[Bonus] Fraud at the Portland Marathon

On February 17, former president of the Portland Marathon, Lester Smith, was indicted by a grand jury on charges of wire fraud and tax evasion. In the indictment, Smith, who has led the Portland Marathon as both president and race director since 1982, is accused of embezzling more than $1 million dollars from the race’s coffers to fund his personal luxury lifestyle.

Today, we’ll be looking back at the story of Lester Smith and his time at the Portland Marathon, the legal cases brought against him and the impact events have had on the Portland running community and the Portland Marathon.

With me to discuss the facts and implications from the case is Jeff Manning, a runner and veteran investigative reporter from the Oregonian who has followed the Lester Smith case closely since it first broke in 2018. So stick around for a fascinating dive into the Portland Marathon story.

In this episode:

  • How Lester Smith evaded detection to misappropriate more than $1 million from the Portland Marathon from 2012-2018
  • Smith's track record at the helm of the race
  • Details of Smith's $850k settlement with the Oregon in DoJ in 2018
  • The allegations in the federal grand jury indictment brought against him in Feb 2022
  • The impact the legal turmoil has had on the local community and the Portland Marathon

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Episode transcript

Panos  2:36  
Jeff, welcome to the podcast!

Jeff  2:38  
Panos, good morning. 

Panos  2:39  
Well, thank you very much for coming on. Good morning to you. I'm really excited to have a real life investigative journalist on the podcast for once. So tell our listeners, please, a little bit about yourself and the work you do at the Oregonian.

Jeff  2:53  
I am a senior investigative reporter - I'm very old. I've been at the paper for a long time. I guess, about 20 years ago, I developed this specialty in white collar crime and, generally, just follow people who were behaving badly. I'm a runner - or at least I was before I got my hip replaced this year. I love writing about sports and the business of sports. So, this was a natural for me.

Panos  3:20  
Absolutely. And I think it's a perfect nexus of things - someone who is interested in sports and white collar crime. That is very relevant for today's discussion. So today, we will be going over the case of Lester Smith, the former president of the Portland Marathon. Some people in the audience may have followed this. It's been going on for a while - I think it all, sort of, like, started to emerge around 2018. I'll give my very rough, kind of, one-liner summary here and then I'll hand over to you to give, like, a more proper summary of what's been happening so far. So Lester Smith, former president of the Portland Marathon, was indicted recently at the federal level - there's been some legal action against him before that - for embezzling upwards of a million dollars during his time at the Portland Marathon. There were also some tax evasion charges and some other stuff. Why don't you give us the more proper summary of the whole case? What's been happening so far?

Jeff  4:28  
You're right. This has dragged on forever. Lester Smith took over a marathon. I thought he founded the marathon back way back in 1982, but it existed before that. He became the official head of the group in 1982. He was a long-time labor lawyer in town. Portland Marathon was his hobby - at least, it started out as this hobby - and then it became, sort of, a full time job. The Portland Marathon emerged with a very interesting image. It wasn't a super competitive Marathon - it was the people's marathon. It allowed you to wear headphones and encouraged the everyday runner to give it a try, and things went fine until 2012. There were a series of years where the race clashed with the police. They clashed over the route. Les clashed with his board of directors which he had founded relatively late in the game. These were, for the most part, a bunch of running enthusiast and they were not professional financial people, but they knew enough to suspect that something was going on. Then, in 2018, it all blew up. The Oregon Department of Justice which regulates nonprofits - Portland Marathon was one of them - came in and accused Les of borrowing $865,000 from the organization, not paying it back, and not being forthcoming about what the money was used for in the first place. Les settled with the state. He repaid the race $865,000. His second in command, Mamie Wheeler, agreed to repay $30,000 to the race. They quit, left town, and everybody thought that it was, sort of, a done deal. Then, they're charged criminally at the federal level just weeks ago, almost five years after the state took the action. Why the long delay? I can't really tell you. So that's where we are now.

