Porsche 356 Registry Litigation: Update?

[356JAGER]

Craig,
Basically it would mean that the publisher would walk away with the funds in the account set aside for future publication, without having to produce anything. A golden parachute if you will. If correct, a very sweet deal. This is my understanding of it, and as stated previously, I would welcome any clarification from the R's leadership should this scenario be incorrect. Keep in mind that this is a club registered as a 'non-profit'..
Best,
Joel

[bobforman]

While I'm waiting for cocktail hour to begin, allow me to say a couple of things. First, about Gordon. The magazine is something I look forward to every other month;it is a well-done publication. With Gordon we have an enthusiast and a damn good editor. A three year contract is not unusual and a declining retainer along it's duration seems OK as he has expenses that would not immediately end should the club crash. Like a water-landing it's unlikely the club will see it's demise anytime soon. So the idea of this being a severance agreement (not a poison pill, in my mind) doesn't bother me.

What does bother me is the veil that shrouds the operations of the club. There is no specific ownership of the Registry. It is owned by the members. In addition, we are stake holders with regard to it's reputation and any liabilities the club may encounter. As owners I believe we are entitled to know everything about the organization we own. Can you imagine owning a business and your accountant won't show you the books? Every other organization I belong to, including three other Porsche clubs willingly publish complete meeting minutes, contractual obligations (see first paragraph) and financial information. The reluctance of the Registry leadership to do likewise is, to me, without justification. While I wish Steve's law suit never had to occur, I certainly understand his motivation to pursue it.

Now where's that martini shaker?

[356JAGER]

Bob,
Generous of you to not be concerned about a payout, but unless I'm not doing my math correctly, the entire membership could be on the hook for up to 3 years of dues, er, subscriptions with nothing coming in the mailbox. Not sure how the majority of subscribers would feel about that if they were aware of that possibility.
Best,
Joel

[Steve Heinrichs]

Jack/All,

I do not want to wade too deeply into Jack's earlier as I noted before. Still, the answer to the list question I believe can be found in the judge's ruling on our motion for summary judgment as to my 1702 claims. It is on the Ohio site.

Steve Heinrichs

[S.J.Szabo]

This business of Mr.Maltby and the dues is more complicated than any superficial view can reveal.

Some number of Members submit dues for more than 1 year. The amounts paid ahead are an obligation to provide Club services (tho in the case of the Reg., they are actually an obligation to provide the magazine, just like Road&Track, etc.).

It is customary in this type of situation, to operate on an accrual method (this is the thinly-veiled disclaimer on every Accountant's re-calculation ever produced), which keeps careful track of those future obligations, to make sure that when tomorrow comes, there are funds to pay that piper.

The Reg. stubbornly clings to the cash method of accounting, presumably because it provides a great deal of slack in financing current operations and for its loose accountability for expenditures. As Mr.Skirmants once noted to me, "it's all just cash in and cash out" Of course, it is only a coincidence that it is also simpler to cook the books.

The Club's Slush Fund is the kiddie's version of provision for this future obligation to the Members. Except that by every indication, it is little more than a ballpark guess of what that obligation is; apparently, a true accounting is too much math for the reputedly one-time business genius' to manage. Thus has arisen the now-popular "3 yr. guesstimate" rule of Slush Fund management.

Mr.Jensen makes an interesting point. In normal circumstances, were the Club to cease to exist (or the more likely scenario of losing its exempt status), any remaining funds would be required, by law, to be returned to the Members. However, it is conceivable that Mr.Maltby could tie the funds up in a lawsuit over contractual obligations. But one would like to think that that would be a tough sell in court.

In reality, the potential scandal with Mr.Maltby lies in his situation as unelected voting Officer in the Club that cuts sweetheart contracts with his publishing company, to produce the magazine that is, according to the Ruling Circle, the sum total of what is the 356 Registry. If the information about said contract now being on an auto-renew basis is correct, it means that They have dropped the last vestige of pretense of the "arms length" contractual relationship that is expected by non-profit ethical and legal standards. Which should surprise no one.

Thus, the Ruling Circle has fully solidified the Club's standing as but a front for a for-profit publishing enterprise, while exposing itself to potential loss of exempt status for a variety of reasonable issues like tax fraud (failure to properly conduct the operation as a legitimate Social Club), insider contracting, inurement, mis-representation, non-compliance with regulations regarding transparency, and general mopery in the service of giant egos.

