Greek Orthodox Stewards of America - June 10, 1999
AFFIDAVIT OF GEORGE CHELPON FILED IN COURT
BY ARCHDIOCESE IN SUIT BROUGHT BY SIMOS C. DIMAS
SUPREME COURT: STATE OF NEW YORK
COUNTY OF NEW YORK
SIMOS C. DIMAS,
For a judgment pursuant to
Article 78 of the CPLR
GREEK ORTHODOX ARCHDIOCESE
Index No. 116896/98
STATE OF NEW YORK
COUNTY OF NEW YORK) ss.:
GEORGE CHELPON, being duly sworn, deposes and says:
1. I, George Chelpon, am the acting Director of Finance of the Greek Orthodox Archdiocese of North and South America, also known as the Greek Orthodox
Archdiocese of America (the "Archdiocese"), the Respondent in this proceeding. I make this affidavit in response to the papers of Petitioner Simos C. Dimas ("Dimas") opposing the Archdiocese's motion to dismiss this special proceeding to support the Archdiocese's motion for sanctions on grounds that this proceeding is frivolous This affidavit is based upon my personal knowledge and knowledge obtained in my capacity as Director of Finance of the Archdiocese.
2. As explained below, the Petitioner's charges of financial mismanagement, wrong doing and that the Archdiocese "did away" with financial controls put in place by the Executive Committee which served from September 1994 through March 1997 are baseless.
.... As shown in detail below .... the financial controls of the Archdiocese have improved under the tenure of His Eminence Archbishop Spyridon. Further, there has been no wrong doing as evidenced by the audits and reports of BDO Seidman and the Archdiocese now enjoys a stronger financial condition and more open and efficient financial reporting methods than ever before.
A. The Financial Controls of the Archdiocese Have Been Improved Under the Tenure of His Eminence Archbishop Spyridon and the Archdiocese Enjoys a Stronger Financial Condition and More Open and Efficient Financials Reporting Than Ever Before
3. My Responsibilities as Director of Finance: I am currently the acting Director of Finance of the Archdiocese, a position which I have held since shortly after the departure of my predecessor, Jerry Dimitriou, who resigned and left the Archdiocese in February of 1998. Mr. Dimitriou submitted an affidavit in opposition to the Archdiocese's motion to dismiss, making erroneous and incorrect charges concerning the financial management and practices of the Archdiocese. For several years prior to assuming my current position, I served as Head of Accounting and reported to Mr. Dimitriou. In my capacity as Director of the Archdiocese, I act as a "chief Financial Officer" or "CFO". I prepared the two-year budget and financial models which were presented to and approved at the biannual meeting the Clergy Laity Congress in Orlando, Florida last July. I coordinate and interact with the Archdiocese's outside auditors BDO Seidman, including all audit work and procedures. I also make financial decisions as to when to make payments, when to transfer funds and other such "day-to-day" financial management decisions. These decisions are mine to make within the confines of the approved budget and, while I do report to the Archbishop and Chancellor, they do not influence such financial decisions made by me. My responsibilities also include reporting financial matters and providing financial information to the executive Committee, the Audit Committee (which is a subcommittee of the Executive Committee) and the Archdiocesan Council and its Finance Committee (the "Finance Committee"). I must emphasize that I have never been told by the Archbishop, the Chancellor or anyone else to hide anything and I have been encouraged to provide all financial information required to the Executive Committee, the Audit Committee and the Finance Committee and individual members of these committees. I prepare financial reports monthly which include a balance sheet and a statement of revenues and expenditures. I am an ex-officio member of the Audit Committee. I also meet with the Executive Committee each month and provide them with monthly financial reports and any other financial information they request. Likewise, I provide the Chairman and Vice Chairman of the Finance Committee with these monthly financial reports, attend the meetings of the Finance Committee to provide financial information and respond to their questions and I talk to the Finance Committee's Chairman and Vice Chairman on a weekly basis to keep them informed of all financial matters and to respond to their questions and suggestions. In short, in performing my duties, I have been encouraged by the Archbishop to be open and forthcoming with respect to all financial information and have made full and complete disclosures to the Executive Committee, the Audit Committee and Finance Committee.
