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Watertown Red and Black legal, financial issues raise concerns

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For 116 years, summer in Watertown has meant Red and Black football.

It has remained a constant in a community that has wrestled with cultural and economic upheaval for the last half century. And its significance to the history of the very game itself is unquestioned. Organized in 1896, the Red and Black is the nation’s oldest semi-pro team and is celebrated by the National Football League with a display case at its Pro Football Hall of Fame in Canton, Ohio.

For north country natives, the Watertown Red and Black means a chance to extend the glory days of playing football after high school or college careers have ended. For Fort Drum soldiers in between deployments, it is a reprieve from the tedium of military life. For some players who have committed youthful indiscretions, it is a second chance at life itself — a chance to find redemption, to hear cheers rather than jeers. The struggles and striving of its players and coaches reflect the enduring tenacity at the heart of the north country culture and provide the community with a sense of pride and tradition, and hope for the future.

But that tradition, that legacy, is being threatened, according to a former star player who alleges that problematic financial practices could bring the organization that manages the team to its knees.

The organization’s financial records were reviewed last year by Watertown tax accountant Brian Williams – who was the team’s quarterback for four seasons. His conclusion? In a written report he bluntly noted: “While on the field of play, and during the Pomp and Circumstance that continues to be alive and well at the games, all seems very good; internally, from a business perspective, this organization is on the verge of a collapse!”

Mr. Williams faulted the board for a lack of financial oversight and sound accounting practices.

After reviewing the team’s books, Mr. Williams said the organization can’t account for thousands of dollars paid out in checks signed to “cash.” He also said that despite billing itself as a nonprofit, the Red and Black hasn’t been one for years.

The organization:

n Failed to file series-990 returns with the Internal Revenue Service for at least five consecutive years

n Had its tax-exempt status revoked by the IRS for failure to file returns

n Failed to obtain tax-exempt status from the New York State Department of Taxation and Finance

Red and Black board members dismiss Mr. Williams’ conclusions, noting that the team has long had difficulty staying in business, and that today’s issues are being resolved.

There have been extended hiatuses over the years — from 1909-12, 1930-31, 1943-45, 1952-53, 1961-68 — but the team has always come surging back, thanks in no small part to its deep and distinguished roots.

“A team which took on all challengers and invariably defeated them,” as the late Watertown native Fred Exley described the Red and Black in his critically acclaimed 1968 novel “A Fan’s Notes,” the team may now face one of its greatest challenges off the field.

n n n

The latest challenge started as a favor.

Early last year, the team’s star quarterback and Watertown accountant Brian L. Williams was asked by long-time Red and Black head coach, general manager and president George Ashcraft to help the organization secure not-for-profit status, which had been revoked by the Internal Revenue Service in 2010 for failure to submit at least three-years’ worth of returns.

In the course of analyzing 44 months of financial reports from January 2009 through August 2012, Mr. Williams says he found of a number of discrepancies, not the least of which were $50,469 worth of checks made out to cash and more than $21,000 in personal loans paid for with team funds.

Mr. Williams said he attempted to find out more about the details of those transactions, but Mr. Ashcraft was unwilling to discuss the matter.

When Mr. Williams brought his concerns to a meeting of the board of directors of the Greater Watertown Red and Black, Inc., Mr. Ashcraft reacted defensively.

“George blasted me,” Mr. Williams said. “He demonized me for bringing any of this up.”

Mr. Williams left the room. When he returned later, Mr. Ashcraft was “as nice as pie,” thanked him for his work and said the board would consider his recommendations, which included placing the team under the auspices of an established not-for-profit while it reorganized its structure and finances.

A week later Mr. Williams received the first of three letters from James A. Burrows, a Watertown attorney representing the Red and Black, asking him to return all corporate documents and maintain confidentiality about the nature of his discoveries.

