Libertarian National Committee Secretary Alicia Mattson’s Comments on the Building Fund

Here are Libertarian National Committee Secretary Alicia Mattson’s Comments on the building fund, delivered this morning (Tuesday, November 22, 2011) around 9 am EST:

“You have my permission to distribute this to others who might be wondering about my opposition to this building purchase.

This will be long because I have experienced a long string of previous disappointments before I got to the point where I would write a message like this. Some of it is info you already know, but I am piecing it all together in one place to put it in perspective. If you just can’t read it all, at least skip to the “AND THE KICKER” section just before the conclusion.

This experience is Exhibit A for why experts will tell you that you should run a capital campaign FIRST and have cash in hand before you pick a site and try to buy. Then there are no urgent races between the fundraising effort and the banks and the seller and the closing agents and the contracts and the lawyers and the mail ballots and the clock.

Regarding the execution of the building fund plan, I feel like this board has been manipulated, repeatedly misinformed, intimidated, and given artificial deadlines to pressure us into voting based on something other than our good judgment and the merits. And I believe that members, donors, and state chairs have been misinformed as well.

Frankly, for some of us, this is no longer about whether it’s a better decision to buy or lease. That concern is overshadowed by a fear that our party might be willing to tolerate decisions being made in this way.

SELLING THE IDEA

I’ll summarize the story of the plan that was sold to us.

Last November we saw a great presentation with a great plan for a capital campaign to eventually purchase a building. I voted for it without any reservations. If executed, it would be a beautiful thing for the LP. I’ve reviewed the audio of that session, and among the features of the plan were:

1) It would be at least a year-long effort, not a rush job just before the end of our Watergate lease.

2) We would raise the money first before selecting a site, not pick a site and then wage war to get into that site at all costs. From page 1 of the business proposal that was forwarded to us before the November 2010 LNC meeting, we were told “A decision as to the actual location would not be decided until sufficient funds were raised for the purchase.”

3) Besides raising funds for the down payment, we would raise funds to also cover $50K of moving expenses, closing costs, etc.

4) We should expect some degree of cannibalization of our general fundraising, though how much is hard to predict.

5) We would know by the next LNC meeting if it was “a raging success or the Titanic”. If it failed, we would give the money back, and we could spin that as a positive thing, championing our having been responsible and honorable.

6) Since it was imperative that we be able to give the money back if it didn’t work out, we didn’t want the building fund to be used to pay for fundraising costs. To help alleviate this concern, Geoff Neale volunteered to pay any fundraising costs in the “first phase” of the plan.

All we had to do was vote to create the fund, and the team would go to work!

The LNC then voted overwhelmingly to create an unnamed building fund with no specific property in mind.

AUGUST 2011 LNC MEETING

By the August 2011 LNC meeting, approximately 9 months after the vote to create the building fund, there had been essentially no fundraising from anyone except staff and LNC members. The chair indicated he had made about 5 phone calls for the project. We had $1000 cash and pledges totaling just under $100,000 for the building fund. This was far short of the numbers we had discussed in November that we’d like to raise.

But there was a piece of property for sale at 1428 Duke St in Alexandria, and the Chair put 15 minutes on the meeting agenda in which we were asked to consider purchasing it. (Tick, tock) We were given a spreadsheet comparing the purchase to some alternative 5-year lease options. The draft minutes reflect that we were told we needed to make a decision by October at the latest due to the amount of time needed to close a purchase deal, and we were told that staying at the Watergate beyond our existing lease which ends in February 2012 would result in our rent increasing dramatically.

Since we didn’t have building funds ready to make a purchase yet, we asked if we could get a 3-year lease somewhere while we continued to work on the building fund. We were told no, that 5-year leases were the standard in the DC area, and our options were buy now or lease for 5 years. (A post-meeting spreadsheet update indicated that one particular property was “one of the few” 3-year leases available, and that building had been closed since the DC earthquake and was scheduled for demolition.)

We postponed the discussion until the next day. In discussions outside the meeting that evening, it was evident that a number of LNC members felt like we were being pushed to make a decision too quickly with insufficient information. The next day we voted to send me and another LNC member to the DC area for up to 10 days to bring back more information. Between the meeting and my DC trip, the Chair repeatedly complained that I would be going and wanted me to cancel. Then it was argued to me that I should shorten my trip, or limit myself to only seeing properties with Staff and our realtor, and not work on my own. But I did work on my own anyway.