4. Improvements to Check Signing and Borrowing Policies: Contrary to the charges made in the opposing affidavits submitted by Petitioner, the financial controls of the Archdiocese have been strengthened--not weakened--since the departure of my predecessor, Jerry Dimitriou. For example the financial controls on the signing of checks have become more stringent, not less stringent. When Jerry Dimitriou acted as Director of Finance of the Archdiocese, a single signature was required on checks in amounts up to $10,000 and two signatures were required on checks over $10,000. On November 10, 1988 the Executive Committee approved more stringent
procedures. Specifically, two signatures are required on all checks and more
restrictive procedures are required on checks of over $25,000. On checks of $25,000 or less, the two signatures can be provided by any of the following persons: myself, the Chancellor, the Archbishop, the Treasurer of the Archdiocese, the Secretary of the Archdiocese or the Vice Chairman of the Archdiocese. The General Counsel is not a signatory to any account of the Archdiocese. For all checks over $25,000 one of the two signatures must be an outside lay person and corporate officer of the Archdiocese such as the Vice Chairman of the Archdiocesan Council, the Treasurer of the Archdiocesan Council or the Secretary of the Archdiocesan Council. Likewise, with respect to borrowing--such as draws on the Archdiocese's line of credit or other transactions resulting in other long term debt, there must be two signatures and one of those two signatures must be that of an outside lay person/corporate officer such as the Vice Chairman, the Treasurer of the Secretary.
5. Improvements to Audit Functions and Establishment of Audit Committee: Effective November 10, 1988, the Archdiocese established an Audit Committee which is a sub-committee of the Executive Committee. All members of the Audit Committee are outside lay persons who also serve on the Executive Committee of the Archdiocese except for myself who acts as an "ex officio" member of the Audit Committee. The Audit Committee is responsible for both internal and external audit functions. It chooses the Archdiocese's auditors, determines the scope of audits and signs the auditors' engagement letters. Currently, the Archdiocese uses BDO Seidman, an independent auditor, to perform its external audit functions. When Jerry Dimitriou acted as Director of Finance of the Archdiocese, BDO Seidman also served as the Archdiocese's outside auditor. BDO Seidman was engaged at that time by Mr. Dimitriou and the Archbishop. Now, under the tenure of His Eminence Archbishop Spyridon, the Audit Committee performs these functions of overseeing and engaging the outside auditor. Hence, the Executive Committee of the Archdiocese, through its Audit Committee, now has much more information and control over audit functions. I have been instructed by the Archbishop and the Executive Committee to bring any problems that come to light to the attention of the Audit Committee and to turn over all such matters to the Audit Committee for its review and action, including making any determinations as to whether an audit is required. The Archbishop and
Chancellor are not members of the Audit Committee.
6. Improvements to Financial Reporting and Delivery of Financial Information: Through the acquisition of new computer software, the Archdiocese has been able to improve its financial reporting and the delivery of financial information to the
Executive Committee, the Audit Committee and the Finance Committee. Since October, 1998, more financial information has become available because of new computer software which provides an accounting system for religious corporations like the Archdiocese and for not-for-profit corporations. This new system has made it possible to respond to requests of members of the Executive Committee and Finance Committee to adjust the detail and formatting of the financial reports and to provide monthly reports of revenues and expenditures. Such information has not previously been available on such a frequent and timely basis to the Archdiocese. I have been instructed by the Archbishop and the Executive Committee to provide open communication — with nothing to be withheld — to members of the Executive, Audit and Finance Committees. I have monthly contact, if not more frequently, with the Chairman of the Audit Committee. I have contact at least once a week with the Chairman and/or Vice Chairman of the Finance Committee. I attend the monthly meetings of the Executive Committee to deliver the monthly financial reports, respond to their questions and provide any financial information requested. While the Executive Committee previously met only 2 or 3 times a year, it now meets every month. The written monthly financial reports provided at the Executive Committee meetings, including the balance sheet and statement of revenues and expenditures, are also provided monthly to the Chairman and Vice Chairman of the Finance Committee. Likewise, I attend all the meetings of the Finance Committee and Audit Committee and--like meetings of the Executive Committee--I freely respond to all financial questions at those meetings. I also am accessible by telephone to these persons at any time and respond as quickly as my staff, time limitations and other responsibilities permit. In recent months, I have received requests from members of the Executive Committee and Finance Committee to provide additional kinds of financial information and different formats for the monthly financial reports and I have responded to those requests to the extent possible based upon our computer capabilities and other practical considerations. I have not declined to respond to any request for information received from any member of the Executive Committee, Finance Committee or the Audit Committee and it is my understanding that the Archbishop and Executive Committee desire that I respond fully and openly to all such requests for information.
