This was posted by Starchild as a comment to an IPR thread re: the Updates on Libertarian National Committee, Bylaws and Platform Committee, Budget and Audit
For background, please see here .
December 6, 2013 at 12:11 am
As I would expect is normal for an organization with a number of full time employees, a large portion of the matters we deal with on an ongoing basis in our operations concern staff in one manner or another.
There are concerns that we shouldn’t discuss certain personnel matters publicly lest we expose ourselves to legal liability, and while given the out-of-control legal system in this society I believe these concerns sadly have merit in certain specific situations, it is clearly unrealistic and detrimental to the interests of our party for everything that relates to staff to be kept secret.
I have attempted to get advice from our general counsel and input from other LNC members about which specific types of information regarding staff need to be kept secret, but no one who knows or claims to know has volunteered this information to me.
In fact, LP chair Geoff Neale specifically instructed our in-house lawyer Gary Sinawski to ignore my questions. I believe this was exceeding his authority as chair, but even if I wanted to compel Gary to give me advice when he chooses not to do so, I don’t know of any way to do this short of a vote by the entire Libertarian National Committee.
In the meantime, Audit Committee chair Aaron Starr sent the following additional material to members of the LNC a couple days ago. Neither he nor anyone else including counsel has told us this needs to be kept secret that I am aware of, and the bulk of the Audit Committee report has been leaked already anyway along with numerous comments posted here by others, so I am going to go ahead and post this in the interests of disclosure and accountability ahead of our December 7-8 meeting in Dallas this weekend.
My fear is that some LNC members will seek to have the entire conversation about the Audit Committee report in secret without disclosing anything. If someone convinced me we face a great legal risk by having a public conversation on the matter I would be more willing to entertain that course of action, but my sense is that the secrecy is as much about avoiding embarrassment and maintaining insider exclusivity as anything else — and these do not strike me as good reasons not to let our members know what’s going on or have an opportunity to weigh in on the matter.
On Nov 30, 2013, at 3:31 PM, Aaron Starr wrote:
Members of the LNC and LNC General Counsel Gary Sinawski,
In his role as counsel for the LNC, I am including on this email LNC General Counsel Gary Sinawski so that he is aware of these issues and can offer his legal advice.
Since the time the Audit Committee submitted its Second Interim Report to the LNC, another detail has come to our attention that we did not notice in time to include in our second report.
Before the 2012 audit even began, Mr. Cloud disclosed to the LNC some information which seems to contradict his invoices, as well as the statements later made by Ms. Howell during the audit.
For background, the LNC’s Policy Manual discusses Conflict of Interest in Section 2.01.2. It reads as follows:
Each LNC Member and each Party officer or employee shall disclose to the LNC situations in which such person’s own economic or other interests, or duties to others, might conflict with the interests of the Party in the discharge of his/her duties. Any such disclosure shall be made at the earliest opportune moment, prior to the discharge of such duties and clearly set forth the details of the conflict of interest, in a written disclosure statement provided to the Secretary. No LNC Member, Party officer or employee shall: (a) transact business with the Party unless the transaction is fair and equitable to the Party; or (b) use information gained in the discharge of Party duties to the disadvantage of the Party.
The Secretary shall maintain a register of all declared potential conflicts of interest by LNC members. This register will be presented and distributed to all LNC members at each regular LNC meeting.
As a result of this policy, during the July 15, 2012 LNC meeting, time was allowed for each person to provide the Secretary with the appropriate disclosures. Below is a transcript of a portion of that meeting, and the matching audio is attached for your own verification of its accuracy.
LNC Secretary Ruth Bennett: Mr. Cloud?
Michael Cloud: I am the President of the Center for Small Government. We don’t have any financial relationship yet to the Libertarian Party, but I anticipate either lending or renting mailing lists so that we can cross mail – so that we can harvest some of our names into the Libertarian Party. That’s number one.
Number two is, although I am not on the board of the Advocates for Self Government, I’ve had a very, very close relationship, long time, with the people running the organization. And I believe that Advocates has a relationship with the LP with the World’s Smallest Political Quiz. I don’t know if there’s any monies involved. I needed to put that on the table.
And third is, I expect to be vendor to the Libertarian Party for fundraising. And in order to alleve (sic) any potential conflicts of interest, I’m charging under market rates for the fundraising I will do – under what the normal pay is for those, so that the question simply doesn’t arise whether or not you’re getting value for your dollar.
Geoff Neale: Mr. Lark, you have a question?
