Controller wants former library director Elliot Shelkrot to repay bonuses

Soon after John F. Street's 1999 election as mayor, one of his predecessors, W. Wilson Goode, approached him about bumping up the salary of longtime Free Library of Philadelphia director Elliot Shelkrot.

Street rejected the request, leaving Goode, then serving as chairman of the Board of Trustees of the Free Library, in a snag: The city solicitor had recently advised the board that it could no longer pay Shelkrot for holding a dual position as president of the Free Library of Philadelphia Foundation. City employees aren't allowed to be simultaneously compensated for a non-city job.

That's when Goode, and the library trustees, decided instead to dip into a non-city trust fund they managed to boost Shelkrot's pay - pay that totaled $236,535 in bonuses over eight years and that, City Solicitor Shelley Smith now says, ran afoul of city rules.

On Tuesday, City Controller Alan Butkovitz, who discovered the bonus payments while conducting a routine departmental audit of the library system, said he wants the solicitor to retrieve every bonus dollar.

"He should just give it back," said Butkovitz, who wrote in the library audit, released Tuesday, that the bonuses circumvented the city payroll system.

While his office uncovered $65,000 paid to Shelkrot in fiscal years 2007 and 2008, Mayor Nutter's chief integrity officer, Joan Markman, subsequently found payments of $171,535 dating to 2001.

Shelkrot, who served as library director from 1987 - when Goode was mayor - to 2007, was making $123,656 a year when he retired, not counting the bonuses, which ranged from $15,0000 to $45,000 annually.

All the bonus money was paid through a 78-year-old library trust fund named after John Ashurst and launched with a $25,000 donation. The income is intended for general library purposes and is controlled by the library's Board of Trustees, an independent body that includes high-profile appointees who serve 10-year terms. The trustees hire the library director and determine his or her salary.

"It is my opinion that these payments were not properly authorized by the city as required under the Home Rule Charter. In addition, they were made and accepted in violation of the spirit, if not the letter, of the State Ethics Act," Smith wrote Markman in a June 30 letter. Markman had asked Smith to weigh in on the legality of the payments after discussing them on behalf of the administration with officials from the library and the Controller's Office.

As director of the Free Library, Shelkrot under the City Charter was authorized to receive only his base salary, paid through the city's payroll system, Smith said.

Shelkrot, reached by phone Tuesday, said: "The only thing I'm going to say is everything that was done then was done properly, to the best of our knowledge, and if you have anything else, you need to ask the library." He is currently the interim director of the Jeanes Library in Lafayette Hill.

The bonus payments were listed on a tax form as "nonemployee compensation" to an independent contractor, rather than as employee wages listed on a W-2 form.

According to Smith, the trustees previously had boosted Shelkrot's salary for years by paying him for his job as president of the library foundation, a charitable group that supports the Free Library. That money was listed as a "supplemental retirement benefit" to Shelkrot.

But that practice ended following objections by the city solicitor in 1999.

It was then, according to Smith, that the board voted to pay Shelkrot periodic bonuses. Then-library board chairman Alexander Kerr noted in one letter to Shelkrot that the extra dollars reflected that his salary "has been behind that of directors of comparable urban libraries."

But like the retirement-benefit payout, the bonus payments drew scrutiny.

A 2001 preliminary draft audit by then-City Controller Jonathan Saidel found that any compensation to the library director should come from the city's general fund and not from a trust fund. At that point, Shelkrot had received three bonuses.

However, the controller's final audit in 2002 made no mention of concern with the bonuses, so they continued.

"If they had a concern, they dropped it," said Robert Heim, current chair of the library trustee board and a board member since 2004. In an interview Tuesday, he recounted the interaction between Street and Goode. Street did not reply to an e-mail Tuesday, while Goode referred calls to Heim.

"With the trustees knowing the controller had audited it in 2002 and not objected to it, there was no reason for them to think there was anything wrong with doing it," Heim said. "So for the controller to come along now three years after these payments stopped and make a fuss about it strikes me a little bit like rewriting the rules of the game after its been played."

Heim also said the trust fund was monitored by the city Finance Department, which was aware of the payouts to Shelkrot, who referred to them on his financial disclosure forms. "This was not a state secret," he said. "This was perfectly transparent."

Current library director Siobhan Reardon, who is paid $185,000 a year, told Butkovitz that she had received no such bonuses from the library board, and that no further such payments would be permitted.