Yesterday proved to be an important day. Graydon Royce penned and published the single most important article yet written about the orchestral apocalypse. So go read it. Now. Please.
Let’s all take a moment to acknowledge that Graydon Royce is the King of Minnesota Orchestra Investigative Reporting.
The article begins:
For four years, the Minnesota Orchestra board has walked a tightrope between managing public perceptions about its financial health and making its case to cut musicians’ salaries.
I’m not writing in a newspaper, and I’m not speaking on behalf of anyone but myself, and I don’t need to be delicate, so please, allow me…
The Minnesota Orchestral Association lied to the public about its fiscal health in order to get what it wanted. Yes, I know that we’ve sidestepped the L-word in the past. I wrote “obfuscations” once; the MOA then wrote about “misrepresentations“. So I’m going to be the first to be blunt, and say lie. They lied. They lied, as in “they presented false information with the intention of deceiving.”
THEY LIED TO US.
Okay, sorry. That’s been bottled up inside me for the last three months, and it feels mighty good to get it out of my system.
“Balances in 2009 and 2010 would support our state bonding aspirations,” Bryan Ebensteiner, vice president of finance, told the orchestra’s executive committee in September 2009, “while the deficits in 2011 and 2012 would demonstrate the need to reset the business model.”
Translation: If we tell people that we’re doing better than we actually are – in other words, if we lie to them – then we can get what we want: i.e., a taxpayer-funded lobby, weakened union, and a “reset business model.” Go, us!
Several issues were at stake between 2009 and 2011.
The orchestra was in the midst of a capital campaign to remodel Orchestra Hall, launch artistic initiatives and build up its endowment. Showing balanced budgets would enhance the orchestra’s image with individual and corporate donors and with the Minnesota Legislature, which in 2010 was asked to consider a $14 million bonding request for the building project.
Translation: If we lie about the state of our finances, people will be more likely to donate to us, and the Minnesota Legislature will be more likely to approve our requests for $14,000,000. Go, us!
In an interview last week, Board Chairman Jon Campbell rejected suggestions that the board had manipulated deficits for strategic and public-relations reasons.
Hey, Mr. Campbell. You may be interested in reading what Mr. Ebensteiner said above. Manipulating deficits is exactly what he’s describing. If Mr. Ebensteiner wasn’t manipulating the deficits for strategic and public-relations reasons, then…what on earth was he doing? Was he just bored one day, and decided he’d entertain himself by planning ahead what years the Minnesota Orchestra would post deficits? Or maybe you’re accusing Mr. Ebensteiner of lying?
“If it was a cover-up, would we have been that transparent in the minutes?” said Campbell.
Yeah, I’ve got a better question: if it wasn’t a cover-up, would you have covered up your financial problems? Isn’t that kinda the definition of a cover-up: covering up something?
Also, I wonder… Back in 2009, was the board really thinking that a reporter would be scouring through 1200 pages of information in 2012? Do you think they thought this article would ever be written? Do you really think the board was playing that long and clever of a game? You know what I think about that idea. Remember the “winning” article?
“We spent countless hours with attorneys to make sure we understood the state law about how endowments work, and the accountants had to agree with our approach to give us an unqualified audit.”
So we’re supposed to trust you…because you talked with attorneys and accountants to see how far you could push this whole thing while still remaining within the bounds of the law? How comforting! There’s nothing sleazy about this at all!
State Sen. Scott Dibble, DFL-Minneapolis, who championed the bonding request, said he was not disturbed that the orchestra had been balancing the budget with larger endowment draws.
“No, not on the face of it,” he said. “It would depend on the nature of the deficit, how serious it was; is it indicative of management troubles or an unstable organization? In the recession, nonprofits were doing lots of things to address operating deficits.”
I encourage Sen. Dibble to take a looksie at this blog. *thumbs up*
[In 2007,] so secure was the board’s sense of the future that it had just signed a deal to raise musicians’ salaries 25 percent over five years. The orchestra was entering “a new Golden Age,” gushed outgoing Chairman Paul Grangaard.
Really? I get to mock the whole “golden age” thing again?
In January 2009, Campbell, then finance committee chair, told the board it needed to decide whether to show operating losses or take larger-than-normal endowment draws.
