BIDMA board, ‘blindsided’ by forensic audit, is told why town launched probe

A strained relationship between town officials and downtown business leaders. A communication breakdown about crucial downtown projects. An executive director moonlighting — and dining on the taxpayer’s dime. 

These are some of the factors that led to the Town Board investigating the finances of downtown Riverhead’s tax-funded business group, according to a tense hour-and-a-half long discussion Wednesday between the group’s board and its Town Board liaison, Council Member Joann Waski.

Last Tuesday, the Town Board voted unanimously to hire a firm to conduct a forensic audit of the 2023 and 2024 finances of the Riverhead Riverhead Business Improvement District Management Association, a nonprofit created to spend tax money collected in a special downtown Riverhead taxing district to promote business and conduct beautification projects there. Forensic audits are used to help gather evidence when a crime or wrongdoing is suspected.

At a BIDMA meeting Wednesday, the group’s board members said they were working in good faith with the town on resolving questions about their finances and restructuring its budget, when a press release dropped Monday night announcing the forensic audit. 

The Riverhead Town Board, which approves the BIDMA’s annual budget and contracts with it to produce certain special events downtown, had refused to approve the BIDMA’s 2025 budget. The town cited the group’s lack of audits for 2023 and 2024 — something required by the group’s bylaws. That left the BIDMA “frozen” for the past few months and unable to plan any events or capital projects downtown, board members said at a meeting last month. 

The town also hired a consultant to produce Alive on 25 and Halloween Fest, two events usually produced by the BIDMA which draw hundreds of people downtown. 

Waski said the town will not give additional money it had budgeted and provided the BIDMA in the last several years. The loss of those funds has BIDMA board members scrambling to create the new budget proposal that cuts expenses by nearly a quarter of their original plan. The top priority is finding a way to keep employing Executive Director Kristy Verity, who is currently on unpaid leave because the BIDMA does not have enough money left to pay her, board members said.

Wednesday’s conversation added more context to the Town Board’s decision to initiate the audit, and gave context to the roots of the conflict between town officials and the business group.

The meeting opened with a personal statement from Suffolk Theater Director Gary Hygom, the vice president of the board, who said the BIDMA’s relationship with town officials hit a tipping point after the group wrote a letter in December asking the town for “more transparency and an open dialogue” about the development of key downtown revitalization projects, which will reconfigure the area’s parking and displacing at least one business. 

“The result from the town was anger and a feeling of being attacked by the BIDMA. This was not intended or expected,” Hygom said. “From [that] moment, the relationship with the town had changed. From our cries for clarity and openness, we are now met with hurdles and roadblocks. The excitement once felt in this room with new ideas turned into a constant defense posture in an attempt to keep things moving forward.”

“This is what led us to where we are today, again, trying to create a budget that would keep our director in place, how we would find the money to make the changes we are also passionate about, and again, before we’re able to overcome that obstacle, we have implied accusation of foul play that would warrant a forensic audit,” Hygom said.

“So let it be. Let the audit begin,” Hygom added. 

BIDMA board members and Verity maintained during the meeting that they had complied with all the town’s requests for financial documents and information requested by town officials. 

Waski had another view, as she questioned the board on certain expenses, withdrawals and treasurer reports. BIDMA board members and Verity had answers to those questions throughout the meeting.   

In one line of questioning, Waski zeroed in on expenses made by the BIDMA to restaurants.

“There are a lot of charges on here for you going to restaurants. And I’m guessing — I don’t know if it’s eating, drinking, whatever it is. I mean, what are you doing at Cowfish?” Waski said to Verity, referring to the upscale Hampton Bays restaurant. “I don’t think that the taxpayers would appreciate that you’re going out on their dime and feeding yourself or whatever you’re doing.”

Hygom said nonprofits often have expense accounts for their directors to buy meals for staff and for business-related lunches. The expenses were less than 1% of the BIDMA’s budget in 2023 and less than .5% in 2024, Hygom and Linda Lombardi, the board’s treasurer, told Waski.

“That’s a wonderful answer to the questions that we have. We have a fiduciary duty to the residents of the Town of Riverhead and the businesses downtown to question this…” Waski said. The process to get the answers to the questions has been “like pulling teeth,” she added.

Hygom and Lombardi said the board is made up of volunteers and was doing its best to give the town the information it had requested. 

Then the town announced the forensic audit.

MORE COVERAGE: Riverhead to order forensic audits of BIDMA group, hire consultant to run 2025 downtown events

“I think we just feel it’s a little more drastic than really necessary,” Lombardi said of the audit. “But we’re open to anything to help you. We’re an open book. I think that the books were handled appropriately.” 

“We weren’t here during these times,” Lombardi said, alluding to the turnover in board members in the last couple of years, which left the current board comprised primarily of members who have served on it less than a year, “but we’re happy to answer and support whatever it is that you need”.

Hygom said town officials’ constant requests for financial information — and now the audit — will hamper the BIDMA’s efforts this year to improve downtown.

“To say the town has been an impediment to what we are trying to achieve, doesn’t even begin to explain the difficulties it’s been to get anything accomplished with the constant barrage of things that you request, of a refusal to pass a budget…” Hygom said. He said the group has been using all of its free time revising its budget — and now will need to spend even more time with the audit.

BIDMA board members said they wanted to focus less on large-scale events and more on beautification projects, public art installations and marketing campaigns; they sent town officials a letter earlier this year saying just that. 

