Columbus Zoo and Aquarium lost at least $631,000 because of misspending by former officials
Misspending and questionable business practices by former executives cost the Columbus Zoo and Aquarium at least $631,000, according to new documents obtained by The Dispatch.
Zoo assets were used improperly for executives' personal items, including concert tickets, golf memberships, Amazon purchases, satellite radio subscriptions and vehicles, according to the forensic audit reports compiled for the zoo by Plante Moran accounting firm.
Investigators said they were conservative in their estimate, only totaling financial losses they could substantiate, but the zoo likely incurred additional losses that they could not quantify.
In one instance, forensic auditors described an "overall culture of entitlement" among zoo executives.
The new details came from investigations prompted by Dispatch reporting earlier this year that uncovered improper use of zoo resources by former President and CEO Tom Stalf and former chief financial officer Greg Bell.
The Dispatch investigation also found that Stalf and Bell allowed family members to live in two properties the zoo managed and charged them below-market rents. The zoo investigation found that this resulted in losses of more than $80,000.
The zoo plans to pursue recovery of the losses — including civil lawsuits, if necessary — against Stalf, Bell and two other former zoo executives.
The forensic analysis also revealed that the zoo advanced $725,000 to IronRoad, the company that managed its seasonal employees. The company is owned by former zoo director Jack Hanna's son-in-law and has not repaid the $375,000 it still owes. The zoo terminated its relationship with IronRoad in late April.
After the Dispatch reports, the zoo board hired Porter Wright Morris and Arthur LLP to investigate, and Stalf and Bell resigned in late March after they were confronted with initial findings. The law firm later retained Plante Moran for forensic auditing.
Additionally, the new audit reports concluded there was no misuse of the zoo's levy funds. The zoo is a taxpayer-supported nonprofit organization that receives levy support from Franklin County taxpayers. The levy money accounted for about 20% of the zoo’s overall revenue of nearly $92 million in 2019.
In an exclusive interview with The Dispatch Thursday, zoo board chairman Keith Shumate said the zoo is working to establish safeguards to "make sure that this never happens again."
"These reports really reveal a breach of trust by the former CEO and CFO," Shumate said. "We trusted them, and unfortunately, they let us down."
Columbus Zoo officials bought vehicles, World Series tickets and more
The reports the Dispatch reviewed show the misuse of zoo funds stretched beyond Stalf and Bell to at least two other former executives, though Stalf and Bell were responsible for the overwhelming majority of the losses — about $423,000 for Stalf and nearly $139,000 for Bell, plus interest.
Pete Fingerhut, the zoo's former vice president of marketing and sales, was responsible for nearly $57,000 in losses, and Tracy Murnane, former director of purchasing, was responsible for nearly $13,000, the reports said.
Murnane retired in spring 2021, Shumate said. Fingerhut's position at the zoo was eliminated in spring 2020 as part of COVID-19-related reductions.
The bulk of personal expenses from all four former zoo executives — more than $166,000 in losses — was amassed on zoo credit cards, according to the forensic analysis, which analyzed more than 20,000 transactions between January 2015 and April 2021.
Nearly $72,000 of that was spent on events and $94,000 was on other items.
The investigators said "zoo officials had a cavalier attitude towards events, making it challenging to determine amounts paid for specific events and calculate losses."
Supporting documentation wasn't always available for purchases and descriptions were sometimes modified "to give the illusion that it related to zoo expenses," the report states. One example is Bell using a credit card to pay for Sirius XM radio, with costs totaling more than $3,600 over about three years. The subscriptions were canceled after he resigned.
"As the zoo's CFO for the last 30 years and a certified public accountant, Bell knew, or should have known, that failing to provide proper supporting documentation can jeopardize the organization's tax status with the IRS," the report states. "The misleading descriptions and/or lack of documentation for purchases provides additional evidence that Stalf and Bell used zoo assets for their personal benefit."
The next-largest loss was for memberships and purchases at Kinsale Golf & Fitness Club, just a few miles northeast of the zoo. Stalf spent more than $53,000 and Fingerhut spent more than $39,000, which also included family members using their membership numbers on purchases at the pro shop and restaurants. Stalf and Bell also had memberships to the nearby Wedgewood Golf Club, costing $26,010 each over three years.
The analysis also examined the zoo's barter accounts, in which officials trade zoo tickets and receive credits. For example, using those accounts, Stalf also acquired five tickets valued at nearly $10,000 for the 2016 World Series in Cleveland, which he shared with his father-in-law and brother-in-law.
He also spent $4,800 on patio sets, $2,734 on limousine rentals and $2,775 on two "Florida trips."
Additionally, the reports reaffirm that Stalf used zoo funds to purchase a recreational vehicle for his exclusive use in 2017 and took it to Put-in-Bay for a family trip, as stated in an initial report this spring. It cost $45,000 and was sold for $37,750 in 2020, netting a loss of $7,250. The reports also detail losses associated with other vehicles purchased for personal use, totaling nearly $40,000 for Stalf and $4,530 for Bell. The zoo also insured those vehicles.
