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AG cites some lapses, but clears Citi Center in $1.2m CEO bonus

Email|Print| Text size + By Geoff Edgers
Globe Staff / December 6, 2007

The attorney general's office announced yesterday that it has completed an inquiry into the Citi Performing Arts Center and will take no further action against the center, which faced criticism this year for its decision to pay president and chief executive officer Josiah A. Spaulding Jr. a $1.2 million bonus despite the nonprofit organization's financial struggles.

The attorney general's review concluded that while there were a few "weaknesses and lapses" in Citi Center procedures, the organization's establishment of Spaulding's compensation and its business relationships with board members and staff were "generally consistent with what we would expect of our public charities."

The announcement stated that where it found weaknesses in "certain procedures and documentation," the Citi Center had agreed to make changes. The report made clear that the review, conducted by David G. Spackman, chief of Attorney General Martha Coakley's public charities division, focused on legal questions, not whether the Citi Center's board made sound business judgments.

The Citi Center's board chairman, John William Poduska Sr., who has steadfastly supported Spaulding, said yesterday that the review by Coakley's office shows that the organization did its homework when deciding, in 2001, to approve a bonus program to retain Spaulding. The board was concerned that Spaulding could be lured away for a more profitable post at a private company.

"All you have to think about is what the alternative might have been if we had lost Joe," said Poduska.

Coakley's office began its inquiry in the fall after the Globe reported on the Citi Center's payment of Spaulding's bonus despite years of budget deficits and programming cuts, including a decision to save money by shortening the run of the organization's popular free production of Shakespeare on the Common. The Globe also reported on the center's employment of Spaulding's wife as its website manager and its decision to retain companies either owned or managed by center trustees. The Citi Center has paid Kortenhaus Communications for public-relations work and DLA Piper for legal services. Lynne Kortenhaus is a Citi Center trustee, as is Elliot Surkin, a managing partner at DLA Piper.

In a 10-page letter sent yesterday to the Citi Center, Spackman cleared the organization of any wrongdoing. He outlined several recommendations for procedural changes at the center, however, and said that the center had agreed to implement these changes. Spackman said the center should keep better records of minutes from meetings, set clear criteria for Spaulding's performance reviews, and conduct regular performance reviews of Spaulding's wife, Joyce Spinney, who is paid $37,953 to be the Citi Center's part-time webmaster. Spackman stated that in the event of a future bonus for Spaulding, the Citi Center's full board should be involved in determining it, and that when board members or their firms are retained by the center, the center's management should be more consistent in disclosing such arrangements with the attorney general's office.

Trent Stamp, president of Charity Navigator, a nonprofit watchdog group based in New Jersey, said he was not surprised by the results of the attorney general's review.

"What they're saying here is that they didn't break any laws even if they ran a large, high-profile nonprofit very poorly," said Stamp. "They were incompetent, but they weren't fraudulent."

But the review appeared to answer the concerns of one key legislator. State Senator Jack Hart of South Boston, whose sponsorship helped lead to $350,000 in state allocations to the Citi Center in each of the last two years, had said earlier this year that he was disturbed by the decision to pay Spaulding the bonus. Yesterday, Hart said the attorney general's review and his own recent meeting with Spaulding put him at ease.

"I'm satisfied moving forward, and I don't have any qualms about supporting his organization in the future," said Hart.

Poduska said yesterday that the Citi Center board remains pleased with Spaulding's performance. "We want him to stay for the long term," Poduska said.

As part of his inquiry, Spackman reviewed Citi Center records and interviewed key board members. He said the Citi Center could not locate minutes from the May 3, 2001, meeting at which it approved a five-year contract with Spaulding that included the $1.2 million retention bonus, which would accrue until it was to be paid out in 2006.

According to Spackman's report, Spaulding's base salary was set in that contract at $304,000 a year, but he received performance bonuses that, at times, brought his pay up to just over $500,000. Spackman noted that to receive those performance bonuses, Spaulding needed to demonstrate " 'high performance' in accordance with 'high performance objectives' " created by the compensation committee.

Spaulding is currently working without a contract, but he has agreed verbally to stay until the Citi Center has implemented its strategic plan, which calls in part for partnerships and mergers with other organizations, Poduska said. That could keep Spaulding in place through at least 2012, Poduska said.

Geoff Edgers can be reached at gedgers@globe.com

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