City of Oaks Marathon spending raises questions

According to 2013 and 2014 federal tax returns filed by the 501(c)(3) City of Oaks Marathon, many expenses weren't itemized. Also, the amount given to charity dropped from $83,500 in 2012 to $41,000 in 2013 to zero in 2014.

The nonprofit's annual revenue was fairly stable over the three years, but Jim Micheels, who served as president of the nonprofit's board until he resigned in December, said expenses increased because he had to hire a race director to oversee the event. Tax returns show salaries paid by the group jumped from $51,107 in 2012 to $85,648 in 2014.

Even though the marathon has always been staged in November, Micheels said no money was donated to charity in 2014 because invoices were still outstanding at the end of the year and that the 2015 tax return would reflect a donation. The 2015 tax return isn't yet available for review, and Micheels declined to say how much money was donated.

He also noted that City of Oaks' bylaws don't specify how much of the revenue from the annual event should go to charity.

The tax returns also show that City of Oaks loaned Micheels' former business, Raleigh Running Outfitters, $12,000 in 2014 and paid his wife, Carolyn Micheels, more than $69,250 combined in 2013 and 2014 to handle marketing.

A best practices manual published by the North Carolina Center for Nonprofits states that nonprofit boards "should strictly prohibit financial loans to board members, the executive director/CEO and other personnel and volunteers."

Jim Micheels said the loan to Raleigh Running Outfitters, which he sold in January 2015, was for T-shirts and giveaways for runners and volunteers and that he has repaid the money. He also said his wife is a professional writer, so payments to her for marketing were legitimate.

He said City of Oaks maintained "detailed records" to account for all transactions and that the board of directors approved all hiring and spending.

"There was no impropriety. I've moved on," he said when asked about his departure from City of Oaks.

"I founded this race nine years ago with the intention of boosting running and health initiatives in Raleigh, developing a national-class race event for which the city can be proud and supporting local health-related charities," he said. "With over $200,000 donated through 2015 and thousands of satisfied runners, I can say I am proud of the event the board and I have built with the support of the volunteers, dedicated professionals and race participants."

Jerry Beckman, who was elected board president in December, declined to comment on questions about City of Oaks' spending.

"I cannot comment on ongoing activities involving board members. I have consulted with authorities and with counsel. It is being looked into," Beckman said. "Until such a time that we know exactly what occurred, we cannot release any information."

WRAL News checked with police in Raleigh and Wake Forest, where the nonprofit is registered, as well as the Wake County District Attorney's Office, the state Attorney General's Office and the Secretary of State's Office, and none of the agencies is aware of a criminal investigation involving City of Oaks.

Race director Ron Wahula left shortly after the 2015 marathon.

"It was an odd turn of events," Wahula said. "I was disenchanted, so I left the race."

But Wahula returned when Race 13.1, which is run by John Kane Jr., the son of the North Hills developer, was hired to manage the 2016 marathon.

Kane said the race has been run by a group of volunteers for years, but his company is in the business of staging marathons, with 25 races in 10 states scheduled this year.

"There are a lot of folks who had great intentions to bring a great event to the city of Raleigh and do good charitable works. Was their attention to detail lacking? Possibly," he said regarding concerns over the race's finances.

He called the City of Oaks Marathon "a natural fit" for Race 13.1, which promises a minimum of $40,000 given to charity annually, plus a percentage of each registration fee.

"We transferred to Race 13.1 because we want to grow the race. We believe the new arrangement will support our intent," Beckman said.