Toronto Goodwill board forced to resign for legal reasons: ex-chairman

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The former chairman of the volunteer board of Goodwill's shuttered Toronto-based chapter says he and his fellow volunteer directors were facing a "trial by fire" and did not abandon the troubled charity by resigning en masse and shutting it down last month, throwing 430 people out of work.

"People think we have washed our hands. We haven't washed our hands," said Michael Eubanks, who came in as chairman of Goodwill Industries of Toronto, Eastern, Central and Northern Ontario about three years ago.

Mr. Eubanks, who is senior vice-president and chief information officer at the Liquor Control Board of Ontario, said in an interview that he and a core group of former directors who quit last month have been working hard behind the scenes with chief executive officer Keiko Nakamura, trying to grapple with the charity's cash-flow crisis.

He said the board, made up of volunteers and community advocates, was forced to quit after obtaining informal legal advice that individual directors could personally be held liable for unpaid wages.

But since then, he said, he and other former directors have been trying to help Ms. Nakamura deal with the crisis. On Monday, Goodwill filed for bankruptcy, allowing it to protect its assets, and, Ms. Nakamura has said, perhaps re-emerge.

Mr. Eubanks, who has previously worked at Eaton's, Best Buy and Canadian Tire, said the charity's sudden shutdown on Jan. 16 was necessary to ensure its workers could be paid.

"It was trial by fire. We wanted to make sure that people were paid," he said. "That was No. 1."

He said Ms. Nakamura told him around Jan. 7 that Christmas-season sales, which Goodwill, like most other retailers, relied on to stay in the black, fell short of those from the year before by 40 per cent. Even though Goodwill had been struggling for years, despite recent efforts to turn it around, he said the drop in sales was a "shock."

Goodwill's line of credit was exhausted, and another valuable revenue source, selling unsold donations to emerging countries, had dried up. As a result, the board was told, Goodwill had no cushion to see it through the winter and would not be able to pay its workers beyond Jan. 16. Its union had previously rejected a management plan to reduce hours during the slower winter months.

In the ensuing scramble, the board consulted insolvency experts. But Goodwill did not even have enough cash at hand to retain a lawyer formally to guide the process, Mr. Eubanks said.

At a meeting on Jan. 15, the board voted to quit, and ordered Ms. Nakamura to shut the stores the next day in the hopes that enough money could be found to cover its final wage bill, which was around $500,000. Mr. Eubanks said the board was not even sure its insurance would cover any liability its volunteer directors could face for unpaid wages.

"We're working at the speed of light," Mr. Eubanks said. "We didn't have time to even check that. But we knew there was a liability."

Carol Hansell, a Toronto lawyer who specializes in advising corporate boards, said it is not unusual for boards of directors in the corporate world to resign when facing an insolvency to avoid triggering that personal liability for unpaid wages.

She said she has given directors similar advice: "If you are [a volunteer director] sitting there thinking, 'Well, there is actually a fair chance that I can lose my house if this doesn't go well' ... I don't know who thinks that is reasonable to ask them to do that."

Mr. Eubanks says he is optimistic the organization can be pulled out of bankruptcy and revived in some form, if it can get its union and its landlords to agree on concessions.

Last week, the U.S.-based umbrella organization of Goodwills across North America officially disowned the shuttered Toronto Goodwill chapter, meaning it cannot operate under the name. But Mr. Eubanks and Ms. Nakamura say they have been told they could reapply for membership once they sort out the financial woes.

According to its bankruptcy filing, Goodwill has liabilities of more than $6-million owed to its creditors, including employees still looking for vacation, severance and termination pay. But since the filing, workers are eligible for the federal wage-earner protection program, which can provide them with up to $3,900.

According to the filing, Goodwill has just $1,300 in its bank account. Much of its stated $835,308 in remaining assets consists of future tax rebates, as well an estimated $250,000 worth of warehouse equipment and $250,000 worth of leftover donations of used clothes and household items.