Matt Potter 11:51 a.m., Sept. 20
Were UCAN Books Audited? Cooked?
As the mystery of Utility Consumers' Action Network's dissolution announcement is explicated, as now appears likely, the spotlight is almost certain to turn to accounting. Was it phony? Will UCAN's new forensic accounting firm unravel the puzzle, or obfuscate it? One key question revolves around yearly gross revenues. The California government code requires charitable contributions with gross revenues of $2 million or more must be audited by an independent certified public accountant. UCAN reports show gross revenues under $2 million from 2004 onward until an upward spike to almost $3 million for the year ended midyear 2010. But whistleblower David Peffer says in a letter to attorney Paul Dostart, hired to purportedly examine whistleblower charges, that UCAN chief operating officer Robert Ames "exerted significant pressure on [the new forensic auditing firm]...to manipulate the books by changing accounting methods and changing the dates on which account balances were recorded in order to get revenue under the $2 million threshold...I was witness to at least one such conversation between Mr. Ames and a representative [of the forensic accounting firm]." Also, UCAN bookkeeper Tony Pettina told Peffer's lawyer Mike Aguirre that on multiple occasions UCAN collected more than $2 million in a given year, according to Peffer.
A truly independent auditing firm would have flagged the six accounts under the misspelled Utility Comsumers Action Network. One of those accounts had more than $262,000. Even though there were six such accounts in different financial institutions, Dostart told Peffer that "UCAN's board has accepted management's explanation that the account name misspellings were inadvertent oversights" and the accounts have been reconciled. Dostart found a total of only $42,000 in the accounts; that was before Aguirre found the document showing that there had been $262,000 in one account alone; that document has been shown on this page above.
A truly independent auditing firm would also have cocked an eyebrow at the $1 million that steelmaker Nucor gave to UCAN for the making of a movie blasting China. UCAN agreed to pass the $1 million to perennial San Diego political candidate Peter Navarro, now a professor at UC-Irvine, who was to make the movie based on a book he co-authored.
A truly independent auditing firm would also have asked questions about the money (said to be $1 million) that UCAN invested in a hedge fund run by a close associate of Navarro. Losses have been estimated at around $100,000. Such an investment might have been legal, but was certainly not prudent for a nonprofit.
Shames did not tell the board about Nucor's agreement to pass $1 million through Nucor for Navarro's film. I have heard from a reliable source that the UCAN board has not passed on $400,000 of that $1 million, and Navarro has been threatening to sue. One board member said the original deal smelled of money laundering. It is not clear if Shames told the board of the hedge fund investment.