Yikes; what a dilemma. Well, I’m sure that whatever the board chose to do, they were open and honest with everyone about it. I mean, they wouldn’t mislead politicians or corporations or hardworking patrons, or you know, hire a public-relations firm to handle –
In 2011, after choosing to balance its budget the previous two years, the board retained the public-relations firm Padilla Speer Beardsley to determine “what size of deficit to report publicly, between $2.9 million and $4.3 million.”
Quick question… Why did the board hire a public-relations firm to determine what size of deficit to report if they were not manipulating the reporting of deficits for public-relations reasons?
Campbell said it is not unusual to consult professionals on reporting news and claimed that “there was no attempt at manipulation.”
You know, maybe I’m unspeakably naive, but it’s my understanding that it’s the job of a PR firm to manipulate public opinion. Here’s the definition of PR from Wikipedia: “The aim of public relations by a company often is to persuade the public, investors, partners, employees, and other stakeholders to maintain a certain point of view about it, its leadership, products, or of political decisions.” Apparently Mr. Campbell doesn’t believe there’s any equivalence between manipulation and “persuading the public…to maintain a certain point of view.” Have fun selling that argument, Mr. Campbell! Sure am glad I don’t have to!
I’m also curious…how many orchestras in the United States hire PR firms to decide how to report their deficits?
President and CEO Michael Henson said the board’s deficit-reporting decisions were strategic.
In case you forgot from a few paragraphs ago:
In an interview last week, Board Chairman Jon Campbell rejected suggestions that the board had manipulated deficits for strategic…reasons.
So if I may be allowed to simplify and summarize… Michael Henson: “Our deficits were strategic.” Jon Campbell: “Our deficits were not strategic.” Hmm. These two might want to, you know, talk. Especially right before they both agree to give interviews for a front page story for the state’s largest newspaper. Just sayin’.
“However you want to present the argument, the reality is we have got to change the business model, because our endowment is being spent down,” he [Henson] said.
Hah. Personally, this strikes me as being akin to an arsonist saying, “However you want to present the argument, the reality is that the house is on fire, and we need firefighters to put it out.” Watching Michael Henson has become like watching a malfunctioning version of that classic computer game ELIZA. You type in a question, and Eliza throws out phrase after phrase only vaguely related to that question.
The documents obtained by the Star Tribune reveal that in September 2009, the executive committee contemplated four possible strategies for covering budget imbalances. The favored scenario would be to report balanced budgets for 2009 and 2010, and deficits in 2011 and 2012.
But there were risks. “Negative outcomes would be that the gap between public announcement of balance and the internal reality of deficits in 2009 and 2010 would need to be maneuvered carefully, and that the deficits in 2011 and 2012 might hinder fundraising,” according to the minutes.
It’s foolproof! Except…somebody somewhere forgot about the whole need to “maneuver carefully” bit. Could they have maneuvered any less carefully?
You know, they played this game pathetically badly. Even I can see that. Their PR firm during the lockout and the lead-up to it has been just terrible. They never planted any hints of trouble anywhere from 2009-2011, thereby leaving the door wide open to later accusations that they were manipulating their public. They very conspicuously – and very unnecessarily – posted articles in 2010 that trumpeted their financial health, even though they knew the entire house of cards would come falling down in 2012. They then didn’t remove those articles once they changed their narrative. They consistently treated patrons like we were childish idiots, thereby antagonizing us and giving us reason to dig through virtual archives to try to figure out what was really going on. They forgot Google. They forgot about Highbeam Research and EBSCO. They forgot that anyone with an Internet connection, some time to spare, and a passion for the Minnesota Orchestra could invest a couple dozen hours and figure out their little game. They thought people wouldn’t care enough to use Facebook and Twitter to make articles spread around the world like wildfire. They forgot – or wayyy underestimated – Graydon Royce. They thought that people like Alex Ross and Drew McManus and Norman Lebrecht wouldn’t be paying attention. They forgot that people have memories, and actually remember things. Their mismanagement of this was just epic.
So you know what? We’re getting to a point where the musicians are becoming irrelevant…in a way. (And boy, does that feel weird to type.) This conflict is beginning to stand for an even bigger question than the fate of the Minnesota Orchestra, and that question is: if the leaders of a major non-profit lie to politicians, corporations, and individual donors about the state of their finances in order to be better-positioned to get what they want, should those leaders face consequences? Personally, I think they should. I don’t think these kinds of shenanigans are okay. Do you? Feel free to make a counter-argument. Convince this naive idealist otherwise.
