The Press-Enterprise
Lou Hirsh
November 26, 2009

San Jacinto chamber has deep ties to some implicated in corruption probe

Caught in the middle of a sweeping corruption probe involving two of its founders, the San Jacinto Chamber of Commerce has moved to reduce the daily role of Executive Director Nancy Ayres.

On Nov. 12, Riverside County prosecutors indicted Ayres and eight others, including a developer who helped found the chamber. Authorities said they conspired to launder hundreds of thousands of dollars and conceal campaign contributions.

Ayres' husband, James Ayres, a city councilman and former mayor, is at the center of the political corruption charges. Three other council members and four developers were also indicted.
The chamber was formed last year.

According to a letter sent to chamber members, the organization's nine-member executive board voted Nov. 18 to accept Nancy Ayres' offer to terminate her current contract "in favor of a new agreement that will contain reduced hours, reduced responsibilities and a reduced salary."
Chamber leaders did not return calls seeking elaboration. Sketchy details regarding Ayres' future role -- as well as other leadership changes referenced in the letter -- left some chamber members this week scratching their heads about what changes have occurred and what is in store.

Several said they are pleased with the job the chamber has done. Other local business leaders remain perplexed by the chamber's creation, since members voted overwhelmingly 10 years ago to merge two separate chambers into what is now the Hemet/San Jacinto Valley Chamber of Commerce.

The San Jacinto chamber was started by a group that included James Ayres, as well as indicted developer Stephen Holgate. According to affidavits filed by prosecutors, Holgate was the chamber's initial CEO and financed its startup by writing a check to the chamber for $50,000 in December 2007.

One of the other indicted developers, Byron Jerry Ellison, once worked for Holgate and was the chamber's initial chief financial officer. Nancy Ayres was named its executive director from the outset, heading its daily operations.

Indicted councilman Jim Potts serves as an ex-officio board member without a vote. None of the chamber board's voting directors is implicated in the county indictments.

In a statement announcing its indictments earlier this month, the district attorney said its investigation "disclosed improprieties in the financial relationship" between Holgate, James Ayres and Nancy Ayres. Among 32 search warrants in an 18-month probe, prosecutors obtained San Jacinto Chamber of Commerce bank records and found ties to other aspects of its investigation among Holgate, Ellison and Nancy Ayres.

Nancy Ayres, who is also a local school board member, will be arraigned Dec. 4 after her indictment on 139 counts, including 43 felonies and 96 misdemeanors. She declined to comment, referring all questions to the chamber board of directors.

Chamber board responds

Directors said the chamber will no longer take any donations from any individual or business accused in the investigation. The board is also ordering a "focused fiscal audit" of chamber finances to be done by outside professionals, and is drafting what will be a new "much reduced budget" based on standard revenue sources.

Reached this week, chamber members said they were encouraged to hear the organization's board will be more hands-on in its leadership, though they were waiting to hear more details on the announced changes.

Stephany Borders , owner of Party Planners, a catering business in downtown San Jacinto, said the chamber has been especially active since September 2008, holding regular monthly business mixers and other member events.

"I think it does a better job in promoting local businesses than the Hemet-San Jacinto chamber, because it serves a focused membership in this city with common issues in the same area." Borders said. "It doesn't have to serve that broader base that the other chamber has to serve."
Chamber member Keith Lundy, a retired Riverside County employee who now organizes charity golf events, said the chamber supports charities, spotlights businesses in a quarterly magazine and helps members network. He said it should be a better organization if leaders indeed move to clean up shop.

But the letter left Lundy and others wondering what exact changes are in store. Lundy said members need to know, for instance, the details of Nancy Ayres' reduced involvement.
Also, the letter says the upcoming audit will include "as much financial information as we can gather for the time prior to the installation of your current Board after the previous Board members resigned; and all information generated from operations since we were installed."
"That is so confusing," Lundy said, noting the letter doesn't specify who resigned or when.
"Their communications have always been kind of vague. That's one reason why I'm no longer a part of it," said Kurt Stingley, owner of Hurley's Automotive in San Jacinto for the past 16 years. Stingley said he recently allowed his annual membership in the chamber to lapse.

Proponents say a San Jacinto-focused chamber was needed to address business development in that city as it grew.

Patti Drusky, president and CEO of the Hemet/San Jacinto chamber, said she remains perplexed by San Jacinto's move to form a new chamber.

She said the Hemet/San Jacinto chamber has about 1,000 members, including 250 San Jacinto businesses.

The new San Jacinto chamber has 154 members, according to its Web site.

EXPERT: CHAMBER MUST ACT

At least one expert on nonprofit leadership says the San Jacinto chamber has much immediate work to do if it is to maintain credibility as the court case plays out in the coming months.
Pat Lewis, senior professional-in-residence at Arizona State University's Lodestar Center for Philanthropy & Nonprofit Innovation in Phoenix, said chamber leaders will need to deal with the shadow now hanging over the organization by being "completely transparent" about changes under way.

"They have to keep the members informed on what's been found out, and they may have to make changes in leadership," said Lewis, who was interviewed before last week's board actions.
San Jacinto chamber board changes are already under way.

In an e-mail Wednesday, executive board member Paula Licitra confirmed that Jeff Sheppard, the board's vice president, resigned within the past week. Sheppard, who heads the Ramona Humane Society, did not return calls seeking comment.

Also Wednesday, the executive board's treasurer, Alonso Ledezma, a broker and owner of San Jacinto Realty, said he hasn't been to a chamber board meeting since about September. He plans to leave the board but has not submitted a letter of resignation.

"You have to donate a lot of time and I started getting busy in my office, so I'm not part of it anymore," he said by phone.

Beyond the chamber's mission, some business owners are concerned about the impact on future development in the city.

"The problem I see is, who is going to have the moral authority to decide what gets done?" said Steven Rowe, owner of Sunridge Realty and a San Jacinto resident since 1996. "Which projects get approved and which don't? This is going to be an issue as long as this shadow hangs over everything."

Chamber ties to indictments

The San Jacinto chamber was incorporated in late 2007 and began operations in early 2008. It rents space in a city-owned downtown building for $1 per year.
According to minutes of a City Council meeting in December 2008, then-vice-mayor John Mansperger, among those recently indicted, described the chamber as "a gift that Mr. Holgate has given to the city."

In a search warrant affidavit in the county corruption probe, district attorney investigator Kim Robinson said the existence of the $50,000 Holgate check to the chamber, and his discovery that the chamber wrote checks to Nancy Ayres over a period of six months signed by Ellison, "led me to believe that the bank account handling the Chamber of Commerce would shed light on more evidence of money laundering."

In chamber bank records obtained through U.S. Bank, the investigator focused on five checks paid to Nancy Ayres totaling $11,000 during 2008. The checks were signed by Ellison. The search warrant affidavit said Ayres did not report the chamber earnings in financial disclosure forms before her election to the San Jacinto school board.

In another warrant affidavit, focusing on the Ayreses' joint account at Altura Credit Union, the investigator found the Ayreses appeared to be depositing an unusually large amount of cash for the years 2005 through 2006, totaling about $140,000. The investigator contacted the Franchise Tax board to investigate potential tax fraud.

A special agent with the tax board informed the investigator that it appeared the couple committed tax evasion. The agent said Nancy Ayres did not report as income two checks from Ellison, totaling $12,500, which she received in July and August of 2006.

Staff writer Gail Wesson contributed to this report.

Reach Lou Hirsh at 951-368-9559 or lhirsh@PE.com
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