Elk Grove Vice Mayor Steve Ly Fired By Previous Employer For Financial Mismanagement, Leadership Failure

October 10, 2016 |

Court documents on file at the Sacramento County Superior Court reveal Elk Grove Vice Mayor and Mayoral candidate Steve Ly was fired as the Executive Director by his former employer for financial mismanagement and failure of leadership.

These revelations were uncovered in documents of a failed discrimination and wrongful employment termination lawsuit by Ly and two other litigants against their former employer, Sacramento-based aid, and charitable organization Asian Resource Inc.

Documents for the case, Steve Ly, Mickey Hawj, Ghia Xiong v. Asian Resources Inc., 07ASS02408, September 24, 2007 show that Ly, who was employed by the ARI for nine months starting in September 2005, was fired after financial mismanagement of the non-governmental agency and the threat of a mass resignation of employees demanding his termination.

Among other charges leveled by Ly was that along with being terminated based on his ethnicity, he was also targeted by the ARI Board of Directors for his refusal to support Jimmy Yee in his 2006 bid for the Sacramento County Board of Supervisors.

In a subsequent declaration by all three plaintiffs filed on December 17, 2007, Ly claimed he “resigned a very lucrative and tenured position with the Sacramento County Office of Education, which he held for eight years. Also, Ly said he sold his home in Elk Grove and bought one with a larger mortgage, in Sacramento, so that he could be closer to his work.”

An ARI declaration filed on April 17, 2009, said “In only nine months, Ly led a 25-year old organization to the brink of insolvency. He lost funding, alienates key partners and drove over half of his employees to threaten to resign if he was not terminated.”

That same declaration stated “Ly’s performance and behavior caused immediate concern among staff at the ARI, and created what they considered to be an intimidating and inequitable work environment.”

Ly’s suit never went to trial as it was dismissed in a summary judgment issued in favor of the ARI on April 14, 2010. In that decision, the late Judge Loren McMaster ruled that Ly and his co-litigants were unable to substantiate among several claims that they were terminated, as he Ly argued, as an act of racial discrimination and for not supporting Yee’s successful bid for the Sacramento County Board of Supervisors.

McMaster’s summary judgment concluded the following:

Ly (right) and his mentor, Elk Grove 
Mayor Gary Davis.

“Steve Ly was hired as Executive Director by the Board of Directors on Sept. 1, 2005. He understood that he was at-will which was in the personnel handbook. Applying for and maintaining grant funding was a key responsibility of his position. Ly was not experienced in grant writing, but instead of learning the process, he delegated that responsibility to inexperienced staff. When he did take part in the grant process, he improperly applied for two grants for the same source, resulting in both being denied.

Ly failed to maintain relationships with key funders, by failing to attend meetings and failing to socialize appropriately with key members of the community or partner agencies.
Ly failed to maintain existing programs, resulting in corrective action against ARI and the loss of $120,000 in funding.

Ly spent an excessive amount in his short time at ARI, without regard for the budget process, depleting ARI’s resources.

Ly hired Xiong as a deputy director, without assuring adequate fund for the position. Xiong was funded through the site supervisor position but was paid almost $2,000/month over the budget for that position. Similarly, Hawj was promoted without any competition or interview for the job, and given a pay increase of $1,029/month over budget.”

Citing the evidence and case law, McMaster also wrote that Ly and the other litigants’ claims their terminations were racially motivated and that Ly and Xiong had been promised long-term employment were unsubstantiated.

Regarding the Yee endorsement, McMaster wrote “Ly admits he never received any direct threats, ultimatums or commands regarding his support of any candidate.”

So just how did Ly, a politician with well-known ambitions, get fired as an Executive Director of aid group after only nine months on the job?

Ly hired as Executive Director of Asian Resource Inc.
The saga started in mid-2005 when the well-regarded ARI founder and Executive Director May Lee decided to retire. At that point, the ARI, which was founded by Ms. Lee, had become a well-respected charitable organization aiding a wide variety of clients in the Sacramento community.