Panos  6:32  
So it sounds like you weren't expecting this whole story to come back and for the federal charges to materialize on top of what happened a couple of years ago with the state case.

Jeff  6:46  
I had been tipped off that it was coming and that the case was still alive. Two years ago, I had heard that they were still investigating. I sat down with several former members of the Portland Marathon board. They had been talked to by the FBI. They thought something was up, and then nothing happened. I thought, "Okay, that's the way it goes." Sometimes they opt not to and they don't exactly share their logic with me. Then, obviously, they never dropped it and they lowered the boom a couple of weeks ago for several counts of wire fraud and several attempts to evade taxes.

Panos  7:24  
The Oregon State case and the federal case - you'd think that they would be on different charges, right? I guess you can't go to trial twice for the same thing. So what was the Oregon case? What were the charges in the Oregon case? And what really was left out for the federal case now to pursue?

Jeff  7:45  
The Department of Justice in Oregon has a unit that oversees nonprofits, and there is a strict separate body of law that applies to nonprofits. Even if you are the founder and chief executive of the nonprofit, you cannot loot it for your own good purposes. It was a civil case in their part. They came in, sued him, and had him dead to rights. He agreed to repay the money, and he did. The criminal thing is a whole different world. It's federal - at least, in this case, it was federal. The US Attorney came in as part of the Federal Department of Justice - there's a whole different body of law there.

Panos  8:25  
The interesting thing for me when I was, sort of, digging up published articles about the case and also reading an interview that Les Smith gave a few years back to, like, a running magazine when none of this stuff had emerged - he was talking about how he was the President of the Oregon Road Runners club before coming into the Portland Marathon. And apparently, there's a story he shared there about meeting Fred Lebow in the Honolulu Marathon and being inspired to, basically, make the Portland Marathon a grander race. And as you mentioned, he sort of took over in 1982. Then, for the next 30 years, no irregularities have emerged, at least, until now, I guess. Then, suddenly, 30 years later, in 2012, he started putting his hands in the register. So, why did it all start in 2012?

Jeff  9:19  
That is the question that haunts all of his former friends because they were just a bunch of runners - they just like to run, they were recreational types, they weren't world class. I think that the other people felt so betrayed because he exposed them to potential liability. To this day, they can't believe that he got greedy. That's what they put it down to - he got greedy. There are lots of conspiracy theories about other people being a bad influence on Les. All of a sudden, according to the federal prosecutors, they were taking a lot of money out of the race to fund shopping sprees, pay for the rent of his girlfriend, and wild stuff. For former or still practicing lawyer in town, it was shocking. It would be arrogant to think that anybody could get away with that. 

Panos  10:24  
Yeah, I can imagine. Actually, speaking of arrogance, it seemed - as you were saying earlier - that in 2016-2017, he had a few, kind of, like, run ins with local authorities, permit being denied and being withheld. Yeah, he may have become a little bit too much of himself around around that time. The other thing that's very surprising to me in all this is that the way of running and the business of putting on races or the act of putting on races involves lots of nonprofits - nonprofits play a very, very key part in this industry. My understanding was that all of these nonprofits are somehow regulated or, like, watched over by the board, the auditors, and stuff like that. How can it be possible for someone to get away with, basically, stealing close to a million dollars and no one figured it out for six years between 2012 to 2018?

Jeff  11:25  
Well, for years and years, the only members of the board were Les and, maybe, Wheeler. So, there was no oversight. They could do whatever they want. As the indictment alleges, he could take money out of the race, pay his credit card debt, and direct Wheeler to get back into the QuickBooks software and obscure that usage. I mean, they created an accounts receivable column where all of these withdrawals were accounted for, to make it look like things were kosher when they weren't. Now, when he brought down this new board - because, at some point, he did - that was when things started to go south on him because suddenly he, admittedly, had this, sort of, crude level, but he had some oversight. His handling of things did not stand up to that scrutiny.

