Case 1i04-cr-00281 Document 43-1 Filed 03/21106 Page 1'1 of 1B

colporatiots that had what seemed like unlimited resources. We did battle to end any nulrber ol
injuslices lo low income and average citizens. Throughout my 23 ycars a1 Public Action I did
evert'thing I could to win our battles firsl - and try lo find the resources to pay the bilis second.

Irecognize lbat at times I pushed the envelope in order to achieve our n1ission. I
recognize now that I certairly woLrld have been better off penonally had I taken a more
con.erv" ire.rpp'oach. Bur I Jidn l.

As a resull. we regularly faced cash shoftages. Sometimes it seemed like a daily crisis.
But we had rvonderful people working witlr us. On e number ol occasions, I had to tell our'
employees we $ouLdn't be able to make pa1'roll. At times, we enListed members of ollr board
and other wealthy suppo ers to make the organization short tenn loans.

And, on occasion, when I was Executive Director ofPublic Action, I admittedly engaged
in conducL to creale floats by engaging in what is commonly relerr€d to as check kttrng as a way
to span thc gaps in our funding. this. ilr cssence, allowed the orgallizalion acccss to what
amounted to urauthorized loans lrom our banks.

A. Thc 1993 Check Kiiing Activily.

December 1991 was such an occasion. In i993, Public Action was dependent upon more
lraditional lbnns of fundraising. such as door{o-door and telephone canvassing, a fundr4ising
dinner, and charitable contributions liom Bealthy individuals. Unlbrlunalely, these sources of
funds Nere inconsistent, and on tnultiple occasions I found thar the organization had lrot altajned
the lundraising goals we had anricipated.

AI the time, I knew rhal Public Acrion had ovef $800,000 ir] rock-solid receivables in its
pipeline, including pledges tiom \\,ealrhy donors, previously commjtred loans frorl individuals
sympathetic to Publjc Action's mission, and earned jrcome from organizing efforts that public
Action coordinated. However. this pipeline of funds was nor immediately available ro public
Action in December l99l in order to meet the day-to-day needs ofthe organization.

ln order to supplement this cash-flow shorrage - just as I would do in 1996 and lg97 I
created a lloat among Public Action's bank accounts by writing a series ot circuit ol checks
among lhe various bank accoulrts uhen I knew these accounts did noi have enough flrl)ds to
cover each check. And. as in 1996 and 1997, I lell cerlain that ro bank wouid ever lose any
monev because I knew ofthe receivables in the pipeljne and I always knew that in the event ot' a
serious problern there were many suppofiers who lvere ready ard willing ro come to the aide of
!Te organrzalr0n,

However, jn late 1993. before Public Action could convcn ils receivables into cash,
several of the organizatioD's banks discovered the tloat and stopped payment on publlc Acrion
checks, rcsulting in an overdratl jn some ot' our accounts. I immediately coDlacted the banks
invoived and worked closely with them to cover rhe overdraft. *ii"h
-a" .omp,.r.ry
extinguished wilhin a lew mo ths. I nade sLlre that clerJ bank was made *hole and, as i knew
al1 along, no bank suffer.ed any loss.

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 Case 1i04-cr-0028'1 Document 43-1 Filed 03/21106 Page 14 of 18

to thc delayed dcposit routine. ljnfortunately, the demands ofthe delay program were more than
I had anticipated.

In addition, Ln early i997. as a condition ofcontinuing to process our credit card salcs.
U,S. Bank of Oregon required that we substantially increase a leserve account lhat we
maintained at their bank. In March 1997 U.S. Bark required that we increase our deposits in tiris
account to 520,000 per week. In April 1997, the brnk increased these required ddposits to
$25,000 per week. By May of i997, we had deposited well over $700,000 into this reserve
accounl.

In order to sustain the delay program, and to make the required deposits into the rcserle
account, I again created an unaulhorized float in our bank accounts. In the spring of 1997, the
floats were large though I was always conlident that lhe amount ofthe float never exceeded the
anrount ofundeposited credil card transactions in the delay program which the organization had
in i1s possession and could deposit at any time to cure the float.

In fac1, it as my firm beliefthen - as il is now that there trere not only adequate funds
available to cover the float: but there was never any actual overdraft. ln lale 1996 and 1997. I
viewed the pool of credit cards funds in the delay program (which had been authorized bv new
members. but not yet deposited) as, essentially, another account - just like our bank accounts.
New mcmberships were authorized each dav and their deposits werc delayed beiween 7 and 30
days to allow cancellations to come in before their deposits. At the same time, each da1,, rfioley
was deposited from this reservoir offunds. afler the appropiate period of time. By mid-May of
1997 there \!as almost $1.6 million of credit card au lodzations available fbr deposit. This
reservoir of funds. combined with our bank ch€cking accounis and the reserve account, cnsured
that there was never a "net overdraft" in olrr accounts in 1996 or J997.

In the spdng of 1997, when it was clea. that we needed more cash, I began discussions
uilh Access about increasing the amount they had loaned the organization. The program had
gone quite well On their initial loan of $l rnlllion, CACCR had already paid Access
approximately $223,000, so the peopie at Access were quite eager to taik.

. But on May 28, 1997, Colc Tavlor tsank notitied public Actjon rhar they \.vould no longe.
honor checks drawn on uncollected funds. During the period ofthe float, Colc Taylor and a1l of
our other banks were knowingly paying on uncollected funds which is the onlv way a float can
be sustained. When I learneal that Cole Tallor would no Longer pa1 on uncolTected funds, I
inlmediately contacted South Shore tsank (now Shorebank) - the bank most likell, to incur an
overdraft as a result of Cole Taylor's decision. I asslued South Shore we had sufficient cash jn
the pool ofcredit card funds in tire delay program lo cover any and all outstanding checks.

In order 1o prevent any bank from suffering an aciual overdratt, I directed the stalf at
Public Action and CACCR ro begin capturing a substantial pofion (though not all) of the
authorjzed credit cafd sales in the delay program. Within a jnatter ofdays, usirg the funds ffom
the delay program, we deposited over $1.4 million into our bank accounts. which was more than
sufficienl to co\'er the cntire float- Over thc nexl 1wo days. Publjc Action deposited an additional
$263,000 dollars in sales from the delay prografl. We did not have to rely at a1J upon rhe more

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