Review finds GOP 'deficit' on Smith exit

Review finds GOP 'deficit' on Smith exit

July 27th, 2010 by Andy Sher in Politics Local

NASHVILLE - The Tennessee Republican Party had a $100,842 "deficit" when its then chairman, Robin Smith, left on May 31, 2009, according to a copy of a routine financial review conducted after Mrs. Smith departed to run for Congress.

The status of the GOP's finances when Mrs. Smith left has become an issue in the 3rd Congressional District's Aug. 5 Republican primary.

An ad by one of Mrs. Smith's rivals, Chuck Fleischmann, charges that Mrs. Smith "left the state Republican Party over $100,00 in debt. Worse, on the way out the door, Smith handed her future congressional campaign staff lavish bonuses."

There was no "audit" per se that was performed. But there was a financial "review" conducted by Chattanooga-based accounting firm, Decosimo & Co. Tennessee Republican Party bylaws require a review whenever a chairman leaves.

Chip Saltsman, a former state Republican Party chairman and Fleischmann campaign consultant, brushed away the distinctions and said what matters was the bottom line.

"It's pretty simple," he said. "It's in black and white. The day she left, the checking account was overdrawn by $19,000, ... and (she) left the party over $100,000 in debt."

He said Mrs. Smith "talks about balancing the budget and she talks about being fiscally conservative but certainly in her actions in the past, she's been none of that."

Smith campaign manager Chris Meekins attributed most of the debt to outstanding vendor payments from the 2008 campaign in which Tennessee Republicans won majorities in both chambers of the Tennessee General Assembly for the first time in 140 years.

"The vendor debt remaining after her departure was on scheduled payment terms and was resolved with revenue from the annual Statesmen's Dinner as scheduled," Mr. Meekins said in a statement.

He said it was not unusual to have payments scheduled with vendors following the campaign season, particularly one as successful as Robin Smith had in winning control of the legislature for the first time since Reconstruction.

The entire argument, Mr. Meekins said, "is a smokescreen to prop up" Mr. Fleischmann's failing campaign.

He charged the Fleischmann campaign "continues to mislead the public with forged documents bearing the Tennessee state seal and making blatantly false statements about alleged bonuses and mismanagement. His ad is the last gasp of a trial lawyer's failing effort."

A copy of the review states the state GOP's unrestricted accounts had a bank overdraft of $19,090 as well as accounts payable and receivable of $108,785 and a $4,927 note payable on May 31, 2009, when Mrs. Smith left.

Those total liabilities of $132,802 were offset by $31,960 in total assets, including $14,893 in equipment. That left a $100,842 deficit, according to the review.

Nicole Thorne Jenkins, an associate professor of management and accounting at Vanderbilt University's Owen School of Management, said that generally speaking a review "is significantly less in scope than an audit. There's less work done."

Professor Jenkins, a CPA, said an accountant's statement in a review would be along the lines of stating he or she was not aware of any material modifications that should be made.

In a full-fledged audit, the auditor would state he or she believes the statements were prepared correctly and presented fairly in conformity with Generally Accepted Accounting Principles or similar standards. The auditor would test items, such as actually contacting vendors to gain assurances about what was presented.

Meanwhile, Mr. Saltsman continued to hammer away on the "bonus" issue. Nineteen days before stepping down as chairman in 2009, Mrs. Smith signed a contract committing the party to continuing employment of her chief of staff, Mark Winslow, for seven more months.

But Mrs. Smith's successor, Chris Devaney, exercised a contractual clause to end the deal. Mr. Winslow was paid $12,504 over a three-month period through August 2009, according to documents and federal financial disclosures.

Mr. Winslow left the party on June 4, 2009, he told friends and on June 30 began issuing news releases as an unpaid assistant for Mrs. Smith's campaign.

"What we're basing that (ad's lavish bonus charge) on is that Mark Winslow got paid $12,000 from the Republican Party, basically to work on Robin Smith's campaign," Mr. Saltsman said. "And as documents show, Robin Smith signed a contract with Mark Winslow two weeks before she left. Then Mark Winslow went to work for her campaign almost immediately."

Mr. Winslow didn't start getting paid by Mrs. Smith's congressional campaign until the fourth quarter of 2009.

Three Republicans knowledgeable about the situation said the final severance agreement Mr. Winslow entered into with Mr. Devaney "replaced the employment agreement" signed earlier by Mrs. Smith.

Summing up the situation, one of the Republicans maintained Mr. Winslow's package "included no bonus money and was a settlement of salary owed under the prior agreement. The agreement with Devaney immediately terminated all employment and responsibilities between Winslow and the state party."