Trouble in Palm Beach County

Bureau resurrects itself after worker accused of $1.6 million theft

By Rachel Wimberly -- Tradeshow Week, 3/12/2007

The alleged theft of $1.6 million over a three-year period to feed a desperate employee's online gambling habit sounds like the storyline for a primetime soap opera. Unfortunately, it's all too real.

Donna Duffer, the former controller at the Palm Beach County Convention & Visitors Bureau, has been charged with one count of grand theft over $100,000 and one count of money laundering. She was arrested in January and released on bail.

The scandal has led to resignations of top CVB executives and intense scrutiny of the CVB by the Palm Beach County Board of Commissioners — but only because somebody at Wachovia Bank happened to notice something amiss with the bureau's bank account.

Longtime CEO Warren McLaughlin and Lee Davis, the bureau's vice president of finance, have resigned. While the county commissioners have said the bureau's status as a nonprofit 501-C6 entity is not in jeopardy, they are threatening to take away management of the county-owned 350,000 square foot Palm Beach County Convention Center.

"Eventually, as we understand it now, the county administration will take over the contracts," said Charles Lehmann, executive director of the Tourist Development Council, an advisory board that oversees the CVB.

The convention center, he said, is an investment deemed too big to treat capriciously.

He said, "The county owns, maintains and pays debt on the building, and has a $30 million investment in a hotel next to it that's breaking ground this year."

Several big questions remain: How did Duffer get away with writing 220 forged checks totaling $1.6 million for so long without anybody noticing? And why did it take three years, until Oct. 23 of last year, for bank officials to notice anything unusual?

"It was a simple question of not having a segregation of duties," said James Stuber, interim administrator of the Palm Beach County CVB.

The county brought in Stuber, a local attorney, to aid in the restructuring of the CVB after McLaughlin resigned.

"There was one person reconciling the bank statements and cutting the checks," said Stuber. "The vice president of finance (Davis) put too much trust in one person."

"What we've done is instituted a full set of financial rules, which includes an outside firm to do bank reconciliations and an internal segregation of duties. I am very confident we are covered now," he added.

As for broader organizational changes, there are very few — for the moment. The CVB will continue to promote and market the city and book hotel and convention center space for events 18 months out; the convention center will handle events taking place sooner.

Contracts with Global Spectrum, the building's day-to-day manager, and Aramark remain in place.

But the board of commissioners will review all that in 60 days. It won't have to work too hard to recollect the details: The 24-year-old nonprofit bureau, also known as Discover Palm Beach County, renewed its $10 million annual contract with the county just last October, about the same time the thefts were uncovered.

Meanwhile, the search for a new CEO is on. Stuber said the CVB was "given approval to move ahead with the search" at the county board's Feb. 27 meeting.

Even though it was Davis who oversaw Duffer, McLaughlin had to go, he said, because "in the end, it's the CEO who is responsible."

He added that the old adage, the buck stops here, applies.

"Something of this magnitude ... maybe it would be different if it was just $50,000, but it had to happen," Stuber said.

His expects a new CEO to be in place by June or July, when he will step aside and return to his legal practice.

"Our goal is to really have things tuned up so when the new president comes in it's a well-run CVB, and they can take it to a new level instead of doing a repair job," Stuber said.

Duffer is accused of taking $925,000 that should have been earmarked for tax and retirement fund payments. In fact, money owed the Internal Revenue Service is still accruing late penalties. Another $675,000 in membership dues and non-tourist tax income is missing.

According to Stuber, several issues are still pending:

• a $4.5 million civil lawsuit against Donna Duffer
• notices of claims against Davis and McLaughlin
• settlement discussions with McGladrey and Pullen, the CVB's accounting firm, and Wachovia Bank
• a claim under the bureau's directors and officers insurance policy
• a request for all parties to agree to mediation.