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Retiree fights mighty Southern California behemoth

Photo by Keith MayMost people know Mark Seidenberg as an unassuming retired guy who trawls used-book stores for textbooks, children's books and atlases that he packs up and ships by the ton to book-poor schools overseas.

But Seidenberg is also feared by the mighty Automobile Club of Southern California's secretive bosses, whose hides the 55-year-old Aliso Viejo resident is out to nail. How much do they fear Seidenberg? Enough to spend millions to stop him.

His penchant for getting difficult tasks accomplished may be what has club officials spooked. Seidenberg used to direct the federal government's multibillion-dollar food-export agency in Washington, D.C. The lives of millions depended on his ability to route grain to ports and onto ships.

But don't dare brand him a bleeding-heart liberal. He's a political conservative so right-wing that he all but falls off the edge. Like Orange County's infamous Congressman John Schmidt, Seidenberg found Richard Nixon too liberal. He opposes any taxes on gasoline and favors toll roads.

After a heart attack threw Seidenberg off the fast track seven years ago, helping people and causes closer to home is about all he can do. Thus his lawsuit to prove that the Southern California Auto Club (AAA), which is headquartered in Costa Mesa, is giving Southern Californians a raw deal.

The Ghostbusters of motoring, AAA is who you're gonna call when your car breaks down and you need a tow. It's also the office you visit before a trip to pick up those cool free maps and travel advice.

But Seidenberg knows something about AAA that most members probably do not: it really is a club. There are no shares, no stockholders—just us, 5 million members across 13 Southern California counties.

That means that we, the members, chose our board of directors, right? Not when existing Auto Club directors are nominating their own successors, according to Seidenberg. And not when the board is spending more than $4 million of members' dues to make sure those nominees win—as they did last year, according to Seidenberg's attorney, Scott Koepke.

He not only finds this selection process unfair, but he also believes it creates boards free to operate without oversight. And by being able to spend members' money lavishly, the boards can create a huge financial empire whose profits go not to the members but to creating an even larger empire—fattening the supposedly volunteer board members' wallets in the process.

Through an examination of the club's annual report, Seidenberg discovered a cryptic $100 million payment for something called "PTHC LLC" that was apparently purchased in 2000 with profits from the club's huge insurance company, the Inter Insurance Exchange. Seidenberg found out the acronym stood for "Pleasant Travel Holding Company," which owns Pleasant Holidays, the nation's leading tour packager to Hawaii.

It's bad enough that the Auto Club board purchased Pleasant Travel without informing its members. It's worse that the club recommended bookings with Pleasant Holidays without offering members special discounts—when in essence the members own the company.

That's not all that's screwy with the books, according to Carl Olson, who teaches accounting at various local colleges.

"The Auto Club actually has two different sets of financial statements, one published in [the club's magazine] Westways, the other an actual statement audited by KPMG," Olson says. "I discovered that there were gigantic discrepancies in the audited financial statements."

Last year, Seidenberg and Olson tried to fix the system from within by running themselves and a couple of friends against the Auto Club's officially sponsored slate of director candidates. The board acted as if war had been declared. According to Koepke, they adopted a "blank check" resolution allowing management to spend unlimited funds to supress the insurgents, who managed to gather only one vote in 50.

That's when Seidenberg called his lawyer.

"We are suing about disclosure," Seidenberg says. "The board shouldn't have spent a penny of members' funds on campaigns."

The plaintiffs want to force the club to engage in reasonable election conduct and to disclose club finances in sufficient detail. For instance, Koepke alleges the club understated $185 million in liabilities—the price of Pleasant Travel. "This was done by removing them from the balance sheet, Enron style," Koepke said.

Auto Club spokeswoman Carol Thorpe sees things differently.

"The Auto Club is allowed by law to campaign for its candidates using Auto Club funds, just as the challengers are allowed to ask for donations," she said. "Beyond all that, we think that we were fair."

Thorpe claims the challengers were never prevented from accessing the same voting members that the board's slate successfully swayed. She didn't mention, though, that the challengers would also have had to pay top dollar for that access. Considering the board's vast war chest—composed of paying members' dues—the challengers didn't even bother.

As for the secret Pleasant Travel purchase, Thorpe said the Auto Club bought a majority interest in the enterprise, but the company's previous owner asked that it not be publicized "because he didn't want to threaten his relationship with his providers."

However they've gone about acquiring other companies, the club's volunteer board members have found a way to line their pockets. The Auto Club board meetings are held concurrently with those of the companies the Auto Club owns. While the directors do not get paid for their Auto Club service, Seidenberg says they pull down annual fees in excess of $41,000 per board member for the portions of the meetings dedicated to the other companies.

"Their volunteer work makes them a lot of money," Seidenberg says. "We think that's wrong."

 
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