The Carolina Theatre was built in 1926 in downtown Durham.
The box office was open and the Carolina Theatre staff was gearing up for an Arlo Guthrie concert, where Guthrie was expecting to play for close to a full house on a stop of his 50th Anniversary Alice's Restaurant Tour on Thursday, Jan. 28.
It seemed it was business as usual for the 1,000-seat capacity, 90-year-old theater, which had seen a boom in business over the last five years, growing from a calendar of 60 live performances to over 100 annually.
But, outward appearances can be deceiving sometimes.
As those guests started filling up the theater seats that evening on Jan. 28, what looked like a profitable event most likely was not.
"Basically, we have been losing money on almost every show," said Durham City Manager Tom Bonfield. "They (Carolina Theatre of Durham, LLC, the nonprofit that has managed the building for the past two decades) have been paying bills with ticket sales from future shows."
What has been called "faulty accounting" has culminated in Carolina Theatre of Durham LLC announcing on Dec. 21, 2015, they were somewhere around $1 million in the hole.
"It looks like the delinquency started as far back as September 2014," Bonfield said.
When that announcement was made in a News & Observer newspaper report, it seemed like the company's board of directors and the executive leadership of the theater were on board to see the theater through these hard times. The newspaper quoted Carolina Theatre of Durham's President and Chief Executive Officer Bob Nocek and Board Chairman Scott Harman. It seemed the two were on the same page looking into what had happened and working on how to go forward.
That same article also disclosed that Carolina Theatre of Durham had asked the city for $600,000 to help it through its current cash flow problems.
But, Bonfield said as board members, specifically the board's four-member finance committee, began looking at the figures, "it was my impression that some things came to light that hadn't been communicated to the board."
These things that "came to light" involved what Nocek had known about the theater's debt and when; perhaps, he hadn't reacted fast enough?
"It just became clear," Bonfield said, "that there needed to be a transition."
That happened on Jan. 22 when Nocek resigned his position at the theater. Local businessman Dan Berman has been named to that position. He is lending his business savvy to the company without pay.
Harman praised Nocek's work at the theater in the resignation announcement. He was quoted as stating: “Under Bob’s leadership, the Carolina Theatre has been recognized for its creativity and innovation, and has played a key role in the renaissance of downtown. We are grateful for Bob’s service to the Carolina Theatre, and for helping us achieve new levels of attendance and diversity in programming. We wish him well in his new pursuits.”
Bob Nocek joined the Carolina Theatre of Durham staff as vice president in 2009 and became president in 2010. During his five-year leadership, he increased the number of shows from 60 to over 100 annually.
That number, however, is set to be scaled back this year.
On Jan. 28, Aaron Bare, the theater's chief operating officer, also stepped down. Bare sent out an email announcing his resignation that was effective immediately. The email stated: "Effective immediately, I am resigning my position as Chief Operating Officer for the Carolina Theatre of Durham, Inc. I have enjoyed working with all of you and am proud of what we have accomplished together during the last nine years."
Bare was quoted on the online Indy Week's Music Blog, saying that: "The timing of my voluntary departure from the Carolina Theatre is unrelated to last week's resignation of CEO Bob Nocek. The time is right for me to move on to new things and I wish the staff and Board of the Carolina Theatre well under the leadership of interim CEO Dan Berman."
Berman has played a large role in the City of Durham, having served on multiple boards.
"I met with Berman this afternoon for about an hour," Bonfield said, on Friday, Jan. 29. "I feel confident that he has his arms around the operational aspects and he is actively engaged with the rest of the staff.
"The Carolina Theatre is very, very important to the city," he continued. "Contributors to the Foundation have stepped up. We will try to figure out the best path forward. Some skeptics feel there is a crook behind every curtain. I don't have any evidence one way or the other."
City of Durham officials and the board of Carolina Theatre of Durham LLC, composed of members of the community, met Monday, Feb. 1, to take a look at the situation and begin working on a solution.
Berman said the next day after the meeting that no specific plans had been laid out as yet.
"We were brainstorming on the best way to move forward," Berman said. "We will meet quite often as we refine what a solution will look like."
One thing that was brought up during the discussion was the $600,000 asked for by the Carolina Theatre of Durham LLC last December to help with cash flow problems, such as meeting payroll and other significant payments that may impact day-to-day operations. Basically, the company was asking for $75,000 from each of the remaining eight years on the operational contract with the city.
"We don't see where $600,000 will fix anything," Bonfield said.
Berman agreed.
"Right now, we are looking at other ways," Berman said.
In the past year, the theater saw the loss of another executive as well, Sam Spatafore, director of Finance. Although it was unclear at VT's press time when Spatafore left that position, in the spring 2015 publication of the theater's "Showtime," Spatafore was listed in that position. The Carolina Theatre of Durham LLC didn't replace that position and is using an outside accounting firm.
In the Dec. 22 announcement of the theater's debt, Nocek said that the theater's troubles came to light in May, 2015, when the State of North Carolina put a levy on the organization's bank account seeking unpaid sales taxes on ticket sales. The nonprofit owed about $155,000.
However, the News & Observer article stated: "According to state records, Carolina Theatre of Durham started owing tax money by October 2014, when it failed to pay $25,966 and was assessed a penalty and interest, for a total bill of $35,616."
The article also stated that the nonprofit had run up an additional $800,000 in debt since July 2013, during a time when the board thought the theater was making a profit.
The news article said: "Previous information released by the nonprofit had indicated it ended the 2013 and 2014 fiscal years with small surpluses and cut its long-term debt to $224,909.
"State tax collection procedures suggest the nonprofit, which reported $3.9 million in revenue in fiscal 2013-14, should have known it had fallen behind in paying its taxes several months before Nocek and Harmon said they learned of the problem," the article said.
The N.C. Department of Revenue sends a delinquent notice roughly 45 days after the return is due and has not been received, spokesman Trevor Johnson said.
By February 2015, the nonprofit had failed to pay the state $120,264 in taxes and with penalties and interest owed $155,510, the records show.
Over the past year, debt continued to mount.
Berman said he is very impressed with the staff of the theater.
"They have been working very hard even though they have found themselves in a position they didn't ask for," he said. "We are all working hard to gain back the city's confidence and gain back the community's confidence. And, all of this is very positive."
Berman doesn't know how long he will be needed in the interim position but he plans, "to stay as long as I am needed."
Interviewed for this story: Tom Bonfield, (919) 560-4222; Dan Berman, (919) 560-3040