On the trip in September, I found that 3-year leases were plentiful. And I found some 3-year lease options that would offer cheaper monthly expense than the building purchase shown on our spreadsheet.

URGENCY TO APPROVE A PURCHASE NOW

During the extensive email discussion, there was a drumbeat that it was imperative that we buy now. We had to get out of the Watergate, and the time was ticking. LNC members wanted a large down payment raised before agreeing to purchase, so that even if no extra principal payments could be made on the mortgage and real estate values dropped we wouldn’t find ourselves underwater when the balloon payment came due in a few years.

Even though we hadn’t really tried any substantial fundraising so far, the story now became that creating the building fund wasn’t sufficient. We had to vote to approve a purchase before they could actually raise the funds.

We gave that a shot. From 10/3/11 to 10/18/11 the LNC adopted a motion dubbed as the “Dan Wiener motion”, which authorized a purchase offer to be made under certain conditions, if certain fundraising milestones were made on a certain timeline. It also required that pledges be collected on legally enforceable pledge forms drafted by our attorney so that we could be confident the pledges were worth more than the paper the email was printed on. The Secretary was one of the people tasked with verifying that the milestones were met and verifying that any offer met the conditions of the adopted motion. The attorney provided the pledge form language on October 21st.

The Chair and Staff began trying to fundraise. On October 24th an email blast went to our email list asking for building fund donations. The Chair started working the phones calling those capable of large donations. A fundraising dinner was planned for December.

BACKUP PLAN

One of the requirements of the Dan Wiener motion was that a separate motion would be adopted to authorize signing of a lease in the event that the fundraising milestones could not be met. On October 28 a mail ballot was started to do just that, provide a backup plan. The Chair promptly accused those sponsoring and voting for this motion of “sabotage” and “undermining” the building fund, even though it was a requirement of the motion we had adopted, and for which the Chair had voted. Even last November when we heard the plan, we discussed the need for a backup plan should the fundraising not reach the goal.

THE OFFER TO PURCHASE

The Chair felt it was imperative that we immediately sign an offer to purchase, even though the fundraising requirements of the Dan Wiener motion had not yet been met to permit an offer to be made.

A draft of an offer to purchase was presented to the Secretary for certification that it was ok for the chair to sign it. The offer contained a 45-day opt-out-for-any-reason clause. The Secretary said that in numerous ways the offer to purchase was not compliant with the approval given by the LNC, including the fact that it was still 66 days before we could determine if the conditions of the Dan Wiener motion would be met, and including the fact that it authorized purchase with a much smaller down payment than the LNC had approved (and would leave us with a larger mortgage balance).

The Chair and Staff wanted to sign it anyway, because it wasn’t enough that the LNC had created a building fund and authorized a purchase, now we supposedly had to have a signed contract in hand to show the donors or else we couldn’t raise the funds.

The Chair wanted to sign the contract first, and then ask the LNC to ratify the action by rescinding the previous authorization in the Dan Wiener motion and approve this instead.

The Secretary was told time was short because the seller expected it to be signed by October 31st. Keep in mind that this property has been on the market for 2 years, so this seemed to the Secretary like a false urgency.

The Secretary advised the Chair and Staff that she didn’t feel it was likely the LNC would approve these purchase terms after-the-fact, and the Chair should talk to LNC members before proceeding. But if they wanted to go ahead and submit a purchase offer that was not compliant with what the LNC authorized, they must include adequate clauses to make sure the contract could not be binding if the LNC did not subsequently approve the offer, and that a backup person should be authorized to opt-out should the Chair for some reason be unable to do so before the opt-out period ended. There was much resistance to these suggestions. The Secretary was initially told that the Seller would not agree to these types of changes, but the Secretary insisted it was imperative to add them before signing a legally binding offer.

To create such protection, the Secretary proposed specific language for the contract that would require LNC approval to be received before the contract became effective and before the 45-day clock started ticking. The Secretary was told that clause was not acceptable, and the Seller would not wait that long. The Secretary suggested that someone instead draft language that would allow the LNC approval to happen during the 45 days, but would result in the contract being automatically canceled on day 45 should LNC approval not be obtained by then.

