Ex-Music Center Official Tells of Financial Disarray : Finances: James Black says he is a ‘scapegoat’ and blames president for lavish spending. She denies charges.

As part of a secret settlement, the Los Angeles Music Center paid at least $150,000 in salary and benefits to a former vice president after he alleged that he was made the scapegoat for the center’s embarrassing financial problems.

The former executive, James B. Black, told The Times that those financial difficulties largely resulted from lavish spending by Music Center President Esther Wachtell, who he said ignored his repeated warnings about overspending.

Breaking a one-year silence, Black also said Wachtell ordered him to change the center’s accounting system to make it appear that they had met the 1990-91 fund-raising goal. Officials later revealed that the center was $1 million over budget and $1.3 million short of the fund-raising goal.

The disclosures threw the center into turmoil and caused the prestigious performing arts complex to scale back fund-raising targets and reduce support to resident companies.

“I think that I was the scapegoat,” said Black, who was in charge of the center’s finances. “I’m not employed there anymore (but) she was the one who was responsible for this.”

Wachtell, head of the center’s prestigious fund-raising arm for five years, denied Black’s allegations, saying: “He’s trying to take care of himself” by attacking her.

Wachtell said her spending practices were prudent and that she did not authorize or know about the accounting changes that led to the fund-raising fiasco.

“You are using somebody else’s money,” she said. “You have to be careful how you do it.”

Black said the center demanded his resignation in August, 1991, over the fiscal problems, but he refused and was placed on paid leave.

Within two weeks, his attorney wrote a letter to Music Center officials, saying that Black “had been made a scapegoat for the mismanagement of his superiors” and that his story would “make interesting reading.” The letter demanded that Black be paid a year’s salary of $120,000, plus benefits, to prevent “several millions of dollars in damage claims.”

According to a confidential March, 1992, agreement recently obtained by The Times, center officials essentially met Black’s demands.

During the last year, Music Center officials have maintained only that Black was on paid leave. Citing personnel policy, they refused to disclose his current salary, and they never indicated that his payments were part of a financial settlement.

Although the seven-page agreement did not require him to remain silent, Black said he believed that part of his obligation was “I presume, keeping my mouth shut.”

And Black said he feared that the monthly settlement payments would be cut off if he spoke out before the final installment in August.

Developer James A. Thomas, finance chairman of the Music Center board during the controversy, said no attempt was made to silence Black. “We did not want to do anything that people would say we were trying to cover something up and keep it secret,” he said.

Wachtell said the center settled because Black “maybe made one mistake after a lifetime of service. . . . He was a great guy. . . . He has a career to pull back together again.”

But Arco executive Ronald J. Arnault, Music Center board chairman during the disputes, said: “I think that when somebody has an attorney . . . it’s beyond altruism.”

The officials refused to confirm or discuss Black’s settlement terms and would not compare the amount to other termination agreements reached with former center executives.

Since 1988, Wachtell, a longtime volunteer and star fund-raiser, has served as Music Center president, at center stage of Los Angeles society and culture.

With Black as her top aide, Wachtell has presided over an annual fund-raising drive that helps support the Los Angeles Philharmonic, plus three other companies that perform at the center’s downtown complex on county-owned land.

For 17 consecutive years, the center reported that its goals were met. But, after the fund-raising problems of July, 1991, the center had to borrow money from its foundation to pay bills and lowered future fund-raising goals.

Officials have refused to discuss Black’s role in the problems. But shortly after he was put on leave, officials said the “financial people involved . . . are no longer here.”

Contacted by The Times, Black, 56, said he has been unemployed, although he has invested in some small businesses. He said the Music Center controversy has been “absolutely devastating” to his career and eliminated his ability to find full-time employment.

The fund-raising problem in 1991 was the culmination of years of poor management, Black said, and Wachtell should shoulder the blame.

He said he had been warning the president for more than four years that spending was out of control, but Wachtell prohibited him from telling the board.

Wachtell flatly denied both assertions.

In several budget memos obtained by The Times, Black told Wachtell that the center was adding more staff than it could afford and spending too much, particularly for unbudgeted items.

Among the expenditures he questioned were $44,000 for meals at the private Regency Club, $11,000 for flowers, $1,000 for cookies and nearly $30,000 for events at Wachtell’s home, such as a $7,000 going-away party for a staffer.