The ARI started in 1980 to provide social services to refugees and immigrants primarily from Southeast Asia. Over the years, the ARI expanded its mission to serve various in-need individuals and the waves of immigrants and refugees who landed in Sacramento including Russian and Ukrainian communities following the collapse of the Soviet Union and more recently, Syrians.

To serve the various communities, the ARI relies on funding from donations, and more importantly, grants. As the agency progressed, one of the main tasks of the Executive Director was securing annual grants which fund their various outreach activities and building relations within the Sacramento community. That outreach was to include regular attendance at meeting from the organizations that provide grant money and socializing with community members at the ARI fundraising events.
When Ms. Lee retired, along with directing the activities of the 30-plus employees at three offices, securing grants had become the main responsibility of her successor. After Ly was hired, court document reveals that Ly failed not only in the leadership of employees, his unwillingness to learn the grant process led to what employees described as the near financial collapse of the organization.

Hiring, early indications of problems, and grant writing troubles

After Ms. Lee had announced her intentions to retire, the ARI started a recruitment to find a replacement. The candidate they settled on was Mr. Ly saying he appeared willing to learn the various tasks.
Ly started his employment on September 1, 2005, at the salary of $78,750 as an at-will employee, which was the standard practice for all ARI employees. The at-will classification would come into play after Ly’s termination as he contended in his lawsuit that Ms. Lee had promised him employment of up to 25-years.

In one of his declarations Ly stated “Although I had run a strong campaign for the [Elk Grove] School Board previously [2002], I had no future aspirations at the time of my hire at ARI. When asked by [Director] Tim Fong of whether I intend to run in future elections I told him no, and that, “I had been there, done that, and didn’t intend on doing it in the future.””

Soon after Ly was hired, the ARI Board of Directors contracted with the first of two outside consultants to evaluate Ly and his leadership. The first consultant, who was retained to help in the management transition, reported to the Board that Ly was “not communicating well with the staff which was creating resistance to his leadership.”

One of Ly’s first email memos to the staff dated October 9, 2005, described his vision of how the operation and staff reporting was to be conducted. The description of the workplace as he envisioned was a top-down organization.

In that email, Ly described a workplace where he would start monitoring employee’s online activities, and that staff at any one of their three offices should expect unannounced visits.

The memo concluded by saying “On a more serious note, do not interpret my civility as a sign of inaction. I am patient and nice, but I will not tolerate insubordination.
If you are confused and would like detail clarification of the e-mail, call and schedule a private meeting with me.”

Negligence in grant writing, hiring beyond budget

When he was hired, declarations from both sides acknowledged that Ly was inexperienced in grant writing, one of the Executive Director’s main responsibilities, but Ms. Lee and the ARI staff would assist and train him to become proficient at the task. As letters from employees who were asked to review Ly revealed, he was unwilling to learn the task and “shirked” them off to employees who had no experience.

In addition to writing grants, it would be Ly’s role as Executive Director to develop and maintain relations with funders, which Ly neglected to do. Ms. Lee’s declaration stated “one of the things I told him was that maintaining relationships with SETA (Sacramento Employment and Training Agency)  and other funding agencies was one of the most important roles of the ED.”

Ms. Lee’s declaration also said she stayed on in an advisory role after Ly’s hire and instructed him how to complete a grant that she had initially started. Instead of following Lee’s instructions, Ly passed it off to an inexperienced employee declarations show.

Lee’s declaration said “It was simply a matter of filling in figures and simple calculations. I gave the proposal to Steve with instructions on how to complete it.”

Rather than completing the grant as instructed, according to another declaration, “Almost immediately after he was hired, Ly summarily dropped the responsibility of submitting a final proposal for Targeted Assistance Grants (approximately $700,000)” from the Sacramento Employment and Training Agency (SETA) on an employee inexperienced in grant writing. Ly also delegated grant writing to three other employees, none of whom had any experience. SETA grants were the ARI’s single largest source of grants representing 90-percent of its then $2 million annual budget.

The employee who Ly dumped the grants on said in their declaration “Before May [Lee] left, she had received a response to her proposal from SETA regarding the Targeted Assistance and related grants (approximately $700,000) which only required minimal adjustments and other information to be added then resubmitted for final approval. Steve simply put the entire packet on my desk and told me to do it.”