Instead, the language in the final draft for the Secretary’s approval was crafted to allow only 15 days after contract ratification (both parties signing) for the LNC to give approval. Note that only allowing 15 days for approval (tighter than the 45 days the Secretary recommended) created a stronger urgency argument that the LNC must approve this ASAP. And it meant that the LNC would need to approve now before knowing about future fundraising progress.

The Secretary agreed that the contract finally had sufficient protections for cancellation if necessary, so the Chair’s plan commenced. A 15-day mail ballot was started on Nov 2 (let’s call this the Hinkle motion) asking the LNC to rescind the previous Dan Wiener motion with its conditions and instead approve this offer. Five days later the Chair and seller signed the offer while the mail ballot was underway, starting the contract clock ticking, with 15 days for LNC approval else the contract automatically terminates, and an additional 30 days after during which we could opt out. The Seller did accept the contract a week later than I was told would be acceptable, and with the clauses that I was told they would not approve.

During the voting on the Hinkle motion, LNC members were lobbied with urgency that if we didn’t vote for this motion right now, the Seller and the banks would be done with us, and the deal would be impossible at any future time. It was not enough to just have created the building fund, or to have approved purchase conditional on fundraising results. Now we were told we had to vote for this motion and have the deal locked in or else the rest of the funds could not be raised.

The Chair applied pressure by sending emails to state chairs in two regions where the representatives were poised to vote no, giving those state chairs inaccurate/misleading/incomplete information and asking them on that basis to direct their LNC representative to vote yes. Lobbying is one thing. Misinforming is another. The Chair told those state chairs that though the LNC had previously agreed to do this, now LNC members were getting “cold feet”.

The LNC did not approve the Hinkle motion, with the most common objection being that it didn’t require a down-payment large enough for what the LNC had said it wanted. Instead of proposing to pay off the building with a capital campaign for a large down payment, the supporting spreadsheets forwarded during the Hinkle motion voting proposed that the mortgage balance would be lowered later by promising to use future general funds to make extra principal payments. Note that this LNC cannot bind future LNC’s to make sure they will make such extra principal payments instead of using those funds for something else.

Even though the Hinkle motion had not passed, the Dan Wiener motion was still in effect, allowing an offer if certain fundraising goals were met on a specified timeline.

CONFUSION?

Numerous times after the Dan Wiener motion was adopted, the Chair and Staff complained that they didn’t understand it, and alleged that nobody could tell them how much they were expected to raise for a down payment – in spite of having at least three LNC members who at any time would calculate from a given set of inputs what the requirement was – in spite of a spreadsheet having been provided on which they could change the inputs and the spreadsheet formulas would do the work – and in spite of the motion itself having laid out example calculations of what were likely the best-case and worst-case scenarios demonstrating a range between $245,000 and $300,000 would likely be needed.

Yet the October 24 email blast to our email list told membership that our goal was to raise only $125-200K.

FIRST MILESTONE

Along the way, Staff in passing told the Secretary and Dan Wiener that the first milestone of the Dan Wiener motion had been met, but provided no data. When pressed for more information to verify, totals of amounts donated and pledged were provided, and it was not actually sufficient to meet the first milestone of the Dan Wiener motion.

When the first Dan Wiener motion milestone date later arrived (Nov 5th which was during the voting on the Hinkle motion), the Secretary requested data to determine if the milestone had been met. No data was provided. Instead the LNC was told we shouldn’t bother with such details, that they weren’t using the legally enforceable pledge forms required by the Dan Wiener motion, and we should just wait to see if the Hinkle motion passed, which had no milestones or requirements to verify fundraising.

And we were told that we shouldn’t even expect them to abide by the legally enforceable pledge form requirement because it was offensive to ask people to sign a “blood oath”. The Chair was apparently not offended by the Seller’s requirement that he sign a legally enforceable pledge to pay for the building, and many of us think the pledges we’re counting on for the down payment should be as certain as our obligation to pay for the building.

CANNIBALIZATION

We understood from the beginning that during a capital campaign for the building fund would inevitably attract some donations from people who otherwise would have been willing to give the same money to our general fund, thus cannibalizing our general fund somewhat. We expected some, no ballpark predictions attempted, of that to occur. And we’d have to cover some credit card processing fees, naturally.

