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
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
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
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
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
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.''