Nonprofit Imperative
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February 2009

What's Included:

Skunk of the Month

Suckered Charities and Donors

Nonprofit News-In Case You Missed It

Recession taking hold…Smithsonian, Universities, more; A Congressional look @ hospitals

Political/Official Chicanery

Police Chiefs; Court Administrator; Sheriff

Comings and Goings

What Do You Think?



See the Skunk of the Month…

Skunk of the Month is the designation made by Nonprofit Imperative, the organization dedicated to eliminating waste, fraud, abuse and mismanagement in nonprofits and government. The Skunk of the Month award is given to charities and government officials who show blatant disregard for the interests and trust of contributors and taxpayers. This month's example is:

Another Definition of Ponzi

It seems that the one of the words most used these days is Ponzi---with good reason. Many of the largest Ponzi schemes have occurred within the religious community. In some cases the church has sanctioned them, in others they been a result of informal communal relationships. All such financial crises were borne out of blind trust. Take last weeks Ponzi indictment of an Arizona Christian nonprofit, Nakami Chi Group Ministries International, which promised 24 percent annual returns and where the owner was dipping into the money to make a down payment on an $800,000 home and to pay gambling debts and other personal expenses. Investors included one pastor, church elders and members of several churches.

It takes chutzpa to pull off a Ponzi scheme but this one has a unique twist. The defendants have filed legal claims against the judge, court clerks, and attorneys. They have filed liens and lawsuits against financial advisors and even a reporter for alerting authorities about their scheme. Do they have a conscious?

Nonprofit News-
In Case You Missed It:

1. The foundation of Olympic athlete Jackie Joyner-Kersee paid at least $457,000 in consulting fees to her husband Robert Kersee's foundation, which did not file federal informational statements from 2002 through 2007
2. U.S. foundations have been lobbying for a piece of President Obama's $1 trillion economic stimulus package to help ease the pain of billions of dollars in recession-related investment losses. Over the past year private foundations on average are estimated to have lost 30 percent of the value of their endowments — or more than $200 billion in total, said Council on Foundations president and CEO Steve Gunderson.
3. The value of university endowments fell about 23 percent on average in the five months ended Nov. 30, according to two newly released reports. The drop is the biggest in the value of college and university endowments since the mid-1970s, said the executive director of the Commonfund Institute, which manages money for educational institutions and other nonprofits. The steep declines are forcing colleges and universities across the country to contemplate wage freezes, layoffs and a halt to construction projects.
4. The newly installed secretary of the Smithsonian Institution announced that he has implemented a hiring freeze and eliminated salary increases and bonuses for one class of its highest-paid employees. G. Wayne Clough has also asked several departments to reduce their current-year budgets by 5 percent to 8 percent. The action, taken because of the decrease in the Smithsonian's endowment by 25 percent last year and the uncertain economic future. The Smithsonian, the largest museum and research complex in the world, is financed through private money and public appropriations from Congress. Public funds account for 70 percent of its $1 billion annual budget.
5. In the Congress, the Senate Finance Committee, and particularly Senator Grassley, the Ranking Member, have been looking closely at tax-exempt hospitals and how they satisfy their obligations under the community benefit standard. The House Ways and Means Committee has also expressed interest in this issue. Proposed sanctions would have included an excise tax on hospitals and the disallowance of charitable deductions to contributors. As part of the 990 redesign, the IRS therefore added a new hospital schedule – the Schedule H – that requires non-profit hospitals to report community benefit and other information about themselves.
6. A suspended Roman Catholic priest has been sentenced to 13 years in prison for embezzling $432,000-$1million from two rural Virginia parishes.
7. Another Catholic priest, this one from Florida, faces trial for allegedly stealing one hundred thousand dollars is seeking a deal.
8. Two priests who authorities say for years stole cash from the offering plate of their Palm Beach County (FL) church and hid it in the church ceiling and offshore bank accounts to pay for lavish lifestyles will soon face a judge. One is accused of stealing $488,000 during 19 months and another is accused of taking $370,000 from 2001 to 2006. Update: both have pleaded guilty and are awaiting sentencing.
9. A former pastor of Hilltop Community Church accused of embezzling more than $100,000 from his church is scheduled to go on trial. Hilltop members have said they were unaware the pastor had been convicted in Virginia Beach in 1994 of at least seven felonies included embezzling equipment from his former employer, a painting contractor, and stealing items including a .45-caliber pistol, payroll checks and guitars, court records show. He pleaded guilty and received a 10-year sentence, suspended pending good behavior. He also had to repay five victims $18,815.
10. A former finance director at a St. Paul (MN) church is charged with embezzling $37,000 from church deposits. She covered her tracks by moving money from church reserve accounts. She told investigators her family was in debt to the IRS and had outstanding medical bills.
11. An initial discussion: North Dakota local governments should have the option of levying property taxes on hospitals, National Guard armories and YMCAs to defray the cost of providing them with fire and police protection, a state legislator suggested.
12. The Chronicle of Philanthropy says that House Democrats unveiled an economic-stimulus package that proposes billions of dollars in spending on Medicaid and other federal programs that will help nonprofit groups in cash-strapped states meet spiking demand for social services. It also proposes spending $200-million to allow AmeriCorps, the national-service program, to expand by 16,000 members to help vulnerable people during the recession, and $50-million to allow the National Endowment for the Arts to provide grants to struggling arts groups. Many, including President Obama, have proposed that the stimulus package include billions of dollars of spending to help charities both weather the recession and put people to work solving the country's problems.
13. The director of the Alamo Community College District Center for Leadership in Science, Math and Technology, handling hundreds of thousand of dollars for the district when she was indicted for stealing $900,000. Court records indicate some of the funds were funneled through her own personal checking account and some of the checks were used to pay her husband, daughter and her then 2-year-old grandson. The Judge recently ordered the former college district executive to continue paying back that which she still owes as part of her sentencing on criminal charges in 2005.
14. The National Heritage Foundation, a Virginia charity ordered last fall to pay millions of dollars to donors who said they had been misled by the organization, has filed for bankruptcy. The vice president says the organization, which manages thousands of donor-advised funds, is "a solid entity that just needed to hit the pause button." The group filed a voluntary Chapter 11 bankruptcy petition in federal court last week, citing the $6.2-million court judgment as its largest outstanding debt. Over the years, the National Heritage Foundation and its founder, John T. (Dock) Houk, have attracted the attention of the Internal Revenue Service and other charity regulators who have accused the organization of helping donors help themselves to improper tax breaks. In 2006, the Pension Protection Act made illegal a common practice at the National Heritage Foundation where donors would donate money to the organization to set up a foundation, take a tax break, and then draw a salary from the new foundation to run its charitable programs.
15. Despite being acquitted of embezzlement but convicted of felony misconduct in office and a misdemeanor conflict of interest charge the former embattled superintendent of Oakland Schools is suing the intermediate district's school board for breach of contract.
16. N.J. state authorities have filed a lawsuit to dissolve the 9/11 Rescue Workers Foundation Inc. charity that was supposed to benefit ailing World Trade Center rescue workers, but instead allegedly spent most of the charity's $75,000 to pay for mortgages, restaurants, dentists and doctors for the organization's two founders.

