Police: Investigation into Peacetown founder’s handling of funds closed in Sebastopol

An investigation into allegations that the founder of Sebastopol’s popular Peacetown music festival misappropriated tens of thousands of dollars has been closed without any referral to prosecutors, police said Thursday.

Petaluma Police Lt. Jeremy Walsh, whose unit handled the investigation into Jim Corbett, the summer festival’s founder, said in an email to The Press Democrat that it “was terminated with no further criminal investigation.”

On Thursday, a day after the last of this season’s concerts was held, Corbett said: “I knew the accusations didn’t have any merit so I wasn’t worried about something happening. But I’m happy to be out from under that now and moving ahead with quite a bit of relief.”

Walsh said the matter was closed because nobody directly involved claimed to have been the victim of any crime.

The board of Peacetown Inc., the nonprofit that produces the festival, had rallied behind Corbett despite the allegations leveled at him by the organization’s former executive director.

“When we accepted the request to conduct the investigation, we were under the assumption there were parties involved that felt they had been defrauded of money or services,” Walsh said.

“During the investigation, we learned those specific parties felt differently and were of the mindset all services, money owed/paid were satisfied and as such, not interested in seeking any further criminal investigation. In these types of investigations, without the basic foundation of having a willing victim to a crime, there really is no investigation,” he said in the email.

Walsh referred further inquiries to Sebastopol city officials.

Sebastopol City Manager Larry McLaughlin said: “We simply told the Petaluma police that the city sustained no loss and that we received value for the money we gave in grants to Mr. Corbett or his organization and they performed as they were supposed to.”

Petaluma police handled the investigation at the request of Sebastopol officials who said they wanted to avoid any appearance of conflict of interest because the city had a long relationship with Peacetown and Corbett. Sebastopol had awarded about $50,000 in grants from taxpayer funds to Corbett’s Mr. Music Foundation.

Allegations by Peacetown Inc.’s former Executive Director Elizabeth Smith prompted the investigation.

Smith in June reported to Sebastopol police that Corbett had accepted city grants and an additional $56,000 in payments from The Barlow market district, where the concerts are held, while Peacetown Inc. was separately funding the concerts. Smith contended that Corbett was effectively taking money from the city and The Barlow for services that the nonprofit was already paying for.

Former Peacetown Inc. board member David Bush had seconded Smith’s account of what took place.

“We didn’t feel we were victimized by any of those activities whether they were true or not,” McLaughlin said.

Smith on Thursday said the investigation’s outcome was “disappointing.“

“I’m not sure why the city or The Barlow are not moving forward,” she said. “Specifically the city. That is taxpayer money.”

Smith had raised her concerns about Corbett to the Peacetown Inc. board of directors starting in February. In June, the board told her it would not renew her contract, saying she had not brought in enough new funding.

On Thursday, Smith said she had been wrongfully terminated and had retained an attorney, to whom she referred further questions. The attorney could not immediately be reached.

Corbett acknowledged that the matter had prompted some procedural changes at Peacetown Inc. and at his own Mr. Music Foundation, to which the city awarded $51,445 in grants since 2018 in support of the summer concerts.

“It made us tighten up our Peacetown ship and the Mr. Music Foundation,” he said. “We now have CPAs and bookkeepers and that’s been a positive from the whole experience.”

According to the state Attorney General’s press office, Corbett’s Mr. Music Foundation has had its status suspended by the Franchise Tax Board since April 2019 and “is delinquent with the registry of Charitable Trusts.”

McLaughlin, Sebastopol’s city manager, said, “that has not come across my radar and I wouldn’t know what effect that would have one way or another. Again, the conversations I had were essentially, ‘Did we receive what we paid for?’”

The Attorney General’s office said that “penalties for charities that continue to operate while not in good standing can include suspension, revocation or denial of registration, civil or criminal complaint, assessment of fines, and administrative or civil penalties.”

Corbett said he is “working on getting it back in compliance but I’m not operating anything out of that right now.”

You can reach Staff Writer Jeremy Hay at 707-387-2960 or jeremy.hay@pressdemocrat.com. On Twitter @jeremyhay