The bill has arrived for legal services concerning the Treasurer of the Diamondhead Country Club and Property Owners Association’s attempt to preform an independent audit of country club operations. Treasurer Michael Schaefer, now deceased, became concerned over exorbitant losses at the club during the summer of 2015. Schaefer, who had a Masters of Business Administration and a degree in accounting, contracted the services of a local certified public accountant to conduct a forensic audit. According to documents filed by the director’s attorney, the actual audit contract was to cost $19,000.
The audit was to focus on operations at Diamondhead Country Club amid suspicions that board members themselves were the cause of the losses. Schaefer had received reports that at least one board member was demanding free food and beverages in return for his services on the board. Schaefer also wanted to know why the costs of wine and beer had skyrocketed during the summer months. Four directors physically blocked the audit and told employees not to cooperate with the auditor.
Schaefer and two other officers sued and got a temporary restraining order to prevent destruction of records. Immediately after the request for declaratory judgement was filed the board changed accounting procedures, concealing certain expenses and giving the appearance that the club had experienced a miraculous turn around along with golf operations.
Mike Schaefer died in January 2016. The case was settled after attorneys for the directors threatened to attach Schaefer’s estate for legal fees and the original plaintiff, John Fletcher, president of the DHCC&POA withdrew from the case, leaving POA Vice President Jerry Weber the only surviving party. Weber was forced to resign as part of the settlement agreement.
Legal fees in the amount of $70,000 were paid to the directors attorney. The officers’, Schaefer, Weber and Fletcher, attorney received $10,000 for his fees.
The Diamondhead Country Club and Property Owners Association does not report legal expenses in it’s financial statements. It lumps all such expenses as “Administration”.