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State audit questions expenditures at California Avocado Commission

by Tim Linden | January 15, 2009
The California Department of Food & Agriculture has turned audit information regarding California Avocado Commission staff expenditures over to the state's Department of Justice, calling more than $1.5 million in expenditures over a three-year period "excessive," noting that some "may be deemed personal."

The audit, which covered the period from July 2005 through June 2008, which was shortly after longtime CAC President Mark Affleck abruptly resigned, detailed the expenditures of "Employee A" and 17 other employees who were identified by letters of the alphabet that did not necessarily correspond to the first letter of their name. However, avocado grower and current CAC Chairman Rick Shade of Shade Farm Management did confirm that Employee A is Mr. Affleck. He added that the other employees were not identified by the CDFA audit and he declined to speculate as to their identities.

Mr. Shade said that "99.89 percent of the questionable" or improper spending of CAC money was done by the former commission president or by other employees "at the behest and benefit of Mark Affleck." He continued, "I am not sorry that the auditors found inappropriate spending. I am sorry that there was something to find."

Mr. Affleck responded to attempts to reach him with a prepared statement through a public relations agency. "For the past several weeks, my attorney has been negotiating a final agreement with the California Avocado Commission that would resolve all issues to its satisfaction. Most of the matters raised in the audit are issues over which reasonable people can disagree. However, to bring this matter to conclusion, I have offered to accept certain expenses and pay for them personally."

In a written response for the media from the commission answering some frequently asked questions, it was revealed that CAC "believe[s] a final tally will show that approximately $100,000 was used for personal use by a former employee. Some of that has already been recovered and further reimbursement is currently being sought."

The audit details "excessive" spending by staff at hotels, restaurants, clothing stores and on luncheon meals bought for staff at the CAC headquarters on a regular basis. Senior management received other perks including large car and gas allowances, gym memberships and nutrition supplements as part of a wellness program. In addition, Employee A (Mr. Affleck) charged the commission for the remodeling and stocking of his garage as a home office, which included a plasma television, satellite radio, Bose headphones, an iPod and a vacuum cleaner. When Mr. Affleck left the commission last May, he did write three separate checks in that general time period totaling almost $30,000 to cover the cost of personal expenditures on his company credit card, as well as some of the equipment in his home office that he kept, and a $10,000 cash benefit that he received to purchase a car.

Noting this reimbursement by Employee A, the CDFA audit recommended that the commission further negotiate with this former employee for additional funds. In fact, CDFA recommended that CAC examine expenditures by all other employees and ask for reimbursements where appropriate.

In the CAC's response to CDFA, the commission indicated that very few of the dollars identified by the auditors as potentially inappropriate were in reality inappropriate. "Of the $1.5 million that they have questioned, there is absolutely no question on about $1.2 million of it," said Mr. Shade. "They were ordinary business expenses."

In those instances, he said that employees used their company credit cards for hotels, meals, airfares and other expenditures that were properly spent while conducting CAC business at conventions and other meetings or business trips. Speaking of current employees, Mr. Shade said that in the few instances where personal use of the company credit card was found, the employees have since reimbursed the commission for those expenditures. In addition, new rules have been established eliminating the use of these credit cards.

The CDFA auditors also took the CAC and its staff to task for holding meetings and conferences at expensive resorts such as the Ritz Carlton and other five-star properties. Expenditures for meals and hotel rooms at these resorts were well beyond the state allowance. In fact, the report indicated that these expenditures were only deemed excessive if they were more than three times greater than the top amount allowed for regular state employees. Specifically, the excessive hotel room expenditures were only noted when they exceeded $750 per night, which is three times the top state employee allowance of $250 per night.

Mr. Shade defended the use of top resort hotels for CAC's nutrition conferences. He said that many years ago, the avocado had a reputation as being a high-calorie, high-fat food. CAC attempted to combat this notion through these nutrition conferences, which were attended by renowned experts in the field. Instead of paying these experts a hefty per diem or their regular speaking fees, CAC held the event at a top-line resort and paid all expenses to attract the top talent. "They wouldn't have come if we were holding the event at the Holiday Inn," he said.

Mr. Shade did say that no nutrition conference was scheduled in 2007-08, nor was one budgeted for this current fiscal year.

The CDFA audit also questioned the purchasing of season tickets to Major League Baseball and pro hockey games by CAC. The audit showed that an inordinate amount of tickets were used by Employee A and other staff members and were not used to advance the goals of the commission. In its response, the commission did defend the practice of purchasing these tickets, stating that the sporting-event tickets were designed to be used by retailers that promote California avocados for the benefit of the industry. Nonetheless, CDFA auditors recommended that this practice be discontinued. In discussing this use of funds, the CDFA reiterated a theme that surfaced throughout the audit: Employee benefits beyond accepted thresholds must be reported to taxing authorities.

Mr. Shade, who became chairman of the commission in November 2007, said that many of the financial improprieties were brought to the forefront by the commission as it conducted its own investigation from the time he was installed as chairman through June of 2008, when the formal CDFA audit began. And in fact, he said that many of the questionable staff expenditures were discontinued in May 2008 by order of the commission. He said that the CAC established a finance committee in August 2008 to review the expenditures of the staff, noting that there has been no evidence of improper spending since that time. He expressed confidence in the current staff. In fact, he took issue with some of the findings of the audit. "I think the audit writer might be looking for a career as a novelist," he quipped. "Some of the improper spending that he pointed to were head scratchers."

While the CAC chairman appears to be content with the changes that have been instituted, some rank and file growers were expressing outrage both publicly and privately. A number of different growers were quoted in the consumer press questioning the oversight of the commission. A shipper- packer who asked not to be identified said that he was fielding many calls from his growers who were very upset by the audit report, "and they are looking for blood. The lavish spending by Employee A was outrageous," he said. "And clearly there was a culture at the commission office of a lavish lifestyle."

This shipper did credit Mr. Shade with bringing a new level of oversight to the position of chairman and transparency to the commission itself. He noted that for many years, the inner workings of the California Avocado Commission had been the domain of a small group of people including the commission president and CAC executive committee.

Another shipper, Phil Henry, president of Henry Avocado Corp. in Escondido, CA, expressed dismay at the audit report's finding, echoing sentiments that he had been hearing from his growers and others. "Based on the findings detailed by CDFA as well as numerous news reports that I have read, I am deeply saddened as it appears that Mark Affleck, the former CAC president, succumbed to temptation."

In its written response, CAC said that there will not be an opportunity for a similar situation to occur in the future. "The current board, which takes full responsibility in recognizing its role in providing for sound governance and its obligations to growers and other stakeholders, has taken swift action to resolve the administrative weaknesses identified in the audit and has sharpened its focus and its level of engagement to prevent a recurrence of any of the items identified in the report."