Receiver urges suspension of charity group ARMS
by Kay Moore
Houston Chronicle; Houston, Tex.; Apr 26, 1986

Citing a ``pattern of self-dealing'' and ``mismanagement,'' the court-appointed receiver for Action for Research into Multiple Sclerosis (ARMS) of America has recommended that the charity's operations be temporarily suspended and its remaining staff terminated.

Attorney Ron Sommers, who filed a receivership report Friday, virtually confirmed most of the allegations made against the charity by British rock star Ronnie Lane.

State District Judge Louis Moore will hold a hearing on the report at 1:30 p.m. Monday.

Sommers asked Moore to determine within 30 days the fate of ARMS and to decide how the remaining ARMS money is to be disbursed.

Sommers found that only $97,361 of the original $1.2 million remained in the three ARMS bank accounts.

Sommers' report was not accompanied by lawsuits against former ARMS officials, and he refused to speculate on whether suits would be filed.

He declined to say what was in the depositions and said he had not decided whether to make former ARMS director Mae Nacol's statement a part of the court record. He said he was unable to take a deposition from former ARMS official Barbara Hunt, formerly known as Barbara Hunt Nacol and once represented to be Mae Nacol's sister, because her attorney requested she not appear.

Nevertheless, Sommers said Friday, ``I think I have a very clear picture of what has gone on'' with ARMS.

Moore appointed the ARMS receiver at the request of State Attorney General Jim Mattox' office.

The report also found that expenditures and salaries were ``unreasonable and excessive'' in light of ARMS' charitable purpose. The accountant's report showed that Nacol was paid $236,833 in salaries, legal fees and disbursements, even though it said the ARMS board of directors never specified a retainer amount and never specifically authorized her salary.

It also said internal financial controls were poorly designed'' and inadequate financial controls were in place during most of its operation. It claimed that a majority of the board of directors did not review the financial structure of ARMS on a month-to-month basis and said officers of the ARMS executive committee did not discharge their duties in a prudent manner.

Larry Hysinger, attorney for Lane, said he agreed with Sommers' report but said he would be disappointed'' if Sommers did not sue some of the former ARMS officials individually. He said he hoped that if ARMS is permanently dissolved, the money would go to the new Ronnie Lane Foundation for MS research, which Lane is managing from his new location in Austin.

ARMS of England, the parent charity of ARMS of America, has also been suggested as a recipient of the remaining funds.

However, Sommers' report found unpaid claims against ARMS totaling $9,611. Those claims do not include the expenses of his law firm, of his accountants - Weinstein & Spira - and of a valuation service used in connection with Sommers' investigation.

Records also show that Lane received money from ARMS for his rent, salary and a caretaker.

Ronnie is the first to admit that the whole board, including himself, put too much trust in Mae Nacol,'' said Hysinger. I don't think the board was ever aware until the end that it was its function to determine how money was to be spent.''

William Burge, attorney for Mae Nacol, said the disputed ARMS salaries, when compared to other foundations, are not out of line. Nacol, who resigned from ARMS last November, has claimed she gave up her attorney's salary in order to direct ARMS.

I don't think that in that light she was paid excessively,'' he said.

Burge said ARMS was able to obtain services and equipment at a reduced price by using relatives or friends of ARMS officials. He said the original $1.2 million was seed money to be spent in gearing up for major fund-raisers scheduled for this year.

Lane and his Scottish physician, Dr. Phillip James, said ARMS officials mismanaged multiple sclerosis research funds. Accountant figures filed with the receivership report showed that only 5.6 percent of the total ARMS funds went to research grants, compared to 8.3 percent for legal fees, 10.4 percent for advertising agency payments and 29 percent in salaries.

Sommers also found that ARMS has a membership roster of 330 members after its 15 months of operation.

The report further shows:

A $3,904 expenditure to former executive committee member Ray Ashley for plants and plant maintenance.

A $4,400 expenditure for meals, drinks and other charges at The Summit dining club.

A $6,753 expenditure to Mae Nacol for a 1972 Lincoln limousine, that Lane earlier said Nacol described as a crate.'' The accountant said Nacol purchased the car a year earlier for $5,500. The accountant said the seller's affidavit, signed by Nacol, reflects the vehicle as donated to the charity.''