Now the town is contracting with an outside group, the Main Street Agency, to produce Alive on 25 and Halloween Fest. The Main Street Agency is run by former BIDMA director and current town board coordinator Diane Tucci, who has produced downtown festivals before. 

Verity said the BIDMA’s letter did not say it was opposed to producing the events. “I don’t care either way about the events, but that’s not what was said,” she told Waski. 

The consequences of losing the events, however, is dire for the BIDMA’s finances. Because it no longer produces the events, Waski said the town will no longer give the BIDMA the additional funding it had set aside in its general fund to boost the BIDMA’s budget for the last few years. That means the BIDMA must now cut $42,000 — or roughly a quarter — of its budget. 

That has board members scrambling to create a new proposal for the town to accept, board members said. A major goal is trying to keep Verity on as executive director. Verity is currently on unpaid leave, board members said. 

“We’re trying to figure out how we can keep an executive director and shuffle the money around to do that,” Hygom said. “That’s what we’re doing, as you would.” 

“Okay, fair enough,” Waski said. “I just hope that it ends up being in the best interest of the downtown businesses…”

“Trust me, we all are, and I find it irritating that all downtown businesses that are represented on the BID are being told we have to have the interests of ourselves at heart,” Hygom said. “Of course we have our own interests at heart.”

Verity’s salary was roughly $50,000 at the beginning of last year, until it was revised in April after Verity announced she was leaving the BIDMA. 

“The town and the BID asked me not to leave and said: name your price. And I did research on what a full time executive director salary is,” Verity said. 

Verity asked for $80,000 with benefits or $90,000 without benefits, she said. The town had considered putting Verity on its payroll to do public relations for the town and allow her to receive health insurance, but the BIDMA board did not want her working for the town, Verity said. 

Verity, in addition to being BIDMA executive director, also has her own marketing firm, Vee.Media. 

She was also employed as executive director of the Southampton Business Alliance. Online blog posts on that organization’s website shows she was executive director as early as Nov. 1 of last year, and was still involved with the organization on Jan. 10. She had also listed the job title on her Facebook page, until recently.

Bryan DeLuca, the executive director of Atlantis Holding Company — the ownership entity of the Long Island Aquarium, Hyatt Place East End and Sea Star Ballroom on East Main Street —  raised Verity’s involvement with the Southampton Business Alliance to the BIDMA board.

Verity told DeLuca that she “does not work with Southampton anymore.” She was hired as a consultant to build the organization’s website, she said.

Hygom said Verity’s role at the Southampton Business Alliance “would not interfere with her role as executive director” of the BIDMA — and it so far hasn’t. 

“We are trying to restructure her salary and keep the BID alive — and [restructure] her job description. When that is secured, when that is finalized, you will be notified of it,” Hygom said to DeLuca. “Until then, there is no discussion about how we are paying or what we are paying Kristy until it is determined.”

DeLuca said the board “keeps accepting inappropriate behavior by the director, and you keep defending inappropriate behavior.”

Wednesday’s meeting also gave a glimpse into how the BIDMA’s relationship with town officials has deteriorated over the last few months. 

After the BIDMA board wrote to town officials in December requesting they be “better informed and involved with the new Town Square planning process and forthcoming developments,” the relationship between BIDMA members and town officials changed for the worse, Hygom said.

“You have to understand that we have people that are working extremely hard, just like you guys do, on what’s going on downtown,” Waski said. “We want to make sure that everything comes together and that we’re able to get downtown Riverhead up and running full speed ahead, and that we don’t miss a beat.”

Waski said the BIDMA “didn’t show up for part of the process.” BIDMA officials denied that characterization.  

“It’s insulting to the people that are working day and night 24/7, pouring their entire heart and everything into this project,” Waski said of the letter. “And to have something like that come out, it was bad. It’s not a good look.”

Hygom, the director of the Suffolk Theater, said the changing or adjusting downtown plans without the proper communication can result in the theater losing “hundreds and thousands of dollars on shows that I booked eight months earlier.” 

DeLuca — who works for town square master developer Joe Petrocelli — said Economic Development and Planning Administrator Dawn Thomas, who leads the town’s downtown planning efforts, has been available for questions at BIDMA meetings. Instead of asking her, the BIDMA board sent a public letter to the town. 

Thomas was not in attendance at Wednesday’s meeting. She previously declined to comment on the communication issues between the town and the BIDMA.

“It looked very intentional. It looked like a sabotage. It was Pearl Harbor,” DeLuca said of the letter. “That’s what it was. You could have had that conversation with her. She was here.”

While tensions ran high at the meeting — and it ended on a sour note — running throughout the meeting was the hope that the town government and the BIDMA could mend their relationship for the betterment of downtown.

Wendy Weiss, East End Art’s executive director and a BIDMA board member, said communication between her organization and town officials has improved before. 

“So I know that despite any animosities, anything like that, I believe it can be worked through. So I would like to know if that can happen here, between the BIDMA and the town. Can we move forward?” she asked Waski. 

“We fully support you guys. We really do,” Waski said. “And I’m sorry that it’s gotten to this point, where it’s just like this tit for tat — and it should not have come to this. Unfortunately, it has. And I think that we need to move forward in a positive way. We need to work together.”

Correction: This article has been amended to remove an error that said the Town Board’ss voted for the forensic audit was 4-1. The vote was unanimous.