Late last May, Brian Sommerwho had just taken over as the commissioner of dodgeball from Jack Neilsen, a sport run by the Chicago Metropolitan Sports Association ( CMSA )noticed an inconsistency with a past invoice for the sport and he immediately informed CMSA president Michael Erwin.
Erwin admitted he was "shocked and very concerned" with what he was seeing, and he wanted to investigate the matter as thoroughly and expeditiously as possible, he said.
Erwin spoke with Sommer, collecting information directly from the new commissioner. Erwin also immediately notified two other board members, Joshua Dehnke and Julie Norris, to start the investigation. Other board members assisted as needed as the investigation progressed.
The board immediately suspended Neilsen from holding any position of authority or any position that could involve the spending of CMSA funds, Erwin said.
"The board looked at reimbursement forms and invoices from Neilsen. We also contacted all related vendors to attempt to verify all invoices at issue," Erwin said. "The board engaged counsel, Greg Ostfeld, who assisted in our investigation and advised the board on its fiduciary responsibilities and legal strategy."
The board investigated reimbursements related to women's dodgeball, open dodgeball, and open softball, which includes Thursday night fall softballleagues that Neilsen was the commissioner for, most notably open Sunday softball, a league he ran from 2008-2015. ( He was commissioner of women's dodgeball during 2012-2016 and open dodgeball during 2008-2016. )
The board also investigated reimbursements related to a softball tournament initially organized by Neilsen.
By July 2016, through consultation with Ostfeld, the board determined that it had enough evidence to pursue disciplinary action and civil claims against Neilsen, Erwin said. "After that, the board continued to consider relevant information that came to its attention, and it continues to do so," he said.
Erwin said, advised by counsel, he would not describe the specific reimbursement forms or invoices, "as doing so could compromise its position in future potential litigation," he said. "The board can say that the reimbursement forms or invoices were related to softball and dodgeball purchases, some relating to the respective sports' budget and some related to the CMSA general fund. The board reviewed approximately 35 reimbursement forms or invoices."
Ultimately, the board determined that Neilsen had received unverified reimbursements in the amounts of approximately $3,000 from dodgeball ( women's and open ), approximately $22,500 from softball ( open and Thursday fall ), and approximately $7,500 from CMSA general funds.
In total, that's $33,000.
"My reaction [after the investigation], and that of the entire board, was one of shock, concern, and disappointment," Erwin said. "The board and I understood the need to take appropriate actions to recover misappropriated funds, pursue CMSA disciplinary proceedings, and consider all legal options, civil and criminal. The board also knew that it needed to re-evaluate how it handles reimbursements and invoices from its commissioners and others in CMSA and update CMSA's policies and procedures accordingly."
Erwin said that CMSA's investigation "turned up no evidence of any other person's involvement." CMSA investigated and questioned multiple individuals, including past and present board members, about possible involvement or what they knew, Erwin said.
Per CMSA policy, all checks associated with reimbursement forms or invoices were signed by any two elected officers ( president, vice president 1, vice president 2, treasurer, or secretary ), Erwin said.
The board notified Neilsen in early July that CMSA would hold disciplinary proceedings, according to CMSA policies and procedures. At the same time, the board notified Neilsen of his right to retain and be advised by counsel at his expense. Neilsen retained counsel and declined to be questioned. Neilsen did not confess to misappropriation.
Also in July 2016, CMSA elections were held, requiring a transition of information to the new board. "The board guaranteed no relevant information was lost in this transition," Erwin said.
Windy City Times has attempted to contact Neilsen for comment, but he has not replied.
A settlement between CMSA and Neilsen was reached primarily through discussions between Neilsen's counsel and CMSA's counsel, with the CMSA board consulted on all relevant points of settlement, said Erwin, who did not say if the settlement was first presented by counsel for CMSA or for Neilsen.
"The Board of Directors consulted with its counsel on the option of filing criminal charges, and no final determination has yet been made. The parties' settlement agreement does not impact CMSA's ability to pursue criminal charges," Erwin said.
The board has been advised by counsel not to provide all details of the settlement agreement, as doing so could compromise CMSA's position in potential litigation if action is needed to enforce terms of the settlement agreement later, Erwin said.
In general, though, the settlement agreement provides for repayment of all amounts CMSA believes were misappropriated by Nielsen, plus interest, in monthly payments.
The agreement also provides that a default interest rate attaches to the outstanding amount if payments are missed, he said. It provides for security interests and stringent enforcement mechanisms in the event of a continuing breach. "These mechanisms would facilitate much quicker enforcement than CMSA could have obtained had it filed a lawsuit from the outset," Erwin added.
Payments began in October 2016 and are continuing monthly, Erwin said, countering last week's WCT article, which noted that sources said the payments had stopped. There are minimum amounts set for each month, with the option to pay more than the minimum.
The reimbursed funds are being proportionately distributed to the leagues and the general fund from which the original reimbursements were paid, Erwin said.
Erwin said the opening balance that Neilsen was to pay was over $37,000, including interest, and interest will continue to accrue throughout the settlement agreement until paid in full. As such, the total settlement amount will depend in part on whether payments are made beyond the minimum required amounts.
In the event of a continuing repayment breach by Neilsen, the total amount including interest becomes immediately due and payable, with stringent enforcement mechanisms, Erwin said. "This has not happened. CMSA is monitoring payments closely and will respond promptly to any missed payments."
The board has since enacted new, more stringent safeguards, Erwin said. For example, the board lowered the reimbursement threshold triggering a requirement for specific board approval prior to purchase, and also now requires purchases exceeding a certain amount to be paid to the vendor directly by the CMSA treasurer. "CMSA will continue to evaluate its financial safeguards regularly going forward as part of its annual review process," he said.
Also see "CMSA president provides update on the situation" at the link: www.windycitymediagroup.com/lgbt/CMSA-president-provides-update-on-the-situation/58063.html .