Declarations from several of the defendant’s employees uniformly say that not only did Ly avoid learning grant writing, but he also passed off the responsibility to inexperienced staff. Those same declarations said Ly did not attend SETA meetings and left it up to employees to represent ARI.

Ly also did not respond to corrective action letters requested from SETA for various grants it had received. “One such corrective action, regarding the WIA Youth Program, was not dealt with in a timely manner which contributed to ARI losing almost $120,000 in funding.”

While Ly’s inattention to grant writing led to the loss of funds, he soon recruited and hired Mr. Ghia Xiong, another party to the suit, as Deputy Director. Although Ly had approval for the hire, he did so at a salary substantially higher than budgeted. Mr Xiong, who relocated from Fresno to Sacramento for the position, was reportedly a close friend of Ly.

At about the same time, Ly also promoted an employee, Ms. Mickey Hawj, to an office manager. Hawj was promoted without any other applicant, internal or external, competing for the position at an annual salary that was over budget by $12,000.

Ms. Lee said in her declaration that she was one of three panelists who interviewed Mr. Xiong. In scoring him on a scale up to 90, he received an average rating of 45. Ms. Lee and another panelist suggested reopening the recruitment process, but Ly hired him without approval of the executive board at a higher than budgeted salary. Xiong was paid $5,666.66 per month, but there was only funding for $3,785 per month. “As a result, between the two ARI lost $2,910.66 every month on unfunded salaries.”

Xiong was subsequently laid-off in August 2006 because of the ensuing funding deficiencies and the dire financial straits of the ARI because of Ly’s leadership. Ms. Hawj left the agency after being offered a lower paying job with the agency.

In the ARI’s initial declaration they noted Xiong and Hawj “can be considered collateral damage of Ly’s incompetence.” They added, “Neither Mickey Hawj’s nor Ghia Xiong’s hiring were done through the normal budget process or paid for by any income source, and are prime examples of Ly’s financial mismanagement.”

Xiong and Hawj joined Ly in the lawsuit asserting they been a victim of racial discrimination. Xiong further claimed he had been promised long-term employment by Ly.

By early December 2005, Ly’s mishandling of grant writing started to catch up with him according to a declaration by the ARI program manager for the California Works for Better Health Programs (CWBH). That employee, who had recently given birth and was on maternity leave, was contacted by Ly and asked to attend a meeting with him in San Francisco regarding a grant proposal from the California Endowment.

That employee could not attend the meeting, but she did have a two-hour conversation with Ly trying to help him prepare. In the end, Ly did not participate in the meeting as pursuant to his role as ED, and instead sent an inexperienced employee declarations showed.

When the CWBH employee returned from maternity leave, she and another employee were assigned by Ly to write grants even though they were inexperienced. The declaration says we “worked on the grant and met several times, but Steve  continually failed to do his part, which was to obtain partners for the collaborative grant.”

In his declarations and depositions, Ly acknowledged that he had assigned grant writing duties to several inexperienced employees. However, he said he did so after they had requested the opportunity to become involved in the process.

By early December, declarations and employee reviews show that employee morale had come to the attention of ARI’s Board of Directors. In a special Directors’ meeting on December 5, 2005, Ly blamed morale problems on four specific female employees. 

No participation in fundraising
Along with his unwillingness to learn about grant writing, by November 2005 board members and key staff started preparing for their annual Lunar Festival and Fortune Festival which took place in February and April 2006 respectively. As Ms. Lee noted in her declaration, these were the ARI’s biggest annual fundraising events that Ly needed to be fully immersed.  

“Steve did not participate in the preparation or help [Board of Director] Stephanie or I despite the fact that is one of the biggest events we put on each year and a great opportunity to build relationships.”

Another Director said in their declaration that starting about the time the Lunar Festival was being organized in November 2005, they heard rumbling on Ly’s job performance. “Steve was not in the office very often, that he treated staff poorly and displayed an arbitrary and capricious management style.”

Ms. Lee, as well as several other Board of Directors and employees in their review of Ly, criticized his aloofness during that crucial event.