7. Petitioner's False Charges Regarding New Software Purchased for the Archdiocese's Computer System: As described in the accompanying affidavit of Mr. Apostolos Lambropoulos, who is responsible for the Archdiocese's computer systems, the charges made by Jerry Dimitriou regarding the Archdiocese's purchase of accounting software are totally false. The Archdiocese decided not to implement the "Raiser's Edge" software marketed by Blackbaud Corporation (which Mr. Dimitriou recommended) because it did not meet the data, accounting and financial needs of the Archdiocese in an efficient and cost-effective manner. This decision was reached following a detailed study and written report of the Computer Committee of the Archdiocese and Pitts Financial Group. The software which the Archdiocese did implement--marketed by Micro Information Products Service ("MIPS")--does not permit — as Mr. Dimitriou suggests — the modification of raw data in the system after it has been entered without leaving behind a record of the previous entry. Indeed, the MIPS software purchased by the Archdiocese is an accounting program expressly made for religious and not-for-profit corporations and is just as secure as the Blackbaud product. As noted above, the accounting capabilities of the MIPS software have enhanced the financial reporting capabilities of the Archdiocese which have made it possible for me to respond to requests from members of the Executive Committee and Finance Committee for more detailed information and changes to the formatting used on the monthly financial reports without any downsides as to security features.
8. Petitioner's False Charges As to Payments Made to the Chancellor And Archbishop, Use of Charitable Accounts and Alleged Cash Collection: As discussed in more detail below, BDO Seidman has recently completed an analysis of the use of charitable funds, petty cash funds and the handling of compensation paid to the Archbishop and Chancellor which shows that the charges made by Petitioner in this regard likewise are wholly without merit. The contention that the Chancellor and His Eminence Archbishop Spyridon are or were "paid off the books" is totally false.... In fact, he has a compensation of approximately $100,000 and the other sums were paid for charity and other appropriate expenditures of the Archdiocese. As to compensation paid to the Archbishop and the Chancellor, Internal Revenue Service Form 1099 are and will be issued for all such compensation. The need to revise any 1099's was caused by Jerry Dimitriou's mischaracterization of the expenditure on the check request. Further, while funds for the Chancellor's compensation were paid —while Jerry Dimitriou acted as Director of Finance — out of a charity account, such funds originally came from the Archdiocese general fund accounts even though checks to the Chancellor were issued for a time out of the aforementioned charity account. Within a matter of weeks after Mr. Dimitriou's departure both the Archbishop and the Chancellor have been compensated from the Archdiocese's operating account and currently receive compensation through ADP, an independent check processor. Helen Bender's statement that I informed her the For 1099's were issued belatedly is simply false. I had no conversation of the nature alleged by Helen Bender. Ms. Bender did come to my office twice and — on the first occasion — I assisted her for several hours in providing information she requested. On the second occasion, my assistants sat with her for several hours in providing information she requested. On the second occasion, my assistants sat with her and spent several hours providing her with information. I also visited the Archdiocese's bank, Chase Manhattan, with Ms. Bender. Specifically, we met with Craig W. Calusen, a Vice President of Chase Manhattan, and we learned the Chase had the same
documentation on file with respect to account signataries as reflected in the then-current documentation of the Archdiocese which I had shown to Ms. Bender before visiting the bank. We also learned that, under the "old watch" (which included Ms. Bender and Jerry Dimitriou), Chase had resolutions on file which permitted Jerry Dimitriou to issue checks solely on his signature alone out of a major investment money account of the Archdiocese. As to the Petitioner's charges that there were "large cash" collections or transactions, again these allegations simply are not true. Cash collections were minimal and I can recall only one instance when a collection tray was displayed to collect money for clergy members. On the occasion I recall, a tray was put out at services to collect funds to defray funeral costs of family members of a clergy person whose family members died suddenly and tragically. A sum of less then $350 dollars was collected and the money was accounted for and used to pay
the funeral costs as represented....
B. There has Been No Wrong Doing As Shown By Reports of BDO Seidman and By The Review and Actions of the Executive Committee
9. Real Estate Purchase Contract and BDO Seidman Report: There is no merit whatsoever to Petitioner's frivolous charges with respect to the contract to purchase a residence for His Eminence Archbishop Spyridon which Petitioner contends resulted in a loss of the $139,500 deposit on the residence. In fact, the real estate was not purchased and a donor contributed $140,000 for the express purpose of replacing the aforementioned $139,000 deposit. This was confirmed by a report submitted to the Executive Committee by the Archdiocese's independent accountants, BDO Seidman. This report, submitted under cover of a letter dated September 21, 1998, verifies that, on May 7, 1998 $140,000 was deposited into an account of the Archdiocese for the express purpose of replacing the $139,500 deposit forfeited by the Archdiocese with regard to the canceled purchase of the real property and that the donation had no conditions or agreement for repayment attached. Thus, the Archdiocese has not suffered any harm or loss relating to the canceled real estate purchase and the Archdiocese has not suffered a loss of $139,500. A copy of the September, 1998 report of BDO Seidman, LLP is attached to this affidavit as Exhibit A. A copy of this report was also furnished to Simos Dimas by letter of the General Counsel dated October 14, 1998.
