Senior Citizens of Davis President’s Asset-Grab Attempt Fails

davis-senior-centerBy E. Roberts Musser

If the reader will remember, the Board of the non-profit corporation Senior Citizens of Davis (SCD) was proposing radical changes in its bylaws.  The new proposed bylaws would have: a) given much more power to the President and the Board, taking it away from SCD members; b) removed independent oversight of SCD assets, investments, and financial transactions; and c) omitted all mention of the Davis Senior Center from its mission and as the beneficiary upon SCD dissolution.  Currently SCD should have approximately $560,000 in assets sitting in its accounts.

In my capacity as an attorney and as a consumer advocate, I was asked by SCD members to review the new proposed bylaws.  I gave my honest legal opinion the proposed changes were not in the best interests of SCD, nor its membership.  Some concerned SCD members took their complaints to the Davis Senior Citizens Commission.  It was there that SCD Board President John Gerlich was encouraged by Commissioners to slow down the process and obtain more member input before putting the matter to a vote.

Despite convening two town hall meetings and an official board meeting to explain his side of the matter, meetings that turned out to be extremely contentious, Mr. Gerlich steadfastly refused to change his position.  At each meeting he reiterated there was going to be an up or down vote on the new proposed bylaws on August 14, 2012.  This persistence was stubbornly adhered to in the face of mounting resistance – from swelling numbers of SCD members, from the city, and from a major SCD benefactor who had contributed hundreds of thousands of dollars to the organization.

At this point, SCD members made a written legal request to the SCD Board to inspect and copy the membership list, pursuant to California Corp. Code Section 6330(a)(1), for the purpose of encouraging SCD members to come to the August 14, 2012 meeting to vote on the proposed bylaws.  The request to copy the membership list was denied.  An SCD member was permitted to view a computer screen of the list, but not allowed to print out a copy.

Other ways were found to notify members, through a Freedom of Information Act request.  As a result, the Davis Senior Center was inundated with telephone calls asking about the proposed bylaw changes and the August 14, 2012 board meeting.  In consequence of all this uproar, a meeting was convened by the SCD Board on July 31, 2012, with SCD members, city representatives and the public in attendance.  The city made its position crystal clear by tendering copies of two scathing letters to the SCD Board, one from the city and one from SCD’s major donor, Mr. George Valente.

The letter written by city representative Chris Helwig emphatically declared: “On behalf of the City of Davis and the Senior Center Staff, I would like to take this opportunity to formally state our strong opposition to the proposed SCD bylaw changes scheduled to be voted on August 14, 2012.  We believe that, if approved, the proposed changes to the bylaws will fundamentally change the nature of the partnership that has existed between the two organizations for over 40 years.  Please place this letter before the entire Board and membership so that they will be informed of City Staff’s position.

The proposed bylaw changes, which omit all wording contained within the existing bylaws making specific references to SCD’s affiliation with the Davis Senior Center, would significantly change the relationship between SCD and the City’s Senior Center.  The proposed bylaws, both significantly reduce the historical connection with the Davis Senior Center, and greatly diminish the likelihood of ongoing, mutual benefits between the two organizations into the future. As with other nonprofit organizations in the City, the City and SCD have an established long standing partnership that has been implemented through agreements that recognize the contributions that each entity brings to the partnership.  If the proposed bylaw changes are approved as currently presented, at an absolute minimum, these agreements will certainly need to be reviewed and evaluated by the City, and the City Council will need to determine, in revised agreements, whether and how our two organizations will conduct business with each other in the future.

