EarthQuest Institute: a betrayal of the public's trust?
Monday, April 02, 2012
Cynthia Calvert
On Dec. 8, 2009, the inaugural “Friends of EarthQuest” fundraiser was held in the grand ballroom of the stately complex that houses the East Montgomery County Improvement District (EMCID). It seemed that everyone wanted to be there, from the county judge to the county lineman. So many showed up for the festivities that some were turned away at the door, no doubt crestfallen by their inopportune misfortune.
But for the fine folks of East Montgomery County that were allowed in, it was a gala affair, punctuated by diamonds and dinosaurs, Cretaceous critters and Christmas glee. All the while, the giant head of a T-Rex held sway over the proceedings, its toothy grin a warning, perhaps, for those who might venture a little too close.
Most of all, this grand event was a celebration of hope for East Montgomery County and its residents.
After almost five years of plans and promises, the advent of EarthQuest seemed fitting for the Christmas season. For it was a gift that vowed to keep on giving, with new jobs, new businesses, new developments . . . indeed, a whole new way of life.
But the good citizens of this community didn’t just attend as well-wishers. Not at all. They came with their pocket books in hand, ready to make a tangible contribution to the dream that had been promised them by local politicians, civic leaders and, most of all, the members of the EMCID board.
And on this one night alone, more than $75,000 was raised for the EarthQuest Institute (“Institute”). This Institute was a nonprofit corporation established by EMCID and the EarthQuest developers as an “edutainment” center, so that the young and the young at heart would be able to learn valuable lessons from the past.
So how ironic is it, that on the very same night the ‘Friends of EarthQuest’ were reaching into their wallets to support this great adventure, the consultants hired by EMCID and the EarthQuest developers had already plundered the Institute’s bank accounts for all that it was worth. So egregious was the theft of the public’s trust that, by the night of the great ball, the Institute was already bankrupted.
The Tribune has obtained copies of the federal tax returns for the Institute.
A diligent review of those records has produced a sordid tale of unbridled avarice; a story that will shock even the most cynical individual. Consider the following facts, all of which are taken directly from the federal tax returns of the Institute for the three-year period of 2008 – 2010:
The Institute received contributions totaling $996,667.
Don Holbrook, president of the Institute (and a consultant for EMCID and EarthQuest), received total compensation of $328,255.
Deborah Thomas, treasurer and secretary of the Institute (and an employee of Marlin-Atlantis), received total compensation of $218,993.
(Unbelievably, as stated in the tax returns, Holbrook only worked an average of 15 hours per week; Thomas, 20 hours per week).
Even more appalling, “professional fees” paid to “independent contractors” equaled $601,776. These fees were apparently paid to EarthQuest consultants, including those controlled by Don Holbrook.
Although contributions totaled $996,000 for the three-year period, the salaries and benefits paid to employees and consultants equaled $1,148,370, exceeding total contributions by more than $150,000.
And the forgoing figures don’t even consider “other” expenditures by the Institute's two employees. These “other” costs included $118,700 for “travel expenses,” and $37,479 for “information technology” among other things.
Consequently, on the night of the great ball, the Institute had a negative cash balance of $225,034. Hence, the prior statement that the Institute was bankrupt in December of 2009 was a factual, not a figurative, assertion.
But the story doesn’t end there, because it’s not easy to spend more money than one has in their bank account, unless they can borrow funds from another source. So how did the Institute spend more money than they had on hand? Simple. By borrowing $332,110 from an account payable, $222,018 of which was incurred in 2009.
Unfortunately, the tax returns do not indicate from whom the money was borrowed. Of course, the logical presumption would be EMCID (or one of its affiliates), as EMCID has been the primary benefactor of the Institute since its inception. In a ‘Memorandum of Understanding’ dated January 22, 2008, EMCID agreed to donate to the Institute $300,000 in 2008 alone. What other monies may have been given to the Institute by EMCID is unknown at this time.
Another intriguing fact discovered in the tax returns is that the Institute acquired a building in 2010, valued at about $300,000, with a $195,000 mortgage. Curiously, no one seems to know where the building is located or even its address. More importantly, who would have loaned $195,000 to a bankrupt organization? Did EMCID, or one of its related entities, provide the mortgage for the EarthQuest building? Again, the tax returns do not identify from whom the mortgage was received.
At the EMCID town hall meeting on March 22, 2012, several questions were posed regarding the Institute. Those queries were largely deflected by board members, stating the Institute was completely separate of EMCID, that the Institute never had an office in the EMCID complex and that none of the EMCID board knew the current status of the Institute. But documents obtained by The Tribune appear to indicate that a very cozy relationship has long existed between the two entities.
Even though Frank McCrady stated at the town hall meeting that the Institute has never had an office at the EMCID complex, all of the federal tax returns mentioned in this article listed EMCID’s complex as the domicile of the Institute. Furthermore, the EarthQuest Institute’s website also lists the EMCID complex as its business address, even specifying Suite No. 200.
How separate is the Institute apart from EMCID? Leon Cubillas, chairman of the board of EMCID since July 8, 2004, has also been chairman of the board of the Institute since mid-2008. This dual representation would have ensured that both organizations were fully aware of each other’s activities.
Lastly, the claim by EMCID board members that they don’t know the current status of the Institute seems incomprehensible. First, the dual representation of Cubillas mentioned above makes such a statement implausible. Secondly, the board of EMCID had a fiduciary duty to ensure that its $300,000 in grants to the Institute were properly disbursed.
Sadly, in the final analysis, the Institute was cleaned out, and allowed to be cleaned out by the very persons entrusted with its mission and oversight.
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Originally Posted by The Wizard
Don Holbrook
Allison McCrady
Ms. Deborah Thomas gained capital markets experience while working at Morgan Stanley and at Manufacturer Hanover Merchant Banking Group-both in New York City-and at Merrill Lynch Private Capital in Dallas, Texas. After leaving Merrill Lynch in 1989, Ms. Thomas served as President and Chief Financial Officer for Just Brakes Corporation, a chain of wholly-owned automotive after-market service centers in Texas. She has since held the position of CFO for a number of early- to mid-stage companies in the software, telecom, and financial services industries. Deborah Thomas has extensive experience in securing debt financing, raising capital for expansion and corporate restructuring, preparing and implementing strategic and operational business plans, preparing corporate and project budgets and financial analysis, and managing all aspects of company accounting functions.
Mr. White is Chairman and CEO of White Ventures, Ltd., a private equity company headquartered in Dallas, Texas. White Ventures controls and manages over $200+ million in assets through White Ventures and its affiliates. The company holds controlling interests in real estate property, real estate development, manufacturing, technology, and oil and gas companies. Mr. White is also committed to investing in the production of renewable fuel sources both domestically and on a global basis. White Ventures’ philosophy is to invest in forward thinking solutions where technology will accelerate and create exponential benefits and new markets in global economies.
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