Dr. James Lark: Yes, please excuse my incredible ignorance. In terms of providing below market rates, is there any possible FEC question? You are a member of this board. I would assume that there probably isn’t a problem, but if you are in some sort of vendor capacity, is there a problem if you are providing services to the LNC at below market rates? You may want to just look into that and see if there is some sort of implication by virtue of federal law.
Michael Cloud: Well then, let me rephrase is that I am providing services at WalMart rates, rather than Neiman Marcus, for our fundraising.
What we want to bring to your attention is that Mr. Cloud’s disclosure in July of 2012 indicates that at that point in time he “expect[ed] to be” a vendor. Expecting to be something is a hope for a future situation that is not yet true. Mr. Cloud did not say he was at that time a vendor who had already reached an agreement with the party on payment terms and was already performing services under that agreement. One could reasonably infer from his statement that he had not yet performed paid work.
However, Mr. Cloud’s invoices make clear that he charged for work done prior to July 15th, 2012 at which time even he apparently did not yet consider himself to be a vendor.
His first two (summary, not detailed) invoices amounting to $33,500 were not presented and paid until October 2012, and those invoices state that they are for work performed from May 15, 2012 through October 31, 2012. No details of the work performed were provided on those first two invoices. The latest long-after-the-fact reconstructed invoice created to support his work shows that he billed $7,429.70 in gross fees and commissions (before discounting the amount to the $7,311.85 billed) for work performed from May 18 – July 15, 2012.
Contrast Mr. Cloud’s July 15, 2012 statement with Ms. Howell’s written statement to Chairman Neale on August 13, 2013 during the audit:
In December of 2011, then-Chair Mark Hinkle and LP Convention Chair Ruth Bennett asked Michael Cloud to do the marketing for the 2012 national convention, despite the fact there was no budget allocated for marketing it. Michael obliged and also refused to be paid for this work. He worked voluntarily for LP HQ from December through early May of 2012. Most of his help involved writing fundraising letters/registration appeals for the convention with the aim to make it profitable. He also reviewed the fund-raising letter I wrote in Jan-Feb and came up with the teaser for the envelope, “The Ron Paul Effect.” He also reviewed and offered edits for a few other pieces we wrote such as blogs and LP News. I didn’t keep track of the specific pieces he helped with on a volunteer basis during this time.
Shortly after the convention, we agreed to his doing paid work for headquarters and to terms of payment. He did this work for the period between mid-May and end of 2012. The terms were:
Fundraising letters: 15% of gross after subtracting $1000, plus $1000 flat fee.
Press releases: $500
LP News issues – review and edits: $500 per issue
Email fundraisers: 10% of gross online donations (not including membership/renewals).
Ms. Howell’s statement above asserts that he only worked as a volunteer through early May of 2012, but shortly after the convention in May, “we agreed to his doing paid work for headquarters and to terms of payment. He did this work for the period between mid-May and end of 2012.”
Ms. Howell indicated that Mr. Cloud already was a vendor, with agreed upon terms, already performing the contracted work well before July 15, 2012.
These conflicting statements cannot both be true. It isn’t likely that in July 2012 Mr. Cloud didn’t know he was already a vendor, had already agreed to terms, and had already performed work for which he was owed. Did Mr. Cloud misinform the LNC about his status at that time, or else was he not yet a vendor, the undocumented vendor agreement came after July 15, 2012, and he then back-billed for work performed before he became a vendor?
Because there was no written contract for this work, the Audit Committee is unable to determine which of these conflicting timelines is accurate. We are unable to determine when Mr. Cloud ceased doing volunteer work and when he became a vendor to whom payment was due. If his vendor agreement came about after July 15, 2012, then some of the items on the reconstructed detailed invoices would not have been owed to him, as they predated the vendor relationship.
At this time we would like to remind you of something we did note in our Second Interim report. On page 7 of that document we noted that the most-recently-reconstructed invoice that was produced on September 2, 2013: “included items Mr. Cloud had previously agreed to do for free before he became a paid vendor. These were related to promotion for the 2012 national convention, and the new invoice suggests he was owed for these under the terms and payment rates of his post-convention vendor agreement, but suggests that Mr. Cloud simply chose not to bill for them.”
On that invoice, Mr. Cloud backdated his payment terms to include $8,250 worth of work (eleven pieces at $750 each) he had previously agreed to do for free between February 14, 2012 and April 30, 2012, even though Ms. Howell’s statement was that “he worked voluntarily for LP HQ from December through early May of 2012,” so it is not unrealistic to question whether he again chose to bill for work between May 15 and July 15, even if it pre-dated his agreement to become a vendor.
Based on Mr. Cloud’s statement indicating that he was not yet a vendor as of July 15, 2012, we are amending section 1.10 of our Second Interim report to include the bracketed, underlined language below.