Defendants’ declarations said the Lunar Festival netted $20,000 which was earmarked for the 2006 Summer Youth Program. As a result of the ARI’s fiscal position at the time of Ly’s firing, that program had to be cancelled.  

New Year, more problems – bodyguards, laptops, leather cases & fiscal ruin

As 2006 started, the grant writing problems continued and employee morale at the ARI began to suffer under Ly’s leadership according to the defendant's declarations’.

The CWBH program director was instructed to fly to San Diego to meet with a partner agency to explore affordable housing and real estate development. Ly insisted she accompany him to San Diego, even though she was admittedly inexperienced in such matters. Ly attended the same meeting but was two to three hours late according to the declaration.
During the same period in early 2006, the CWBH employee said she started to note that “Steve would leave the office for long periods of time during the work day and would leave very early most days, and generally spend time in his office with the door closed. I once attended a meeting with Steve and on the way home we stopped at a janitorial supply store for 45 minutes so he could purchase supplies for his other business.”

Other employees also claimed Ly owned investment properties and during regular business hours, he attended to renting the units. In his declarations and depositions, Ly denied he had ever conducted personal business, including study for law school, while on duty.

By this time, Ly had dropped out of Lincoln Law School after two years of attendance according to the institution. Ly’s various biographical sources say he attended University of Northern California’s Lorenzo Patino School of Law following Lincoln but does not list a graduation date. It is not known if Ly, who is not a member of the California Bar, ever took the Bar Examination or if and when he graduated.

The unaccredited Patino School of Law, which was founded by famed Sacramento bail bondsman and bounty hunter Leonard Padilla in 1983, closed its doors as of 2013. It is reported between 1997 and 2011, the school, which Padilla considered a law school of last resort, had 134 students take the bar exam with only 11 passing on their first attempt. 

In the declarations and employee reviews, it was noted several times that during his tenure Ly regularly made self-indulgent expenditures. Among the items mentioned was the purchase of a $1,200 laptop computer, a $350 leather case for the computer, frequent meals, excessive cell phone bills and he “submitted reimbursement request for golf tournaments, volleyball tournaments, and even two bodyguards.”

According to declarations and employee reviews, Ly hired two bodyguards at ARI’s expense. Varying cost were mentioned in declarations ranging up to $7,000.

The bodyguards were hired after Ly terminated an employee in December 2005. One female employee said in declarations that she “felt threatened and intimidated by the bodyguards hired by Ly.”

Ly did acknowledge the purchase of the laptop computer and attending golf tournaments but made no mention of the leather computer carrying case, frequent meals or cell phone bills. He also said the golf tournament provided him with a good opportunity for networking.

As the Board of Directors started hearing further employee rumbling, a second outside consultant was hired to analyze the workplace. According to the defendant’s declarations, this consultant called one of the Directors at home on several occasions to express concern about Ly.

That declaration said the consultant felt that Ly “did not have good decision-making skills, didn’t follow through and was arbitrary in his leadership.”

Employee’s revolt, ARI Board of Directors takes action

As 2006 wore on, the defendants’ declarations paint a picture of not only rapid deterioration of ARI’s finances but poor employee morale.

On April 26, 2006 an ARI manager attended a meeting of SETA, which was according to several declarations was supposed to be a regular task for Ly. At this meeting, the employee learned that the ARI had lost about $120,000 in youth funding.

On May 8, 2006, Ly reportedly told employees during a staff meeting of the loss of funding and sought suggestions on how to keep the agency afloat.

“The staff, including Plaintiff’s discussed ARI’s financial situation at the May 8, 2006, staff meeting during which [fiscal manager] Szeto reported they might face 50% layoffs. After Ly’s termination, May Lee and Szeto reported to the Board that they needed to eliminate the Deputy Director position and even then the budget would be lean pending further cuts.”

By this point, several of the employees, concerned about their employment, met offsite to discuss the situation.

Another declaration said, “Many of us were afraid of losing our jobs either because we would be fired by Steve or because ARI was going out of business.”

Two employees, one the fiscal manager and the other an Associate Director, “discussed their growing concern regarding programming and finances. After the SETA funding cut was announced, they were convinced that ARI would not survive if Ly, and to a lesser extent Xiong, remained in charge.”