Second, the City of Davis Staff expects that the SCD Board will continue to work with its membership, the George and Lena Valente Foundation, and the City, to ensure that the existing assets of SCD are fully applied towards their original intent or purpose, and not be used for SCD activities that diverge from the purposes for which the funds were initially solicited.  The City Staff expects that SCD will not divert these funds from use at the Davis Senior Center…”

The major donor from SCD, George Valente, who has contributed more than $800,000 towards the Davis Senior Center, in his letter had much to say, the most pertinent parts reading as follows: “As a lifetime member of SCD, this letter shall serve as an official record of a “no” vote on the proposed changes to the SCD bylaws… 100% of the contributions from the George and Lena Valente Foundation accepted by SCD in the past were intended to directly support the ongoing programs, services and facilities of the Davis Senior Center.  These funds are not to be used for a broader purpose and are intended to be spent at the sole discretion of the Davis Senior Center Staff, in cooperation with the SCD membership.  If these funds will no longer be facilitated in this manner and with their original intent, I respectfully request that the remaining balance of funds be returned to the George and Lena Valente Foundation…Should the SCD Board of Directors choose not to proceed with any and all of the above requests, consideration of future contributions to SCD from the George and Lena Valente Foundation will cease immediately.”

Things then seemed to go from bad to worse.  Board President Gerlich made up an arbitrary rule pulled out of thin air that those members joining SCD after June 30, 2012 would not be eligible to vote on the proposed bylaws at the Aug. 14, 2012 meeting.  He didn’t dare take the chance a slew of people would suddenly join SCD in order to swell the number of detractors against the proposed bylaws.  He then decided the vote on August 14, 2012 would be taken by secret ballot, even though the current bylaws required a voice vote.  And he refused to send out either one of the letters critical of the proposed bylaws in the SCD voter packets, neither the letter from the city nor the one from Mr. Valente.  The packets would only contain his self-serving version of the issue.

The weekend prior to the vote, Mr. Gerlich created total chaos, by sending out the voter packets with information indicating an up or down vote was to take place on Aug 14, 2012.   Then shortly thereafter he turned around and sent out a post card saying the meeting was canceled.  Many members received both pieces of information the exact same day, causing complete confusion.  Mr. Gerlich also attempted to post a flyer in the Davis Senior Center, stating the August 14, 2012 meeting was canceled.  However, Senior Center Staff refused his request.   Instead upon legal advice, they posted an announcement the meeting would still be held as scheduled and anyone was welcome to attend.

The Davis Enterprise ran a story on the matter in their Sunday newspaper, two days before the Aug 14, 2012 meeting, explaining the meeting was still scheduled under the law. I carefully informed the reporter that interviewed me it was important for SCD members to understand a vote would take place on August 14, 2012. It was made clear Mr. Gerlich could not unilaterally decide to cancel such a meeting without the proper notice and board meeting, which had not taken place.

Part II

It was heartening to see approximately 250 SCD members in attendance at the August 14, 2012 special membership meeting to vote on the proposed bylaws.  The Board President John Gerlich was nowhere to be found during the entire proceeding.  He was in the building, ducking his head into the room for a brief second just before things got underway.  Then he was gone.  Apparently Mr. Gerlich did not care to face a “mob” of irate senior citizens.  He tried to later claim in the Davis Enterprise it was not an official SCD meeting, so indicated he would not recognize any vote taken as legitimate.

Board member and former Board President, Betty Iams, called the meeting to order.  Even though she appeared to be the only Board member there, it was a proper membership meeting according to the current bylaws.  This was because a quorum of the Board at a membership meeting is deemed to be a majority of those Board members present.  And only one Board member seemed to be in attendance at the time.  Ms. Iams then requested I come up to the podium and address everyone.

The audience was asked by me if they wanted a brief overview of the issues, or if the floor should be opened up for questions.  The consensus was for an explanation of what was going on.  Many seniors did not understand why there was so much fuss over the proposed bylaws.  Others were more in the know.  Thus SCD members were given a brief rundown on the changes being advocated for in the proposed bylaws.

As I mentioned in a previous article in the Davis Vanguard, the proposed bylaws would give the President and Board much more power, taking it away from members; remove independent oversight of assets, investments, and financial transactions; and omit mention of the Davis Senior Center in its mission statement as well as eliminate it as the beneficiary in case of dissolution.  The SCD principal place of business would no longer be at the Davis Senior Center, but in the new proposed bylaws would be anywhere within the city or county.