So I guess the question now is: where do we go from here? Yesterday’s article established the fact that the leaders of the MOA lied to the entire state of Minnesota over the course of several years. Can we ever trust them again? I can’t. The musicians can’t. Many important donors can’t. The state of Minnesota can’t. How do we get that trust back?
There will be some people who will say, well, okay, maybe the MOA did lie to us, or manipulate numbers, but dwelling on that fact won’t move us forward. I agree with that…to a certain extent. (As tempting as it is, it would be counterproductive to wallow in the absurdity for too long.) But I also believe in the axiom that “those who don’t study history are doomed to repeat it.” And we need to get a clearer unbiased picture of what exactly the history has been, so that we never make the same mistakes again. This is a public trust issue now.
After an airplane crash, the National Transportation Safety Board doesn’t sit back and say, well, we’ll never get back the people who died, so let’s just keep moving forward. No: they get out into the field and they analyze every little detail of the accident, and, if necessary, they change the rules moving forward. I submit that the financial crash that occurred within the MOA ought to be submitted to a similar kind of rigorous analysis, and that the public should be privy to it. If they don’t…how is the MOA expecting to fund-raise when they’ve broken trust with the entire community? If the community doesn’t trust them, where exactly do they think donations are going to come from in future? Because I can guarantee you, Santa’s not going to come to Orchestra Hall with a sack-full of hundred dollar bills. No, I think it’s much more likely he’ll bring coal.
Are massive 30-50% pay-cuts for musicians (and all of the changes in work rules) in the MOA’s contract proposal necessary to save the Minnesota Orchestra? Maybe. I don’t know. But here’s one thing I do know for sure: we now can’t trust a single word the MOA says. Ever. If they lied then, then who’s to say they’re not lying now?
The game is up. And if the MOA doesn’t realize this, then their PR nightmare has only just begun.
Annnnnnnnd, just as I was getting ready to post this, the universe decided to prove that last point in a rather dramatic fashion. Robert Levine has a new blog entry up called “Cooking the books“, and its closing paragraph is a doozy.
I lived in the Twin Cities for eight years. It’s a remarkable place, with a remarkable philanthropic culture and infrastructure of non-profit organizations. The people that run the Minnesota Orchestra are a disgrace to that culture. The board should resign and the new board should make its first order of business to fire Michael Henson. Maybe then the orchestra can be run by people with ethical standards above those of the bottom 20% of used car dealerships. The Twin Cities, and the Minnesota Orchestra, deserve better.
As the kids on Tumblr say…
23 responses to “Is Minnesota Orchestra Management Lying To Us, Part 3: Yes”
Emily, I love you. I’ll get a better post in later, but daaamn. So Powerful. Thank You!
Jon Campbell is quoted as saying: “We spent countless hours with attorneys … and the accountants had to agree with our approach to give us an unqualified audit.”
As I recall, the guys at Enron said much the same thing, and we know how that turned out: the bankruptcy of Enron Corporation and the dissolution (for all practical purposes) of Arthur Andersen, their auditors. I’m not suggesting anything untoward about the MOA’s auditors, of course, but the thought of Enron did come to mind after Campbell used the word “coverup” for the first time during this labor dispute. Interesting choice of words, even if it was a denial.
Just wondering how much it cost Minnesota Orchestra to hire Padilla Speer Beardsley. Quite literally adding to their deficit, (the financial one, not just the ethical one.)
No way of knowing for sure, but perhaps PSB knew exactly what they were doing, in a good way, “from the inside,” as it were. They’ve been around for ages and would not want to see the Minnesota Orchestra destroyed (I hope).
Drew McManus noted that “The MOA website currently lists the PR firm, Padilla Speer Beardsley Inc., as a donor in the $5,000 – $9,999 level.” Do you think they donated their services? I have no idea how any of this works. http://www.adaptistration.com/blog/2012/11/27/in-minnesota-the-game-is-afoot/
Most likely, it has been an “in-kind” donation on the part of Padilla. That seems to be a way for companies to reach the highest levels of “giving” without actually parting with any dollars. (Unless the two ways of contributing are listed separately in Annual Reports, etc., which is sometimes the case.)