Mr. Williams complied, even turning down a Watertown Times request for an interview, citing his pledge of confidentiality. However, Ammbrose Souza, a former Red and Black coach who quit the team last season after clashing with Mr. Ashcraft over coaching decisions, eventually provided a copy of Mr. Williams’ report to the Times.

With his report being released to the media, Mr. Williams then told the Times that he would discuss his findings.

Mr. Ashcraft declined to comment on Mr. Williams’ report and referred questions to Mr. Burrows, who described Mr. Williams as a “disgruntled volunteer” and said that his claims were not to be taken seriously.

n n n

The Greater Watertown Red and Black, Inc., attempted to reconstitute itself as a not-for-profit corporation under section 402 of the New York state not-for-profit law on March 27, 2003, “to inculcate in young men a desire and ability to participate in the game of football, to train them in courage, self-reliance and kindred virtues,” according to the incorporating documents.

Pursuant to that incorporation, the organization was supposed to secure a 501(c)(3) tax exempt status from the IRS.

In 2006, then-president Robert C. Freeman III hired the Watertown accounting firm Poulsen and Podvin to assist.

According to Mr. Freeman, the process was never completed because paperwork was missing and the organization had neither the time nor the staff to sort everything out.

Finally, in 2010, the IRS automatically revoked the corporation’s tax-exempt status for failure to file form 990-series returns — what a not-for-profit organization files with the agency instead of an income tax return — for three consecutive years.

According to Mr. Williams, there is some question as to whether the forms were ever filed.

On top of the team’s issues with the IRS, the New York state Department of Taxation and Finance has no record of the Greater Watertown Red and Black, Inc., being a sales tax-exempt organization. This means ticket sales and concessions sales could be taxable under state law.

The whole matter may simply be attributable to inattentive bookkeeping, according to Mr. Williams. After all, the organization is maintained by volunteers who all have other responsibilities.

“I can assume much effort and time has been put into this organization, each board member seems to have a true passion for the sport, the tradition, and what the team means to the city. Maybe at a certain point, being able to run the organization effectively was too much of a burden to some,” Mr. Williams wrote in his report.

Mr. Souza had a similar assessment of the situation.

“I never saw any blatant misuse of funds or anything like that. It’s not like I saw (Mr. Ashcraft) go pay a contractor to put siding on his house or buy or Corvette or something,” Mr. Souza said. “But when you read the report and the team’s paying a loan that’s out in George’s name and then you ask him what it’s for and he doesn’t answer, then it’s kind of like, ‘Okay, what the heck?’”

Steven L. Weed, vice president of the board of directors, said that the organization’s tax problems have all been taken care of and that Mr. Williams has no knowledge of the rectified situation because he has not been around since October, when he began receiving letters from the organization’s lawyer.

Empire Football League Commissioner David E. Burch, who was present at the October board meeting, encouraged the Times to call the IRS to confirm the Red and Black’s status.

“We have no record that the organization is tax-exempt by virtue of an approved application,” said Kenneth Gerding, an IRS official who answered the agency’s not-for-profit phone line.

The agency maintains an online database of exempt organizations. The Greater Watertown Red and Black, Inc., does not show up in search results as an active not-for-profit though there is record of its status having been revoked.

A call to the State Department of Taxation and Finance yielded the same result.

“We checked the records: Greater Watertown Red and Black, Inc., is not an exempt organization with the Tax Department,” spokesman Cary Ziter said in an email.

The organization is not listed with the New York State Attorney General’s Charities Bureau either.

According to Mr. Williams’ report, the Greater Watertown Red and Black, Inc., is now a taxable entity and must file corporate tax returns for all years following the loss of its tax-exempt status and pay the associated taxes.

In addition, sponsors will no longer be able to write off charitable contributions they make to the team until the organization’s not-for-profit status is reinstated.

According to IRS regulations, a charitable organization must provide a written disclosure statement to donors for contributions in excess of $75. A donor claiming a deduction of $250 or more is also required to obtain written acknowledgement for a charitable contribution made within the same tax year that the donation is made.