The reasons given for such drastic alterations were 1) that SCD needed to be more of a “business model”; and 2) greater “flexibility” was needed.  This rationale was not very convincing to the crowd, as they shook their heads in consternation.  None could understand why the Board would thumb their noses at: the Davis Senior Center Staff, the City, a major donor, and SCD members – just to push for changes in the bylaws that were not even in the best interest of the organization.

SCD members wanted to know how the bylaws even came to be in existence in the first place.  I explained the Board had approved the proposed changes – except the lone holdout of Board member Betty Iams.  Ms. Iams had doggedly tried to convince the rest of the Board what they were attempting to do was foolish and unwise, but the others on the Board refused to listen, approving the changes anyway.  They determined the proposed bylaws would be put to a vote by the membership, as required in the current bylaws.

I noted to the audience it was very telling no other board members, other than Ms. Iams, were now present for the actual vote.  Someone piped up that Board Vice President Wes Penny was standing in the back.  Caught off guard, I apologized and invited him to join Board member Betty Iams at the front of the room.  Mr. Penny took courage in his hands, and graciously acquiesced to my request, and came forward.

It must have been terribly embarrassing for the poor man.  In my opinion, he showed a lot of bravery to face such a hostile crowd.  Then came the piece de resistence of the entire morning.  As I spoke about the potential for the elimination of the independent position of Finance and Budget Director, a former SCD member, Ed Contreras, who had held that very position before, spoke out with vehemence.

He insisted there needed to be proper checks and balances over SCD finances.  He could not support the changes in the proposed bylaws.  This was someone who spoke with great authority, because he was a former auditor for the state.  His background gave him extreme credibility.  But the finest moment came when the vote was actually taken.  The audience was tired of questions and demanded the proposed bylaws be put to the test.

As the presiding Board member with the greatest rank, Board Vice President Wes Penny was asked by Board member Betty Iams to supervise taking the actual vote.  Mr. Penny asked all those in favor of the proposed bylaws to stand up.  There was not a single taker.  Subsequently, all those opposed to the proposed bylaws were asked to stand up.  As you can probably guess, every single person in the room rose from their seats, including those who came with canes and walkers.  It was a stunning spectacle, an awesome moment.

Mr. Penny had the grace to accept defeat, and conceded there was no point in counting the votes.  He declared the proposed bylaws unanimously and officially disapproved.  Nevertheless, Mr. Penny defended the Board, stating they all voted in good conscience.  However, he noted the SCD members had spoken, then indicated SCD would move forward.  He complemented members on the process that had taken place, which seemed an odd remark in the circumstances.  It must have been a difficult moment for him.

I then tendered a formal written legal request to the Board, to form a Bylaws Subcommittee, made up of 3 SCD members, 2 SCD Board members excluding the President and Vice President, a member of the Davis Senior Citizens Commission, a nonprofit expert, and 2 members of city staff.  The request also asked that a Nominating Committee for elections be formed, which was supposed to have been done in July.  It remains to be seen how receptive the Board will be to these requests and to its angered membership.

Lesson to be learned:  Never, ever underestimate the power of seniors who believe someone is trying to put something over on them!

Elaine Roberts Musser is an attorney who concentrates her efforts on elder law and aging issues, especially in regard to consumer affairs.  If you have a comment or particular question or topic you would like to see addressed in this column, please make your observations at the end of this article in the comment section.

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19 thoughts on “Senior Citizens of Davis President’s Asset-Grab Attempt Fails”

  1. greeneyes

    As someone who works as a consultant with a many small nonprofit organizations, I commend you for getting the word out on this attempted “power play” to undermine this organization and sticking to best practices for nonprofits. Job very well done!