And let us not forget the potential blowback from the contract with Porsche, that was clearly signed under false pretenses (that the Registry is a car club... remember that Mr.Dunn himself has declared that the Registry is a magazine, and at $7.50/issue, a bloody expensive one at that).

How is this conduct not "inimical to the well being of the Club"?

[Bill Sampson]

What is this about a "Poison Pill" provided to the Editor, Maltby? This is the first I have heard of this, but that may be because I have been lurking in the background, and not following this regularly.
Can someone provide the factual details behind this?

Thx

Tom
Atlanta

The term "poison pill" comes from defensive measures undertaken by companies to discourage potential acquiring companies. The "targe" will adopt a provision, for example some type of long term contract which must be honored by the company even after it is acquired. In our case, a long term contract with a vendor, whether or not desirable, would have to be honored by new boards. Also, in the Registry's case, to my knowledge, a long term contract has not previously been given our largest vendor. A "new" board will be stuck with old boards have done. They might want that, but, choice is removed.

[356JAGER]

Steven,
You wrote:

Mr.Jensen makes an interesting point. In normal circumstances, were the Club to cease to exist (or the more likely scenario of losing its exempt status), any remaining funds would be required, by law, to be returned to the Members. However, it is conceivable that Mr.Maltby could tie the funds up in a lawsuit over contractual obligations. But one would like to think that that would be a tough sell in court.

Caveat being that the contract with Mr. Maltby grants him those funds, a fact unknown due to the 'confidentiality' of such agreements entered into by the trustees, one of whom is the publisher himself. It all sounds so incestuous to the untrained ear.

[DG58INNM]

Interesting discussion, like all these that pop up over the Registry business. The key, and I mean it with all sincerity, is that it truly is a discussion. Disparate points of view are put forth, examined, argued, rebutted, but not trashed or belittled.

For myself, I am in agreement with Mr Forman's comments. I think the magazine is a good publication. There are things I might like to see a little different (for example: I miss the old classifieds, the outer wrap, and I dislike the auction stuff). But it is a quality product, and I don't object to the publisher making a profit. That is good business and the way our system works. I don't know the details (of course!) but it doesn't seem unreasonable to me to issue a 3-year contract for such an activity. The publisher has some investment of resources that he expects to recoup over time. Similarly, I can understand some level of protection for him should something happen and the contract cannot be completed as originally planned. I am certain that any such protection would be limited to funds on hand, and it would never be possible to compel former members to pay out on the contract after their memberships lapsed. It is also unlikely, in the event the club ceased to exist, that anyone would expect a refund of dues. Creditors and lawyers (sorry Bill!) are expert at eating up all remaining assets under such circumstances, and that's just the way it is. So I don't think this is really the equivalent of a "poison pill".

The big problem is still that these things are kept under wraps. Mr Forman's 2nd paragraph nails it. To this day, I don't have any reason to believe any actions of the Trustees in the interests of the Registry are illegal, or even unethical (with some exceptions, primarily the excommunications and threats thereof). These stories we have all heard, of expensive dinners and drinks, of travel reimbursement, of gifts to selected friends and relatives, of contracts to selected few, may or may not be wrong. Each of us will have a different level of tolerance (I don't mind a guy having a beer or three at Club expense, but I know some of you feel differently). The problem lies with the fact that it is all done in secrecy, so none of us members can know whether we have a problem with it, or not.

I believe this whole mess would, and should, go away with transparency. Unfortunately, it doesn't seem to be happening. At least not without the efforts of Mr. Heinrich and court involvement. For the life of me, I still don't understand the resistance to open books, open meetings, and meeting minutes.

DG

[Bill Sampson]

David: Thanks for posting your usual cogent thoughts.

I think the magazine is pretty good also. It costs too much and there is too much non-356 stuff in it. I share responsibility for keeping magazine costs under control for another old car club and base my conclusion on that comparison - there are naturally differences between the two entities.

As for the 3 year contracts I understand that there are legitimate reasons for such things in some instances, but, find the timing suspicious since for 20 years there have been (as best as I know) annual renewals only. Since it is a new "feature" I chose the poison pill characterization. So, I guess we can respectfully disagree with each other on that one.

