Amid turbulent times, board members of the nonprofit Seeds Community Café vow to carry on its mission of feeding all regardless of ability to pay, but without the help of founder and former executive director Lyn Harwell.
The board decided to part ways with Harwell last week, members said, citing poor direction, management and business practices since the café began serving food in 2013.
An email sent to Harwell May 31 by board president Gene Tanski said, “… because of the actions you have taken, we as a board have decided that there can be no formal relationship between you and Seeds Community Café.”
According to documents provided to the Colorado Springs Business Journal by members of the board, Harwell failed to pay employees, vendors and taxes, and did not provide the necessary insurance for the restaurant for six months. Board members sat he also ran up at least $92,000 in debt without letting the board know and made personal purchases with Seeds credit cards.
The board reached out to the Business Journal following a May 26 CSBJ story about Harwell’s departure from Seeds to pursue a social enterprise opportunity inside the Manitou Art Center in Manitou Springs.
“We started to notice discrepancies in vendor relationships, in financials, in promises and positions out there — commitments made that we didn’t know anything about or that weren’t matching what we’d approved as a board … a lot of inconsistencies which got us digging further and further,” Tanski said.
Not adding up
Documents detail bounced sales tax checks from 2015 to the city of Colorado Springs, a log of personal purchases on Seeds credit cards and past-due invoices from insurers, food and marketing vendors, as well as a letter from landlord Murphy & Co.
“I too have expenses and expect payment when it’s due,” the Murphy & Co. correspondence signed by owner Charles Murphy, dated Aug. 29, 2016, states. “This business transaction cannot continue in this fashion. You are in violation of your lease. Enclosed is a statement of your account. The statement includes 2016 September rent and parking charges showing a balance owing $6,020.”
Records also show more than $2,500 in purchases made by Harwell from November 2015 through November 2016 on an Ent Credit Union account, and nearly $1,200 from May 2016 through October 2016 on an ANB Bank-affiliated account. Transactions included dining at local restaurants and personal cell phone charges, dog grooming fees and movie tickets.
“That’s a personal issue for me. You don’t not pay employees and then get your dog a haircut,” Tanski said in an interview with the Business Journal.
In a follow-up email to the Journal, Tanski wrote:
“Given the nature of controls in place at the time, it is hard to follow the various cash withdrawals and deposits from one account to another.
“We also know that some or most of the charges were identified and accounted for as compensation. But not all of them. However, we can’t tell what fell through the cracks.
“Bottom line is we don’t know how serious of a legal issue this is but the reality is probably not much. …
“However, it does point to a couple of character and integrity issues. 1. It shows a way of running a business or organization that is unprofessional and without accountability.
“2. When you are asking employees to hold checks or simply not paying them, or you have checks bouncing for [insufficient funds], should you be using organizational cash for dog grooming and personal restaurant trips?
“To be clear, at this time, Lyn had chosen to stop taking paychecks himself. But that was his decision. It does not justify diverting funds that could have been used to honor a check or pay a merchant or employee for personal charges. As a business leader, your obligation always has to be to those who depend on you.”
Harwell stepped down from his leadership role at Seeds in April following emergency surgery and hospitalization, and Jennifer Bostick took his place. According to the board, the intent was to keep Harwell involved in Seeds, but away from the day-to-day operations.
Bostick, who has been with the café since its opening, said she was one of the employees who frequently went unpaid.
“There was always a feeling of, ‘We’re barely making it.’ I always took it as: We’re a nonprofit, that’s the nature of a nonprofit,” Bostick said.
She said she has more than $1,600 in checks she has not been able to cash and is owed even more.
“I have timesheets I never submitted because, why?” she said.
The Business Journal sent Harwell the board’s statements, asking for his response. He addressed the statements via email.
“On May 9 Mr. Tanski … publicly [announced] that I would be acting as Seeds’ spokesperson and helping with the transition,” he said. “Now, I receive this email … filled with inaccurate and unsubstantiated accusations from Mr. Tanski. I do not know what prompted this turn of events. I wish Seeds and the board all the best. At the end of the day, Seeds is facing the same struggles that all restaurants face. The fact that Seeds is a nonprofit does not change the fact that operating a restaurant is very challenging. I sincerely hope that Seeds thrives.”
Harwell said Seeds had financial oversight in place.
“I am a bit confused by this statement. After multiple requests, Seeds’ board formed a financial committee in January 2016,” he said. “Since the summer of 2016, the financial committee has had complete oversight of all spending, and Mr. Tanski served on that committee.”
Tanski said it was only toward the end of 2016 that many of the discrepancies were discovered by the board. Previously, all financial information came directly from Harwell.
“Every month we’d get these beautiful reports with beautiful bottom lines,” said board vice president Jan Cass.
Tanski said the board was unaware of Harwell’s debt accrual.
But again, Harwell disputes his claim.
“Again, I am unsure how Mr. Tanski can make this claim,” he said. “Not only was the whole board aware of Seeds’ financial position, including outstanding debt, Mr. Tanski served on the financial committee. And although Seeds does carry a certain amount of debt on its books, it is substantially less than $92,000.”
The debt, according to Bostick and Tanski, has been reduced by about a third since November 2016.
Harwell also said that the finance committee had oversight of all credit card purchases.
“All credit card records were reviewed by the finance committee,” he said. “The charges that Mr. Tanski is referring to were approved first by Seeds’ accountant, whose boss and employer sits on the board, and then by the finance committee once it was formed. Additionally, any ‘personal’ charges were booked against my salary, which was $4,760 in 2016, so the correct payroll taxes could be withheld. This known and transparent arrangement was approved by the board in part because I went many months without drawing a paycheck so the rest of the employees could get paid.”
Harwell acknowledged that he failed to pay the appropriate payroll taxes.
“Seeds has been in the red since inception, which is one of the reasons I repeatedly requested help from the board in board meetings … for fundraising assistance and grant acquisition,” Harwell said. “It was the finance committee that made the final decision on what bills were paid and when. And the board was aware of the past due payroll taxes.”
He blamed the expired insurance on the accountant Seeds used.
“Our accountant and accountant admin authorized an automatic payment of the organization’s unemployment insurance when there was insufficient funds in the organization’s account to cover that premium. Subsequently, the unemployment insurance was returned and our liability insurance was canceled due to lack of funds. It took the board six months to take action and rectify the situation.”
When asked who was investing in his newest project in Manitou Springs, Harwell responded, “I am not sure how this new venture is related to Seeds, but I have to respectfully decline to reveal who our investors are or how much money has been invested.”
Continue the mission
Tanski and Cass said there was much trepidation in going public with Seeds’ financial information and placing the blame on Harwell.
“This was a tough thing the board had to talk through,” Tanski said. “On the one hand, Lyn is the founder of Seeds and there’s been a lot of good Seeds has done in the past. We look to do as much or more going forward.”
The goal now is to explore transitioning Seeds’ programs to for-profit social enterprises in order to support the café. Those include its food truck and catering operations and perhaps educational programs, Tanski said.
According to Cass, Harwell’s new social enterprise project, CrEATe, expected to open in Manitou this summer, will be direct competition for the restaurant.
“We look forward to the competition, but we really want Seeds to be secure,” she said. “We want to preserve this place — we love this place. But we’ve had to divorce ourselves from the founder and focus on the concept and the mission.”
Editor’s note: Clarification has been added to this article indicating programs under the Seeds umbrella will be exploring for-profit options, while the café itself will remain a nonprofit.