Updated: 3:40 p.m.
Former Portland Marathon Director Les Smith illegally borrowed more than $865,000 from the nonprofit that operates the event, according to officials at the Oregon Department of Justice.
Smith, who had been the director of the event since 1982, entered into a settlement agreement with the state, agreeing to repay the Portland Marathon $865,000. Of that, $50,000 will be used to reimburse the Department of Justice for the cost of the investigation.
Smith admitted no wrongdoing in the settlement agreement.
He is banned from participating in any foot races in the future and he is prohibited from forming another nonprofit, according to details of a settlement released Wednesday by the Oregon Department of Justice.
Neither the loans to Smith, nor the amount, were explicitly disclosed in the nonprofit's tax returns. State law prohibits loans from nonprofits to their officers.
According to a Department of Justice news release, investigators found that Smith operated the Portland Marathon "without any meaningful board oversight" and "received hundreds of thousands of dollars in loans from the Marathon—a practice that is illegal."
The settlement prohibits Smith from serving as a director or officer of any charitable organization and requires him to dissolve Next Events, his for-profit company, according to the news release.
"In addition, he is not able to operate, or be involved with, any foot races in the future, and he is prohibited from seeking reinstatement with the Oregon State Bar," the news release said.
Kateri Walsh, spokesperson for the Oregon State Bar, said Smith's license to practice law has been suspended for failure to pay malpractice insurance dues since April 15, 2016.
Smith began borrowing from the nonprofit years ago, state officials said. It's still not entirely clear how much he borrowed in total, though it's at least $865,000. State lawyers said they don't know what Smith did with the funds.
Smith's wife, Paula Smith, is named alongside him in the settlement. State officials said she did not play a meaningful role in the Portland Marathon organization.
Department of Justice spokesperson Kristina Edmunson said Wednesday that the agency is still investigating the involvement of Smith's long-time partner in both Next Events and the Portland Marathon, Mamie Wheeler.
Neither Smith nor Wheeler is still employed by the Portland Marathon.
Janet Hoffman, a prominent criminal defense lawyer in Portland, represented Les Smith. She pointed out that Smith admitted no wrongdoing in the settlement.
"It was a highly contested matter," Hoffman said. "We're glad that we were able to resolve this with mutual releases between the Portland marathon and the board and the Smiths. Mr. Smith hopes that there be a successful 2018 Portland marathon without distraction."
The Department of Justice confirmed in July of 2017 that it was investigating conflicts of interest related to the Portland Marathon's relationship to two for-profit companies as well as the marathon's corporate structure.
In a statement, Oregon Attorney General Ellen Rosenblum called the marathon a "capstone event in Oregon," adding that she is "hopeful that this settlement will enable more successful events in the future."
The current board of the Portland Marathon consists of Julian Smith, chair, Richard Busby, Andy Ritchie, Jim Schaeffer and Gina McVicke.
In a statement sent out Wednesday, the new board of the Portland Marathon said they look forward to "the opportunity in 2018 to strengthen its partnership with the City of Portland and intends to work with city leaders to ensure this iconic event is top quality, reflects the character of the people who live and work in Portland, and showcases the City of Portland's natural beauty."
In January, the City of Portland announced that it would allow the Portland Marathon to go forward in 2018. Officials had said they would look for a new operator for a 2019 marathon in Portland.
"We are reviewing communications from the board," Mayor Ted Wheeler's spokesperson Michael Cox said over the phone, "and once we do that we will have more to say about a path forward."
Portland Bureau of Transportation spokesperson Dylan Rivera said Wednesday that the agency is still "evaluating the situation and today's news from the Oregon Department of Justice."
The last several years have been rocky for the Portland Marathon. The event was almost shut down before it began on race day in 2016, due to issues with the distribution of the safety plan.
At the same race, the wrong man was awarded first place and a number of runners reported running too far, which potentially impacted their ability to qualify for the Boston Marathon.
In 2017, the marathon was denied a permit until several weeks before the event, due to issues with the city regarding course route and a history of late payments.
Jeff Manning contributed to this report.
-- Lizzy Acker
503-221-8052
lacker@oregonian.com, @lizzzyacker