THE MITCHELL LAW FIRM, LLP
CLIFFORD B. MITCHELL (1927 - 2010)
PAUL A. BRISSO*
NANCY K. DELANEY*
RUSSELL S. GANS
NICHOLAS R. KLOEPPEL
RYAN T. PLOTZ
AMY A. HUNT
KAREN J. ROEBUCK, Senior Associate
ATTORNEYS AT LAW
426 FIRST STREET
EUREKA, CALIFORNIA 95501
www.mitchelllawfirm.com
Established 1915
TELEPHONE (707) 443-5643
FACSIMILE (707) 444-9586
P.O. DRAWER 1008
EUREKA, CA 95502
WILLIAM F. MITCHELL (Retired)
JOHN M. VRIEZE (Retired)
EMERY F. MITCHELL (1896 - 1991)
WALTER J. CARTER (1949 – 1993)
R.C. DEDEKAM (1929 – 2011)
* Of Counsel
May 20, 2022
Via Certified Mail
Dianna Rios
RE: Fortuna Business Improvement District
Dear Ms. Rios:
I serve as City Attorney for the City of Fortuna. As you know, the City formed the Fortuna Business Improvement District (“District”) pursuant to the California Streets and Highways Code and contracted with the Fortuna Business Improvement Corporation (“Corporation”) to administer the District and promote its purposes. Through the contract, the City provides public funds to the Corporation to administer on behalf of the City for the benefit of Fortuna’s businesses. I understand that you served as the Corporation’s executive director for a period of time, including from 2015 through a portion of 2021, until you resigned.
As you may be aware, the Corporation failed to conduct annual audits pursuant to the contract with the City for the six-year period beginning with fiscal year 2015-2016 through 2020-2021. The Corporation, at the City’s insistence, retained Anderson, Lucas, Somerville & Borges, LLP to conduct an audit of the Corporation’s finances during the afore mentioned six (6) year period. This audit is now complete, and the findings of the audit have been shared with the City.
The auditor found, generally, that the Corporation lacked adequate financial controls and managerial oversight during the six (6) years under audit. One area of particular concern—and the reason for this letter—is the auditor’s finding that you received a significant overpayment of compensation in the aggregate gross amount of $9,656.02 from the Corporation, itemized as follows:
May 20, 2022
Date of Payment Amount
June 30, 2015 $ 1,215.02
July 1, 2020 $ 4,000.00
November 1, 2020 $ 3,000.00
November 23, 2020 $ 1,000.00
July 31, 2021 $ 405.00
From our own review of the financial records of the Corporation, we see that during calendar year 2015, you received hourly compensation in the amount of $1,251.02, in addition to your annual salary of $42,953.43. We see that during calendar year 2020, you received vacation pay of $6,000 and sick pay of $2,000, in addition to your salary of $49,251.95. We also see that during calendar year 2021, you received vacation pay of $310 and sick pay of $95, in addition to your partial year salary of $29,000. These figures match the auditor’s listing of “overpayments” to you during the same period.
We are aware that the Corporation, which was your employer during all times relevant, sent you a letter dated February 27, 2022, in which the Corporation’s president wrote, “After consideration and review by the auditor and an attorney, we do not believe there was any deliberate misuse of FBID funds.” We understand that the Corporation was aware, at the time it sent this letter, of the auditor’s findings with regard to the abovereferenced payments.
The City is not yet able to opine as to whether the overpayments resulted from a deliberate misuse of FBID funds or whether the payments were a result of some other cause or circumstance. Regardless, as these are public funds, the City has an obligation to see that the public is made whole, if, in fact, the auditor is correct in finding you received $9,656.02 in overpayments.
Accordingly, the purpose of this letter is to notify you of the auditor’s findings regarding the above-described payments and provide you the opportunity to repay any amount you concur represents an overpayment of compensation during your employment. If you are so inclined, I ask that you contact me prior to June 2, 20222, to let me know your intentions. If you disagree with the auditor’s findings, you are encouraged to provide an explanation.
On June 6, 2022, City staff will be providing a report to the City Council on the audit, the significant findings, and the reasons why the contract between the City and the Corporation is being terminated. We hope to report that you have voluntarily agreed to repay the overpayments after being notified of the same.
May 20, 2022
Thank you for your attention to this correspondence. We look forward to your response.
Respectfully,
Ryan T. Plotz
CC: City Manager