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Draft Situation Report:
Issues raised at the executive session of the CIL Board held on May 24, 1976.
1. General Specific fiscal management concerns. A motion to authorize the executive director to pay the first quarter 1976 withholding installment to the IRS (Due May 3) was tabled unanimously because of a general belief that the action as framed was improper and might create personal liability on the part of Board Members. A motion to authorize the chairperson to enter into a contract for a "survey audit" (n.t.e. $1000) managed by Larry Mazor of the firm Moss. Adams CPA with support from the finance committee was passed unanimously.
2. The prospects for a contract with DR designed to alleviate at least the short run fiscal crisis were to be explored in Sacramento by as many CIL Board members as could make it at Ed Roberts earliest convenience.
Events since May 24.
Directors Kaplan, Williams, Zukas, Owen, Mcewen, Galloway met with Roberts on May 26 and obtained a commitment in principal to negotiate a contract for not less than $60,000; Roberts to forward a letter of intent within a few days. A letter from Roberts arrived at the CIL on June 9. The letter, while not quite a formal "letter of intent," was accompanied by the firmest possible assurances (verbal) that the contract was proceeding normally.
Chairperson Kaplan approved the contract with Moss, Adams, CPA and Mr. Masor began work assisted by Williams, Cole, Lukas, Mcgregor, and Ms. Lester. After approximately 10 hours of work by this team, the survey was suspended because further inquiry would have disrupted the assistance being rendered by Mr. Keys, an accoutant associated with Jim Wigton, and might therefore have jeopardized the timely negotiation of the contract with DR. This suspension occurred at about 11:00 a.m., June 2.
Immediately following the decision to suspend there was a vigorous discussion between Cole and Draper observed by Zukas. Of the several issues involved the one appearing least amenable to resolution was Cole's assertion of a Board interest in the selection of the Comptroller.
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Moss, Adams, CPA subsequently intervened with the IRS to obtain a two-week extension on the first quarter payment of withholding taxes. This extension expires June 18.
An attempt to hold a special board meeting on June 4 failed for lack of a quorum. The finance and executive committees being present in full, it was decided to discuss the agenda for the June 10 special meeting.
Phil Newmark, when questioned later about the apparent conflict between his assertion of possible personal liability for board members and Article II, Section 7 of the by-laws which was inserted in the by-laws at the time the CIL was incorporated at the suggestion of attorneys then serving as legal advisors to the incorporators.
Phil urged that the Board obtain a researched, authoritative legal opinion from an attorney in private practice and recommended Peter Koppelman. Mr. Koppelman was contacted and estimated that the research and preparation costs would be around $250.
Newmark and Cole conferred by phone on the evening of June 9 (Newmark is in L.A.). Newmark urged that Koppelman be engaged immediately and that the question include an exact description of the action proposed and a review of the now negotiated contract with DR to ascertain whether there was a possibility of liability in this specific case. He said that he would contact Koppelman to clarify any communication from the CIL once arrangements had been completed.
It is understood that a copy of the contract negotiated with the local DR office will be available and subject to approval at the June 10 special meeting.