Urban League's financial crisis worsens; acting CEO out

The Urban League of Metropolitan Seattle is facing a withering financial crisis — and may even sell its longtime headquarters — in the wake of the recent Seattle schools scandal.

The venerable civil-rights nonprofit recently parted ways with acting Chief Executive Tony Benjamin, the second top leader to leave this year.

At the same time, the Urban League has shuttered its once-praised small-business contracting center, which had received millions of dollars in government contracts over the past nine years to assist minority and women-owned businesses.

Having already made significant layoffs, the Urban League is considering the sale of its headquarters at East Yesler Way and 14th Avenue, according to a statement released Monday by the board of directors.

Benjamin's sudden departure came last month, as the board decided to close its Contractor Development and Competitiveness Center (CDCC), which Benjamin had managed.

In an April 4 email to city of Seattle officials, Benjamin blamed "negative publicity" from the schools scandal, which "unfairly damaged the reputation" of the organization and hurt its ability to renew some government contracts.

Monday's statement from the board said the nonprofit was "moving in a new direction in terms of leadership" and would hire a new leader "as soon as we have stabilized the organization and found additional funding sources."

Benjamin and other Urban League leaders did not respond to numerous requests for interviews over the past week.

Board Chairman Paul Chiles initially agreed to an interview with a Seattle Times reporter Monday morning. But Chiles canceled the interview a half-hour before it was to begin.

In its statement, the Urban League said it was exploring "multiple ways to move forward and reduce debt," including the possible building sale. It has owned its 32,700-square-foot headquarters since 1973, according to board member Steve Kipp. Its assessed value was $5.3 million last year.

Benjamin's departure closely followed the resignation of James Kelly, longtime president and chief executive, who stepped down in January, citing personal and health concerns. Kelly, an influential local political figure, had been the public face of the Urban League for more than a decade.

Kelly's exit came about a month before the eruption of the Seattle Public Schools' scandal, which centered on waste and possible fraud in the school district's small-business program run by Silas W. Potter Jr.

Potter's program had been set up to help minority-owned firms get school-construction work. But a state audit found evidence the program may have wasted $1.8 million in public money. A criminal investigation is under way.

The Urban League was the single largest recipient, receiving nearly $600,000 in school-district contracts that auditors labeled "questionable uses of public funds." The money was to pay for minority-business outreach and training — a specialty of the Urban League's CDCC.

But auditors criticized the Urban League's invoices as vague, and some district employees told investigators the spending did not benefit the school district.

At a March news conference, Benjamin disputed the audit, saying "we have done nothing wrong."

Even before the audit's release, the Urban League had struggled with a steep decline in government funding, its main source of income. The nonprofit got 84 percent of its revenue in fiscal year 2008 from taxpayer-funded contracts and grants, according to IRS filings.

One of the Urban League's benefactors had been the city of Seattle, which under former Mayor Greg Nickels had awarded it a succession of contracts.

The city spent nearly $4 million on the CDCC between 2002 and 2011, to assist women-and-minority owned firms to compete for city work.

The Urban League got a separate $500,000-a-year contract from the city to combat youth violence starting in 2009, after a rash of fatal shootings in Southeast Seattle.

In the last year, Mayor Mike McGinn sought competitive bids for the contracts. As a result, the Urban League lost its youth-violence contract to other nonprofits this year.

The CDCC contract was cut by more than three-quarters, down to a maximum $100,000. The city had paid only $19,000 of that when the CDCC shut down last month.

Despite the recent troubles, "I think the city had a successful partnership with them overall," said Fred Podesta, the city's director of finance and administrative services. "I see [the CDCC closure] as kind of a shame because I think they were able to help people."

The Urban League board said the organization "is still open and operating," noting its housing and education programs have dedicated funding.

But its statement acknowledged "that in this economy and events of the last few months, we must restore faith and trust in our organization, and we plan to do that. ... "

Seattle Times researcher David Turim contributed to this report.

Jim Brunner: 206-515-5628 or jbrunner@seattletimes.com

Information in this article, originally published May 2, 2011, was corrected May 3, 2011. The title of Fred Podesta, Seattle's director of finance and administrative services, was incorrect in a previous version of this story.