Mount of piling debt
The Mount's financial troubles now totaling more than $8.7 million to several creditors, including $4.3 million owed Berkshire Bank raised red flags as early as March 2006, when an outside audit questioned whether The Mount could continue "as a going concern."
Today, the historic summer home of the famous Gilded Age novelist is now in default to all its major creditors.
In 2006, faced with daunting debt, all but one of the board's half-dozen trustees quit.
The new board assembled in late 2006 and willing to inherit The Mount's financial challenge brought sharp business minds, ambitious turnaround plans and money connections in places like New York and London. But no board member is a Berkshire resident one has a weekend house here and only one carries a broad institutional memory of The Mount and its CEO, Stephanie Copeland.
Copeland, who has been CEO since 2001 but has worked at The Mount since 1993, was heavily focused on raising restoration funds for Wharton's historic house and gardens. But as is the case with other nonprofit organizations in the area, operational fundraising has proven daunting in recent years.
But the Mount's debt level appears unique compared to other nonprofit operators here.
"It's out of control," said one veteran of nonprofit administration in the county.
Asked yesterday to reflect on her oversight of the purse strings, Copeland replied that she would never have ignored obligations to pay insurance, maintain its buildings and meet other operating costs.
"I definitely felt obligated to delivery quality and I think we have done that extremely well, considering how little we had to work with in manpower and money," Copeland said.
Yesterday, she had an update: The Mount has raised $500,000 in donations since the "Save the Mount" campaign was launched on Feb. 24 with the foreclosure threat. The Mount has 16 days to raise the rest $2.5 million to satisfy Berkshire Bank's demand, and Copeland said she's leaving no fundraising stone unturned. An anonymous donor has agreed to match the funds The Mount raises, Copeland has said.
A big boost came this week with an e-mail blast to about 1,500 people who have previously supported or visited The Mount, she said.
'Nerves of steel'
But a Mount employee, who was laid off with seven others last month, said Stephanie Copeland has "nerves of steel and is willing to walk a really tight line to get where she thinks she ought to go. And she overextended things way too much. It's been a lot of wishful thinking."
Copeland led the charge in raising $13 million over 10 years to renovate and restore The Mount, where work is still incomplete. But raising funds for an operating budget that grew from six figures in its early years to $2 million today has been hampered by donors' desire to give "restricted funds," or cash for specific purposes, said Copeland.
She said she has not focused heavily on local charitable donations, as the Edith Wharton Restoration has an international audience from which to draw.
But Copeland conceded that, after The Mount's controversial decision to evict the Shakespeare & Co. theater company from its summer home at The Mount years ago, "nobody would touch us with a 10-foot pole."
Some of that bitterness remains among potential donors, according to local nonprofit insiders.
To keep going, The Mount has repeatedly dipped into or borrowed heavily from its restricted donations in recent years to pay operating bills, according to financial documents obtained by The Eagle. Copeland said that money was not tapped without donors' approval, and some, but not all, has been repaid.
Simultaneously, borrowing has skyrocketed.
The new board that assembled in 2006 believed The Mount's red ink could be turned around with creative fundraising, educational programming and a broader role for the Plunkett Street estate.
They said they envisioned an organic farming organization that could be operated in partnership with area farmers and local schools, said board members Gordon Travers, who joined the board in 2006, and Hannah Burns, who joined last year, also from New York City.
Last year, with some fresh business guidance from the board, The Mount's admission revenues reached a record high. But an ambitious fundraising campaign last year never gained traction, said Travers, who has a vacation house in New Marlborough.
Now, Berkshire Bank's generosity in repeatedly extending credit to The Mount has become its biggest financial burden. The bank has the power, in theory, to take over the expansive estate.
Referring to the bank's foreclosure notice, Travers said, "It has been a long time coming."
Of the board that resigned, he said, "These were people who had historic ties to The Mount in the late 1990s, and they felt uncomfortable and not able to engage in the type of fundraising that was projected at the time, to cover the debt and operating expenses."
Travers, who has restructured businesses in the past, had been excited about a bright future for The Mount when he signed on. He said this week, "I now know why they asked me to be on the board."
Travers joined with Lord Christopher Tugendhat of London, an investment banker, Wharton fan and House of Commons member.
Also joining then was Sandra Boss, an American business consultant based in London, who is now interim board chairwoman of The Mount.
Those three board members in 2006 each delivered $50,000 in contributions with their arrival, according to The Mount's financial records and audit reports. But their money made little dent in the troubles.
Plan falls through
An elaborate fundraising plan to finance the repayment of The Mount's $2.5 million purchase of Edith Wharton's personal library from British bookseller George Ramsden in 2005 never materialized last year as planned.
Instead, The Mount was forced to focus first on its Berkshire Bank debt.
Ramsden gave The Mount 10 years to pay back $900,000 in connection with the Wharton book collection. The Mount paid him in 2006, but Ramsden did not receive his second payment last year.
Robert Wilmers of Buffalo, N.Y., a bank executive and philanthropist who financed most of the book collection with a $2.5 million loan, was to be paid in full by Dec. 31, 2007. He has not been paid; he declined a request for an interview this week.
In a phone interview from Great Britain, Ramsden was circumspect about the outstanding debt owed him.
"They've been in touch, and we're on very friendly terms," he said. "I'm just concerned they get out of their difficulty and that this one piece of American heritage remains intact."
Ramsden has a secured lien on the famed Wharton book library, which he can reclaim if he is not paid.
In December, said Travers, "a donor pulled back, after seeing the (The Mount's financial) books. The debt burden was so great compared to revenues that people didn't want to put money down a hole."
The Mount's leaders say Berkshire Bank has been supportive and generous toward The Mount, and has been apprised of the situation. Travers, who said he is serving on his first board of trustees, said he is committed to "transparency" with lenders.
Travers and Burns, who works at Lehman Brothers in New York, said the board should, ideally, have 15 to 20 members, including local ones.
"It is not unrecognized that as a board we don't look good compared to other institutions out there," he said, of the board's size and shortage of Berkshire-connected members. "We are competing with a lot of others institutions in the Berkshires."
Financial reports prepared in 2006 by the independent accounting firm Lombardi, Clairmont & Keegan of Pittsfield were foreboding.
The firm's report is included with The Mount's financial disclosure forms, which are routinely filed with the state Attorney General's office.
According to the report, The Mount's net assets had decreased by $177,600 in the year ending March 2005, and by nearly $950,000 in March 2006. That time period covers the $2.5 million purchase of the Ramsden book collection.
To meet its bills, according to the audit report, The Mount had dipped into $500,000 in restricted funds to cover operating costs, and its overall liabilities exceeded assets by $4.8 million.
Meanwhile, Berkshire Bank had increased a line of credit to $1.82 million.
Along with a projected budget deficit for the upcoming 2007 fiscal year, those factors "create an uncertainty about the organization's ability to continue as a going concern" said the report.
Then, in March 2007, the annual audit raised an even bleaker number: The Mount's net assets had dipped by another $1.2 million. Liabilities were up to $6.03 million; again, the organization had dipped into restricted funds.
The Berkshire Bank note was increased again, to $3.745 million, with far tighter terms this time. Future pledges from the planned fundraising effort last year were to be used to repay the bank debt, and other restrictions were imposed.
Copeland said the contributions of donors will not be processed until The Mount is able to work out its deal with the bank.
"We've had terrific response by the community to this emergency," she said, of local support for The Mount. "I am heartened by it."
Hannah Burns said of the board, "We take the issues quite seriously, and we want to bolster senior management in both operations and finance. We have to separate the business from the creative."
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