Slavery museum disputes $1.6 million shortage claim

By: Will Jones | Times-Dispatch
Published: January 14, 2012

Former Gov. L. Douglas Wilder's slavery museum is disputing a claim by the city of Fredericksburg that the museum failed to account for $1.6 million in funds.

As part of its efforts to seek federal bankruptcy protection, the United States National Slavery Museum is trying to stop the appointment of an examiner to review its finances.

The museum also maintains that it be allowed to reorganize so it can eventually resume fundraising and seek tax-exempt status with Fredericksburg.

Last month, an attorney for the city filed a motion as part of its efforts to collect more than $215,000 in delinquent real estate taxes owed on a 38-acre site where the museum has been planned. A hearing is set for Wednesday in U.S. Bankruptcy Court in Richmond.

In last month's motion, Jeffrey A. Scharf, an attorney for Fredericksburg, asked that an examiner be appointed to investigate an "unexplained change" in cash donations from the nonprofit museum's federal tax form for 2005. He said that, based on its beginning cash balance, donations and expenses, the museum should have reported a year-end balance of $1.9 million but instead showed $315,865, leaving $1.6 million unaccounted for.

In a response filed Wednesday, Sandra R. Robinson, an attorney for the museum, described the city's claim of accounting irregularities as inaccurate and "careless." She noted that Fredericksburg does not "make allegations of fraud, dishonesty, or gross mismanagement of the affairs of the museum by current management."

Robinson said the museum's tax form for 2005 reflects the purchase of about $1.6 million "in various fixed assets" on a line that reported $17.4 million in land, buildings and equipment. "Consequently, once the museum's tax return has been reconciled — properly — there is no cash discrepancy," she wrote.

Robinson added that Fredericksburg's attempts to reconcile the museum's finances were inconsistent with generally accepted accounting principles.

In an interview Friday, Scharf said the museum's explanation "makes sense" to a degree but does not eliminate the need for an examiner.

"There still remains a question — in my mind anyway," he said.

Also this week, Pei Partnership Architects filed a memorandum supporting Fredericksburg's request for an examiner or for the museum's case be converted to a Chapter 7 liquidation. The architectural firm is owed $3.7 million, according to the museum's bankruptcy filing.

The museum filed for Chapter 11 bankruptcy protection in September and reported $7.2 million in liabilities and $7.6 million in assets — essentially nothing more than the donated land.

Wilder, a former mayor of Richmond who teaches at Virginia Commonwealth University, insisted in a February post on his website that the museum would be built in scaled-back fashion. He has served as chairman of the museum's board.

As part of its reorganization plan, the museum is asking the bankruptcy court to allow it to use William Allan Jones Jr. as its accountant on a pro bono basis.