Chancery Court Judge Jennifer Schloegel granted POA officers Fletcher, Weber, and Schaefer a TRO yesterday, canceling a special meeting called by some directors for last night to vote disapproval of the forensic audit ordered by Treasurer Mike Schaefer. The order preserves relevant financial records and suspends the audit until a full hearing on interpretation of bylaws prescribing the treasurer’s and board’s powers and duties can be held.
Since the board split over the bylaws interpretation issue that arose after Schaefer appointed Patches Rhode as auditor to investigate ballooning country club losses, attorney Bill Kulick is representing the three officer-directors who petitioned for the TRO while Rick Tubertini represents the board and eight directors named as respondents.
Seven of the eight directors issued a letter earlier this week stating their side of the issue — that Schaefer “(1) exceeded his authority; (2) acted in a secretive, underhanded manner without consultation with the Board of Directors; and, (3) violated POA policy on procurements exceeding $5,000.” They subsequently distributed the letter, nominally addressed to a POA member who had asked about the audit halt, through email lists to an unknown number of recipients. In addition, one of the seven has been arguing his views on Diamondhead News Online’s Facebook page.
Schaefer has stated his side of the issue to the court in his petition, stating that he has a fiduciary duty to ensure funds are not being squandered, therefore if he suspects wrongdoing he must be able to find out whether suspicions are warranted. Learning that the club’s losses would total over $500,000 by fiscal year’s end, after an initial audit he determined that a forensic one was needed. He found from research that CPA Patches Rhode, with extensive relevant background, was best for the job.
Acting under authority provided in the bylaws (“The Treasurer may designate agents to assist the Treasurer in the performance of these duties.”), he concluded a professional services agreement with her. His position, supported by the president and vice president, is that the treasurer must be able to investigate and “stop the bleeding” even where there is opposition from the majority of the board since a corrupt board could involve itself in malfeasance.
The hearing is expected to be held within 10 days.