Steel Museum Mismanagement Exposed by NorCo Grand Jury

A Northampton County Grand Jury has cast a glaring spotlight on a pattern of mismanagement, conflicts of interest and excessive salaries at the Steel Museum on Bethlehem's south side. It's a disgusting display of pigs at the trough, being fed in part by public tax dollars. They include former Steel execs who had a very soft landing after the Bethlehem giant went belly up. But they also include a who's who of local big shots like Lee Butz and Charles Marcon, who slopped at the trough like the biggest porker you'd ever see.

This Grand Jury investigation started in reaction to Express Times and Morning Call articles raising disturbing questions about the lack of progress at the National Museum of Industrial History, located at the site of the Bethlehem Steel Plant. Formed in 1997, this Museum was projected to attract up to three million visitors per year.

Seventeen years later, despite the infusion of $17-19 million in both public and private funds, it hasn't even opened.

CEO Stephen G. Donches, the Bethlehem Steel Corporation’s Vice President of Public Affairs, has received almost $2.5 million dollars in salary and benefits over the past 12 years. According to forensic auditors, it's double what should be paid to the CEO of a similarly sized non-profit organization.

	Wages	Retirement	Total
2002	$   135,000.00	$  17,629.00	$   152,629.00
2003	$   180,000.00	$  18,801.00	$   190,801.00
2004	$   180,000.00	$  16,739.00	$   196,739.00
2005	$   180,000.00	$  22,526.00	$   202,526.00
2006	$   180,000.00	$  21,689.00	$   201,689.00
2007	$   180,000.00	$  22,206.00	$   202,206.00
2008	$   177,220.00	$  27,061.00	$   204,281.00
2009	$   176,194.00	$  29,815.00	$   206,009.00
2010	$   181,460.00	$  23,179.00	$   204,639.00
2011	$   179,420.00	$  24,031.00	$   203,451.00
Total	$1,749,294.00	$223,676.00	$1,972,970.00

It did not stop with Donches. According to the Grand Jury, "The Museum was a resting place for soon to be unemployed officials of the Corporation who continued to benefit from high paying salaries, retirement benefits, and other benefits at the expense of the organization."

While paying his pals, Donches reportedly "exploited" potential donors with "overly optimistic and unrealistic expectations as well as public statements by Mr. Donches as to the near opening of the Museum despite Board direction that donors be cautioned as to the viability of the Museum."

Where did Donches get his money? About $9 million came from Priscilla Payne Hurd, and former Bethlehem Steel Boss Hank Barnette kicked in just under $1 million. The Museum also received $70,000 in federal funds from the Institute of Museum and Library Services; a state RCAP grant of $1.4 million; and another $10,000 from the state DCED (Department of Community and Economic Development). All artifacts had been donated by the Smithsonian at no cost to the Museum.

With this money, Donches also took care of board members.

The most outrageous example of this is with Lee Butz, Chairman and largest shareholder at Alvin H. Butz, Inc., and regular campaign contributor to anyone in power.

Before becoming a Museum board director, the Butz company was doing work for the Museum, and had been paid $810,977.00.

After being placed on the Board, when Butz clearly had a conflict, his company was paid another $2 million for various constructions projects.

Interestingly, investigators are unable to find any discussions in the minutes of Board meetings concerning a contract awarded to Alvin H. Butz Incorporated prior to the actual signing of the contract on May 27, 2008. In fact, at a meeting just two days after this contract was supposedly signed, not a word was said during another meeting.

Other Board members benefited as well, although their transgressions are minor by comparison to Butz.

L. Charles Marcon, the Board Chair and another blueblood, thought nothing of bidding on construction work at the Museum.

The Museum has funds on deposit with what was then called KNBT Bank, and it just happened that Director Daniel G. Gambet was connected to that bank.

According to the Grand Jury, "[t]he Museum lacked transparency and the Board routinely granted lucrative salaries and retirement benefits which were out of line with similarly missioned and sized non-profit organizations."

Though the Grand Jury believes there is insufficient evidence for a criminal prosecution, it has recommended that Donches resign or be fired. It also wants  the Board to review their own conflicts of interest, and the Jury is asking the state Attorney General's Charitable Trusts Section to determine whether to dissolve the museum. Finally, it is suggested that the Board consider suing Donches civilly.

You can read the Grand Jury Report in its entirety here.