(In Our Opinion)
Background
The Reading Country Club was purchased by Exeter Township through eminent domain, under the threat of housing development, for $20.5 million over a decade ago. This acquisition was financed through a $10.5 million loan and $18 million in bonds. To date, the Reading Country Club, which includes both the golf course and hospitality businesses, has resulted in millions of dollars in losses for Exeter taxpayers. Notably, $10.5 million of the original bond remains unpaid, and there has been no evident effort to reduce the significant deficit. The club serves fewer than 500 Exeter residents annually.
A pressing question is why the current Exeter leadership, including Gardella, Vollmer, Bell, Schnee, and Piho, are determined to maintain an operation that is clearly a financial disaster. This includes the recent illegal hiring of Dan Hoch, an unlicensed lawyer and friend of Schnee, to manage the township’s only cash business.
Successive groups of Exeter Supervisors, from Lisa Vanderlaan to Galterre and Gardella, have turned the Reading Country Club into a financial burden, costing taxpayers millions. The golf course, with its outdated design, is used by fewer than 450 people in a town of 25,000, creating a significant financial imbalance. The Club House, which was once a profitable bar and restaurant, was drastically altered by these leaders using millions in taxpayer money, resulting in an unattractive and unprofitable establishment that ultimately closed.
For years, it was believed that the poor state of the Reading Country Club was due to the incompetence of various township leaders who consistently made poor decisions. This began with a small group known as the ERCCP, which included members such as Speece, Galtere, Staub, Gardella, and Foy. These individuals worked diligently to gain control of the board, and once they did, substantial amounts of money began flowing into the golf course. It appeared that these members were treating the club as their private domain, funded by taxpayers, to enhance their social standing.
One notable incident involved the ERCCP vice chair and Exeter Supervisor, Speece, who resigned in disgrace after it was discovered that he approved a private wedding event for the golf course superintendent’s daughter, disguising it as a golf outing and holding it at the Reading Country Club clubhouse, which was closed to the public. However, the most significant scandal during the ERCCP era involved Lisa Vanderlaan and Township Manager Granger. They forced the management company, VIVA, out of their contract to run the RCC restaurant and bar by breaking the lease agreement. This led to a lawsuit costing the township over $3.8 million, including nearly $2 million in legal fees and a final settlement of $1.8 million to VIVA. After this incident, the clubhouse remained closed (except for private use by ERCCP members and their friends) until RHM took over its management.
A review of the financials revealed questionable expenses, such as high costs for lawn maintenance and amenities for the few golfers, disproportionate full-time employment at the club shop, and minimal revenue. Initially, the club’s finances were tracked through an enterprise fund, which required balanced budgets similar to private businesses. This system provided necessary checks and balances, leading to the conclusion that the club’s losses were due to poor management and lobbying by a small group.
However, the situation worsened under the leadership of Gardella, Vollmer, Bell, and Schnee, especially after the hiring of a dubious township manager, Betsy McBride, and the promotion of finance clerks to directors. Vollmer was appointed treasurer, marking a significant shift in the club’s finances and governance, prompting a reevaluation of our understanding of the financial mismanagement.
Under the governance of Betsy McBride, Gardella, Vollmer, Bell, and Schnee, the first significant red flag was the failure to present a balanced budget. Despite numerous spreadsheets presented to the public, none accurately reflected the township’s financial status. Consequently, expenses spiraled out of control. The township’s annual expenses, already high at over $10 million, escalated first to $12 million and then to $15 million without clear justification. Financial reports revealed concerning allocations, with hundreds of thousands of dollars consistently assigned to vague categories such as “services,” “consulting,” and “training”.
The situation at the Reading Country Club (RCC) became even more alarming. For example, an audit of the initial $18 million bond proceeds revealed that complete financial records from 2005 to 2016 for three RCC funds were missing. Additionally, the audit stated that $2.7 million intended for capital improvements was misappropriated for “operating expenses,” ending up in the pockets of a management company hired to run the golf course. It is noteworthy that since then, the Supervisors in charge, Speece and Staub, have sold their homes in Exeter Township and moved out of state.
The RCC operated under an enterprise fund, which legally required balanced budgets and provided necessary scrutiny. Under Gardella, Schnee, and McBride, the RCC was shifted to a government fund, which lacks stringent oversight, and makes the Golf course a Municipal Golf, even though it is currently illegally maintained at Private Golf Course rules and standards. This change led to unexplained losses at the RCC, which were covertly covered by transfers from the township’s general fund. Subsequently, Schnee negotiated a contract with RHM, a hospitality company associated with The Hilton Hotel in Reading. This contract, poorly drafted and heavily biased, required Exeter taxpayers to subsidize up to 83% of every dollar made by RHM, and in some cases, 100% of alcohol sales. This led to numerous quid-pro-quo events, including lavish parties hosted by Gardella, Schnee, Vollmer, and others at the taxpayers’ expense during the run-up to the November 2023 Supervisor elections. Predictably, this arrangement exacerbated the RCC’s financial losses. Further issues arose when the bureaucracy, under McBride’s leadership, began illegally moving funds to create the illusion that the RCC was profitable under RHM’s management.
