CEDAR RAPIDS — GO Cedar Rapids worked with its bank to recall $300,000 worth of checks written to vendors involved in the newbo evolve festival to avoid overdrawing its account, the tourism bureau acknowledged Wednesday.
GO Cedar Rapids board chairman John Myers said former chief executive Aaron McCreight — who was fired Aug. 20 by the board, citing being misled and the festival’s $2.3 million loss — should not have written the checks, although sufficient funds existed in the account at the time he wrote and mailed the checks.
McCreight was aware Bankers Trust had the first right to payment per the terms of a $2.25 million line of credit, Myers said. There would not be enough money to meet a payment deadline to the bank if the checks were cashed, he said.
“Aaron McCreight should not have written those checks,” Myers said. “He should not have sent those checks out the door.”
GO Cedar Rapids initially declined to acknowledge the bad checks. The organization provided explanation after a Gazette report on Wednesday featured interviews with vendors whose payment had not cleared.
McCreight wrote the checks to vendors and a check for $250,000 to Bankers Trust as part of loan repayment the week of Aug. 6-10 before going on vacation, Myers said. The festival, which featured Maroon 5 and Kelly Clarkson and celebrity speakers such as Olympian Adam Rippon, fashion designer Carson Kressley and filmmaker John Waters, was held Aug. 3-5.
Myers said some checks were cut in the wrong amounts and others checks went to vendors without legal contracts.
“Aaron should have been much more diligent in running the organization in not putting those checks out the door,” Myers said.
Myers said the bank got wind from McCreight himself about the checks to vendors and the account having insufficient money to meet an Aug. 15 payment deadline. Noticing the account still had enough money, the bank took $500,000 out of the account on Aug. 13 and then notified GO Cedar Rapids director of finance Doug Hargrave, according to Myers and a statement from GO Cedar Rapids.
The board of directors immediately worked with the bank to stop the checks, Myers said. Myers said technically the checks did not “bounce” because they recalled the checks rather than having them not clear due to insufficient funds.
Myers said he was not sure how many checks were canceled. He said did not question the bank’s actions, saying he believes the bank did nothing wrong.
Scott Valbert, a spokesman for Bankers Trust, declined to comment about the loan other than to say, “Bankers Trust does not share financial or other details about our commercial or individual customer relationships. However, I can confirm that we are working closely with the GO Cedar Rapids’ board of directors and leadership on this situation.”
Myers said an independent audit will examine communication between McCreight and Hargrave, who should have notified McCreight not to write those checks.
After initially declining to identify Hargrave’s role with the organization, GO Cedar Rapids told The Gazette on Wednesday Hargrave was hired full time as finance director on July 1. Hargrave previously served on the organization’s board of directors.
Myers reiterated that the board is committed to repaying all the money owed to the bank and vendors, but said, at this point, he does not know how soon that will be. He said vendors can expect to be contacted directly this week or next to begin discussing a payment plan.
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GO Cedar Rapids’ interim chief executive Jim Haddad is working on different concepts for how to continue the organization while paying off its creditors and will present it to the board in the coming weeks, Myers said.
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