by Mike Andrew -
SGN Staff Writer
The saga of Verbena Health came one step closer to its end in a Seattle courtroom on December 7, 2011.
On that date Superior Court Judge Kimberley Prochnau granted summary judgment for Verbena - represented by its sole remaining board member, David Haack - and against former Verbena Executive Director Mo Malkin.
In May 2008, amid allegations that Malkin had embezzled an unspecified amount of money from the organization, Verbena Health - which evolved from the more limited Seattle Lesbian Cancer Project and provided health care programs to Seattle's Lesbian, Bi women, and Trans communities - collapsed.
According to court documents, Malkin's attorney, Charles Hamilton, did not contest the substantive embezzlement charges. Instead, he claimed to the court that Haack lacked standing to bring the suit, that the suit was improperly filed, and that Malkin had been improperly served.
Judge Prochnau ruled against Malkin on all points. Verbena was awarded $80,000, plus interest in the amount of $32,114.
For Haack, the award was vindication after almost four years of what he described as 'agony' in an SGN interview.
'Thank God,' he exclaimed, when asked how he felt. 'It's done. Three and a half years of my life. Done!'
For former Verbena employees, directors, clients, and community supporters the judgment might bring some sense of closure to an unhappy episode in the Seattle LGBT community's history.
According to Haack, who spoke with SGN about the case, Malkin was hired in 2006.
'There was an outside audit in 2006,' Haack noted, 'and it was released in the first quarter of 2007.'
The audit showed that its finances were in order when Malkin was hired, contrary to rumors spread at the time Verbena closed in 2008, Haack said.
Haack joined the Verbena board in November 2007. His first clue that something was wrong came in 'late February or early March 2008,' he told SGN.
'I got a phone call from Mo,' he remembered. 'Mo was crying, she said she didn't know what she was going to do. There was no money to meet payroll.'
Haack helped secure a loan of $12,500 from a Verbena supporter to cover the shortfall. At that time he asked about scheduling an audit of the organization's books, but Malkin told him it was not necessary, he said.
By the time of the March 2008 board meeting, several board officers had resigned. It was decided that each of the remaining members would have to take on an executive position.
Haack says he accepted the position of treasurer in spite of the fact that he had very little financial management experience.
'You don't want me to be the treasurer,' he grinned. 'You want me on development. You want me to help raise money.'
Because of his inexperience as a treasurer, Haack invited a friend - an accountant - to join the board and help with the financial management of the organization.
Haack says that after an initial examination of Verbena's books, his friend warned him, 'If I were you, I'd leave this organization immediately.'
In April 2008, Haack continued, Malkin cancelled a scheduled meeting with Verbena's accountant. Although she promised she would reschedule the meeting, she never did.
On May 7, Haack says, he got a call from Verbena's development director saying that the organization's checks were bouncing. Soon after that, he got a call from the supporter who loaned Verbena the $12,500 to cover payroll, informing him that she had not been repaid on schedule.
Malkin denied both reports, Haack said.
The jig is up
By May 10, Haack told SGN, the board discovered that its treasury was empty.
'I got a phone call from Chris [Hanssmann, the board president],' Haack recalled. 'He said, 'David, we don't have any money.'
'The board got together the same day,' Haack continued. 'Of the four members present, three left immediately.'
Haack elected to stay on to try to make some sense of the mess, and to retrieve any money he could. He does not criticize the board members who resigned.
'The members I was able to work with were absolutely phenomenal,' he maintained. 'There was just no way we could sustain the organization.'
According to court records, Malkin had written checks on Verbena's account to herself, to fictitious consulting agencies she owned, and to her partner. She also wrote checks to Caesar's Palace casino in Las Vegas.
On May 11, Malkin was put on administrative leave.
In all, Haack estimates that Verbena lost $500,000.
The consequences for anyone associated with Verbena fiscal collapse were devastating. On May 13, Verbena's entire staff was terminated.
'It cost $1,000 a day to keep the staff,' Haack noted. 'Later we found that no payroll taxes had been paid. And we had a $19,000 tax lien from the IRS.'
When Verbena closed, it defaulted on its rental agreement for the space it shared with Gay City at 511 E. Pike Street, putting an extra strain on Gay City's budget. Verbena was also the fiscal sponsor of several smaller LGBT organizations, none of which received money to which they were entitled.
Wrapping up outstanding employment issues took several months, Haack said. Then he and the remaining board members turned to finding Malkin and trying to recover Verbena's money.
'The biggest challenge was to find a law firm,' Haack said. Eventually Perkins Coie agreed to take the case pro bono.
A private investigator tracked Malkin to Chicago, and she was served with papers in 2010. When Verbena's attorneys deposed her, she pled the Fifth Amendment on every question, including routine questions about her address and occupation, court records say.
How did it happen?
Part of the missing money story seems to be a lack of oversight by Verbena's board. According to Haack, board members never suspected Malkin until it was too late.
'I don't think there was anyone who thought Mo would do anything like this,' he said. 'She appeared to be such an activist, she spoke so eloquently&.'
According to Haack, Malkin had also constructed an elaborate system to embezzle Verbena's funds.
'When we went to WaMu [where Verbena had its account], we found two other checking accounts we didn't know about,' Haack told SGN. 'We also found two credit cards we were unaware of. In the one account we had access to, we found $12,000 of misappropriated funds.'
Malkin had apparently concealed her theft by transferring funds back and forth from the secret accounts into the public one. Spreadsheets presented to Verbena's board always appeared to be in order, Haack maintained.
The board president was listed as a signer on the account, but his signature was not required on checks, and he rarely signed any, Haack said.
Haack also found that the man he was told was Verbena's accountant 'never did any accounting work whatsoever.'
While some of Verbena's financial practices almost seem to invite abuse, they are not uncommon in community organizations. Haack insists on revisiting Verbena's experience as a warning to other organizations.
'It's so important that we, as a community, figure out how this happened, so that it never happens again,' he told SGN.
'I understand people's reluctance to take it up again, but we owe these women who built this organization, and supported it with their time and money, and who depended on it.'
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