But it was clear that the goal was not to create the building fund by intentionally cannibalizing our general fund, as we still have to fund party operations, especially coming into a presidential election year.

Early in the discussions some complained that the LNC’s fundraising expectations were too stringent, so the Dan Wiener motion generously loosened the terms to allow payment of perhaps $50,000 of moving costs and closing costs out of the general fund, so only the mortgage down payment would have to be raised.

Both the Dan Wiener motion and the Hinkle motion included explicit provisions that the down payment must be made with donations that had been restricted to the building fund, not from our party’s unrestricted general fund.

In early September the LNC was informed of a large donation that the Chair specifically indicated was unrestricted. Later this was reclassified as a restricted building fund donation.

A donor who has previously given the legal annual maximum to our general fund has pledged to give two future-year donations to the building fund. This may well be direct cannibalization of our future general fund.

The original capital campaign fund plan, with its promises of a team of past LNC Chairs and past Presidential candidates making 1-on-1 calls to large donors as phase 1, making calls to medium donors as phase 2, and then finally as phase 3 making general email/letter appeals to our broad membership base to finish the job…that plan was never executed. A handful of large donors have been called by the chair, but largely the fundraising effort has been to send mass emails to our broad donor base which we typically rely upon for our general fund.

The plan offered with the Hinkle motion proposed to replace a large down payment with a smaller down payment and promise of future extra principal payments…from the general fund.

Since the LNC from the beginning a year ago insisted that the building funds had to be protected in case of a need to refund, thus they cannot be used for fundraising costs, I am left to presume that the LNC general fund is paying for a fundraising dinner in Las Vegas in December, so that all revenues can all be preserved in the building fund.

Since there was no “phase 1” fundraising according to the plan, I do not know if Geoff Neale is redirecting his offer to pay for phase 1 fundraising costs and instead helping offset costs of some other aspect of the effort.

Saturday our Executive Director asked the LNC Executive Committee to approve spending $25,000 out of the general fund to send a fundraising letter out to our broad donor base. Sunday the request was repeated but with only a request for $10,000. The Executive Committee has so far not considered this idea.

In spite of the intent of minimizing general fund impact, the execution so far has been based nearly entirely on using the general fund to create the building fund.

MISINFORMATION, SPIN, AND MORE PRESSURE

The LNC did not name our building fund, nor has the LNC voted to name any eventual building after anyone. After the LNC created the generic building fund, the Chair began calling it the David F. Nolan Memorial Building Fund and started using that in fundraising appeals. Though when asked later by LNC members, the Chair indicated it was the name of the fund rather than the building, many LP members, understandably, inferred that if we purchased a building, it would be named after Mr. Nolan. When the Chair sent emails to state chairs in at least two regions asking them to pressure the votes of their regional representatives, he claimed that the LNC had created the fund for the purpose of honoring Mr. Nolan, though at the time the fund was created the LNC had not yet learned of Mr. Nolan’s death. After complaints from board members, at least this problem has now been addressed with an explanatory message to our email list sent on Monday.

At the beginning we were told that it would be no big deal if we didn’t raise enough money, and we could generate good donor vibes even if we had to give the funds back because we hadn’t raised enough. But since fundraising efforts began, the Chair has repeatedly applied pressure for continued moving of the goalposts implying that it would be a horrible thing to have to give back any funds.

The Chair’s previously-referenced emails to some state chairs indicated that a failure to approve the Hinkle motion would mean we would have to return around $150K of donations, yet we had less than half of that in cash which would need to be returned.

When on November 16, well past the first milestone date of the Dan Wiener motion, some additional fundraising documentation was provided to two LNC members, it still was counting in pledge totals a $5,000 pledge that has clearly been retracted. When this was mentioned, the response was dismissive, and I presume that pledge is still being reported in the fundraising status totals.

On Monday a message was sent to the LP email list asking for $30,000 more to convince those pesky (my word choice) LNC members who have been voting “no”. I believe it is inappropriate to use our email list to suggest to future convention delegates that certain LNC members are not performing well. We often praise Ron Paul for being “Dr. No” on things he finds to be unacceptable in Congress. But vote “no” on this plan on the LNC, and the Chair might try to get your state chair to squeeze you, or he might send an email to the membership about you.

