Thousands of Dollars Are Missing From former OB Town Council Accounts

Editordude: Steven Mihailovich has quickly become one of the best reporters to cover OB and Point Loma. Here’s his latest on the morphing of the OB Town Council into something different.

By Steven Mihailovich / Pt Loma – OB Weekly / May 25, 2024

The Ocean Beach Community Foundation, formerly known for nearly six decades as the Ocean Beach Town Council, reported preliminary findings of an ongoing audit that revealed thousands of dollars unaccounted for in the various bank accounts and credit cards held by the Town Council.

The audit was triggered by a financial scandal that emerged under former OBTC president Corey Bruins.

With board member Mandy Havlik having resigned recently, the remaining seven Community Foundation board members expressed their resolve at a meeting May 15 to continue the events the community has become accustomed to, such as the annual pancake breakfast, holiday parade, holiday food and toy drive and others, regardless of the name of the organization or its current troubles.

“Some things have happened, but we’re all here,” said board member Stephanie Kane. “We’re committed to making things better. Our time is dedicated to righting the ship and having these events to bring the community back.”

The board’s travails came to public light in January, after the board learned Bruins had become the sole authorized agent and signatory of the Town Council’s two primary bank accounts: the OBTC account as a tax-exempt 501(c)(4) nonprofit social organization and the account of the Ocean Beach Community Foundation, a charitable 501(c)(3) nonprofit that was acquired by OBTC in November 2020. Contributions from the public to a 501(c)(3) organization are tax-deductible.

Bruins was first elected to the OBTC board in 2015, then became its treasurer in 2017 and president in 2021. The organization said it discovered in May 2023 while applying for a grant that the Town Council hadn’t filed required forms with the U.S. Internal Revenue Service since 2017 and that its nonprofit status had been revoked in 2021.

Though such organizations are exempt from income taxation, they generally are required to file annual returns with the IRS of their income and expenses.

Penalties also were assessed for missed filings for 2021 and ’22. The group has been trying to get the IRS to drop those penalties, according to Community Foundation President Shelly Parks.

The San Diego Police Department’s Financial Crimes Unit was notified of the problems in January, and the board submitted a report of embezzlement in February, Parks said.

She said cash withdrawals were made on the OBTC checking account but added that no further documentation is available.

“We have paper records of them, but it’s just a signature,” she said. “Where did the money go? I don’t know.”

“We’re still awaiting an investigation to begin at this point,” Parks said. “The wheels of justice turn slowly, as they say, so we are being patient — as patient as we can.”

Bruins, who was ousted in January, has not been formally accused of a crime.

The board announced after the disclosure of the scandal that it had hired an independent certified public accountant to conduct a financial audit of both OBTC and OBCF. The audit goes back to 2017, the last year the IRS returns were filed and the year Bruins became treasurer, so it is far from complete.

The board also announced reforms including the formation of a finance committee, revisions of its bylaws and financial access available to all the board members.

OBTC originally opened its accounts with Union Bank, which was acquired by US Bank in December 2022.

Board member Anna Firicano said the OBTC checking account was $220 in arrears in July 2021 and since has been charged off and turned over to collections. OBTC’s Union Bank credit card had debt of $12,161 as of February 2022. Its US Bank credit card had debt of $120 in June 2023.

But because OBTC had regularly reported a healthy checking account during its meetings under Bruins, Parks was hard-pressed to reconcile the deficit.

“What was being reported to us and the community was some $21,000 in the OB Town Council account, and what was actually uncovered was negative $220,” she said.

Questions from the audience at the meeting were fast and furious.

Former Town Council board member Tracy Dezenzo, who resigned in the wake of Bruins’ dismissal, asked whether the credit card purchases were for legitimate OBTC expenses.

“There were hotels and car rentals out of state. I feel like that’s a very huge red flag,” Parks replied. “I don’t know of any OB Town Council things that happened out of state.”

The OBCF board, however, was careful not to make any accusations of wrongdoing.

“We can only share the facts today, so we’re not accusing anyone of anything,” Parks said. “We’re just sharing missing money, charged-off accounts. … We’re just sharing the facts that we know at this point. It will take some time and some police authority to figure out exactly where [the money] went.”

The independent audit has been complicated by the fact that the OBTC checking account was already closed when Union Bank was acquired by US Bank. Thus, the only available records are paper statements that have to be manually entered into spreadsheet software before a full picture can be obtained.

“We have to enter the date, the description and the amount into [the spreadsheet] before we can upload anything into [accounting software],” Parks said. “So … it is not going to be overnight that the audit is done and we have answers as to exactly where the money moved.”

The audit is further muddled by the use of various third-party financial software for transactions such as ticket sales and membership fees. Parks said a separate process is required before administrative access is granted for each software program, ranging from notarized letters to court subpoenas.

“There are certain accounts that we don’t have access to and need a court order,” she said. “We are waiting on Financial Crimes to be able to help us out with that. We’ve been in contact with somebody in the [San Diego County] district attorney’s office, but the police part has to happen first. An investigation has to happen before we get that.”

Other financial issues related to the scandal have arisen. While holiday events were being organized in December, some vendors refused to participate because of unpaid invoices from previous events, Parks said.

“When we went to put the [holiday] tree in, when we went to do some of the activities of the parade, we realized that [some] vendors wouldn’t work with us because we had debts from 2022,” she said. “So in 2023, we paid out three vendors we owed before.”

Denny Knox, executive director of the Ocean Beach MainStreet Association, which manages the OB Business Improvement District, estimated that nine vendors were owed money by OBTC.

“We heard from a lot of those vendors that they weren’t being paid by the Town Council,” Knox said. “We use some of the same vendors. The only reason we knew about it was that they cut off our credit because of the Town Council. We had to say, ‘Hey, we’re not related.’”

In light of the disclosures, the Town Council name is being permanently removed. Parks said OBCF’s lawyer and the CPA have advised against using it in any form.

Because of the Town Council issues, “there is $14,000 in debt right now,” Parks said. “A really bad credit score. If we tried to go get a bank account with that entity, it’s not going to happen.”

Former OBTC president Jim Musgrove recommended that the board get public input about whether to change the Community Foundation title.

“This … is part of the reason people are screaming for transparency,” Musgrove said. “The community has to have some input or you’re not going to get the community’s support and you’re not going to get the money to raise funds to do the things you need to do going forward.”

Parks responded that the current need for the stretched board is to limit any promises to those that can definitely be kept.

“We need to prioritize, and when we have to spend time manually entering hard-copy bank statements, [then] catching up and filing our taxes and dissolving the [OBTC], keeping things on track with the Community Foundation, keeping things on track with our events … starting fundraising and doing elections next month are on our top 10 list,” she said. “Maybe a name change is number 12 or 15. It’s there on the list and maybe something we’re going to get to, but there are only seven of us right now.”

Still, Parks said the board believes it is time to swing back into routine operations with the Community Foundation’s bank account balance at about $30,000. The pancake breakfast fundraiser is set for September, and the board is seeking candidates to fill its eight empty seats in its election June 26 to July 4.

“I want you guys to know that there are seven strong board members up here,” Parks said. “The seven of us are committed to righting the ship and ensuring that the activities of the OB past — the historical things like the parade, the Halloween decorating contest, the tree in the sand, the food and toy drive — all of those things that are part of the tradition of the fabric of OB are going to continue.”
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