That same month ARI’s individual Board of Directors started to hear directly from employees about morale problems brought on by Ly’s management practices. Two Directors contacted the employees directly to assess the situation.

One employee’s declaration said they told a Director “That the employees did not like working for Steve, that he did not work hard or seem to care about the organization, that we were spending too much money and losing funding.”  

Around May 15, declarations show that employees learned there was a special Board of Directors meeting scheduled for May 16. The employees who previously met offsite decided to attend the meeting to express their concerns.

At that meeting, 11 employees, several of whom were in management positions, came in unannounced and presented a mass letter of resignation.

The letter, which can be viewed here, announced that the 11 signatories would resign in one week. 

The letter said of Ly and Xiong “We have not seen the substance of Steve and Ghia’s work. We, in fact, believe they are spending a great portion of their time implementing personal (non-Asian Resources) goals.

We do not wish to tell the Board what action to take; however, we feel there is no alternative to either our resignation or the termination of Steve Ly and Ghia Xiong. Therefore, we regretfully are submitting one-week notice of resignation with May 22nd, being our last day of work if the Board chooses to maintain the employment of Steve Ly and Ghai Xiong.”

A Director’s declaration described the meeting saying “It was a very emotional meeting, and there were a lot of tears. The employees who came forward, many of whom were immigrant women, were willing to quit their jobs because they felt poor leadership was harming the organization and the community we served.”
After telling the employees they would need two weeks to address their concerns, the Board of Directors decided to conduct anonymous employee evaluations of Ly. What they found in those surveys helped them make their determination.

ARI employees sound off on Ly’s management style, spending habits, work habits, favoritism and discrimination

The next day, the ARI Board of Directors distributed a letter to employees seeking their participation in a Management Leadership Practices Inventory. As part of that process, employees were also invited to write specific comments about Ly anonymously.

The results of the numeric survey showed Ly had lost the confidence of the workforce. The individually written narratives painted an unflattering portrait of Ly’s leadership style.
The several traits and allegations regarding Ly mentioned in the descriptions are in the following categories. 
These comments have been transcribed verbatim from employees’ reviews. All the employee letters can be viewed here.

Favoritism, Discrimination  

 “He is only close with some of the Hmong staff, and he speaks in Hmong when communicating with them which makes other staff uncomfortable.”

“He has hired 4 new staff and all of them are Hmong. There is an African American employee who was already on board who has been with the agency for 9 years and qualified for the position but he was not hired much to my dismay. All Hmong were hired. Discrimination was in place.”

“When the other same position came, all staff in the agency knew that it was a fake interview because he made that position to keep one more Hmong.”

“I have witness Steve to only pick and choose to provide services to the younger and good looking female clients and to clients with Hmong decent.”

“Steve Ly is very discriminatory with his hiring/promoting practices. This is evidenced in the new hires. He only rewards those that he feels he can easily manipulate or take advantage of.”

“Additionally, he has only promoted people that are Hmong, or that he feels he can manipulate.”

“He does not communicate or associate himself with any of the staff unless they are Hmong.”

“After that I gave up to work on Persian community’s partner. It seems as Steve Ly said on his first meeting with us ‘it is going to be a real ASIAN RESOURCES. I hate talking about the ethnicity like that, but discrimination is a big issue here. Everybody know that pass the glass ceiling here is depended on your ethnicity not our hard working.”

“Steve and his friend Ghia listen to their favorite staff and influenced by them very fast.”

Management style

“Steve does the opposite of promoting cooperation. He pits people against each other via non-communication with some of the managers and full blown communications with others leaving the management team, on different pages at all times. He has the same practice with staff.”

“All Steve does apply pressure to the ARI staff. However, the results are usually poor, because people continue to scramble to do his work.”

“He procrastinates and when he can’t finish – ask staff to do it.”

“On one hand, Steve like to be out of the office a lot, he has lack of time management skills, is not very courteous when it comes to returning messages left by other agencies and people.’

“Steve has openly shared his personal disdain for the E.D. of the Southeast Asia Assistance Center and has used ARI as a way to ‘get back at her.’”