The zoo also paid for six iPads with data plans for Stalf, a loss of $22,000.
Mark Collins, Stalf's attorney, said he has not received a copy of the audit, but questioned its usefulness and said "any opinion rendered by Plante Moran is simply incomplete."
"A forensic audit merely shows money coming in, and money coming out — it is completely void of any context, so it is inherently assumptive," Collins said in an emailed statement. "While we would have loved the opportunity to sit down with Plante Moran to provide the firm with the full picture, Plante Moran offered us no such invitation."
Sam Shamansky, Bell's attorney, said he also hadn't seen the audit report as of Thursday afternoon.
"Greg Bell has always been committed to repaying whatever loss occurred to the organization as a result of any mistakes or oversights for which he was responsible," said Shamansky.
Fingerhut said all of his spending was authorized by Stalf and/or Bell, and he used the golf memberships and other perks only at his bosses' urging and always to do business with zoo supporters.
A message to Murnane was not returned Thursday.
Columbus Zoo board of directors lacked oversight mechanisms
Shumate said the zoo board had no knowledge of most of the misspending, and said the board never authorized executives’ use of event suites.
“That’s just not what nonprofit organizations should be doing,” Shumate said.
The forensic audit reports note a number of credit card expenses by the former executives included references to entertaining zoo board members. The reports show examples totaling more than $14,000, including dinners, unspecified tickets and event suites, meals, and cigars, among other charges.
Shumate said there may be some legitimate expenses tied to executives cultivating relationships with board members. But he said record-keeping on executives’ credit cards was so bad that it’s hard to determine what constituted proper spending and what didn’t.
“Doing an interview with a board member over a lunch or dinner, that’s a legitimate situation,” Shumate said. “Going out and having a $2,000 dinner, well, I don’t know about that one. Things like that are a little more questionable.”
The role of the board is "really one of oversight and safeguards, and in hindsight, we didn’t have the proper mechanisms in place to address (executives’ misspending), said Craig Marshall, a member of the zoo board’s audit committee.
“...What the Plante Moran report shows are some things we can do to improve our safeguards,” Marshall said.
The board officials said they have already implemented some of the auditors' recommendations to strengthen its oversight roles, including setting up a hotline where employees can report fraud allegations. The board also plans to implement "surprise audits" to assess various areas of zoo finances at random times.
IronRoad and Jack Hanna's family connection
The zoo had used professional employer organization IronRoad to manage its seasonal employees for years, zoo board members said. The company's CEO is Billy Southerland, Hanna's son-in-law.
As a result of IronRoad's cash flow challenges in 2015, the company requested a $350,000 prepayment for service fees, which auditors characterized as an advance. Then, it required the zoo to fund one full month's payroll, totaling $375,000 in deposits, which IronRoad was to hold until its service agreement with the zoo ended.
Such employer organizations do not typically require prepayments like those outlined in the audit report, investigators wrote.
IronRoad has not paid back $375,000 it owes the zoo, and investigators estimated interest due for all of the zoo's prepayments could range anywhere from $56,000 to $718,000.
A message left with IronRoad on Thursday was not returned.
Analysis of zoo bids and contracts
Investigators reviewed dozens of zoo capital projects to determine whether they followed proper bidding processes. They concluded the zoo followed proper bidding or selection processes on most projects, except for the selection of Meade Construction for the construction of a $2 million cabin project at The Wilds.
Stalf personally selected Meade as the vendor and did not seek competitive bidding. The company billed the zoo a "substantial cost overrun" for the project, which Stalf instructed Bell to pay, circumventing normal accounting processes.
While Plante Moran could not confirm any "quid pro quo between Stalf and company president Andy Meade for awarding the contract to Meade Construction, this unusual selection raises a question of self-dealing by the former CEO," a report said.
During the same time of the cabin project at The Wilds, investigators noted, Meade completed an expansion of Stalf's garage at his personal property, which "further indicates a personal relationship between Andy Meade and Stalf."
Other investigations of Columbus Zoo continue
Following The Dispatch's investigation, a number of outside agencies announced investigations into the zoo earlier this year. Zoo officials said they are continuing to cooperate with those outside groups.
Ohio Attorney General Dave Yost’s office announced on April 1 that its Charitable Law Section would be investigating the allegations involving Stalf and Bell.
Ohio Auditor of State Keith Faber’s office is also conducting an audit of the Columbus Zoo, the first time that office has ever reviewed the zoo's finances, even though the zoo has received tax levy funds for decades.
Officials with the Ohio Ethics Commission, which investigates potential violations of state law related to the misuse and abuse of public offices, have also said they are considering whether the agency has the authority to investigate the zoo. It hasn't yet announced a decision, though.
The zoo board has shared the new forensic audit reports and their recommendations with the Ohio Attorney General, the Ohio Auditor, the Ohio Ethics Commission, the Franklin County Commissioners, Columbus Mayor Andrew J. Ginther and the Columbus City Council, according to a statement emailed Thursday afternoon.