Campbell (Board Chair) “the accountants had to agree with our approach to give us an unqualified audit.”
That is not what unqualified opinion means. Unqualified means the organization followed accepted accounting principles (GAAP) and the financial statements reflect what the organization did (free of material misstatements). It is not an opinion on the organization’s approach, their business decisions, or anything else related to the management of the orchestra.
Thank you. I think this is an important distinction to make, especially for those of us not well-versed in these types of issues. And of course Campbell knows what he’s talking about. He’s misleading us about not misleading us while misleading us. The mind boggles.
Emily, have you seen the new Star Tribune article? Written specially by CEO of the Tribune and board member of MNO???
Yes, I DID just see this. I’m busy clicking all sorts of links over here and networking and such, so I just caught it. Gee, I’d love for Mr. Campbell to explain in detail why Mr. Henson is so perfect. I want to hear an in-depth explanation of why he’s so awesome. Go ahead, Mr. Campbell.
Oh, and does it strikes anyone else as being ***incredibly bizarre*** that after the musicians issue a vote of no-confidence in Michael Henson, the person from the MOA to respond to that vote is…not Michael Henson? If someone did that to me, I would want to be front and center attempting to prove my capability, intelligence, and worthiness for the job. What exactly is happening here? Where is he?
Actually, the StarTribune article was written by Claude Peck and Kristin Tillotson, two well-known reporters. The “disclaimer” at the end of the article is just to let people know that the publisher of the paper has a vested interest in all of this (to put it mildly).
He’s hiding. Because he’s is a pickle to say the least. Also, why is Mr. Campbell issuing this statement? The man who lied about lying? “Michael Henson is the perfect manager” HA! Don’t make me laugh (oh wait, I just did). I think it is becoming clearer that management is desperate to keep control, to stay out of jail, whatever.
Also, how did Graydon Royce get access to the minutes? And WHY would management give such damning evidence to a reporter?
As I understand it, the minutes were a part of the 1,200 pages given to the musicians (I think?) at some point. Graydon and possibly other reporters went through it very carefully and found the smoking gun. That’s my take on it, anyway, unless I read the article wrong (which is very possible).
Since Jon Campbell was the Finance Committee chairman for FOUR YEARS prior to becoming board chairman, and therefore is most responsible for this entire scandal along with Henson, it seems likely that he is now trying to save his own neck.
Henson lying to the Minnesota State Legislature to obtain state funding? Oh, that will go over real well with them.
Yes, it’s also my understanding these are from the 1200 pages given to musicians. But we don’t know who Mr. Royce got them from, or when. Quite a few people would have had access to them, so the question is: who had an interest in releasing them? Musicians? Campbell/Henson? A rogue board member who was a “whistleblower”? A board member…who happens to be the publisher of the Strib? Lots of possibilities… We know nothing more than that. And I’m not going to speculate any further than that, as tempting as it is…
Thanks a lot Terry! (And thanks for correcting my error above)
Yes, I feel like Campbell and Henson are desperately trying to cover their butts. I don’t see how they can possibly get out of this, even with a pitiful “We Have Confidence In Michael Henson” from the board. I’d be feeling pretty sick if I was one of them right now.
As we learned when it was reported that a Minneapolis City Council member was living with the orchestra’s marketing director, it’s a small world in so many ways!
Just for the record, here’s the source re: Jon Campbell as Finance Committee chairman from the Minnesota Orchestra website:
Jon R. Campbell, who serves as an Executive Vice President of Wells Fargo, was elected Board Chair by the Orchestra’s Board of Directors, succeeding Richard K. Davis, who completed a two-year term. Since joining the Minnesota Orchestra Board in 2001, Campbell has served on its Executive, Audit, and Board Development and Governance Committees and has chaired the organization’s Finance Committee for the past four years.
http://www.minnesotaorchestramusicians.org/?p=3655 This is interesting.
Oy vey, “the Minnesota Orchestra does not receive a top score at CharityNavigator.org because management does not make audited financials or Form 990 available on the orchestra’s website.” Minnesotans are going to HATE hearing that! Quite simply, it is not who we are.
Wellllllllll, now Minnesotans can get the 2011 990 AND a whole lot more:…………
Emily, this is great — you are a smart cookie and keep up the good work! (And Song of the Lark is my favorite book.)