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Report: Amistad finances out of reach for state economic development commissioner

By Johanna Somers

Publication: The Day

Published September 12. 2013 4:00AM   Updated September 12. 2013 10:53AM
Schooner organization funded by line item, putting it beyond purview of DECD

Mystic - Amid grumbling that the Amistad is in Puerto Rico and not in Connecticut for this week's Schooner Festival, the commissioner of the Department of Economic and Community Development has asked the governor and the legislature for more authority to oversee the ship's finances and operations.

Catherine Smith said in a three-page report released Tuesday that current state law does not allow the DECD to impose requirements on line-item budget recipients such as Amistad America Inc., other than mandating audits. "We have few remedies for lack of performance, or even concerns about operational issues," the report said.

State Rep. Diana Urban, D-North Stonington, has pushed for an explanation of how Amistad has spent more than $8 million in state funding after The Day reported that the organization had lost its nonprofit status and that the ship, which was built at Mystic Seaport, was no longer homeported in Connecticut.

Gov. Dannel P. Malloy's chief of staff, Mark Ojakian, had asked Smith to report back to him by Tuesday on what was being done to improve the financial accountability of the Amistad and its owner.

At a press conference Wednesday in Mystic, Urban called for the dissolution of Amistad's board of directors and was critical of the DECD.

"My first reading of that report is - it is not our fault," Urban said. "Well, you know I don't have any patience with 'it's not our fault.' We are accountable to the taxpayers of the State of Connecticut. People need to read these reports. You would be aghast at what they are saying or not saying."

She said DECD could have gone to the chairmen of the legislature's Commerce Committee or to state representatives and said, "There are problems."

"Before 2007, you can see it. They are starting to go down the tubes financially," Urban said of the Amistad organization. "It is very clear. You don't have to have a degree in finance to see it."

Urban and state Sen. Andrew Maynard, D-Stonington, said they don't want to point fingers, but would rather move forward. Maynard said he has not met with Amistad's current board and would like to before making a decision on whether to support Urban. Urban said she has met with the board and wants to see it dissolved.

Hubert Delany, CEO of Entrepreneurs & Professionals Network, said on Wednesday that he and Dennis Burroughs, a former Amistad crew member, are in the process of filing for nonprofit status for their organization, named SOS Amistad. The current Amistad board could be dissolved and recreated, or SOS Amistad could take over the vessel, Delany said at the press conference.

"I think that, either way, there ultimately needs to be a new board. I think everybody agrees on that," he said.

The DECD report briefly describes how more than $8 million in taxpayers' money was spent. Dredging and docking facilities in New Haven before the construction of the ship cost nearly $2 million; $2.5 million went for construction of the ship; $725,000 paid for repairs; and $3.5 million went to operating subsidies.

The DECD said it funded the initial construction of the ship and provided working capital for repairs, but does not have a role in decisions regarding operating expenses. Amistad America receives line item funding of $379,000 in the state budget annually, and DECD passes these funds along, the report said. The DECD "has no authority to impose conditions on the funding or to withhold payment for non-performance," the report said.

The requirement that Amistad must be in Connecticut waters for six months each year was based on a 10-year lien on the ship, the report said. This lien and requirement expired in October 2010.

Amistad America has operated at a loss for several years since the termination of federal funding, which at its peak comprised 80 percent of the organization's funding of $2.2 million. The organization also has struggled financially since of damage to the ship's bowsprit during an accident at sea, which prevented it from earning revenue for two years while repairs were underway, according to the report. While operating at a loss, the vessel accrued several hundred thousand dollars in debt, the report said.

Amistad asked for extensions from the IRS and the state's Office of Policy and Management, which was doing an audit. When those extensions expired, the IRS revoked the organization's nonprofit status. The state is paying the firm Cohn Reznick about $75,000 to audit Amistad America; the audit should be completed by November.

Amistad's accounting firm, T.M. Bixbee, is expected to file Amistad's 990 forms for 2009 to 2013 in the next 60 days to reinstate its nonprofit status, according to the report. The organization also is negotiating with its unsecured lender, TD Bank, to clear its debt within 60 days.

Amistad is in Puerto Rico for the filming of a television series, which will earn the organization $250,000. Urban didn't want the ship to travel to Puerto Rico during hurricane season, and Stonington First Selectman Edward Haberek said Amistad should be at the Schooner Festival, which is being held this week in Mystic and New London.

Others have said being in a TV show about a pirate ship does not fulfill the Amistad's educational mission.

"To take, almost in desperation, a role as a made-up pirate ship in Puerto Rico to help pay the bills shows some real failing in the fiduciary responsibility this board has," Maynard said.

The schooner was launched in 2000 and sailed to ports around the United States to tell the story of African captives freed after a Supreme Court case in 1839. Delany said he abhors the fact that the Amistad, which was created to educate young people about unity and justice, is being used in a pirate television series and has been taken out of New England waters.

"This ship, which is supposed to be about doing right and persevering to do the right thing and freeing people - to use it to dramatize acts of piracy is inappropriate. Another ship would be better," Delany said.

The DECD report said that in the future, the TV show would be filmed in November so Amistad would not be sailing during hurricane season.

j.somers@theday.com

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