12/09/2005 1:00AM

Guild says $2.1 million misused under ex-leader


The Jockeys' Guild is considering legal action against its former president, L. Wayne Gertmenian, after an internal review suggested that as much as $2.1 million of its members' contributions to health and savings accounts were instead used to pay operating expenses over the past two years, guild officials said Friday.

According to the officials, the review showed that approximately $850,000 from the guild's Health Benefit Reserve Account, which is used to pay for health insurance, was "misappropriated" to the guild's operating account. Another $1.25 million that was supposed to be contributed to individual members' savings accounts was instead mingled with operating funds and used to pay expenses, the officials said.

The review was undertaken by the guild's new management after Gertmenian, a tenured professor of economics at Pepperdine University, was ousted by the guild's board of directors on Nov. 15. Gertmenian was at the helm of the guild for 4 1/2 years.

Gertmenian did not respond to a telephone request for comment on Friday.

Information regarding the financial transactions has been forwarded to the police in California and to the FBI, according to the guild's legal counsel, Barry Broad.

"Whether this was criminal in nature is not a judgment for us to make," Broad said. "We want to give members of law enforcement complete access to determine whether a crime has been committed." Broad declined to be specific about what information was handed over to the law-enforcement agencies.

The guild has also contended that Gertmenian and officials of Matrix Capital Associates, his management company, attempted to cash checks totaling $217,000 from the guild's accounts on the day he was removed from office, in violation of spending controls put in place two weeks earlier. Guild officials said in a statement on Thursday that they were able to stop payment on checks totaling $104,000, but that a check made out to Gertmenian for $69,000 was cashed, along with a check for $44,000 to Albert Fiss, the guild's former chief operating officer, who was ousted along with Gertmenian.

Broad and other guild officials said on Friday that the guild would seek to recover those funds, and possibly other funds as well, in a civil lawsuit, although no lawsuit had been filed by Friday.

"I think everything is on the table," said Angie Gimmel, a spokeswoman for the guild. "It's all going to be reviewed."

Gertmenian was paid $165,000 a year in annual salary by the guild. Matrix Capital Associates, which is solely owned by Gertmenian, was paid another $335,000 a year. Matrix also collected monthly rent payments of $4,000 from the guild for office space in a building leased by Matrix in Monrovia, Calif. The guild has since moved its offices to Duarte, about two miles from the former office.

Guild members contribute dues based on the number of horses they ride. The dues initially pay for a member's health insurance, but after a member has contributed enough money during the year to pay for the insurance policy, the remaining dues are supposed to be kept in an individual savings account maintained by the guild.

Because of the $2.1 million total deficit in the health and investment funds, the guild will be required to set aside funds in the future in order to fund the obligations to its members, guild officials said. Despite those obligations, the guild is not facing financial insolvency, according to the officials.

In addition, the guild did not pay many of its bills over the final six months of Gertmenian's tenure, according to a statement the guild issued late Thursday, and it failed to collect dues to fund the health insurance of many of its members. Darrell Haire, the guild's interim national manager, said in the release that the guild would attempt to work out payment plans with its vendors to satisfy the bills and collect the debts from those members who did not pay.

In the next few months, the guild expects to hire an independent accounting firm to conduct an official audit of its books, according to Broad. The firm will also likely be retained by the guild in order to determine how the guild should structure its books so as to ensure "complete transparency" to state regulators and members, Broad said.

Over the last two years, a number of state regulatory agencies, including the California Horse Racing Board, have attempted to conduct audits of the guild to address questions about the guild's transactions.

"We need an accounting system that's open and transparent so that auditors know what's going on," Broad said. "We don't want to have these questions coming up every year."