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Background Checks Failed To Catch RSCVA Ex-CEO DeLone’s History Of Harassment Suits
Background checks on Phil DeLone, then a candidate for CEO of the Reno Sparks Convention and Visitors Authority, failed to catch two lawsuits alleging workplace harassment in two states, a Reno Gazette Journal investigation found.
The lawsuits, which are public documents available through a court records search,were missed even as a member of the RSCVA board of directors repeatedly emphasized the need for “proper due diligence” in vetting the job candidates at the time.
Documents obtained by the Reno Gazette Journal through a public records request also show that the RSCVA and the search firm it hired debated over who was responsible for conducting DeLone’s criminal background check. The RSCVA ended up doing the criminal background check through another party.
The past lawsuits against DeLone — one in Reno and one in Tucson, Arizona — gained added significance in light of new misconduct allegations against the former tourism boss at the RSCVA. DeLone was still under investigation over the allegations when he offered his resignation in February.
The Reno Gazette Journal broke the story about the investigation on Jan. 28, which it confirmed through an earlier public records request.
It is the third documented complaint against DeLone involving workplace misconduct. It also means that DeLone has been the subject of complaints in at least three of the last four companies he has worked for.
Proper vetting of candidates was raised multiple times at the RSCVA’s monthly meeting on Feb. 27 as the organization kicked off its fourth executive search in less than a decade. The first of those searches led to the selection of Utah tourism executive Mark White, who suddenly changed his mind prior to starting the job. The other searches yielded former CEO Chris Baum and his successor, DeLone, who was chosen in a 5-3 vote by the board on Nov. 11, 2016.
Following the revelations involving DeLone, the background check process was mentioned as a top priority by several RSCVA board members as they discussed how the position should be filled.
“For the background check, will we be hiring an outside firm for that?” asked board member Shannon Keel, general manager at the Grand Sierra Resort. “Because that would be of the utmost importance.”
Board member Mark Sterbens, senior vice president and general manager of the Nugget Casino Resort, echoed Keel’s statement.
“The most important thing is definitely to hire an outside firm to do the background check,” Sterbens said.
Holes in the standard background check process
The question is whether a typical background check would catch cases such as the two lawsuits that were filed against DeLone.
The Reno Gazette Journal was able to find information about both cases — the first one was settled and the second one was dismissed in DeLone’s favor — through a court records search. The cases, however, were filed in 1991 and 1996. The industry standard for background checks typically has a baseline of seven years. Groups such as the Society for Human Resource Management cite the Fair Credit Reporting Act, which limits the lookback period for background checks to no longer than seven years, including “any arrest record or adverse non-conviction information.”
The Fair Credit Reporting Act, however, only applies to third-party background screening firms. It does not apply to employers who decide to do the background check themselves, according to the Privacy Rights Clearing House, a nonprofit advocacy group.
In the case of DeLone, his employment and criminal background checks were all done through third-party companies. New York City-based search firm The Lapham Group hired IntelliCorp and HireRight to do DeLone’s employment background check. The RSCVA hired VerifiedFirst to do DeLone’s criminal background check, which only turned up a speeding ticket in 2012.
All indications from the background checks and DeLone’s references showed that DeLone was a great candidate, according to the RSCVA. The reference report provided by The Lapham Group showed a glowing appraisal of DeLone from people such as Eldorado Resorts Executive Chairman Gary Carano, who described the former Silver Legacy sales executive as a “superstar sales director.”
Based on the information provided about DeLone, RSCVA Board Chairman Bob Lucey did not see a need to go beyond the standard background search criteria prior to hiring him.
“When the board interviewed Mr. Delone, he sounded like an outstanding individual,” Lucey said. “The background checks also came back fine so there was no reason to dig deeper.”
A history of CEO troubles
The progress of the background check was the subject of several exchanges between the RSCVA and The Lapham Group in the midst of the CEO search in 2016.
One exchange was fueled by comments from then-RSCVA board member John Farahi, CEO of Atlantis parent company Monarch Casino & Resorts. During the course of the CEO search, Farahi pointedly told RSCVA staff multiple times that he wanted “to make sure the proper due diligence has been done on these candidates” — something he also repeatedly brought up during board meetings.
While Farahi described the organization as much-improved toward the end of his stint as a board member in 2017, he also developed a reputation over the years as one of the organization’s toughest critics.
A big reason for Farahi’s wariness was the CEO carousel that plagued the RSCVA over the years.
In May 2000, then-CEO Phil Keene was fired without severance after racking up $11,420 in personal expenses with his company credit card. His replacement, Jeff Beckelman, was credited for getting the RSCVA back on track but left a few years later to take a job in Palm Springs.
Meanwhile, poor staff morale plagued the tenures of CEOs Ellen Oppenheim and Chris Baum.
