Dede Wilsey, longtime head of the board that runs the de Young Museum and Legion of Honor in San Francisco, is giving up her top spot after the museums paid a $2 million settlement to a former high-ranking executive who said Wilsey had her ousted for revealing alleged misspending of museum money.

“After several years of serving as president and CEO, and with a competent director of museums in place, (Wilsey) believes it will serve the museums better for her to now focus on other areas where her skills and expertise will have a positive impact,” Ken Garcia, a spokesman for the Fine Arts Museums, said in a statement released to us.

Wilsey, a fixture on San Francisco’s social scene and the two museums’ main financial benefactor, did not respond to requests for comment.

News of her decision came after the museums’ Board of Directors agreed to pay $2 million to keep former Chief Financial Officer Michele Gutierrez from filing a wrongful-termination lawsuit, sources tell us.

$450,000 payout

Gutierrez accused Wilsey of pushing her out of her job last year for blowing the whistle on Wilsey’s payment of $450,000 in museum money to an ailing former staffer. Wilsey got her to sign off on the payment without first seeking board approval, Gutierrez said.

Wilsey said she didn’t need the board’s approval, but not everyone was convinced, including the state attorney general’s office — which launched an investigation that is still going on.

In April, the museums announced that anonymous donors would repay the $450,000. Speculation, never confirmed, was that Wilsey herself was footing much of the bill.

The attention on the case helped trigger a management shakeup and rewriting of the board’s bylaws. As part of that shakeup, the museums intend to eliminate a provision that allowed Wilsey to serve as board president for life — something that the attorney general’s office suggested.

For their part, museum officials insist the legal settlement and Wilsey’s pending exit aren’t connected.

Wilsey is expected to be replaced at the next board meeting in October by two co-chairs, sources tell us — former Visa President and CEO Carl Pascarella and Jack Calhoun, former president of Banana Republic. Calhoun joined the board last year. Pascarella is a former board member who still serves on its audit committee.

Pascarella and Calhoun also headed the recent search that led to the appointment of Max Hollein as the Fine Arts Museums’ new director. Both are considered close to Wilsey, who is expected to stay on the 43-member board, possibly as president emeritus, sources say.

As part of the power change, Hollein will assume Wilsey’s duties as chief executive.

Fundraising prowess

Wilsey has served as board president for nearly two decades and took over as CEO in 2012 after the death of museums Director John Buchanan. She is credited with almost single-handedly raising $190 million to rebuild the earthquake-damaged de Young in Golden Gate Park.

However, in recent years, Wilsey’s autocratic leadership style and accusations that she used museum personnel to tend to her personal art collection have opened her to criticism and gossip in museum circles.

The turning point came in October when former museum finance chief Gutierrez dropped a bombshell whistle-blower complaint — both at San Francisco City Hall and with state Attorney General Kamala Harris — about the money that she said Wilsey had ordered paid to ailing ex-staffer Bill Huggins.

Huggins was an $82,000-a-year stationary engineer until he suffered a heart attack and retired in September 2014. His wife, longtime museum registrar Therese Chen, worked closely with Wilsey until going on leave to care for her husband. She died of a stroke in March.

Risk of lawsuit

Unhappiness over the seeming lack of transparency in the Huggins payout prompted a string of high-profile resignations among board members, including philanthropist Bernard Osher, financial services executive Jack McDonald and former City Attorney Louise Renne.

Any lawsuit Gutierrez filed could have exposed the museum board to further scrutiny and potential public embarrassment. In a worst-case scenario, the attention could have jeopardized the nonprofit status of the board, which relies on a mix of private and city money to run the de Young and Legion of Honor.

“It was resolved amicably,” attorney Joe Cotchett, who was representing Gutierrez, said Friday. He declined further comment.

It wasn’t immediately clear who is picking up the tab to pay Gutierrez. But a Fine Arts Museums insider says the board and executive staff are covered by an insurance policy that indemnifies them for at least some of the settlement.

On the City Hall front, the city controller’s office wrapped up its fieldwork last week on an audit of the museums’ payroll practices to determine if there was additional potential misuse of money. A final report isn’t expected for several weeks.

‘Scrambling for cash’

Meanwhile, we’re told that the museums just ended the fiscal year with a $2 million to $3 million deficit.

Hollein, the new executive, was out of the country and unavailable for comment. But board member Calhoun downplayed the problem, telling us in a statement that the budget awaiting the board’s approval “aligns revenue and expenses to allow the museums to operate profitably in this fiscal year.”

One museum insider, who was not authorized to speak on the record, described the financial situation with more urgency: “We have serious cash-flow issues, and are scrambling for cash.”