Financial records didn't tell of $332,400 deal, its accountants say


August 18, 1994|By James Bock | James Bock,Sun Staff Writer

In a review of the NAACP's 1993 financial statements, a Washington accounting firm has found that the civil rights group did not disclose a deal to pay a fired aide to Executive Director Benjamin F. Chavis Jr. up to $332,400.

"Our interim conclusion is that apparently management did not consider this transaction to be of significant magnitude that it should have been disclosed in the financial statements," said Robert Titus, a principal in the firm that audits the NAACP books.

"There's a lot to indicate that it should have been disclosed," Mr. Titus said.

However, the accountant said his firm, Mitchell, Titus & Co., would not complete its review until after the National Association for the Advancement of Colored People's board of directors meets Saturday at its Baltimore headquarters to discuss the settlement.

Dr. Chavis' job is on the line at the board meeting as a result of his agreement in November 1993 with Mary E. Stansel, the former aide who has accused him in a lawsuit of sexual discrimination, sexual harassment and wrongful discharge. Dr. Chavis denies the allegations.

The NAACP executive director signed the out-of-court settlement with Ms. Stansel without the knowledge of his board of directors or general counsel.

The deal had two parts: a series of payments to Ms. Stansel totaling $82,400, and a pledge to give her another $250,000 if Dr. Chavis failed to get her an offer of an $80,000-a-year job. Ms. Stansel contends that the NAACP reneged on paying the $250,000.

Mr. Titus said payments made to Ms. Stansel in 1993 -- $55,400, according to the settlement -- were included as expenditures "in the legal department category." He would not say specifically how the payments were classified.

"The legal department spends money. On the face of it, it didn't raise a red flag," he said.

What did raise a red flag -- because it appears nowhere in the 1993 financial statements -- was the possible $250,000 payment to Ms. Stansel, which normally would be listed as a contingent liability, the accountant said.

Mr. Titus said he hoped to sit down with Dr. Chavis, NAACP Counsel Dennis C. Hayes and others next week to see whether there was good reason not to list the $250,000.

"We're trying to get the real facts surrounding the transaction to see if that judgment was appropriate or not," he said. "You could make a case one way or another."

The NAACP's chief accountant, Harry Maragh, could not be reached for comment.

Mr. Titus said he was confident his firm had conducted a proper audit based on the documents made available by the NAACP.

If he concludes there was "material misstatement" about 1993, the statements would have to be revised, Mr. Titus said.

He said his firm has audited the NAACP's books for about a dozen years and a situation like this one "has not come up before."

The NAACP, which has an annual budget of $18 million, including its magazine The Crisis, faces a deficit of nearly $3 million.

Dr. Chavis says he inherited much of the shortfall from his predecessor, the Rev. Benjamin L. Hooks. But Dr. Hooks says he left the NAACP in the black.

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