1.10 CALCULATION OF COST PAID PER WORD (BOTH AUTHORED AND/OR CO-AUTHORED)
Leaving aside for the moment that the Audit Committee cannot substantiate the dollars raised by Mr. Cloud through email fundraising, it is claimed that $216,106 was raised from all of his writing efforts based on our count of 22,488 words being written, which supports the payment to Michael of $39,466.50 in gross fees and commissions (before discounting the amount to the $38,800 billed). [If one were to characterize the time prior to July 15, 2012 as volunteer work, then $172,005 was raised (before printing, mailing and other fundraising costs) based on 18,884 words written for $32,036.80 in gross fees and commissions billed by Mr. Cloud. The actual bills and payments amounted to $38,800.]
However, of the total revenues generated, $76,867 (over 1/3) was from work that cannot be substantiated in the emails staff provided to us. If you review the chart provided in the Exhibits you’ll find that there are 11 items for which no documentation was provided to support work the LNC paid for. There is no substantiation for those 4,589 words written, no substantiation that three issues of LP News were edited and therefore no substantiation that $13,252.85 in gross fees and commissions (before discounts) were earned by Mr. Cloud. [If one were to characterize the time prior to July 15, 2012 as volunteer work, then $45,096 (over ¼) of the revenues cannot be substantiated. There are 6 items for which no documentation was provided. There is no substantiation for 2,434 words written, no substantiation for two issues of LP News edited and therefore no substantiation for $8,522.65 in gross fees and commissions earned out of the $32,036.80 in fees claimed as earned by Mr. Cloud subsequent to July 15. The actual bills and payments amounted to $38,800.]
Though the Audit Committee’s task does not include making judgments about how much a vendor’s work is worth, we will pass along to the LNC some additional data for your independent evaluations. Of the roughly $26,000 in fees the Audit Committee can substantiate, the Word document properties show around 3,900 minutes of time that these documents were open. We can’t be sure how much time Mr. Cloud spent working on these. (One can easily imagine that a person will often walk away from a document with it open on his computer while working on something else. One can also imagine that someone might spend some time not working directly on a document because there is thinking that goes on before writing commences. And there is work that is done after completing the document.) Using this amount of time as the best available reasonable gauge of the amount of work done, results in a rate of pay of approximately $400 per hour. [If one were to characterize the time prior to July 15, 2012 as volunteer work, then of the roughly $23,500 in fees that we can substantiate, the Word document properties show around 2,800 minutes of time. As such, the recalculated rate of pay exceeds $500 per hour.]
The Audit Committee requests that the National Committee answer the following questions at its upcoming December 7-8 meeting in Dallas:
· Given that Mr. Cloud indicated that he was not yet a vendor as of July 15, 2012, as of what date does the Libertarian National Committee believe that Mr. Cloud ceased being a volunteer and became a vendor?
· According to the Bureau of Labor Statistics (http://www.bls.gov/ooh/media-and-communication/writers-and-authors.htm), the median annual wage of writers and authors was $55,420 in May 2010 (or $26.64 per hour). Freelance copywriters tend to earn more to cover office costs, self-employment taxes and other costs. According to the 2012 Writer’s Market, a freelance advertising copywriter charges between $35 and $150 per hour. Depending on when work as a vendor began, the Audit Committee can document Mr. Cloud working anywhere from 46 to 65 hours. Given the policy that no National Committee member shall “transact business with the Party unless the transaction is fair and equitable to the Party” and Mr. Cloud’s commitment to “providing services at WalMart rates, rather than Neiman Marcus” rates for his copywriting skills, what portion of the $38,800 paid to Mr. Cloud does the Libertarian National Committee consider to be a fair and equitable amount of compensation?
Aaron Starr, Chairman
Libertarian Party Audit Committee
It appears we can no longer post photos and audio and video links in the IPR comments under this new format (I presume this has been discussed and explained elsewhere, but since I haven’t mentioned it previously, let me just say for the record that I vastly preferred the former look and feel of IPR before the change a couple months ago!). So you’ll have to take my word for it, for the time being, that the audio file of the July 15, 2012 LNC meeting that Aaron Starr attached to the message above contained a recording of a conversation which I believe to be accurately reflected by the transcript above, and which accords with my memory of what was said at that meeting.
Since we will be discussing the Audit Committee report this weekend, I’m interested in hearing from party members how you feel this situation should be handled. Especially if you are someone who does not post often, or has not posted previously on this topic.
Love & Liberty,
((( starchild )))
At-Large Representative, Libertarian National Committee