Verbena Embezzlement Case Draws to a Close

Seattle Superior Court Judge Kimberley Prochnau granted summary judgment against the former executive director of an LGBT health center that folded amid allegations of embezzlement.

Verbena Health, an organization that had evolved from the more limited Seattle Lesbian Cancer Project and provided health care programs for Seattle's lesbian, bisexual women, and trans communities, collapsed amid embezzlement allegations in May 2008. Former Executive Director Mo Malkin was accused of embezzling a specified amount of money from the organization.

According to court documents; Malkin's attorney, Charles Hamilton, did not contest the embezzlement charges. Instead, he claimed to the court that David Haack, who is its sole remaining board member, lacked standing to bring the suit and that the suit was improperly filed, and that Malkin had been improperly served.

Judge Prochnau ruled against Malkin on all points. Verbena was awarded $80,000, plus interest in the amount of $32,114.

The history of what happened has loomed as very unhappy episode for Seattle's LGBT community.

Verbena hired Malkin as Verbena's executive director in 2006. That same year, an outside audit was conducted and released to the board in the first quarter of 2007. According to news reports, the audit showed that Verbena's finances were in order when Malkin was hired.

But then things began to go wrong.

Haack, who joined the board in Nov. 2007, said that he received a call in March 2008 from Malkin. She was crying and telling him there wasn't enough money to meet payroll.

After helping secure a $12,500 loan from a Verbena supporter to cover the shortfall, Haack says he suggested scheduling an audit of the organization's books-Malkin told him it was not necessary.

By March 2008, several board officers had resigned and the remaining members had to step up and take on executive positions, said Haack, who became the treasurer, in spite of the fact that he had little to no financial management experience.

The newly appointed treasurer said he then invited a friend, who was an accountant, to join the board and help with the financial management of the weakening organization.

After an initial examination of Verbena's books, Haack's friend warned him to leave the organization immediately.

Then, in April 2008, Malkin cancelled a scheduled meeting with Verbena's accountant. She promised she would reschedule the meeting, but she never did.

On May 7, Haack says, he received a call from Verbena's development director saying that the organization's checks were bouncing. Soon after that, he received a call from the supporter who loaned Verbena the $12,500 to cover payroll, informing him that she had not been repaid on schedule.

According to Haack, Malkin denied both reports.

By May 10, the board discovered that its treasury was empty. The board met the same day, and, of the four members present, three left instantaneously. Haack says he elected to stay on to try to make some sense of the disarray, and to recover any money he could.

Court records indicate that Malkin had written checks on Verbena's account to herself, to fictitious consulting agencies she owned and to her partner. She also wrote checks to Caesar's Palace in Las Vegas.

Malkin was placed on administrative leave on May 11.

In all, Haack estimates that Verbena lost $500,000.

The cost for anyone linked with the Verbena fiscal collapse was devastating. On May 13, Verbena's entire staff was terminated and no payroll taxes had been paid, resulting in a $19,000 tax lien from the Internal Revenue Service.

When Verbena closed, it defaulted on its rental agreement for the space it shared with Gay City, putting an extra strain on their budget. In addition, Verbena was the fiscal sponsor of several smaller LGBT organizations-none of which received money to which they were entitled.

The remaining board members turned to finding Malkin, who had skipped town, to recover Verbena's money.

A private investigator tracked Malkin to Chicago, and she was served with papers in 2010. When Verbena's attorneys deposed her, she pleaded the Fifth Amendment on every question, including routine questions about her address and occupation, according to court records.