  2. E Roberts Musser

    To greeneyes: Thanks – but it took a village, let me tell you. I had tons of help behind the scenes. SCD members stuffing envelopes, others talking to seniors as they came into the Senior Center, the Davis Enterprise article a few days before the vote, Senior Center staff, a couple of attorneys helping me pro bono, a UCD professor, and on and on. It took all of us pulling together to get this done. And the battle is far from over… it has only just begun… this is not a sprint, but a marathon…

  3. Steve Hayes

    Well done, Elaine! Turning the Titanic in any form is no easy task. As “greeneyes” has summarized, you have done it well in this case. I have enjoyed working with you on the Davis Senior Citizens Commission over the past four years, and know that the Commission will be in good hands in the future. Continued Best Wishes

  4. E Roberts Musser

    To Steve Hayes: One of the good things that came out of this is that seniors are offering to apply for vacancies on our commission! How about that! I have thoroughly enjoyed working w you – you have been an outstanding commissioner. Keep in touch…

  5. E Roberts Musser

    Statements made by Gerlich in the Enterprise:

    [quote]1. “The Board does not have now and has never had any intent to change the mission of the SCD by amending the bylaws. The principal purpose of SCD remains to provide support to the facilities, programs and activities of the Davis Senior Center.”
    2. “There’s a lot of money [$560,000] just sitting there, doing nothing.”
    3. As for removing the Senior Center from SCD’s purpose, Gerlich said it would not change the organization’s fundamental relationship with the center…
    4. “The whole thing is about control. It’s about the city wanting to control half a million dollars…(But) we have many members that do not use the Senior Center and we need to (cater to everyone in the organization).
    5. The vote many have been unanimous, but Gerlich said Tuesday after the meeting that he would not recognize it, as the gathering was not an official SCD meeting.[/quote]

  6. Michael Harrington

    The Board has a fiduciary duty to conduct a background check on anyone with signing authority on the nonprofit’s checking or financial accounts. There is a lot of money in those accounts, or should be.

    There should be an independent audit of the nonprofits’ financial accounts going back at least 5 years. I recommend Manny Carbahal, a local CPA.

    I think the Board should hold an emergency vote to immediately send letters to the various financial institutions telling them to freeze all accounts pending completion of those background investigations, at least the first portion of the audits, and further notice from the Board.

    I think the major donor needs to get personal counsel to evaluate the situation and give him direct unconflicted advice.

    The Board needs to immediately retain appropriate expert counsel to set up the emergency vote to freeze the accounts, set up the audit, and review the bylaws.

    Finally, given the misjudgments, attempt to remove financial controls, and take away member oversight and authority, I think the President, Gerlich, should immediately resign, and immediately remove his signing authority from all financial accounts.

  7. carhar

    The board in this case is made up of members hand picked by the President!
    The board may have a duty to do all the things you suggest Mr. Harrington but they will do what the President tells them to do, except for maybe one or two people. The President has more votes on his side.
    Finally your last suggestion is the one that should be followed – resign!

  8. E Roberts Musser

    [quote]I think the President, Gerlich, should immediately resign, and immediately remove his signing authority from all financial accounts.[/quote]

    He can be asked to resign, but that doesn’t mean he will…

  9. Michael Harrington

    If I were the Board, I would deal with this, fast. Members bear personal responsibility if something is amiss. The two Members I saw at the metting yesterday seemed like nice helpful people who are just trying to serve their community, but ignorant of the duties and issues. That’s why that Board needs to retain counsel ASAP, and protect themselves from potential issues with its officers and those checking accounts.

  10. Michael Harrington

    Elaine represents members, so they have a conflict of interest right now as to the current set of officers and Board Members. That’s why the Board needs its own counsel, NOW, and that attorney will work with Elaine to straight out and clean up the mess. Elaine could handle it, but there is a technical conflict right now.

    If this is not fixed right away, this could get really really ugly. There is a lot of money at stake, but more importantly, there is a danger that this mess will interfere with the quality of the SCD’s programs and services provided to its members. And that would be a sad thing indeed.

    I believe the Board has consulted with a local attorney who would be very apropriate to hire, but retention has to be completed before anything can be done.

  11. carhar

    If the Board does have to retian an attorney that is just so sad as the [b]SCD members[/b] will have to bear the financial burden of cleaning up all of this mess. To my knowledge the Board does carry insurance just for things like this but attorney fees are something else. Lets hope this mess can be straightened out as soon as possible without hurting to many people.