Oppenheim was expected to go through “a grueling job review” before resigning in February 2011, the Reno Gazette Journal reported at the time. Although Oppenheim received some praise for her work, she was also criticized for not letting department heads do their jobs and not booking as much business as hotel-casino executives wanted to see.
In July 2011, Utah tourism executive Mark White was tapped to replace Oppenheim after a $60,000 five-month job search. Prior to starting the job, however, White suddenly withdrew from the position. White’s exit kicked off another executive search, with former Detroit tourism executive Baum being chosen as CEO later that year in December.
Baum’s tenure would be marked with poor staff morale yet again as well as some key missteps. Baum pushed to promote the region to filmmakers, which included $152,000 in total payments in 2012 and 2013 to one of his former Detroit associates to serve as the RSCVA’s film consultant. The final straw involved a disastrous 2015 event to celebrate denim’s Reno roots called the Blue Jeans Jam. The inaugural event was downsized after losing vendors and cost the RSCVA $125,000.
Farahi’s desire to avoid a repeat of the CEO controversies was evident in a 2016 letter between the RSCVA’s legal representative and The Latham Group. RSCVA lawyer Ben Kennedy informed Latham Group President Craig Latham that Farahi wanted the firm to go beyond the standard background check process and “do some additional digging with whatever sources you feel appropriate to provide assurance to the Board that you have checked with others in the industry and/or those that would be in a position to give meaningful feedback on the candidates.”
Farahi also wanted assurances from The Latham Group that “if there were any meaningful negative information out there your due diligence would have uncovered it.”
Once the background checks came in clean, Farahi ultimately voted in favor of hiring DeLone later that year. What Farahi did not realize at the time was that his concerns about missing any “meaningful negative information” would be proven true almost four years later.
Farahi says he does not know enough about DeLone’s situation to comment on it or whether he would have changed his vote in hindsight. Farahi expressed disappointment, however, that such key information did not make it to the board.
“Obviously, the job was not done well," Farahi said of the background check. “We just didn’t have all the information to make the right decision.”
‘We still have a long way to go’
Asked how the various background searches missed the two harassment lawsuits against DeLone, Lapham of The Lapham Group responded, “I don’t know,” when reached by phone on Friday morning. Lapham added that his company does not do background checks itself but coordinates with third parties that specialize in them.
Lapham also defended his executive search firm’s work and pushed back against the RSCVA’s claims that The Lapham Group was supposed to do the criminal background check on top of getting information about DeLone’s work history.
Lapham pointed to correspondence from Oct. 27, 2016. In the letter, the RSCVA included release forms to be signed by the candidates and asked Latham to have the forms returned so the background checks could be processed. Lapham did not provide the letter due to confidentiality reasons but it was provided by the RSCVA in response to the Reno Gazette Journal’s public records request.
According to Lapham, the letter led him to believe that the RSCVA was handling arrangements for the criminal background check. On Nov. 4, 2016, however, an RSCVA representative sent another letter to Lapham stating that it went ahead and arranged the criminal background check because of his firm's failure to do so.
It also reminded The Latham Group that it was obligated to “coordinate all necessary background checks, and any testing of the finalist candidate as requested by the Board,” according to its contract
Lapham disputed the RSCVA's statement.
Farahi, meanwhile, stressed that the background check for the next CEO should be more comprehensive than the last one. If a firm says it is not capable of doing a more comprehensive check, then the RSCVA should find a company that can, he said.
Reno Mayor Hillary Schieve, who is also a member of the RSCVA board, agreed with Farahi.
"I don't know the parameters legally if we can ask candidates if they have ever been involved in previous lawsuits ... but I think the process should be very defined and specific," Schieve said. "Moving forward, we should definitely put in parameters to ensure that the RSCVA is putting its best foot forward."
Given the tremendous progress that Reno-Sparks has seen in the last five years, the top tourism job in the region should be a prized position that attracts the best candidates, according to Farahi. Instead, the high CEO turnover could very well scare them away, he said.
Schieve also expressed concern about the impact on RSCVA employees. Despite the constant turmoil and lack of stability at the top of the organization, the RSCVA's staff members have managed to do great work, especially within the last five years.
"All of those positions are critical to the RSCVA's success and everyone in those current positions are really talented," Schieve said. "I certainly hope this doesn't bring down morale but I believe it also gives everyone the opportunity to kind of hit the reset button."
In addition to the negative impact on staff, Farahi says that the constant issues involving the RSCVA's chief executives are affecting the organization’s credibility with the industry as well as the local community. As someone who has served on the board multiple times, Farahi accepted responsibility for the issues the RSCVA faces.
“Ultimately, the responsibility rests with the board,” Farahi said. “How many CEOs have we gone through who just couldn’t get the job done?”
“We’ve made enough mistakes as a board and we can’t make any more mistakes. You can’t afford to make any mistakes when you lose so many CEOs, and yet here we’ve made another one again. We still have a long way to go.”
by Jason Hidalg