I suspect that the contract with Gordon's company was executed by the club as a corporation. Although the trustees in the past have been quite negligent about maintaining that status my information is that for the last few years they have been more diligent. If it is a corporate contract you are correct that only corporate assets would be exposed and once those were gone there would be no way to reach the members, UNLESS, the corporation was shown to have failed to comply with corporate formalities. This immunity is a special privilege, welfare in fact, and the privilege is lost to those who are careless. Recently to my knowledge due care in that regard has been exercised sufficiently to avoid piercing the corporate veil. In the highly unlikely event (so far as I know) that the R went bankrupt, there would be creditors such as the publisher, and the 7000+ members who would be owed for their subscriptions.

That last matter, the change in financial reports that did not mention that liability, is what first concerned Steve Heinrichs and ultimately led to the suit.

To their credit, although dragged to it kicking and screaming, the trustees have substantially (and grudgingly) increased transparency. Not enough and with completely unfounded accusations of those who sought that transparency, but, they've done a little. So, thank you a little, trustees.

And, thank you again David. Wheeler Peak is still there I hear.

[Meissen540]

So the arrangement is not exactly a "Poison Pill" per se, although it might be difficult for new leaders to continue such a contract, it really does not deter a "take over" of the leadership. I suspect the contract was put in place as a way to manage dues paid in advanced. Gordon probably demanded such contract, and this is a vehicle to accrue future dues, or payments, to him, as previously mentioned, since he is supplying resources for the product, and that is the only product for his company. If so, a sloppy way (at best) of getting the job done from an accounting perspective.
Bill, I know you were explaining what a Poison Pill is, but no need. Thanks.

Another Question:
Whatever came out of the "independent auditors/advisors", namely Eric Cherniff and Mark Roth. Was anything ever suggested or pointed out from their efforts? I am wondering as I know both of them have a belief in transparency of the financial dealings.

DG, Yes! Transparency would alleviate all of this! All of us here believe that. Unfortunately the majority of members seem complacent, or scared to voice their opinion.

[Meissen540]

Bill,
Looks like you hit the send button quicker than I, but we are on the same page, namely, a means of management of the dues....er....subscriptions.

[bobforman]

DG, you are wise beyond your years.

Also, am I right; trial starts today?

[356JAGER]

Tom,
Not an attorney but the scenario is, to my knowledge, roughly this:

The publisher (also a club member and trustee for life) has been granted a
3 year contract to publish the magazine, which uses up the vast majority of
the club's funding. That contract automatically renews every 3 years. A fund is set aside to cover future publishing costs, not sure of the amount, but it isn't lunch money. That money accrues to the publisher should the club go belly up.
Think that covers it roughly. If my understanding of the issue is in error, I would invite Mr. Maltby or one of the trustees to provide enlightenment. Copies of all the contracts they have made on behalf of the rest of the members should be made available to those members on their website, but I believe they claim that 'confidentiality' bars those who are bound by their contracts, and pay for them from knowing the contents.
Hope this helps.
Best
Joel

Update per Mr. Maltby:

A: He is not a trustee
B: The 3 year contract doesn't automatically renew
C: The fund set aside is to cover all member liability should the club
go belly up.
D: Mr. Maltby would not be a recipient of those funds
E: The cost per issue is $ 4.80 per magazine, not the figure quoted by
another party on this forum

Thank you Mr. Maltby for your clarifications. Please feel free to join this conversation on this venue to clarify the issues.

[Meissen540]

Thank you Joel for supplying that response from Gordon. His response makes far more sense, assume it is fact. Once again Transparency would prove it as fact.... which gets us back to what started all this, right? Thanks Gordon for setting us straight.
I really don't get why so much has to be held secret.... as Vic says, its a damn car club.

Gordon, this forum is far more civilized than the Registry forum. You should feel free to post here. Your input would be respected.

Tom
Atlanta

[Steve Heinrichs]

Guys,

Just to clarify a few things--

1) The trial has been delayed at the request of the judge's office. It is being re-scheduled.
2) Given the withdrawal of the counter claim against me, the trial now essentially consists of my claims against the Registry for defamation and, as well, fiduciary obligation issues and my termination. The judge has already ruled in my favor as to the 1702 claims (with one exception) and ruled that my termination was unlawful.
3)The recent debate here could readily be clarified by making Mr. Maltby's contracts for both the magazine and member services through separate companies, available for review via posting. Similarly, the Goodie Store contract could also be made available to clarify its status.
4)The posts on the Registry with respect to "vin" number are very sad as to the treatment of yet another long time 356 person who has contributed much over many years.

Steve Heinrichs