AND THE KICKER

All of the above has caused me and many others quite a bit of dismay. But in the past few days, after the Hinkle motion failed to be adotped, I’ve learned something new that has infuriated me.

All along, we’ve been pressured that we HAVE to leave the Watergate.

LNC draft minutes from August indicate we were told that if we stay in the Watergate beyond February, our rent will increase dramatically.

The October 24 email blast to our general email list included the following:

“The lease on our national Libertarian Party headquarters is up at the end of February 2012.
The landlord has indicated they’ll be raising the rates 10% to almost $140K per year.
The building (the infamous Watergate Building) is only 60% leased as it is, so we think they’re trying to get everyone to leave.
Speculation is that the owners want to sell an empty building, ready to occupy, to George Washington University, which is right across the street from our office.
Also, building maintenance has begun to slip and we’re overrun with mice and rats!
Time to move!”

So I thought it strange when recently I started receiving emails from proponents of this particular purchase saying that if we’re not going to buy this particular building, maybe we should just stay in the Watergate for a bit longer while we continue to raise building funds.

When did that become an option? Our rates are going up to an unaffordable level, right? It’s rat-infested, right? The owners want us out, right?

I was confused when on November 16 an email from the Chair to the LNC included the following:

“If we want to purchase a building later, it makes more sense to stay put and avoid the moving expenses into another leases building and commit ourselves to a 3 year lease at a minimum.
Let’s avoid the expense of two moves and move just once, shall we? We don’t want to waste our donors money, do we?”

We haven’t even been talking about staying at the Watergate. Wasn’t an option. Had to move.

Then over this past weekend in an off-list discussion with some EC members and Staff, I was told that one of our options now that the Hinkle motion had failed was:

“Hold off a year and stay at the Watergate at current rent, raising even more funds for a much better HQ…”

About 10 hours later in the same email thread I was told that if we stayed at the Watergate it would cost us double what we’re paying now.

(Recall that the message to our LP email list on Oct 24 indicated there would be a 10% increase. The numbers have varied.)

I asked which statement was correct, that we could stay at current rate, or it would cost us double to stay. The answer I received was that if we just over-stay our existing lease we will be penalized with a substantial increase, but we could possibly negotiate a new 1-year lease and keep our current rent rate. ! ! ! ! !

The LNC has not before been told that this was even an option. Instead we, and our members, and our donors heard talk of outrageous rent increases, creating a sense of urgency that we must buy this building right now. And we had been told we shouldn’t expect to find a lease for any term less than 5 years.

Has this entire process since August been based on scare tactics about something that wasn’t even true? All the sense of urgency, the artificial deadlines, the claims of what the seller will/won’t agree to, the attempted intimidation of regional representatives, the difficulty getting accurate information about our fundraising status…???

CONCLUSION

Sadly, with this history of misinformation, moving goalposts, and the bait & switch operation, I’m at the point where it would be naive of me to believe anything I am told about this project. What else might we need to know to make an informed decision? Fool me once, shame on you. Fool me twice, shame on me. Fool me 20 times … it’s downright embarrasing.

Asking me to continue to vote for this particular purchase at this point is to ask me to reward some unacceptable behavior. It’s not just been offending people and stepping on toes. It’s more than that.

Over this past weekend, the LNC has been asked to scramble (in the 5 days between failure of the Hinkle motion and the automatic cancellation clause of the signed contract) to try to salvage the contract signed by the Chair before he had LNC approval for it, with its artificially urgent 15-day do-or-die deadline that may have been designed to pressure to the LNC to act sooner, a process started before getting LNC input on the idea.

It’s no wonder some of us have had enough and are putting our collective foot down. It’s no wonder that some of us want some means to verify what we’re being told from here on out.

I feel like I’ve been manipulated and misinformed into wasting a colossal amount of my time over the past few months. And many others have invested a lot of time also. It is quite an understatement to say I am unhappy about this.

At this point, I have to consider which is worse for the future of the party:

a) to spend a little more money for office space for the next few years, or

b) to allow the LP to become one of those parties where $860,000 internal decisions are based on misinformation, confusion, and manipulation

I can live with (a). If I vote for this purchase now, am I contributing to (b)?”

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