City Attorney Resigns in Wake of Check Controversy
The Greensboro city attorney Mujeeb Shah-Khan resigned Feb. 21, ending a tumultuous week in which his decision making was called into question.
The Greensboro City Council met in closed session at 4pm on Friday. After emerging from closed session without taking any action, a statement announcing Shah-Khan’s resignation was released about 6:30 pm. Shah-Khan joined the City of Greensboro in May 2012.
City council members objected this week to the revelation that a $750,000 loan payment was issued to the International Civil Rights Museum before a contract between the city and the museum was signed. Public records revealed an email chain wherein Shah-Khan advised the city manager that it was acceptable to issue the check without having a signed contract, despite objections from city finance staff. Shah-Khan will receive six-months pay as part of a severance package.
The council had met earlier in the week in response to the disclosure that the City of Greensboro distributed a loan to the International Civil Rights Center and Museum without a signed contract. The Greensboro City Council unanimously agreed to a new rule preventing the City from writing a check without a signed contract when one is required, with the exclusion of emergencies.
“I think this is the first time I’ve voted on this council to legislate common sense,” said Councilman Tony Wilkins.
Many people remain confused about what occurred regarding the ICRCM. Mayor Pro Tem Yvonne Johnson expressed her own concern with being in the dark.
“I think that we really need to talk about what really happened in this situation and how we got to be where we are,” Johnson said. “A lot of people say, ‘The Museum didn’t do this,’ and some people say, ‘Well, the City didn’t do this.’ We don’t even know what happened. We don’t know. We are speculating.”
A lot of information about the situation is out there and more information continues to come to light. Since this information can be overwhelming, YES! Weekly has analyzed this information and synthesized it for our readers. For those seeking more detailed information, the City of Greensboro has made all public records regarding this situation available at www.greensboro-nc. gov/CivilRightsMuseum.
TIMELINE OF EVENTS
The current situation began on Aug. 20, when the City Council discussed a resolution authorizing a $1.5 million grant to the ICRCM. The Council voted 6-3 to amend the resolution to provide for a forgivable loan instead of a grant. This change was made to strengthen the position of the City, according to former Mayor Robbie Perkins.
The resolution was tabled until the City Council meeting on Sept. 3. At this meeting, former City Manager Denise Turner Roth outlined the loan structure, loan payment terms, loan offset and requirements for the ICRCM. The City Council voted 6-3 to adopt the plan.
According to the agreement, the total loan amount is for $1.5 million. The agreement provided that the ICRCM receive $750,000 of that in 2013, to be paid 30 days after the City approved the Museum’s 2010 and 2011 audits.
The remainder of the loan is to be paid in installments of $500,000 and $250,000 in 2014 and 2015. These installments would be paid after July 1 of each year and within 30 days of receiving future audits.
In late October, Roth began pushing to process the first payment of $750,000. According to email records, on Oct. 24, 2013, City Attorney Mujeeb Shah-Khan told Roth that she could get payment out before a signed contract was in place if necessary.
“If you need to get the payment out before the contract is signed by them (I know they want the financial institutions involved to look at it) — that won’t be an issue,” Shah-Khan said to Roth. “They’ve met their obligations for the first payment.”
On Oct. 25, 2013 Finance Director Rick Lusk questioned whether a loan agreement had been signed.
“As long as everyone understands the risk of not having a signed agreement and circumventing the internal control system,” said Lusk.
“We understand the risks,” said Shah- Khan.
Communications Manager Donnie Turlington told YES! Weekly that Lusk was “referencing the procedural process that the City traditionally follows in routing checks. Traditionally, the City has a signed agreement/contract in place for the majority of its check requests.”
Also on Oct. 25, Roth informed City Council of her intentions to move forward with payment.
“The City has completed its review of the 2010 and 2011 audits submitted by the International Civil Rights center and Museum (ICRCM),” Roth said in an email to the City Council. “Our review has deemed the audits to be acceptable. All questions have been answered by the ICRCM and its financial representatives. Therefore, I am comfortable moving forward with the first loan installment of $750,000.”
