The American Bar Association has posted a tax form that reveals a onetime staff member diverted about $1.3 million from the ABA over a period of eight years.
The ABA became aware of the theft by a nonmanagerial staff member in September, according to Form 990 (see page 118) and an interview with ABA Executive Director Jack Rives.
The employee was immediately placed on administrative leave and fired the next day. Lawyer and blogger Scott Greenfield tweeted the news Monday. Law360 followed with a story, as did Greenfield at his blog Simple Justice.
The ABA notified the Board of Governors’ executive committee and law enforcement. Rives said the ABA is cooperating with the investigation and has been in touch with law enforcement as recently as Tuesday.
The ABA investigation is being aided by forensic experts from Grant Thornton, along with staff members from internal audit, financial services and the general counsel’s office.
The ABA is seeking recovery of the funds from its insurance carrier. Rives said the association is expecting to recover most of the money diverted over the period between 2010 and 2017. In that same period, ABA expenses were over $1.7 billion. While well-hidden with falsified documents, Rives said the theft became apparent when the individual got more ambitious in attempts to divert more money.
Since the discovery, the ABA has reviewed and revised procedures, establishing more stringent controls and financial oversight.
In addition to terminating the employee alleged to have diverted the funds, the ABA took other disciplinary actions, including oral coaching and additional training, and it has taken more severe personnel actions that Rives was not at liberty to discuss.
The revelation of the theft occurred as the ABA is grappling with a decline in lawyer members and dues revenue.
The ABA has responded with a plan to reshape how the nearly 140-year-old association delivers services and benefits to members. In April, Rives began restructuring the ABA to align with the four goals of the association: serving members; improving the profession; eliminating bias and enhancing diversity; and advancing the rule of law. ABA entities are now organized in one of nine centers falling under one of the four goals.
While Rives is cutting costs associated with staff, the ABA’s Board of Governors is significantly reducing programmatic expenses. In fiscal year 2018, the general operating budget was $96.1 million, down from $116 million in fiscal year 2014. In February, ABA Treasurer Michelle Behnke reported that the budget would need to be cut by at least $5 million more for the next fiscal year, which begins in September. To meet budget targets, the ABA offered buyouts to 118 employees, with 42 accepting voluntary separations. According to Law360, about nine employees were laid off after the restructuring. Rives said the ABA workforce dropped from 912 on March 1 to 862 on April 1.
At its June meeting in Denver, the Board of Governors made additional cuts, reducing and eliminating all but nominal funding to several standing committees. Rives said the Board of Governors has made more than $2 million in programmatic changes for fiscal year 2019.
Rives’ compensation has fluctuated over the years, with steep increases, then a lowering of base pay starting in 2016.
Total compensation for Rives rose from $698,871 in 2011 to a high of $1,250,567 in 2015 before dropping to $1,173,030 last year, according to the tax forms (respectively at pages 83, 98 and 112). Rives’ base pay was $686,969 in 2011, $1,227,690 in 2015, and $907,828 in 2016.
Rives acknowledged a lower base pay, though he noted his current contract gives him the opportunity to earn more with performance-based incentives.
Rives became executive director of the ABA on Law Day, 2010. Before joining the ABA, Rives was Judge Advocate General of the U.S. Air Force, the senior U.S. Air Force attorney, and was the first military attorney to attain the three-star rank of lieutenant general, according to his online bio.
Journal staff contributed to this article.