Panos  12:27  
Was he forced to involve more people into the board? I guess, if he was doing shady stuff, he wouldn't have volunteered to bring those people on?

Jeff  12:40  
That's a complicated question and I don't really have enough grounding. That's 10 years ago. The only thing I knew about the Portland Marathon at the time was that he wanted to avoid certain parts of town for the marathon because the traffic was going to be a mess.

Panos  12:56  
Right. So do we know how he got found - like, what happened - and all that stuff around 2018?

Jeff  13:06  
I think the board members tipped off to the Department of Justice that things were not right.

Panos  13:12  
I see. I guess, we also have the minutes of the state case. Has Les tried to defend himself against the accusations in any way?

Jeff  13:24  
He settled the state case by repaying the $865,000, then he moved to Texas and dropped out of the marathon. I think that he thought that he had successfully fended off any further problems. He did hire a criminal defense lawyer here in town - a very good and very expensive one - and everyone thought that with the two of them together, that was going to be the end of it. How did the state case morphed into the federal case? It's just something that we have not yet figured out. I think we, too, thought it was a done deal. The race has gone through some difficult times since then. Things are looking up now, but for a while there, there was a real post Les Smith hangover. It's taken a while for the reformed race under new management to find its feet and find his legs.

Panos  14:22  
Yeah. A great management, it is. The new management, Brooksee, I think, is a really solid company. Let's hope they make the most of this and they give the people of Portland back there race. In terms of Les, you said he moved to Texas. The federal case against him - do we know when that's set to go to trial?

Jeff  14:39  
These things are really really slow. If it follows the usual pattern, it will drag on for months, if not years. It just seems to be the practice of many federal prosecutors that you file the charge, then you sit back and just wait for the other side to finally crack and say, "Okay, I'll settle" so that they can avoid a trial, which is expensive, takes a ton of work, and you never know what's going to happen. So, I fully expect that to happen in this case. It's not just &865,000 - there is more money that's unaccounted for. We don't have a good idea of how much, whether they're gonna find it, or whether they're ever gonna be able to recover it. So his former board members are convinced that there is a lot more money that are unaccounted for - they would be in a better position to know than I, so we'll see. Generally, what happens is, as they learn more, the prosecutors will file an amended complaint that is stronger, has more detail and, again, just ratchet up the pressure on Les to settle.

Panos  15:47  
Yeah. The other thing, actually, is that in all of this, Les also had a for-profit company on the side which he was the owner of, right? And there were some practices of transfer pricing in the whole thing, right? Basically, the nonprofit award contracts directly to Les' business - it's almost, like, taking money from one pocket and putting it into the other pocket - no oversight at all that.

Jeff  16:16  
Les had a pretty sweet deal here. He was getting paid a salary of $514,000 by the marathon - pretty hefty. He was getting hired by other events, by the marathon - management contracts. According to both Departments of Justice, he was stealing money from the organization. So, he had three flows of revenue going into his pocket. I think that any, sort of, public athletic event is so dependent on the goodwill of the public. If you're a runner, you want to feel like you're supporting a solid organization, and you want to feel that they are doing this for altruistic reasons. When it started to come out that there was money going missing and the suspicion that it was winding up in the director's pocket, that was really damaging to the race and to the reputation. And like I said, they're still, sort of, battling that hangover. 

Panos  17:19  
That's interesting. In terms of the fallout - you're a runner, you're a local resident, it's very important to you, you know the people on the ground and you know how the community is feeling - in what ways did this, kind of, betrayal manifest itself? Like, how did this whole story, sort of, affect the local community, the running community, and the people of Portland?