  12. JustSaying

    Elaine, thanks for your excellent efforts on this fiasco, in spite of all the other work pressing on you these days. To think this could have slid right through because of Mr. Gerlich’s misleading aggressiveness, his manipulation of the unsophisticated board members and his nearly successful attempt to gain member approval in a such an underhanded manner.

    In the same mail that we received the expensive mailer promoting the bylaw vote, we got his postcard (saying the meeting was cancelled) supposedly signed by “The Board.” Instead of reporting that he was responding to the members’ outrage by backing off, Mr. Gerlich’s postcard pronounced his intentions to charge ahead.

    Instead of responding to concerns of those who attended the meeting, Mr. Gerlich hid out, leaving it to two other board members to deal with the membership. Instead of accepting what appears to be a legally called, legally conducted meeting, Mr. Gerlich tells the [u]Enterprise[/u] that he “would not recognize” the unanimous vote.

    There’s a level of arrogance here that I’ve observed only once before in a non-profit organization’s actions, that being the Susan Komen scheme to cut off funding for Planned Parenthood’s breast cancer screening programs. And, there was an actual public policy issue behind this decision–as opposed to the patently selfish motive here to get control of money to spend on “catering to” folks who are not Senior Center members. Finally, those who whose actions were not supported by (or in the interests of) organization members were promptly forced to leave their posts.

    Mr. Gerlich’s other comments to the [i]Enterprise[/i] display such a disregard for the obvious truth (“leaving out the Senior Center)…would not change the organization’s fundamental relationship with the center….” and “lots of money just sitting there” (which he seeks to spend on other than Senior Center purposes).

    And, his claims that the new bylaws are modest, routine copies of those of similar groups simply is not true, at least in the matter of ceding so much unfettered financial control to the president.

    It’d be interesting to look back on how Mr. Gerlich rose to such a high-level position in the SCD. Did he strategize this effort over several years to gain complete control of the SCD’s funds? Or, did he just lose his way once his fellow seniors bestowed a little power on him?

    Now that he and some of the other board members have been so throughly discredited, will they quietly resign and allow Davis seniors and their organizations to move on? Or, will they insist on generating continuous confrontation either by forcing through a different version of changes or by just keeping the membership in an uneasy fear that something else bad might happen in the future?

    It’s odd that such an innocuous yet beneficial organization could so easily be forced into chaos. One hopes things will settle down quickly and allow all of the related groups to get back to their good efforts.

    The generosity of the George and Lena Valente Foundation has helped make the Davis Senior Center a model. Everyone needs to let the work continue, unimpeded by selfishness.

  13. E Roberts Musser

    [quote]Elaine… can you inform on how one can join the SCD?[/quote]

    To join SCD, just go to the Senior Center, and fill out an application form… It is my understanding both SCD membership and donations have decreased since Gerlich has been in office…

  14. E Roberts Musser

    [quote]It’d be interesting to look back on how Mr. Gerlich rose to such a high-level position in the SCD. Did he strategize this effort over several years to gain complete control of the SCD’s funds? Or, did he just lose his way once his fellow seniors bestowed a little power on him? [/quote]

    It is my understanding that the VP had some health problems, stepped down, and appointed Gerlich as President. Gerlich then was elected to his position, and appointed at least 2 Board members, perhaps 3. He created a complicated computerized bookkeeping system that he controls.

  15. carhar

    [quote]It is my understanding that the VP had some health problems, stepped down, and appointed Gerlich as President. Gerlich then was elected to his position, and appointed at least 2 Board members, perhaps 3. He created a complicated computerized bookkeeping system that he controls. [/quote]
    [b]Elaine[/b], Wes Penny the VP now,was the President in 2011, stepped down for health reasons and the VP at that time was Betty Iams. She became President to fill out the year. John Gerlich was voted to fill the VP and that is what he did till the end of 2011 when he was voted in as President.

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