FORMER EAST COUNTY CHAMBER CEO MIKE CULLY SPEAKS OUT ON ORGANIZATION’S FINANCIAL WOES
By Miriam Raftery
An ECM exclusive special report
"I think the organization is finished. It can't run by committee, which is what's being proposed." -- Mike Cully, former Chief Executive Officer
March 5, 2013 (San Diego’s East County) Updated 3:30 p.m. – Last week, ECM reported that the San Diego East County Chamber of Commerce let go its Chief Executive Officer, Scott Alevy, and terminated the position amid dwindling financial resources.
Now Mike Cully, former CEO of the Chamber who was fired in September 2010, reveals that he recently won a lawsuit against the Chamber over his termination. “I feel comfortable talking about this now," said Cully, who has not spoken publicly about the issues until now.
Moreover, Cully reveals a troubled financial history at the organization he once ran. “The problems with the Chamber preceded my arrival,” he told ECM in an e-mail response requesting his comments on the Chamber's current issues. “When I was interviewing, I requested, but never got—a full download of their financial status. And for good reason, in retrospect.”
ECM has asked the Chamber’s acting President, Becky Burgstiner, repeatedly for an interview, but she has not responded. An article in the U-T San Diego stated that the nonprofit Chamber’s resources dwindled from over $191,000 in 2008 to less than $80,000 in 2011, the last year for which tax records were available.
Now Cully offers intriguing details on what happened to some of that money.
Cully took over in fall of 2008, following the ouster of Terry Saverson, the CEO who led the Chamber for 11 years. “As a parting gift, they gave her something in the range of $100,000 severance. Nice paycheck. That was the majority of the Chamber reserves,” Cully said.
At the same time, in what Cully dubbed a “perfect storm” battering the Chamber’s resources, the La Mesa Chamber stripped the Chamber of any revenue derived from the Oktoberfest event “which for the Chamber was significant: around $60,000 to $90,000 a year,” cully said. “When I got there, I learned that the organization was about three months from closing. Nice welcome.”
Cully says when he took the helm, he made immediate changes to downsize staff, start a travel program and hire a competent salesperson to turn around the financial situation. “I got us going in the right direction in a horrible economy,” he reports, but adds that there was “tension with the board, despite the well thought-out business plans and my constant updates and transparency.”
He indicates he was “shocked” when the Chamber fired him, too. But he observes, “They did for entirely financial reasons.” He was earning over $75,000 a year but had cut his own salary to help the organization, he told ECM. “They had given me a stellar review and raise just months before my termination.” Cully estimates reserves were down to around $30,000 when he left. The majority of operating funds went toward salaries for three full-time and one part-time employee plsu health insurance, with an annual budget around $300,000. About 35-40% of costs were paid out of memberships, with the balance from events and other means.
He also said the decision was in part “political, mirroring the board even today. It’s less an organization focused on business,” he added, “rather than an organization formed to feed the egos (for the most part) of the 40 directors It’s absolutely political at its core.”
After his termination, Cully reports, “I sued and won.” Although he did not disclose the precise details of the settlement, he stated, “I wasn’t after and wouldn’t accept anything more than what I was supposed to get from my contract. My attorney and their attorney fees probably doubled my actual reward…but I didn’t care because I was doing this on principal. I was vindicated. I did nothing wrong, never lied and was always transparent with the condition of the chamber.”
Cully says he doesn’t know if the Chamber had a plan going forward, at least beyond Cliff Diamond, who assumed leadership briefly after Cully’s ouster. On January 1, 2011, Alevy took the leadership reins.
“I’ve been in far worse spots,” Alevy told ECM in an April 2011 interview Those include combat zones in Southeast Asia and the crash site of a PSA flight in San Diego, where Alevy headed up public relations for the airline. He also worked as a lobbyist, Chula Vista Councilman, and handled communications for the San Diego Regional Chamber of Commerce. Alevy also drew controversy for submitted PR bills to the Sweetwater Union High School District for meetings that people named as attending said they never occurred, the U-T has reported.
No suggestions have been raised over any alleged improprieties under Alevy’s watch at the East County Chamber. According to Cully, Alevy was a friend of Chamber Board member Joe Mackey.
“What didn’t happen when he [Alevy] took over was any more change or innovation to continue to dig the Chamber out of the hole,” Cully said. “They continued using my business plan, which was a living document, and never got creative with finding new programs, etc.”
He cuts some slack for Alevy, however. “Scott was another casualty from a very decided board. He may well have been a good and popular CEO, but it all boulders down to what he did or didn’t do financially.”
Another former Chamber insider, who spoke to ECM on condition that that anonymity be provided, questions how the Chamber managed to run through so much money.
During the recession, the economy led many businesses to drop their memberships due to hefty fees. Political controversies and increased overt lobbying by the National and State Chambers may have led some to distance themselves from local chambers. Competing Chambers formed, including the La Mesa Chamber of Commerce and the Rancho San Diego Chamber, though the latter later closed its doors. Chambers have also faced competition from other business networking groups and the rise in online marketing opportunities for merchants.
But even with falling membership revenues, the San Diego East Chamber had other major resources to draw on, the former Chamber insider told ECM.
“What happened to all that money from the Chairman’s Club membership money?” the source asked, pointing out that companies, tribes and organizations pledge many thousands of dollars at Diamond, Platinum, Gold, Silver, and Bronze levels. The Chamber also hosts events ranging from golf tournaments to last year, a Centennial Gala. A Centurions Club was also established for major donors in the Chamber’s 100th year. With rent for office space just one dollar a year, the former Chamber source asks, “where did all that money go?”
The Chamber isn’t answering, though 2012 tax records, once filed, may provide some clues.
Cully told ECM that "controlling spending" has always been the problem. He cites "funding of Leadership" as an example. "I even got a nice $40,000 grant from ATT for that...but the board didn't want that put entirely toward leadership as it was intended, so it was co-mingled." He also indicated that a merger he orchestrated with the Alpine Chamber fell through because Marcel Becker, current Board Chairman at the East County Chamber, killed the deal. "That would have shored up things if we had executed," Cully said.
At last Friday's Chamber meeting, acting President/CEO Becky Burgstiner insisted that the Chamber is on "solid ground." She is running the organization temporarily, while Becker is recovering from surgery.
But with no salaried position for a leader to replace Alevy, some suggest a less rosy future.
Cully makes a dire prediction.
“I think the organization is finished,” he predicts. “It can’t run by committee, which is what’s being proposed, but I believe the financial condition to be so dire, there’s no alternative. Such a shame.”
Key staffers have jumped ship to take jobs elsewhere. Jarryd Davis, vice president, “wound up with a great job,” said Cully. Sherral Bearss, who handled membership, has moved on to work for the Pennysaver.
Cully has also moved forward, he says. “I felt I had to reprove myself when I landed the job with car3gp,” he says, adding that within a year it went from zero members to 12,500, “a very successful and popular business.”
The experience has left Cully embittered, he concludes. “One thing is certain: despite my love of public service and helping people, this Chamber and board ruined it for me. I will never go back to that.”
Note: An earlier version of this story stated that the City of La Mesa withdrew Oktoberfest funds; in fact it was the La Mesa Chamber.