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State AG files suit to void Maryfest contract

 

April 25, 2018 | View PDF

FIle Photo

Mark Jensen

A previously secret agreement is allegedly restricting Maryfest's ability to raise funds for the Marysville Strawberry Festival and, with help from the state's Attorney General's Office, Maryfest officials hope to void that agreement.

The contract signed by former Maryfest board members in February 2017 puts a lifetime ban on six individuals who were formerly volunteers and board members, and also bans the Seattle Seafair Pirates organization.

If Maryfest allows those individuals back into the organization, Maryfest could be required to pay Mark Jensen, former vice president of Maryfest, $25,000 for each banned person allowed to rejoin the organization.

The agreement also sets out that Maryfest would donate $4,000 to the Marysville Community Lunch Program and $10,000 to the Holiday Treasure Chest Charity Foundation, a nonprofit organization that Jensen is the executive director of.

As part of the agreement Jensen would not seek legal action against the Maryfest organization.

The agreement specifies that "'Maryfest' acknowledges the extreme hardship on the Holiday Treasure Chest, by 'Jensen' being forced to defend himself against multiple and unwarranted attacks by the aforementioned Previous Board Members."

Jensen did not respond to email or calls for comment.

The contract also includes a confidentiality clause which prohibited board members from talking about the agreement.

"This Agreement is to be kept confidential at all times and not made available nor any subject matter contained herein be made available to non-Executive Board Members, members, the public or any other entity," states the agreement.

The Attorney General's suit said that this has made it difficult for current board members to fulfill some their responsibilities.

"The confidentiality portion of the agreement has limited Maryfest's ability to explain to its donors and past and present members why certain individuals are unable to participate in the Strawberry Festival," state officials wrote.

The agreement was signed on Feb. 21, 2017, by Jensen and a number of former board members who are no longer with the organization.

Current Maryfest president Jodi Hiatt said she and other new board members learned of the agreement in an executive session shortly after she took office.

"None of us had seen it before, or even heard of it. We were shocked," she wrote in a declaration that was submitted with the Attorney General's lawsuit.

Maryfest's lawyer worked with the state's Attorney General's office in an effort to undo the contract, resulting in a lawsuit that was scheduled to be heard on April 24.

"Maryfest has in place very strong leadership and their hope is to move on and be relieved of the risk that this contract created and welcome back the people that the contract sought to preclude to be involved forever," said Gary Baker, a Marysville lawyer who is representing Maryfest in the suit.

Baker said that contracts that go against state public policy are generally unenforceable.

"There are several legal arguments why this agreement is not enforceable, some of them procedural under Washington law and some of them based upon the conflicts of interest and breaches of fiduciary duties," said Baker.

The Attorney General's lawsuit puts forth many of these arguments, including the procedural arguments that the Maryfest board allegedly did not have eight directors present as required by the organization's bylaws to vote for the agreement, that the vote allegedly did not happen at an open meeting and that they failed to record the vote in the official minutes.

Other arguments put forth by the lawsuit include that nonprofit corporations like Maryfest do not have the power to distribute income to their officers or directors.

"We contend that this agreement on behalf of a charity is against public policy and it appears to carry out a personal dispute rather than a legitimate purpose for a public charity like Maryfest," said Baker.

"Using charitable resources for a private purpose or if the parties have conflict of interests so there wasn't a fair arms-length transaction [an agreement made between parties that do not have biases in favor or against each other], the courts can invalidate contracts on those grounds," said Baker.

Because the contract bans former volunteers and calls for confidentiality, the lawsuit contends that Maryfest has been having trouble getting sponsors, which is one of their primary revenue streams.

Maryfest officials estimate that the festival will cost $260,000 this year and they have $90,000 in expected revenue currently.

The organization can use their reserves, but Maryfest officials say that will leave them broke or near broke.

Regardless, the plan is still to put on a festival in June.

"The festival will happen this year, and we're excited to move forward, but this is part of the baggage that the current board inherited that needs to be cleaned up," said Baker.

The Attorney General's lawsuit was scheduled to be heard at the Snohomish County Courthouse on April 24.

 

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