Approximately a year ago, the township’s accounting firm, Herbein, resigned unexpectedly. A month later, Betsy McBride also resigned, with Schnee drafting a special contract ensuring the township would cover her legal expenses in any future litigation involving her.
Under the leadership of Schnee, Vollmer, Bell, and Piho, the unexplained financial losses at the Reading Country Club began to accelerate significantly, amounting to hundreds of thousands of dollars per quarter. Recently, a final red flag emerged with the last-minute, illegal hiring of Dan Hoch, a failed lawyer with an inactive license due to bankruptcy and a friend of Schnee, to manage the Reading Country Club’s cash operations.
Our prevailing theory
Our theory is that the persistent efforts to discredit any commentary and the extreme resistance to implementing strong scrutiny and checks on the RCC’s operations and finances suggest that a large-scale embezzlement operation has been going on for years.
We believe that both the Exeter Bureaucracy and officials and contractors, past and present, including Schnee, Piho, and Bell, are profiting from this scheme, both directly and indirectly. The estimated size of the embezzlement is in the hundreds of thousands of dollars.
The clear, long list of established risk factors for embezzlement by Exeter Township governance and government employees, with the RCC as its epicenter are:
Lack of Internal Controls —> Constant refusal for a new forensic audit much like it was done years ago and uncovered multiple improprieties.
- Weak Financial Oversight: If there are inadequate checks and balances in place, such as segregation of duties, it becomes easier for individuals to manipulate financial records and misappropriate funds.
- Inadequate Auditing: Without regular and thorough internal and external audits, fraudulent activities can go undetected for extended periods.
Access to Funds and Financial Records —> Clerks turned directors override external CPAs
- Unrestricted Access: Employees or supervisors with unrestricted access to township funds and financial records can easily divert money for personal use.
- Manipulation of Records: Those with the ability to alter financial records can cover up their tracks, making it difficult to detect discrepancies.
Weak Governance —> Schnee, through resolution penned by him, has full control of Exeter Township’s governance
- Incompetent Leadership: Poorly trained or inexperienced supervisors may not recognize the signs of embezzlement or implement effective preventive measures.
- Conflicts of Interest: Supervisors or contractors with personal interests that conflict with their official duties may exploit their positions for financial gain.
Contractor Fraud —> At the top of the list is Schnee Legal Services, which is redacting its invoices to conceal unethical, outrageous, and appalling billing practices.
- Inflated Invoices: Contractors might submit inflated invoices for work that was either never performed or was performed at a much lower cost.
- Kickbacks: Contractors may offer kickbacks to township employees or supervisors in exchange for awarding contracts or approving payments for substandard or unnecessary work.
Financial Mismanagement —> Obviously there is a good reason why Herbein abruptly resigned
- Poor Budget Controls: Inadequate budget controls and monitoring can lead to overspending and provide opportunities for funds to be siphoned off.
- Misallocation of Funds: Funds intended for specific purposes may be diverted for personal use or to cover up previous embezzlement activities.
Lack of Transparency —> It is quite evident from the “last-minute” resolutions and the retroactive attempts to cover up misdeeds by Schnee, Piho, Bell, and others, that taxpayers are being denied access to public documents. This is exemplified by the thousands of dollars Schnee has billed for Right-to-Know requests, among other tactics, to prevent anyone from understanding what is truly happening.
- Opaque Processes: A lack of transparency in financial transactions and decision-making processes can conceal embezzlement activities.
- Inadequate Reporting: Failure to provide regular, detailed financial reports to the public and oversight bodies can allow fraudulent activities to continue unchecked.
Cultural and Ethical Issues – Schnee and Piho, along with Bell, are notable examples. Their behavior during public meetings illustrates their constant efforts to stifle and silence dissent. This is evident in Schnee’s lawsuits and the condescending behavior of Piho and Bell, who frequently engage in personal and childish attacks.
- Unethical Behavior: A culture that tolerates unethical behavior or lacks clear ethical guidelines can encourage embezzlement.
- Pressure to Meet Financial Goals: Employees and supervisors may feel pressured to meet financial goals or cover up financial shortfalls, leading to fraudulent activities.
Personal Financial Pressure – Schnee is financially struggling, Piho is using his business as a personal piggy bank, and Bell is not well-compensated at Fidelity Investments.
- Personal Debt: Individuals facing significant personal financial pressures may be more likely to engage in embezzlement.
- Lifestyle Inflation: The desire to maintain a lifestyle beyond one’s means can drive individuals to steal from township funds.
Inadequate Consequences —> This is most notably exemplified by Schnee telling the public, “If you don’t agree with these decisions, you can always sue us.”
- Lenient Penalties: If the penalties for embezzlement are not severe or the likelihood of being caught is perceived as low, individuals may be more inclined to commit fraud.
- Lack of Prosecution: Failure to prosecute offenders can create a perception of impunity, encouraging others to engage in similar behavior.
Conclusion
All the risk factors for a massive embezzlement scheme are present in Exeter Township, centered around the Reading Country Club.
To mitigate this, first Piho, Bell and Schnee must go.
They need to resign and be fired.
To do so, It is essential to have strong involvement from Exeter taxpayers and the public to address this issue. Given the circumstances, it is highly unlikely that Piho, Bell, and others will resign voluntarily, and it is even less likely that Schnee will be fired or quit on his own.