Board clears manager in embezzlement, rescinds previous charges of belligerence

By Jack Durham
Press Editor

The McKinleyville Community Services District Board of Directors announced last week that its manager has been cleared of two allegations made against him that were never previously made public – that he was personally involved in embezzling district funds and involved in a collusion in connection with the alleged embezzlement.

The board also voted to drop the discipline/dismissal/release meeting notice issued last September and rescind allegations made against Marking involving alleged belligerence to the board.

Marking cleared 

The MCSD board met in closed session to discuss the issue at the beginning of the Wednesday, April 16, meeting after which board President John Corbett made an announcement. The announcement was difficult to hear, so Corbett repeated it during a break, saying “There were allegations that the general manager was personally involved in embezzling the coke, well the soft drink funds, and personally involved in collusion with (another employee). The board found those were not valid and therefore we’re referring personnel to the general manager.”

The board’s decision means that Manager Tom Marking can handle personnel issues with regard to the alleged embezzlement.

The announcement was the first time that it was disclosed that Marking was accused of embezzlement and collusion. According to Marking, those accusations against him were made in writing by former Business Manager Jim Harding. Harding denies that he made those allegations.

Former treasurer’s accusations

Last month former Business Manager and Treasurer Harding – who worked for the district for 11 years – said he was forced to retire after he suspected financial irregularities and his efforts to have the matter properly investigated were thwarted by Marking. Harding said Marking decided to conduct the investigation himself and wouldn’t provide any details of the investigation or share his findings with him. As the MCSD’s chief financial officer, Harding said he felt he had to speak out or he could be seen as being part of a cover-up.

In an interview last month, Harding made it clear that Marking was not the suspect in the alleged embezzlement. He did, however, say that it looked like a cover-up, as Marking told him to drop the matter. Harding said the embezzlement centered around money from soda machines at the McKinleyville Activity Center. Harding declined to name the suspected employee.

Marking has flatly denied the charges, saying that the investigation was properly conducted and Harding was kept in the loop.

‘A line of bull’

After Wednesday’s meeting, the board’ s announcement from its closed session was posted on the McKinleyville Press Blog. After comments from the public were posted on the blog critical of Marking, the manager responded with criticisms of Harding and his critics.

“You guys are a hoot,” Marking wrote. “You guess at everything but what is so obvious, that Harding has been feeding you a line of bull; but you are so very gullible and want so badly to believe all this drivel. Do you really expect Harding to admit that he has lied to you and done some really stupid and unprofessional things, like accuse the GM of embezzlement, fraud and collusion? Since you all know him so well, go ask him.”
“When it’s put in writing and signed with his signature, there is not much doubt. And go ask about the tens of thousands we have now had to spend because of his ego and vindictiveness,” Marking wrote. “We could have built a playground and finished the soccer fields with less than what this has cost. Go ask him why he has so much self loathing that he tried so desperately to tear down what we are trying so hard to build up for the community.”
Marking continued “Hey Durham, go ask Harding face to face if he ever made written accusations that accuse the GM of embezzlement and fraud. Just because he didn’t publish it with you doesn’t mean he didn’t do it. And ask him about Section 632 of the Penal Code and if has ever done something so sneaky and dishonest as that?”
Harding was contacted on Friday and asked whether it was true that he accused Marking of embezzlement and collusion in writing. “Not true,” Harding responded.

The alleged penal code violation referenced by Marking involves secretly recording a conversation without the other person’s knowledge. Harding declined to comment on the allegation.

On the McKinleyville Press Blog, Marking suggested that perhaps Harding was secretly working for someone to cause problems at the MCSD.

“Go ask some tough questions and ask him what his motives are? Who he is working with and why would he put his career at risk for such a stupid thing. And go ask about his response to the long letter sent to him about the investigation and where is his evidence of all this embezzlement and fraud… or has he finally figured out he is the one delusional,” Marking wrote.

When asked about his motives, Harding said he thought there was a cover-up and felt he had a fiduciary responsibility to let the public know about the financial irregularities.

When asked about Marking’s suggestion that he may have been working for someone, Harding responded “I have no idea what he’s talking about.”

Marking’s contract

Also at last week’s meeting, the MCSD board discussed Marking’s employment contract with the district. As of last week, the contract was still being reviewed by the MCSD’s attorney so the board was unable to take action on it.

However, the board did vote 3-2, with Directors Javan Reid and Jeff Dunk dissenting – on some of the terms of the contract.

The terms included the following language “The discipline/dismissal/release notice of Sept. 19, 2007, including accusations and charges are rescinded.”
Marking was accused of belligerence to the board, in part due to letters he sent to the board. In one letter, he accused Director Jeff Dunk of “arrogance” and “grandstanding” and wrote that “his entire manner is offensive.” In another letter, Marking accused former Director Ron Coffman of having a “lack of character and ethics.”
After the letter regarding Coffman, then-President Reid called for a closed session to discuss the alleged belligerence. That meeting was canceled after Marking announced his “intent to retire” effective May 1, 2008.

