The Pennsylvania Bar Association has assumed control of the Pennsylvania Bar Institute after audits showed the PBI lost more than $4.1 million between 2015 and 2017 and had been operating since Jan. 1 at an operating loss of roughly $44,000 per week, according to a letter sent to the PBI’s directors and officers from outgoing PBA president Sharon Lopez last week.

The PBI board, which has many members in common with the PBA board, voted to eliminate the officers and directors of the PBI in April. Lopez said in an interview Thursday that the decision was not made lightly, and the PBI is now being assessed to determine how it should proceed. Property leases and personnel costs will be taken into account, Lopez said.

“It was clear that in order to keep the gold standard of CLE in the marketplace and in order to preserve the brand that PBI has … immediate action had to be taken,” Lopez said.

The PBA publicly announced the decision in a press release issued Thursday, just over a week after Lopez sent a letter to the PBI’s officers and directors notifying them of the decision and explaining the rationale behind it.

In the April 25 letter, Lopez said the PBI losses dating back to 2015, “combined with a FY 2019 budget which approved an operating deficit of several hundred thousand dollars, led the PBI members to conclude swift action was needed.”

“The fiduciary duty of the PBI members is not only to the institution but also to its employees, and more specifically their pensions,” Lopez said in the letter. “If the PBI continued on the path it was on, the PBI reserves would have been depleted in approximately 20 months. Staff retirement benefits would ultimately be jeopardized. Twenty-two months is a relatively short period of time, considering the PBA officers have been meeting with the PBI officers about the ongoing use of reserves for more than two and half years and losses have been occurring since 2015.”

Reached Thursday, Lopez said the letter was not intended to be public but added that she stands by everything in it.

“We were aware that there were opinions and information going around that were perhaps misleading and, not only inaccurate, but maybe in some respects accusatory,” she said, “so the letter was really meant to set the record straight for the board members” and to assure them that the PBA remains committed to providing CLE throughout Pennsylvania.

Lopez said in the letter that a PBI members meeting was held April 18, at which they voted to terminate the PBI board of directors and replace them with PBA board members.

“The PBI members also voted to begin the voluntary dissolution and wind-up of the business of the PBI as a separate corporate entity,” Lopez’s letter said. “The PBI will continue to exist as a separate entity until such time as the dissolution is complete. As the PBI is a 501(c)(3) and the PBA is a 501(c)(6), any remaining reserves (after satisfaction of expenses/liabilities) will be appropriately directed to a separate nonprofit or foundation.”

Once that process is complete, the letter said, statewide CLE programs will be provided by the PBA CLE Department.

In the letter, Lopez acknowledged that the news might have come as a surprise to some of the PBI’s directors and officers.

“Immediate action needed to be taken to curtail this pattern of operating loss and use of reserves to cover operating expenses,” Lopez said. “Regular and frequent meetings were held with PBI leadership to discuss the ongoing concern. It was assumed that this was being communicated to the PBI board in some fashion. If this was not done, we apologize.”

Lopez said in the letter that, last spring, the PBA board obtained an independent legal opinion on the options available to the PBA and the PBI, and shared that opinion with PBI officers in August 2017.

“They shared our concern for the financial well-being of the PBI and agreed to take action to stave off the financial loss,” Lopez said in the letter.

A performance audit of the PBI commenced in February of this year and was completed April 4, according to the letter.

“The recommendation to dissolve the PBI,” the letter said, “was based on several key findings arising from the performance audit: 1) the structure and separateness of the PBI and PBA was not useful and led to inefficiencies; 2) the financial situation of the PBI was dire and the most recent PBI budget for FY 2017-2018 was approved with an operating loss (approximately several hundred thousand dollars); 3) the strategic plan had many good ideas but there were no immediate plans for change as the implementation of the plan was set for the fall of 2018; 4) the executive staff did not have an alternative plan to bring the PBI back to financial health, but relied almost exclusively on website targeted marketing; 5) the website registrations, which began in January 2018, had not resulted in a net increase of course registrations; and, 6) two key employees left the PBI during the audit, the marketing director and the IT director.”

“We are cognizant of the fact some may criticize this action as premature because strategic planning and the new website was just getting started,” Lopez said in the letter. “However, during the performance audit, and the meetings with leadership, we did not see evidence of the course changing direction.”

Lopez said Thursday that, after the decision was made to restructure the PBI, she reached out directly to the PBI’s 20 directors and heard back from about two-thirds of them.

Many of them had the same question, she said: Is now the right time to do this?

“I might have had that question a little bit more firmly in mind before we took the action,” Lopez said, “but since we’ve taken that action and since our executive team has now entered into the direct oversight of PBI, I am more than satisfied that the action was correct and needed.”

Lopez also said in the letter that PBI executive director Richard McCoy left the organization April 20.

Asked Thursday whether McCoy’s departure was the result of the restructuring, Lopez said, “Dick chose to leave when he left.”

“Obviously, the rationale and timing of our communication regarding the restructuring of the PBI necessitated his departure at some time but he chose to leave when he chose to leave,” Lopez said.

McCoy could not immediately be reached for comment Thursday.

As for the rest of the PBI’s staff, Lopez said it was her understanding that the previous PBI leadership laid off about 10 people in the fall, but added, “At this point there’s no plan for a major overhaul of staff.”

She acknowledged, however, that “buildings and leases and personnel costs are always something you look at when you’re trimming the bottom line.”

“The thing that might change is the diversity of programming … the number of programs being offered in various locations,” she said, adding, “I do believe that in the end, the consumer, who is reviewing the options available on the web, will not see a difference in terms of what the programming is.”