Michael Shames, former head of financially ailing watchdog Utility Consumers' Action Network (UCAN), has been told to return $474,019 to UCAN as a result of consultation with the Attorney General's office. As reported by the Reader in July of 2011, Shames was taking for himself 10% bonuses off the intervenor fees that UCAN received from California Public Utilities Commission (CPUC) hearing participations. Board members didn't know of the practice, although Shames claimed they did.
Yesterday (Oct. 2), Kendall Squires, UCAN chairman, wrote to Shames. Squires told how UCAN had reviewed the 10% bonuses with the charitable trust section of the AG's office. "On the basis of its investigation, UCAN's board concludes that your bonuses from 2005 through 2012 were unauthorized and improper," Squires wrote. "This letter demands the return of $474,019 in unauthorized compensation you arranged to be paid to yourself between 2005 and 2011." In the letter, Squires said Shames did not report the dollar amount of each bonus payment to the board, and did not report the total amount of his annual compensation including bonuses in UCAN's 990 reports to the IRS. Also, there are no records showing the board approved any bonus payment at any time.
It appears that Squires had delayed sending the letter. On September 23, Kim Malcolm, who recently resigned as the executive director, wrote to a board member and said, "As far as I know, UCAN's board has not followed up on compliance with the Attorney General's directive that the UCAN board demand repayment of Shames's bonuses...If I were on the board of an agency that is under investigation for all kinds of possible malfeasance, I would not delay compliance with any law enforcement agency's directive."
I have heard from several reliable sources that the FBI/U.S. Attorney investigation of UCAN's finances is intensifying. Today, UCAN said that it has been asked to provide additional documents to the U.S. Attorney. UCAN has waived the attorney/client privilege in relation to communication with certain lawyers and law firms between Jan. 1, 2010 and the present.