The dynamics on the board changed last November with the election of Helen Edwards, which meant Marking had three supporters on the board – Edwards, Bill Wennerholm and John Corbett. All three support Marking’s proposed contract.

Under the terms approved by the board, the manager’s annual salary of $108,600 would be increased by the same amount as received by his fellow district employees for their cost of living adjust this fiscal year. Marking would also get six months of his annual salary after he leaves the district.

The proposed terms included a stipulation that Marking’s contract would have a termination date of May 1, 2009, with no allowances made for renewal or extension. Wennerholm made a motion to remove the word “no,” which would allow for the board to renew Marking’s contract next year if it so chooses. Wennerholm’s motion was followed by the 3-2 vote.

BREAKING NEWS: Special meeting on ‘employee harassment/embezzlement investigation’ Saturday

A special closed session meeting of the MCSD Board of Directors has been called for 2 p.m. Saturday, March 29, at Azalea Hall, 1620 Pickett Road, McKinleyville.

Time will be provided at the beginning of the meeting for public comment. Then the board will convene behind closed doors, “per government section 54957.”

Here are the two closed session items exactly as they appear on the agenda:

• Personnel – Evaluation of performance in matters pertaining to employee harassment/embezzlement investigation. This is an information only item with no action to be taken.

• Contract negotiation with the general manager.

Then there’s an interesting bit of language near the end of the agenda under “Report out of closed session” that reads “No report shall be disclosed regarding employee release until all administrative remedies have been exhausted.”

It sounds like an employee may be released in relation to the alleged embezzlement. Otherwise, why would this language be included on the agenda?

The other noteworthy language on the agenda – faxed to the McKinleyville Press at exactly 4:20 p.m. today – is that it refers to “employee harassment.” I suspect this is a reference to the alleged “threats” that Manager Marking says former Business Manager Jim Harding made against an unnamed employee.

SODAGATE – Manager says allegations are false, without merit

By Jack Durham
Press Editor

The allegations made by the former business manager and treasurer of the McKinleyville Community Services District that an embezzlement investigation was not properly handled are false and without merit, according to Manager Tom Marking.

As first reported in last week’s McKinleyville Press, former Business Manager Jim Harding said he was forced to retire after Marking allegedly thwarted his efforts to see that a proper investigation took place. Marking initially declined to comment and referred all questions to MCSD Board President John Corbett.

But last week, Marking spoke about the allegations both during an interview and near the end of the Wednesday, March 19, board meeting.

‘Very unprofessional’

As the MCSD board met behind closed doors to discuss Marking’s employment contract, the general manager discussed the allegations while standing outside Azalea Hall.

“We’re very surprised and somewhat disappointed that Mr. Harding would make these allegations in the paper,” Marking said. “We felt that when the incident was brought to our attention, I, as the manager, acted timely.” Marking said he researched the alleged embezzlement, discussed it with the district’s auditor and brought the matter to the Board of Directors. The investigation was properly handled and Harding was kept aware of the details, according to Marking.

Referring to Harding, Marking said “We think he’s reacted in a very unprofessional manner and we think what he’s put in the paper is without merit and when we do respond to him we think we’re going to prove that by and large it’s false and without merit.”

Different accounts

Marking and Harding tell totally different accounts of how the matter was handled.

According to Harding, Marking said he would only conduct a solo investigation into the alleged embezzlement and refused to share his findings.

Harding said he asked that the matter be brought to the County Auditor or the Board of Directors for an investigation. He said he also suggested that the MCSD’s Audit Committee review the matter.

After the Feb. 20 board meeting, during which the matter was discussed in closed session, Harding said that Marking told him that the board didn’t want the auditor involved. When Harding pressed Marking for more information, he said none was forthcoming.

“He wouldn’t tell me what he did,” Harding said. “He showed me nothing – zero.”

Harding said that as the MCSD’s chief financial officer and treasurer he “had a right” to know what was going on. If he ignored the suspected embezzlement, he could be considered complicit in a cover-up, he said.

‘Sodagate’

At one point in last week’s meeting, board President John Corbett referred to the controversy as “Sodagate,” being that the financial irregularities center around two soda machines at the McKinleyville Activity Center. The MCSD stocks them with beverages. Profits from the machines go to the Parks and Recreation Department budget.

During an interview, Marking suggested that the issue revolved around missing cases of soda, which may have been stolen by kids using the facility.

But in an interview last week, Harding said it appeared that there was missing cash.

The machines, Harding said, were installed at the center in January 2004 – halfway through the fiscal year. Over an 18-month period, from January 2004 to July 2005, the machines generated a profit of about $1,000, Harding said. The next fiscal year, 2005-2006, the machines also made a profit of about $1,000, he said.

