Attorney general steps into August Wilson Center case [The Pittsburgh Tribune-Review]

Oct. 31--The Pennsylvania attorney general could ask to overhaul the management at the financially troubled August Wilson Center for African American Culture, a nonprofit expert said.

"It certainly does not look good for the board," said Jack Owen, an attorney with the Downtown firm of Rhoades & Owen. "The attorney general will be looking at the board to see if it has fulfilled its fiduciary duties."

In a rarely used move, lawyers for Attorney General Kathleen Kane on Thursday filed a petition in Allegheny County Orphans' Court asking for a full accounting of the center's finances. Common Pleas Judge Lawrence O'Toole approved consolidating the petition with Dollar Bank's foreclosure proceeding on the nonprofit's $40 million Downtown building. A hearing is scheduled for Monday.

The AG's office said nearly $17.4 million in public money went toward construction of the building. Kane's spokesman Joe Peters said the office is working with the center and Dollar Bank "to help restore the center's financial stability."

Oliver Byrd, interim president and CEO of the center, and several of its board members could not be reached for comment.

"This is not a criminal action," Peters said. "... Attorney General Kane's interest in the oversight of charitable organizations is to ensure good stewardship on the part of charitable boards."

The state's involvement adds another element of uncertainty in the fate of the center, Western Pennsylvania's pre-eminent African-American arts group. The center's building, named after the late Pulitzer Prize-winning playwright from Pittsburgh, opened in 2009 on Liberty Avenue.

Dollar Bank, which holds a $7 million mortgage on the center's debt, started foreclosure proceedings in September when the center defaulted on its mortgage and allowed insurance on the building to lapse.

The bank asked an Allegheny County Common Pleas judge to remove managers, appoint a receiver and stop the center from seeking bankruptcy protection. The center's financial troubles can be traced to its decision to borrow heavily to finance construction of the building to close a shortfall in fundraising.

On Oct. 1, the Allegheny Regional Asset District, which uses sales tax revenue to fund arts groups, tentatively declined to support the center's operations for the first time in 15 years. RAD's board said it would give the center $300,000 only if it fixed its problems.

David Donahoe, RAD's executive director, declined to comment on the AG's action.

County Councilman Bill Robinson offered a lifeline, including $500,000 for the center in his proposed 2014 capital budget.

"It's unfortunate that a judge will have to make a decision on the existence on the August Wilson Center," Robinson said.

The center's 2012 audit paints a bleak picture.

Schneider Downs, the auditor, questioned whether the center could continue running. It cut the value of its assets nearly in half -- from $40.6 million in 2011 to $20.5 million in 2012.

Most of that decline is linked to an "impairment fee" of $17.6 million that the audit assessed, citing "continued losses and insufficient cash flows." The center ended fiscal 2013 with a deficit of $1.8 million.

Previously, the attorney general intervened locally in the bankruptcy case involving the Allegheny Health Education and Research Foundation, or AHERF, one of the largest health care systems in the state. During the course of AHERF's bankruptcy proceedings, creditors filed more than 20,000 claims seeking more than $5.9 billion.

The attorney general became involved in disputes with the McCune Foundation. One lawsuit concerned a trustee's decision not to sell McCune's stock in National City Bank before it plummeted.

On Oct. 25, the attorney general's office asked a Crawford County judge to remove and reorganize Conneaut Lake Park's board of trustees, saying members failed to insure two park buildings that burned down and fell $900,000 behind in paying property taxes. A hearing is scheduled for Nov. 19.

Staff writer Matthew Santoni contributed to this report. Bill Zlatos is a staff writer for Trib Total Media. He can be reached at 412-320-7828 or [email protected].

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