By the end of the day, a check order was ready to go. The check order states, “Legal is currently working on the formal signed contract but has stated that the 1 st payment can be made without it.”
The check was signed on Oct. 25, 2013.
The posting date is Nov. 4, 2013.
The ICRCM was to provide an audit for 2012 by Jan. 1 of this year, or the City would be able to seek an immediate return of the full $750,000. The ICRCM issued this audit on Jan. 17 (though It appears the City may not have received the audit until later). According to John Swaine, the City’s contact at the Museum, Roth approved an extension for the ICRCM on this stipulation.
“The former City Manager… granted a request for an extension in December and all efforts are geared to a reasonable delivery,” Swaine said in a Feb. 4 email to City officials. “The consolidation of five legal entities is a very difficult and time consuming process. So, at this point, all of the field work has been completed and the audits are in the drafting phase with the related notes.”
At the Feb. 18 City Council meeting, City Manager Jim Westmoreland — who officially replaced Roth on Feb. 1 after Roth took a another job — confirmed that Roth gave the ICRCM an extension.
“I had a conversation with the former City Manager this weekend,” Westmoreland said. “She did tell me that she did have a conversation with the folks and representatives from the Civil Rights Museum. She did grant them an extension. She said it was a one month extension. She also expressed to me that she didn’t recall notifying Council about that extension.”
Earlier in the day, the City Council discussed the ICRCM’s loan agreement and sustainability plan in a workshop session. Discussion in that session led to the adoption of the new rule to never write checks without a signed contract in the City Council meeting later in the day.
“This council has approached this much differently than I think other councils would have in the past,” said Mayor Nancy Vaughn. “We have opted toward transparency and looking at this issue head-on. We didn’t do it in small group meetings, we gave out the public documents and we’re not hiding from this. We’re going to learn some lessons and we’re going to look at process failures within the city, as well, and figure out what we can do to prevent this from happening on another occasion with another group.”
According to the most recent data available, the ICRCM has spent $542,771 of the $750,000 installment, leaving $207,229 left in the restricted deposit account. Councilman Zack Matheny proposed freezing or firmly restricting those funds, but Shah- Khan advised that this should not be done.
“It is difficult for us to go into their accounts and place conditions on the money sitting in their accounts,” Shah-Khan said. “We would express serious concerns with that.”
On Feb. 19, Shah-Khan issued a statement regarding his role in pushing the installment forward. His statement follows:
“In my role as City Attorney, I provided counsel regarding the legal aspects of the issuance of the first payment to the International Civil Rights Center and Museum. I advised the former City Manager that the Museum had met the terms approved by City Council during its September 3, 2013, meeting and that the City was legally permitted to provide the payment. In this capacity, I was fulfilling my role of providing legal guidance to the former City Manager.”
FINANCIAL SITUATION AND SUSTAINABILITY OF THE ICRCM
According to audits, the ICRCM recorded losses for 2010, 2011 and 2012 in the amounts of $1,404,772, $1,545,082 and $11,560,013, respectively. In 2012, $8,759,006 of the loss was an impairment loss on the real property due to a difference between the book value and the fair value, which a third-party appraisal determined to be $13,500,000.
According to the 2012 audit, the Museum had $4,225,902 in loan debt and $23,921,651 in related entity debt. Of course, these numbers will have changed, but there is no 2013 audit available yet. Some numbers do seem to have gone down, though. For example, at the end of 2012, the ICRCM owed Carolina Bank $987,500. According to the Museum’s sustainability plan, the ICRCM currently owes Carolina Bank $886,636.
The sustainability plan for the ICRCM says that the Museum will be debt-free by the end of 2016. It also lays out 26 goals to help the organization advance and become stronger in the long-term.
There are also unique goals and expansion ideas in the sustainability plan. The Museum is pursuing a legislative initiative that which would result in U.S. Congress authorizing a commemorative coin to honor the Greensboro Four, with proceeds of coin sales going to the Museum. !