But something changed in fiscal year 2006-2007 when the machines were in the red $100, according to Harding. Harding, who oversaw the district’s $4 million budget for the past 11 years, said he first noticed the discrepancy after receiving an invoice for beverages last November and discovering a negative balance in the account for this fiscal year.

Harding said that one employee at the MCSD had keys to the machines and was responsible for emptying the money and bringing the cash to the MCSD office on Sutter Road. Harding has refused to name the suspected employee to the press, saying that doing so would be inappropriate. However, he’s made it clear that it’s not Marking.

$10,000 retainer

Harding said that after demanding a proper investigation, he returned to the office the next day and Marking barred him from entering his office. He was then placed in disciplinary suspension and, the next day, he received a letter from Marking stating that there were allegations he made threats against an unnamed employee. Harding, who denies the allegations, said he felt forced to retire and submitted his paperwork at about 2 p.m. on Tuesday, March 4.

That evening the board met in closed session and, according to President Corbett, agreed to have its auditor review the financial irregularities.

At last week’s meeting, the board was presented with a “Cash Disbursement Detail Report” on its consent calendar, which includes several items identified as “routine in nature.” They are typically approved with a single vote. Director Javan Reid requested that approval of the report be pulled from the consent calendar and questioned the very last expenditure in the document – a $10,000 payment to attorney Jay G. Putnam.

Marking said it was a retainer for an investigation into a “labor complaint.” Marking said that if he receives such a complaint, he is required my MCSD policy to have such an investigation. Given the timing of the complaint, it’s likely that the matter is related to the alleged threats made by Harding, although that couldn’t be confirmed.

The board wasn’t provided with any further details, and voted 3-2 – with Directors Reid and Jeff Dunk dissenting – to approve the expenditure.

Marking’s contract

The board was scheduled to meet in closed session at 6 p.m. at last week’s meeting to discuss Marking’s contract. Before doing so, the board invited public comment, most of which was critical of the general manager.

McKinleyville resident Pat Higgins, who was elected last year as the Fifth District representative to the Humboldt Bay Harbor, Recreation and Conservation District, testified that the allegations made by Harding, if true, were an egregious violation of the manager’s duties. “This is grounds for dismissal for Tom Marking,” Higgins said.

Others made similar comments, with resident Paul Coffman stating “There’s a dark cloud hanging over the MCSD and its board.”

Later, after  the board’s closed session, President Corbett announced that no decision was made and consideration of Marking’s contract would continue.

Corbett’s checklist

Near the end of Wednesday’s meeting, Marking’s contract was once again on the agenda. But being that the board had already announced that its consideration was continued, it became another opportunity to address Harding’s allegations.

President Corbett reiterated that because this is a personnel issue, he was “very limited” in what he could say. Rather than address the issue directly, he offered up what he referred to as a “personal checklist” for dealing with such a matter.

The first order of business, he said, is to make sure that public records regarding the matter are secured, something which he said he spent considerable time working on.

“I’ve gotten assurances that the records are safe and secured,” Corbett said.

He also said that because the auditor is involved – a decision he previously said was made by the board on March 4 hours after Harding retired – it “guarantees that there will be a public record.”
But, Corbett said, initially the board will have to exercise caution with the information. The board will need to review the results of the audit with an attorney to consider whether there are any criminal issues that need to be reported. The district’s civil liabilities will also need to be weighed, he said.

He stressed that there was a long, careful process that needs to be followed.

‘Quite sensational’

After Corbett’s comments, Marking addressed the audience regarding the allegations.

“That you for your comments. As for the article in the paper, it’s quite sensational. Some might think it’s informative, some might not,” Marking said. “Let me just say that there’s lots of conjecture about what I did or did not do and how fast I did or did not act.”

Marking said he was notified about the financial irregularities on Feb. 12 and “it only took me a few days to put this all together.” Marking said he came in on the weekend of Feb. 16 and Feb. 17 and conducted the investigation. On Presidents’ Day, Feb. 17, Marking said he met with Board President John Corbett and the district’s auditor to review his findings.

“It was not a board decision, it was my decision, to bring in the auditor,” Marking stated. Marking said he discussed the matter with the board during a closed session on Feb. 20 and then spoke to Harding on Friday, Feb. 22. Marking said Harding was in “total agreement” with how the process was being handled.

“I thought at the time that we were in total agreement,” Marking said.

“Apparently, over the weekend, he had changed his mind,” Marking said.

“Mr. Harding came in on the 27th an acted in a way such that it was unacceptable,” Marking said. Marking said he gave Harding a warning on that day, and then suspended him the next day.

“At no time was he ever told not to talk to anybody. All he was warned about was not to make accusatory statements,” Marking said.

In about a week to a week and a half, Harding will receive a letter from the district, Marking said. He encouraged the press to ask Harding to offer the letter for publication.

“Everything I’ve done is to protect the district, to protect the employees,” Marking.

He ended by asking residents for their patience as the district works to resolve the matter.