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210 25 A Significant Event that Changed My Plans Finally, a matter arose that involved a working shareholder being charged with a major conflict of interest. When the transfer station went into operation in 1970, it opened up new opportunities for the Boss Scavengers to get out of collecting garbage and be retrained as drivers, truck maintenance workers, and managers. Under this unique arrangement, Boss Scavengers remained on Sunset Scavenger Company’s payroll, even though they were actually performing services for another entity. The transfer station would contract with Sunset Scavenger Company to provide the personnel for these necessary posi­ tions and reimburse Sunset at an hourly rate that would not only include the then prevailing hourly rate for direct labor, but also other related costs, such as pension, health, welfare, and so forth. The primary reason for this arrangement was to simplify payroll. Although physically working for another entity, the Boss Scavenger was still controlled by the rules, regulations, and bylaws of Sunset Scavenger or the revised bylaws of Envirocal Inc., the holding company . All employees of the other entities were still dues-paying members of the Sanitary Truck Drivers and Helpers, Local 350. The only exception to this arrangement was senior management. In this controversial situation, a Boss Scavenger had been as­ signed to the transfer station, initially as a driving instructor training and certifying some thirty-five drivers to drive the 80,000pound eighteen-wheeler waste-transfer vehicles. In time, as the need for drivers waned, the transfer station needed continual maintenance , periodic improvements, and upgrades—sometimes costing as much as $100,000. The protocol was, of course, to put these needs out to competitive bidding, review the bid based on the specifications, consider the contractors’ qualifications, and award the contract. Over the years, and especially between 1982 and 1986, the contract became awarded to the same entity. I personally thought this was strange, and other members of the board noted it as well. The shareholder involved was a longtime friend of mine, so I contacted him personally about the matter, wondering about 211 A Significant Event that Changed My Plans a possible conflict of interest and noting that some of the board members had concluded that he was getting kickbacks. He vehemently denied such a claim and facetiously said, “If I was getting kickbacks, the company was still getting the lowest bid.” After further discussions with him, I concluded that he was somehow connected with the company financially. I cautioned him that, if he were connected with the company, he did have a conflict of interest and should clean up his act and find another contractor. Once again, he denied any wrongdoing and argued that the company always got the lowest bid. I told him that was not how I saw it and the board was on the hunt. I suggested that, in his own best interests, he should terminate his relationship with the contracting company. If the board were to make a move on him for a purported “breach,” there would be nothing I could do to help him. The next day, I received a call from the contractor asking to see me. When he arrived, he brought with him his bank ledger, corporate agreements, and other company documentation to prove, once and for all, that this shareholder had no financial interest, direct or indirect, in the contractor’s business. He had me review his company and personal checkbooks, insisting that the shareholder ’s name never showed up anywhere. I thanked him for sharing this information with me. I was satisfied that there was no credible evidence to tie the shareholder to the contractor. My gut feeling, however, was still to the contrary. Unbeknownst to me (until I was provided a copy of the board agenda the day prior to the next meeting), several members of the board had called for the shareholder to appear before the board to respond to charges of a conflict of interest. At the board meeting , the suspect shareholder denied the charges and showed us the documentation to demonstrate his innocence. After the presentation and a very short discussion, the board of directors voted eight to three to fine him $5,000 and give him a month’s suspension , for a total penalty of $10,000. It was evident that this decision had been made in advance and outside the boardroom walls. I and the other two board members who voted against the fine were harshly criticized for not voting...


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MARC Record
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