“Steve Ly, listens to people, individuals, and in group, but he never follows up with them or make decisions about their ideas.”
“Steve Ly isn’t a stable person. I can’t trust on his behavior. Some day he is friendly and warm and shows that he ready to sit and talk to your, but some days he ignores people totally, even doesn’t answer their hello.”

“Steve’s words do not match his actions, staff have learned that Steve does not honor his words, and have since stopped trusting him completely.”

“He often cancels meeting with me and is almost always unavailable by phone or email.”

“Steve has made a practice of slandering former employees.”

Body Guards

“After Mary’s he hired two security men to protect him and he paid the $7,000 from our general fund, which was unnecessary.”


“He did very little in coordinating the Fortune Festival, and finally, when he did come to the Youth Conference, he openly-bad mouthed the work the youth had done…”

Grant writing

“He does not know anything about the programs w/in the agency nor care to know about it.”

Private work while on duty

“Steve conducts a lot of personal business during business hours.”

“In addition, Steve spends work hours doing personal business. In several occasions I have received timesheets from his private janitorial business. There was an occasion I was in the copy room and received a fax confirmation order for mops, (50), ammonia several gallons and other supplies. It was addressed to Steve.”

“He conducts personal business during office hours. Meet w/ his tenants for his personal issues.”

“He use office hours to do his homework as well as his law practice to provide services to his personal clients free of charge, but want to charge a fee for other not of his acquaintance.”

“I also received about 5 to 6 calls that week inquiring about the rental.”

“If he is in the office, he spends most of his time doing private work.”

“In addition, Steve utilizes a lot of company time to do his homework. Most days the door is close or on other days his lights are off and he is working on his laptop doing homework. I say homework because he has his school books on his desk.”

“Furthermore, Steve has used company equipment to run his personal janitorial business as well as to rent out his own properties.”

“On several occasions, Steve conducted his personal business during Asian Resources work hours at the Broadway Career Center. He arranged meeting with his personal staff and from his other business, a janitorial service, to discuss the service’s contract.”

“Every month, his other staff from his personal business faxes in timesheets to him and some of them occasionally come in to meet with him about the company.”

Using ARI to cultivate political ambitions

“I believe Steve is here at Asian Resources for his political interest. He on numerous occasions has expressed interest in running for political positions. I believe he is using ARI for his stepping stone of ‘community leader.’ 

“He didn’t plan to stay with ARI for more than a 1-1½ year, because he is in the process of finishing law school. As soon as he finishes law school he will leave. The only reason he took this position with the ARI is to become more recognized and popular with the Sacramento County.”

“His purpose for working here at ARI , I strongly believe he did it for his political agenda. He did at one point in time state he will run for office when the time comes. Here is where he wants to build his political foundation and cares nothing for the agency and the staff who are committed…”
“I feel ashamed to be working with such a person with these characteristics and intentions.”


Follow a tabulation of scores compiled from the employee evaluations and the individual narratives, the ARI Board of Directors voted unanimously to terminate Ly’s employment. Ly claimed one of the Directors who was Hmong, voted for the termination “because she is prejudiced against me due to a family feud.” 
In a letter dated May 30, 2006, the letter said the numerical scores and strongly-worded narratives highlighted were unfavorable. “The survey also showed an overwhelming lack of confidence in your leadership style among both managers and staff throughout the organization.

On the basis of your past performance, the management and staff evaluation, and recent observations of by the Board of Directors, we have come to the conclusion that best course of action is to immediately separate you from the position of the Executive Director and from the organization.” 

The termination letter was signed by Timothy Fong, PhD., who was the President of the ARI Board of Directors. In Fong’s declaration, he said the board met on May 25 and unanimously voted to terminate Ly’s employment.

Fong’s declaration also stated “I feel great pride in the decisive action we took as a board in terminating Steve. We gave Steve ample opportunity to succeed in the position, despite the several issues described above that arose before May 15, 2006. When confronted by the staff, however, we acted swiftly and correctly, and were able to honestly confront our own error in hiring Steve.”

2016 by Elk Grove News. All rights reserved.

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