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Jan 21, 2007 4:58 pm US/Central
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Nonprofit Gives Perks To Execs, Layoffs To Others
Minnesota Diversified Industries Plans To Layoff 250-300 Workers, Many Disabled, Many Making Minimum Wage
MDI Execs Get Treated To Parties, Spa Vacations, Golf Outings, Casino Trips
Outrage Over Hypocrisy, 'Self-Enrichment And Self-Indulgence'
St. Paul (AP) ―
A nonprofit plastics maker with the mission of training and employing disabled people has given its executives expensive party perks in recent years, while it planned to layoff workers.
About 100 workers at Minnesota Diversified Industries have been affected by layoffs this fall, according to an investigation by the
Star Tribune. Many of those workers are disabled people making at or near the minimum wage.
MDI recently told state officials that 250 to 300 more workers will be laid off, at least temporarily, in March.
MDI has taken its executives on a Lake Minnetonka party boat, has given them $100 bills to gamble with at a casino, and has sent its executives and spouses to a retreat at a golf-spa resort.
The executive entertainment, offered once or twice a year, continued even after the company lost money in 2005. At a getaway last fall, CEO Mark de Naray and five vice presidents checked into the Grand View Lodge, a resort on Gull Lake near Nisswa, for a strategic-planning session where they played golf and discussed plans to lay off workers.
"It's very low dollar value," De Naray said of the $8,000 resort bill and similar expenses. "And, you know, when you work as hard as we do at this business and you need time away to get your thoughts on a strategic plan, that's how you do it."
The first round of layoffs began a week after the trip, the newspaper reported.
The company's plants in Grand Rapids, Minn., and Hibbing, Minn., make plastic boxes for the Postal Service -- which cut orders 65 percent this year.
De Naray, MDI's chief executive since 2003, said he takes responsibility for the layoffs even though he couldn't control the Postal Service cuts. He had hoped to increase revenue by 2010 and had expanded operations in Grand Rapids in anticipation of growth.
But the growth in other accounts didn't make up for the more than $20 million drop in orders from the Postal Service. Now, MDI is likely to report a loss of nearly $3 million for 2006, De Naray said.
MDI had sales of about $41 million in 2005 and was the sixth-largest social service nonprofit in Minnesota, according to a
Star Tribune survey of the state's 100 largest nonprofits.
MDI gets government set-aside contracts because it trains and employs disabled workers. Federal law says 75 percent of the production workers on such contracts must be blind or disabled.
Although he serves on the nonprofit's board of directors, De Naray didn't tell the board about the executive perks.
On one trip in 2004, about a dozen people were staying at Hotel Sofitel in Bloomington when De Naray took them to a bus without revealing its destination. Then he or an assistant handed out $100 bills for gambling during a casino trip.
De Naray said the executives "were going to enjoy ourselves for a few hours" and the point was to see who could win the most money, which would be returned to MDI. He said he doesn't remember if the nonprofit got all the money back.
"I am in shock," said former board Chairwoman Catherine Connett, when told of the outing. She led the board's governance committee at the time. "I just don't think that is an appropriate behavior."
Rich Cowles, executive director of the Charities Review Council of Minnesota, which monitors nonprofits, said gambling with charity money is "in the category of self-enrichment and self-indulgence."
MDI's set-aside contracts with the government are overseen by a nonprofit association called NISH. Martin Williams, its regional executive director, said he would make inquiries about the issue that could lead to an investigation. He said results would be turned over to a federal board that has the authority to deny set-aside contracts.
Tim Hoffmann, who takes over as MDI's board chairman this month, said the perception that executives spent nonprofit money on themselves doesn't help as the company struggles to cover losses, find new customers and bring back laid-off workers.
But he doesn't consider the "executive planning sessions" to be excessive, because most of them were in the Twin Cities. "They weren't boondoggles in the Virgin Islands," he said.
"Is there some activity that we shouldn't repeat? Absolutely ..." he added.
MDI's current and former leaders have been well paid. In 2005, De Naray earned $340,000 in salary and benefits, according to
Star Tribune research. He said the 2005 figure included a bonus, and that he's currently paid $263,000. An analysis of nonprofits a bit larger than MDI found the average top salary is $230,000, said Linda M. Lampkin, research director of the ERI Economic Research Institute in Redmond, Wash.
Former MDI Chief Executive Lloyd Bratland left the company in 2003 with nearly $900,000 in severance pay, deferred compensation and salary, according to MDI's tax returns. This occurred after the board of directors retained a lawyer to investigate his management style, said former board member Elmer Trousdale.
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)