The former executive director of Los Altos’ Peninsula Symphony is expected back in court July 16 for a plea hearing in his alleged misuse of the nonprofit organization’s funds.
Stephen Jay Carlton, charged with embezzlement, grand theft and tax evasion, was arrested in February – six months after board members discovered that the symphony’s two bank accounts were nearly empty.
The symphony scrambled to raise money and was able to save its concert season.
Santa Clara County Deputy District Attorney Judy Lee said some of the money Carlton allegedly stole was in the form of checks that he issued to himself to pay off personal credit card accounts. She declined to discuss the items he charged on the cards.
Carlton’s wife, Karen, was jointly named on at least one of the accounts that allegedly received symphony funds, but she has not been charged with a crime.
Lee noted that she and Carlton’s defense attorney, John Cahners, have been “doing the numbers” to negotiate a plea that, if approved by the judge, would avoid a jury trial. Cahners declined to comment on the case.
A Los Altos Police investigation provided an assessment of which money went where. Carlton’s defense attorney is providing documents to make a countering case for what, if any, money was misappropriated.
In addition to determining how much prison time Carlton might serve, a plea deal could include an agreement on the amount of restitution he would have to pay to the symphony.
California penal code sets a sentencing range of probation to three years for a single count of embezzlement, but Carlton – in custody since February after electing not to post bail – faces multiple charges. The restitution amount set in a plea deal represents the expenses a victim has suffered – not a defendant’s ability to repay that amount.
Reports of stability masked exhausted funds
Peninsula Symphony board members realized in September that money was missing – and it first seemed like only a mistake. It started with a call from the bank that alerted the symphony’s secretary that the organization’s checking account was overdrawn.
“On paper, we had all of our endowment. We had no inkling that the money was moved,” said Alan Bien, chairman of the symphony’s board of directors.
But when symphony board members checked the accounts directly, it appeared as though nearly $500,000 was missing. Bien said Carlton was charged with misappropriating slightly less than $250,000, and that the other funds were depleted by hidden cost overruns and decreased fundraising.
“It was being reported to us that we were getting more donations and revenue than really came through,” Bien said of Carlton’s alleged misdeeds. “Essentially, the loss of the endowment was total, but we can only attribute half of it to embezzlement.”
Bien said Carlton told the board that he had found an accounting company and auditor that would provide financial services to the symphony pro bono, in exchange for recognition in concert programs. The symphony now believes that the company and auditor did not exist.
“People who had been doing things systematically for us for over 10 years were told that he didn’t need their help. That should have been a red flag for us,” Bien said.
The symphony’s leadership has received a rough education in how nonprofits can, in the name of frugality, take inappropriate risks. Bien conceded that they were “naive,” and have adopted new, guarded business practices in recent months.
“We’re doing a much more thorough financial background on people,” he said. “That’s the nature of business these days – everyone has to do it.”
A musical comeback
Not doing so before nearly put an end to Peninsula Symphony, founded in 1949.
“On Sept. 20, it seemed the symphony was out of business,” Bien said.
In addition to renting venues for concerts, the symphony had been funding music education it provided in Mountain View, Sunnyvale and Redwood City, for public schools that had eliminated music due to budget cuts. The educational program resumed in January, and the symphony’s last-minute fundraising has allowed it to perform its full slate of concerts this season.
“Within the first five days, we got commitments and pledges of about $200,000, which was absolutely phenomenal,” Bien said. “These were verbal pledges – the money didn’t all come in – but it gave us a sense that we could continue here.”
Bien said the orchestra is poised to end the year in the black, with a small reserve. As it rebuilds the endowment fund, Bien said the orchestra would have to identify new ways to cut expenses and rebuild a subscriber base that has flagged in recent years.
“There are many of us who’ve been with the orchestra for probably 25 years. Most of us probably can’t think what we’d do on Tuesday nights if we didn’t have rehearsals,” he added.