A Northampton County Grand Jury has cast a glaring spotlight on a pattern of mismanagement, conflicts of interest and excessive salaries at the National Museum of Industrial History on Bethlehem's Southside.

The Grand Jury investigation started in reaction to media reports raising disturbing questions about the lack of progress at the National Museum of Industrial History, located at the site of the Bethlehem Steel Plant. Formed in 1997, the museum was projected to attract up to three million visitors per year.

Seventeen years later, despite the infusion of $17 to 19 million in both public and private funds, the museum hasn't opened.

Museum CEO Stephen G. Donches, onetime Bethlehem Steel Corporation's vice president of public affairs, has received almost $2.5 million dollars in salary and benefits over the past 12 years. According to the Grand Jury report, forensic auditors say it's double what should be paid to the CEO of a similarly sized non-profit organization.

Concerns do not stop with Donches. According to the Grand Jury, "The Museum was a resting place for soon to be unemployed officials of the Corporation who continued to benefit from high paying salaries, retirement benefits, and other benefits at the expense of the organization."

The Grand Jury report says that Donches may have "exploited" potential donors with "overly optimistic and unrealistic expectations as well as public statements by Mr. Donches as to the near opening of the Museum despite Board direction that donors be cautioned as to the viability of the Museum."

Funding for the project came from several sources. About $9 million came from the late Priscilla Payne Hurd, and former Bethlehem Steel boss Hank Barnette kicked in just under $1 million. The museum received $70,000 in federal funds from the Institute of Museum and Library Services; a state Redevelopment Capital Assistance Program grant of $1.4 million; and another $10,000 from the state Department of Community and Economic Development. All artifacts for display had been donated by the Smithsonian at no cost to the Museum.

The Grand Jury report also questions activities of some museum board members.

Before Lee Butz, chairman and largest shareholder at contractor Alvin H. Butz Inc., became a museum board director, the Butz company was doing work for the museum and had been paid $810,977.

After being placed on the board, the Butz' company was paid another $2 million for various construction projects.

According to the Grand Jury report, investigators are unable to find any discussions in the minutes of museum board meetings concerning a contract awarded to Alvin H. Butz Inc. prior to the actual signing of the contract on May 27, 2008. In fact, at a meeting just two days after this contract was signed, not a word was said during another meeting.

Other museum board members were also reported to have conflicts of interest.

L. Charles Marcon, the board chair, bid on construction work at the museum.

The museum has funds on deposit with what was then called KNBT Bank, and board director Daniel G. Gambet was connected to that bank.

According to the Grand Jury, "[t]he Museum lacked transparency and the Board routinely granted lucrative salaries and retirement benefits which were out of line with similarly missioned and sized non-profit organizations."

Though the Grand Jury believes there is insufficient evidence for a criminal prosecution, it has recommended that Donches resign or be fired. It also wants museum board members to review their own conflicts of interest, and the jury is asking the state Attorney General's Charitable Trusts Section to determine whether to dissolve the museum. Finally, it is suggested that the museum board consider suing Donches civilly.