MINNEAPOLIS -- Minnesota Diversified Industries, a nonprofit plastics maker that relies on government contracts and grants to employ disabled people, has taken its executives on a Lake Minnetonka party boat, given them $100 bills to gamble with at a casino and sprung for a retreat for executives and their spouses at a golf-spa resort.
"I am in shock," said former board Chairwoman Catherine Connett, when told of the company-paid gambling outing.
The executive entertainment, typically offered once or twice a year, continued even after the company, one of Minnesota's largest nonprofits, lost money in 2005. At the most recent getaway, executives played golf and discussed plans to lay off workers.
A week after the trip, the company dismissed 30 employees, the first wave of layoffs that have affected 100 people, many of them disabled workers paid at or near the minimum wage.
MDI recently warned state officials that 250 to 300 more workers will be laid off, at least temporarily, in March. The layoffs at its plants in Grand Rapids and Hibbing would reduce the overall work force by more than half. Many of the workers are disabled. The plants make plastic boxes for the Postal Service, which cut orders 65 percent this year.
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CEO Mark de Naray and five vice presidents checked into the Grand View Lodge, a resort on Gull Lake near Nisswa, Minn., for a strategic-planning session last fall. The perks included golf and spa services. Spouses joined the executives for one or two nights, De Naray said.
"It's very low dollar value," he said of the $8,000 resort bill and similar expenses by the nonprofit. "And, you know, when you work as hard as we do at this business and you need time away to get your thoughts on a strategic plan, that's how you do it."
MDI, founded in 1964, had sales of about $41 million in 2005 and was the sixth-largest social-service nonprofit in Minnesota, according to the Minneapolis Star Tribune's recent annual survey of the state's 100 largest nonprofits.
MDI gets government set-aside contracts, such as the Postal Service work, because its primary mission is to train and employ disabled workers. Federal law says 75 percent of the production workers on such contracts must be blind or disabled.
De Naray, former chief executive of Select Comfort, a mattress maker, joined MDI as its CEO in 2003. He said he takes responsibility for the layoffs even though he had no control over the Postal Service cuts. He had hoped to increase revenue threefold to $125 million by 2010, and had expanded MDI's manufacturing in Grand Rapids anticipating rapid growth.
But the growth in other manufacturing and services hasn't come close to making up a drop of more than $20 million in orders from the Postal Service. Now, MDI probably will report a loss of nearly$3 million for 2006, De Naray said. He estimated 2007 revenues at $25 million, a 39 percent drop from 2005.
People who took the 2004 casino trip said the group of about a dozen was lodged at Hotel Sofitel in Bloomington, Minn., when De Naray ushered them onto a bus without revealing its destination. Then he or an assistant handed out $100 bills for gambling.
De Naray said that the executives "were going to enjoy ourselves for a few hours" and that the point was to see who could win the most money, which would be returned to MDI. He said he doesn't remember if the nonprofit got all the money back.
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Minnesota Diversified Industries Inc.
Headquarters: St. Paul
Plants: Hibbing, Grand Rapids
Employees: More than 500
2005 revenue: $41 million
2005 Loss: $278,000
2006 Loss: $2.9 million
Mission: This tax-exempt nonprofit trains and employs disabled and disadvantaged people. Most revenue is from sales to the government under a federal set-aside program. Also receives federal, state and other grants.
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Products and services: Plastics manufacturing, packaging, assembly, fulfillment services. Largest customer is the U.S. Postal Service.
Recent and planned layoffs could reduce the work force by more than half.