Not all not-for-profit organizations have to file the full series-990 return with the IRS. Those that bring in less than $25,000 a year can simply mail a postcard with their information to the agency.

With revenue that is generally more than $50,000 a year, according to Mr. Williams’ report, the Greater Watertown Red and Black, Inc. would have to send in the full form, which includes detailed information about all income and expenditures as well as salary information for board members, executive officers, and employees.

The returns are supposed to be posted in a public place.

The Form 990 for the Watertown Family Y, for example, is available on the organization’s web site and is 37 pages long.

*****

This is not the first time that the Red and Black has faced dire financial straits and challenges to its legacy.

In a 1977 Watertown Daily Times story about the first day of practice, Sports Editor John O’Donnell wrote, “In recent years the financial picture of the Red and Black has been dismal with the team forced to seek extension of credit or fold. For the past few seasons the decision to continue was not made until the last possible moment.”

The team was suffering from increasing operating expenses and a reduced fan base but the seeds of its problems were sown when the team was flush with cash.

“Most of the debts incurred by the Red and Black came some years ago when the fans filled the stands. Money was available to hold parties and banquets and even pay expenses for overnight trips.

Those days are gone. Instead the club is operating on a tight budget. Trips will no longer include a dinner paid for by the club,” Mr. O’Donnell wrote.

*****

Today, Red and Black officials say they still face financial issues but that there is one very good reason not to trust the assessment of Mr. Williams: He has a criminal record.

Mr. Williams acknowleged that he has had troubles in the past.

In 2007, he pleaded guilty to second- and third-degree forgery resulting from two incidents in which he was accused of forging the names of two individuals to checks he obtained while working as a bookkeeper at Atomic Sign Works.

He used some of the money to buy crack cocaine, according to court records.

He was referred to Drug Court in July 2007, completed his treatment program and had the second-degree forgery felony charge reduced to a misdemeanor.

Daniel J. Gill, owner of Atomic Sign Works, said Mr. Williams has made full resititution for his missteps and that he has done some sign work for Mr. Williams at his accounting firm since the incident occurred.

“I would stand up for Brian,” Mr. Gill said. “If he’s looked into it, I would believe him.”

Since 2007, Mr. Williams seems to have made a full recovery, aided in no small part by his return to the sport of football.

A standout player at Watertown High, Mr. Williams joined the Red and Black in 2005 as a defensive back. After his scrape with the law, he returned to lead the team to an Empire Football League championship in 2009 as quarterback — the first time the team has won since 1980.

He was named the league’s “Iron Man of the Year” for three straight seasons and was the public face of the team during his tenure.

“Red and Black was a savior for me, you know? ...It absolutely provided me so much peace I guess,” Mr. Williams said.

Mr. Williams said he still wants to play but that after everything that has transpired, he feels he could not return to play Red and Black football.

“Once I got the lawyer’s letter, the three lawyer’s letters, I almost took it as a pretty good indication that you’re really not welcome around here.” Mr. Williams said.

Mr. Souza, who sat in on board meetings as a representative of the team’s coaching staff but was not at the October meeting, became a sounding board for Mr. Williams’s frustrations.

“You’ve got a guy that’s been the team leader for four years,” said Mr. Souza, “and somebody who’s obviously in the fold enough that he’s doing some consult work for the team on the accounting side. And George can’t pick the phone up. Instead, he calls a lawyer up and says, ‘Go get my s... back.’ It’s very much the kind of backhanded move that’s driven a lot of people away.”

Mr. Souza left the Red and Black in the middle of last season and agreed to join the staff of the Syracuse Shock in December. He was followed by defensive coordinator Jeremy Chaney, special teams coach Christian Hughes and offensive/defensive line coach Aaron Brown.

*****

The accounting firm of Poulsen and Podvin has been hired again to help sort out the team’s finances, according to Mr. Burrows and Mr. Weed.