“We currently are like a wagon going downhill,” Black wrote in a March 20, 1990, memo. “If we do not do something to gain some measure of control, we are increasing our chances of crashing.”

In June, 1991, Black said, it became apparent that the center would not reach its fund-raising goal of $17.6 million.

He said Wachtell instructed him to find new accounting techniques that would show the goal had been reached. “Esther said: ‘Make the goal,’ ” Black said. “I came up with what I thought were reasonable ways and she agreed to them.”

Black said he beefed up his 1990-91 fund-raising estimates by counting somewhat speculative sources of income, such as delinquent dues from the center’s support groups. Board members have said they were not informed of the changes.

In midsummer of 1991, the center ran out of cash and board officials realized that the fund-raising goal had not been met.

On Aug. 23, Arnault demanded Black’s resignation. According to Black, Arnault said he and Thomas had lost confidence in Black, and that Wachtell could no longer work with him.

Black refused to resign and hired an attorney, Robert L. Murphy, who demanded a year’s salary plus benefits for Black.

Although the Music Center officials said Black remained an employee and was performing duties during his leave, “there were no duties,” Black said.

At the request of Music Center officials, however, he wrote a 19-page letter detailing the causes of the financial problems--and Wachtell’s role. “The Music Center overexpended the approved budget every year I have been employed,” he said. “. . . When I would discuss expenses with Esther, the most common response was: ‘Don’t worry, Jim. I’ll just raise more money!’ and the second response was: ‘I’ll discuss it with the chairman.’ ”

That letter became the basis for his lawyer’s argument that Black deserved compensation.

“After reviewing the information provided by Black, I am more convinced than ever that he has been made a scapegoat for the mismanagement of his superiors,” said Murphy in a Sept. 5, 1991, letter to the center’s lawyer at Gibson, Dunn & Crutcher. “His story would make interesting reading and he makes an excellent witness.”

Murphy, then with the firm of Greenberg, Glusker, Fields, Claman & Machtinger, said the center’s lawyer, David A. Cathcart, refused to discuss the accuracy of Black’s allegations during settlement negotiations. Reached by The Times, Cathcart declined to comment on the allegations.

Without any written agreement, the Music Center continued to pay Black his salary each month. In March, 1992, the center and Black signed a letter of agreement, which variously described his departure as a “resignation” and a “termination.”

It terminated Black’s employment as of Aug. 31, 1992, and provided him with the balance of his $120,000 annual salary and $25,000 in accumulated vacation, plus medical benefits. The salary reflects a $20,000 raise that he received in June, 1991, shortly before the center’s fund-raising crisis. Wachtell received a $30,000 raise, to $200,000.

Black said he believes he acted properly but that if his actions warranted dismissal then so did Wachtell’s.

“The board had three ways to handle it,” he said. “One way is, they could have come in and said: ‘Both of you people have really screwed up, you’re both out of here now.’

“The other way they could have done it is to say: ‘Both of you screwed up and you’d better not do it again.’

“The third way . . . was to pay me off for a year and to make me out a scapegoat. That is obviously the option that was chosen.”

Wachtell said she does not recall any warnings from Black about overspending. When The Times provided her with copies of Black’s budget memos, she said she had no recollection of Black ever having shown her the memos.

Wachtell also denied that she prevented Black from alerting board members about financial problems. “There’s not a financial decision that is made here, not very many dollars that are spent here, that I don’t bring that decision to my chairman and the finance committee,” she said. “I’d have to be an absolute fool to make those decisions by myself.”

Thomas and Arnault said Black’s allegations were reviewed by board members and auditors a year ago.

“All that has been considered and acted upon,” Arnault said. “It is inappropriate to comment on personnel matters.”

Black also criticized the 70-member board--which has included prominent social and business figures, some from Times Mirror Co., parent of the Los Angeles Times. He said the board should have been more vigilant.

Board leaders have declined to detail the role of the Music Center leadership in the financial problems. However, Arnault has acknowledged that “this was not a sterling managerial performance by us collectively,” meaning Wachtell, Thomas, Black and himself.

In the last year, the center has instituted new financial controls. The board has a greater oversight role. And the center conducts its annual audit before--rather than after--it announces the results of its annual fund-raising drive.

Officials said recently that the goal of $15.5 million for 1991-92 was achieved.