Jeff  17:43  
Well, participation nosedived, for one thing. I mean, this is a race that's between the marathon and half marathon - they would have more than 10,000 people a year. I think in the last year, it was 4,000. So, it is, sort of, a shadow of his former self. Although Brooksee said, "We're going to build this up to one of the preeminent marathons in the country. We're gonna have 30,000 people participating by 2030, etc." They started having trouble with the city and no one understood why could this race that has been happily coexisting with the city for years suddenly not be able to agree on anything? Les' inability to mend those fences and keep those relationships intact - people just didn't get it. I don't know if there's a relationship with the fact that he felt that the authorities were coming in and cornering him. There's this great moment-- not a great moment - it was a terrible moment. I think it was the year after last left. They had put the race in the hands of new management - this was not Brooksee, this was another company. At some point, a Union Pacific train crossed the route of the marathon and blocked that route. So all these runners who were hoping to, obviously, run it as fast as they could, maybe, to qualify for some other marathon were blocked by a frickin freight train. It was going slow enough across the road that it took, like, 20 minutes. Some runners refused to wait. They were hopping up on the train between cars and jumping down on the other side. It's a minor miracle that no one was killed, but people were furious afterwards. That management company did not last another year, and they brought Brooksee in. That was, sort of, a sad realization of where the marathon had gone.

Panos  19:39  
Yeah. I actually remember the story you're referring to. I remember thinking, after the whole fraud thing, you had the thing with the train - it was almost like there was a curse on that event. I mean, you get so much bad luck just stacked one year to the next. I really hope Brooksee can do an awesome job making the Portland marathon all it can be because Portland - I've been to the city - is an amazing place. Like, Oregon deserves a solid metropolitan marathon like the Portland marathon. So, let's hope everything turns out fine. In terms of Les, I guess, and his federal case now, what's at stake for him? Are we talking jail time or more fines? Or how bad can this turn out for him?

Jeff  20:29  
It can turn really bad. He could be looking at jail time. I mean, this is not a violent crime. He's older. These prosecutors don't mess around. They are willing to talk a deal, but they' also have the power to imprison you and I've seen cases less serious than this in terms of the amount of money that will that will result in jail time. You do not want federal charges filed against you. Generally, they are very cautious - they only bring charges which they think they can win. So, I guess time will tell where Les ends up - it's not going to be good.

Panos  21:07  
Yeah. It's not a small thing - what he what he did. I think, beyond the money, as you said, it wreaked havoc on the event, on the community, on the trust people had in the Portland marathon, and everything. So let's leave this whole thing to the courts. Let's let it take take its route, I guess. So, Jeff, I think this has been amazing and really informative. Thank you very much for coming on. Where can people find you if they want to learn more about the story or about yourself or maybe reach out?

Jeff  21:39  
Anybody who wants to talk marathon, I'm very interested. My email is jmanning@oregonian.com and I love to hear from you. We'll be following it closely. Oregonlive.com is our website. This is a tough time in Portland. There's a lot going on between the pandemic, the social unrest, wildfires, and heat domes. This has not been a happy time for a place that has generally been one of the more successful urban areas, and it would be really nice to have the marathon come back really strong. There is some good news, Oregon Health Science University, which is our big medical complex med school, huge employer, has stepped back in as the lead sponsor of the race. They had dropped out last year because of the pandemic. Last thing a struggling race needs is for their lead sponsor to a drop out, but they're back. So let's hope that that is a harbinger of good times to come.

Panos  22:38  
Absolutely. Yeah. Let's hope that. I'm sure, as I said, Brooksee is a great bunch and they're gonna do their best to bring the Portland Marathon to its former glory and beyond. So Jeff, I want to thank you very, very much for coming onto the podcast and sharing all of this with us. 

Jeff  22:55  
Thanks, Panos.

Panos  22:57  
And I want to thank the listeners for sticking with us for this special episode, and I will see everyone on our next episode!

Panos  23:10  

I hope you enjoyed this bonus episode, on the Portland Marathon fraud case with Oregonian investigative reporter, Jeff Manning.

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Until our next episode, come join the discussion with more than 6,000 fellow race directors in our Race Directors Hub group on Facebook, take care and keep putting on amazing races.

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