But they may run into the same problems that prevented them from completing the job in 2006.

At the very least, they will have to resolve the unanswered questions Mr. Williams has raised.

Laurie J. Podvin, the account manager for the Red and Black, was unreachable despite repeated attempts to contact her.

Some of the numbers will likely be similar to Mr. Williams’: Over the 44 months of statements that Mr. Williams analyzed, the Greater Watertown Red and Black, Inc., brought in $185,444.44 in deposits.

According to the profit and loss report Mr. Williams prepared, $47,550.96 of that revenue came from “direct public support” from individuals or businesses.

The rest, $137,893.48 came from miscellaneous sources unnamed in the report.

The report includes categories listing expenditures for everything from legal fees — $1,350 — to rent, parking, and utilities — $8,230 — to uniform and equipment expenses — $20,179.94 — and even footballs — $2,756.00.

At the bottom of the first page of the profit and loss statement is a category listed as “Ask My Accountant,” a catch-all category for expenditures that are not categorized or easily explained.

It is in this category that Mr. Williams parked the checks made to cash and the personal loan being paid with team funds. The “Ask My Accountant” category contains $58,994 in expenses and consumes nearly 32 percent of the corporation’s total deposits.

After all expenses, the corporation had a net income of $6,571.10 during that 44-month period.

*****

On Oct. 21 in Canton, Mr. Ashcraft accepted a North Country Heritage Award on behalf of the Red and Black.

The award is given annually to “masters of local traditions” by Traditional Arts in Upstate New York.

Heading into his 23rd year as head coach, there is no question that Mr. Ashcraft is a master of local tradition.

He has been involved with the Red and Black for more than 40 years as a player, fan, and coach.

He is the team’s steward and most ardent supporter. He has spent more seasons as head coach than any other in the team’s history.

There would be no Red and Black without him, his supporters have said.

Steven P. Duffany, a Watertown insurance broker and loyal sponsor of the team, said that he would continue to donate to the Red and Black regardless of the not-for-profit’s standing with the IRS.

“It wouldn’t make any difference to me,” Mr. Duffany said. “I want to see the team survive. I will support them the best I can.”

Mr. Duffany said that he usually donates no more than $100 a season and does not deduct the contribution from his taxes.

Pointing to his experience running Pop Warner football teams and Babe Ruth baseball teams, Mr. Duffany said that he knows what it is like to try to keep an organization together on donations and promises.

“George is out there scrambling... People automatically assume that he’s getting rich off the Red and Black but he’s not,” Mr. Duffany said.

Acknowledging Mr. Williams’s problems in the past, Mr. Duffany said he was a “good quarterback” and a “good guy” and that he would take his evaluation of the organization’s finances seriously.

But he doubts that Mr. Ashcraft is profiting from the Red and Black.

Mr. Duffany said he could understand Mr. Ashcraft being personally offended by having his intentions questioned.

“George probably interpreted it the wrong way,” he said. “You just don’t say anything like that.”

Even Mr. Souza, who openly clashed with Mr. Ashcraft last year understands the quandary the Red and Black is in.

“I think the best thing that could happen for the team,” he said, “is that Ashcraft moves on but I don’t know if there’s anybody else in the community that will come in and put the effort into it that he has, even if at times his effort was misplaced.”

*****

In the meantime, preparations are underway for the team’s 117th season.

On a recent spring evening, Red and Black coaches put their players through their paces, running drills, plays, sprints, and sending the offensive line crashing into the tackling sled. There was no hint of the organization’s financial woes. Sights were set on the practices and games ahead.

As the sun went down and the lights came up on the Alex T. Duffy Fairgrounds, the continuance of the legacy seemed both a foregone conclusion and something earned moment by moment.

Money problems, tax issues, those things are temporary.

Sweat, the smell of grass, a setting sun, the love for the game, these things are as eternal as anything can be anymore.

Times Sportswriter Josh St. Croix contributed to this report.



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