LAS VEGAS — After years of controversy, the Liberace Museum is closing — leaving behind a hotbed of drama and allegations of financial mismanagement since the showman died in 1987.
His will — which named as executor his attorney, Joel Strote, and assigned him trustee of Liberace's scholarship foundation and museum — has been fought over.
Friends, employees and Liberace's sister charged that Strote coerced the entertainer during his final days into signing the agreement, mismanaged Liberace's money and spent it on himself. Strote won the suit.
But critics' overall accusations of mismanagement and misspending by museum officials have never ceased. Those in charge must now pack up the collection of everything from cars to costumes, tackle a mortgage debt and consider how best to honor the flamboyant pianist.
Some fans and former employees have directed blame for the museum's problems at current board chairman Jeff Koep, who was invited to join the board by Strote.
Ultimately, Koep says, the museum is closing because of financial problems stemming from the economy, location and waning interest, a problem that will be remedied now that the foundation has signed with an entertainment group to tour the collection.
"Closing the museum gets rid of what costs us the most — costs and property," he says. "The endowment has been keeping the museum open.
"Some people ask, 'Why didn't we get a handle on things?' Maybe the board didn't get a handle on things early enough. Maybe we should have closed it sooner. Why should we continue in bad times to manage that property? That shouldn't be the business we're in."
Koep says the board saw the closure coming for several years during which the foundation and museum lost money. In recent years, net assets declined, at one point by more than $500,000 a year, according to Internal Revenue Service 990 forms from 2005, 2006 and 2007. But its net assets, averaging about $13 million from 1998 to 2006, jumped to $20 million in 2006, before landing at $17.4 million in August 2008. During that time, from 1998-2008, expenses exceeded revenue in all but three years.
That means that, in 2008, the foundation and museum were worth $4 million more (on paper) than in previous years. Its 2005 financial report shows a sale of stocks of $10 million, resulting in a $45,000 loss. Koep says that was a result of the foundation and museum switching investment-management companies.
The question is whether something could have been done to stop the losses.
Although other organizations — the Las Vegas Philharmonic and Nevada Ballet Theatre — braced for the economy at that time by scaling back, the Liberace Museum and Foundation didn't make any large effort to scale back.
It let go its president, Darin Hollingsworth, in 2009, a mutual decision by the board and Hollingsworth, who was paid $120,000. But in January, the board hired one of its members, Jack Rappaport, as president at $90,000, even though it had a museum director on staff.
Some argued that Hollingsworth's hire posed a conflict of interest. Hollingsworth had been a financial adviser with Merrill Lynch and had been director of development of the UNLV Foundation.
But it is Rappaport's position that is the focus of criticism.
Rappaport, a commercial real-estate broker, has been managing the property and is involved in the sale of the museum (officials have been shopping it around, offering the property to one group for $3 million to $4 million).
Koep says there is nothing wrong with Rappaport's role — that the board is an unpaid working board, and Rappaport was invited because of his professional background in commercial real estate and could deal with leases, other rental agreements and utility issues.
Rappaport represented the property as a board member, but was never paid for it, Koep says, adding that he also is not the museum's real-estate agent.
"He's representing the foundation as its president in selling the property. Our thinking was that if he could get a good real-estate deal, we'll take advantage of it. There is no agreement in place that Jack would get any commission whatsoever."
Although Rappaport is being let go along with the other employees at the museum, Koep said it's possible that he or others could stay on in some capacity. "We'll need a transition team," Koep says.
There is also the changing of the investment company to Hollingsworth's former firm, which he formally introduced to the board. In fiscal year 2005, Koep says, money was transferred from its San Francisco investment company to the local Merrill Lynch — Hollingsworth's former company where a friend of his worked.
Koep says Hollingsworth presented Merrill Lynch representatives to the Liberace board, which then switched to Merrill Lynch because board members thought they might get better results. Hollingsworth had no input, he said.
Distributed by Scripps Howard News Service.