous vote in favor of the proposal at Wednesday night’s monthly board meeting.
Counsel for Justice (“CFJ”) was formed in 2014 when the Los Angeles County Bar Association Foundation, an independent entity, merged with LACBA. Two years ago, when a reform movement forced the first contested elections for LACBA officers and trustees in 25 years, leaders of the movement questioned why the association, which was losing about $1 million a year and depleting its reserves, was subsidizing CFJ’s projects.
With the reformers now in control of the organization, the step taken Wednesday night is aimed at ending the subsidies while wiping out the existing debt.
Treasurer John Hartigan and Trustee Ed Summers, chair of the Audit Committee, in presenting the proposal, both insisted that the CFJ debt is not collectable. Hartigan, a partner in Morgan Lewis, posed the question of “How in the world,” in light of that fact, LACBA has been “been carrying it as an asset” on federal tax returns.
Fundraising Impeded
Summers, counsel for Avery Dennison Corporation, said the appearance of the debt has been a “tremendous” obstacle for CFJ personnel in their fundraising efforts and remarked that it is necessary to “get this monkey off their backs,” and that it was “high time that we do this.” He opined that members of the CFJ board need some breathing time “so they can figure out what they need to do to get self-sufficient.”
Hartigan questioned whether the $4.5 million figure is accurate. It is based largely on allocation of a portion of LACBA’s overhead costs to CFJ, which operates out of LACBA’s offices.
“The current allocations really aren’t right,” he declared.
As to what the figure ought to be set at, Hartigan said:
“We are not satisfied that we know what that number is.”
The resolution that was passed calls for an effort to arrive at an accurate allocation for future use.
$150,000 Figure
LACBA Chief Financial & Administrative Officer Bruce Berra said that if only incremental costs are considered (as opposed to fully allocated costs), should CFJ depart the premises, the association’s costs would diminish by only about $150,000 a year.
Trustee Sheri Bluebond, chief bankruptcy judge for the Central District of California, pointed out that if the debt is forgiven, “we can never resurrect it.” She suggested a “forbearance agreement,” under which LACBA would desist in its collection efforts for the present time.
LACBA President Michael E. Meyer, who heads the Los Angeles office of DLA Piper, said of the debt:
“We know it’s uncollectable. There’s no doubt about it.”
With questions persisting as to the need for forgiveness, he asked, rhetorically:
“What are we going to do? Get a judgment?
“Put them out on the street?”
Wording of Resolution
The resolution that was adopted says:
“RESOLVED, that this Association hereby forgives debt owing to it from its affiliate LACBA Counsel For Justice (“CFJ”) in the amount of $4,514,688, the entire amount owing as of December 31. 2017. effective as of said date; and be it FURTHER RESOLVED, that LACBA management shall in consultation with LACBA’s Audit and Finance Committees review and revise as necessary its internal accounting procedures to address recent organizational and personnel changes, and to appropriately reflect the allocation of internal resources; and be it
“FURTHER RESOLVED, that CFJ undertake renewed and increased efforts to achieve its economic self-sufficiency, and to eliminate by December 31, 2018 all financial support required from LACBA to sustain it.”
CJF is not customarily identified as an “affiliate” of LACBA. An Oct. 28, 2014 LACBA press release announced a “merger” of the foundation, and Projects Inc.—identified as “LACBA’s public service organization”—into CFJ.
No Confidentiality
Also emerging at Wednesday’s meeting was information that the Elections Committee—comprised of Meyer, President-Elect Brian Kabateck of Kabateck Brown Kellner LLP, and Immediate Past President Margaret Stevens of Daehnke Stevens LLP—has decided to eliminate the pledge of confidentiality on the part of members of the Nominating Committee that has existed in recent years.
Last year, a probe was launched to determine the source of information published in the MetNews that then-Immediate Past President Paul Kiesel had lobbied members of the Nominating Committee to choose Michael Lindsey as president-elect over Kabateck. Lindsey had been defeated by Meyer in the 2016 contest for president-elect.
On the basis of the supposed leak, Stevens, then president, refused to certify the election results after no opposition emerged to selections by the committee—a ministerial duty under the bylaws—and a new election was planned, leading to a writ proceeding.
In light of adverse rulings, Stevens eventually certified the results.
She did not participate in the vote to eliminate confidentiality this year in connection with Nominating Committee deliberations. Stevens has scantily participated in LACBA affairs since Meyer took over as president on July 1.
Copyright 2018, Metropolitan News Company