10. The Response to the Ad Hoc Committee Report and Actions by the
Executive Committee: The Department of Finance, the Chancellor's Office and the Office of the General Counsel to the Executive Committee analyzed the Ad Hoc Committee Report dated May 28, 1998 and prepared a memorandum response dated July 3, 1998, a copy of which is attached to this affidavit as Exhibit B. This memorandum response has been publicly available since it was published on or about July 4, 1998 on the web site of the Greek Orthodox Church located at http://ww2.goarch.org. It also was distributed to the delegates at the 1998 Clergy/Laity Congress held in the summer of 1998. A copy of this Memorandum was also forwarded to Simos Dimas by letter of the General Counsel dated October 14, 1998.
11. On Friday, September 25, 1998 the Executive Committee adopted a resolution which notes in its recitals that the Ad Hoc Committee was discharged in July 1998 and that the Executive Committee is satisfied that complete disclosure of all financial matters has or will be made and that all of the questions regarding the issues in the preliminary report dated May 28, 1998 of the Ad Hoc Committee have been or will be addressed to the satisfaction of the Executive Committee within a reasonable period of time. A copy of the September 25, 1998 Resolution of the Archdiocese's Executive Committee is attached to this affidavit as Exhibit C.
12. Thus, matters relating to the Ad Hoc Committee's Report of May 29, 1998, the response of the Archdiocese and the finances of the Archdiocese are being reviewed by the Executive Committee as it deems necessary or appropriate. Since the Executive Committee is satisfied that complete disclosure has been made and that it will undertake such review as it deems necessary to address any issues that have or will be raised concerning the Archdiocese's finances, there simply is no basis for Petitioner's unfounded charges.
13. Improvements In the Archdiocese's Financial Condition Under His
Eminence Archbishop Spyridon and Public Financial Disclosures: Despite the allegations of the Petition and the opposition affidavits submitted by Petitioner Dimas, even beyond the measurers described above, the Archdiocese has adopted additional measurers affording access to its financial information since the enthronement of His Eminence Archbishop Spyridon in September, 1996. For example, as Petitioner Ms. Bender and Jerry Dimitriou surely know, the audited 1997 financial statements of the Archdiocese and consolidated entities were distributed this summer to the delegates at the 1998 Clergy Laity Congress — over 900 individuals, to all the members of the Archdiocesan Council — over 165 individuals and to each of the Church's parishes 3 over 550 parishes. The opinion of BDO Seidman, LLP, independent auditors' report of page 3 of the audited 1997 consolidated financial statements is not qualified and, among other things, the independent auditors opined that the consolidated financial statements present fairly, in all material respects, the financial position of the Archdiocese and the consolidated entities. A review of the audited 1997 consolidated financial statements demonstrates there is simply no factual basis to the unfounded allegations contained in the opposing affidavits. A copy of this 1997 audit was furnished to Simos Dimas by letter of the General Counsel dated October 14, 1998. A copy of the audited 1997 consolidated financial statements of the Archdiocese and consolidated entitles is attached to this affidavit as Exhibit D.
14. Moreover, the audited 1996 consolidated financial statements of the Archdiocese were published in 1997 in The Orthodox Observer, the newspaper of the Archdiocese which is sent to approximately 140,000 addresses which include all the stewardship families of the Church. The publication in 1997 of the audited 1996 consolidated financial statements, which occurred after the enthronement of His Eminence Archbishop Spyridon, was the first time the Archdiocese's audited consolidated financial statements were ever published and was also the first time complete financial disclosure was made regarding the Archdiocese and its institutions. The audited 1997 consolidated financial statements also have been published in The Orthodox Observer. Simos Dimas was advised of these publications by letter of the General Counsel dated October 14, 1998....
15. Additionally, a summary of the Archdiocese's financial performance with 19931997 comparisons was published in the June 1, 1998 edition of The Orthodox Observer, which as noted previously, is sent to all stewardship families of the Church, was distributed to all the delegates at the 1998 Clergy/Laity Congress held this summer and was published on or about July 4, 1998 on the publicly accessible web site of the Archdiocese located at http://ww2.goarch.org. The 1993-1997
comparisons and summary of financial performance is attached to this affidavit as Exhibit E. This information was provided to Simos Dimas by letter of the General Counsel dated October 14, 1998. In my personal view, the Archdiocese has been in much better financial condition since the arrival of His Eminence Archbishop Spyridon.
16. Given the resolution of the Executive Committee attached hereto as Exhibit C and the financial disclosures reflected in Exhibits D and E hereto, there can be no valid or proper assertion that the Archdiocese has failed to communicate with the Executive Committee or the laity about the finances of the Archdiocese. Moreover, as noted in Exhibit D hereto, the Executive Committee is satisfied that complete disclosure of all financial matters has or will be made to the satisfaction of the Executive Committee.
SWORN TO AND SUBSCRIBED
before me this _____ day of February, 1999.
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