We flagged these few examples of nonprofit mischief (can't make this up):
1. Heart of Texas Council on Alcoholism and Drug Abuse (TX) under $100,000
2. High Point (NC) Elks $81,000
3. St. Joseph (MO) Public Schools Band and Orchestra Parents (BOP) $29,000
4. St. Joseph (MO) Family YMCA $11,000
5. Sixes Presbyterian Church (GA) $60,000
6. New York State USBC Bowling Association $272,000
7. Options in Supported Living (CA) $225,000
8. Sacramento Association for the Retarded (CA) $100,000
9. Delaware Hospice $200,000
10. Rialto Youth Soccer League (CA) $30,000
11. Nakami Chi Group Ministries International (AZ) $11 million
12. Montana (Lutheran) Synod $11,000
13. Casa Youth Shelter (CA) $400,000
14. Ann Arbor Amateur Hockey Association (MI) unknown
15. Fair Oaks Elementary School (CA) Parent Association $10,000
16. Adrian Public Schools (MI) $324,000
17. Routt County Habitat for Humanity (CO) $72,000
18. YMCA (PA) $90,000
19. Burnsville Athletic Club (MN) $35,000
20. Great Bridge Swim & Racquet Club (VA) $23,000
21. Fresno (CA) Unified School District $200,000
22. WGBH (MA) $500,000
23. Turning Pointe Therapeutic Riding (RI) $40,000
24. Saunders Middle School (VA) $6,000
25. West Hazleton Community Ambulance Association (PA) $6,000
*update

Political/public official chicanery (just a few):

1. A former police chief in New Jersey was sentenced to seven years in prison on Friday for stealing $180,000 from Mothers Against Drunk Driving while serving as its state chairman.

2. The Flint (MI) interim police chief was charged with illegally receiving public money, $47,000, through a no-show job at a security company run by his father.

3. A former South Carolina Department of Social Services Finance Director and nine other individuals were charged in a federal complaint with theft of federal program funds, mail fraud, wire fraud, and conspiracy for their respective roles in an alleged scheme to embezzle more than $5.5 million dollars (writing 761 checks of around $7,000 each) from DSS over a 4-5 year period.

4. A former 88th District Court magistrate/court administrator for Montmorency County was arraigned on embezzlement charges in excess of $100,000.

5. Marion Township (MI) Treasurer Ruth A. Gath has avoided jail but will have to pay $10,000 in restitution on charges she embezzled that amount from the village.

6.A former sheriff's deputy in North Carolina has pleaded guilty to embezzling money from the Yadkin County Sheriff's Office. He pleaded guilty to 10 counts of embezzlement, two counts of attempting to traffic in opium and OxyContin and one count of obtaining property by false pretenses and common law forgery. Thornton admitted he changed a doctor's colonoscopy report to make fellow employees think he had cancer.

7. A former South Tucson police lieutenant pleaded guilty to embezzling more than $560,000 from the city and its Police Department over a four-year period. More than $500,000 of the stolen funds came from the sale of vehicles, guns and jewelry seized by South Tucson police, while nearly $60,000 was in the form of currency taken from the Police Department's evidence room

8. A former employee of the New York Power Authority (NYPA) was sentenced to serve 37 months in jail and to pay a $5,000 criminal fine for his role in a kickback and bribery scheme. The former purchasing warehouse assistant at NYPA, pleaded guilty to conspiring to defraud NYPA in a bribery scheme where he accepted kickback payments from a vendor; also caused NYPA to pay in fraudulent overcharges. He also pleaded guilty to income tax evasion for failing to report as income any of the kickbacks that he received for the years 2005 through 2007. He was also ordered to pay, with another individual, $253,836 in restitution.

9 The former Senate Majority Leader for New York, Joseph L. Bruno, was charged with mail and wire fraud in an eight count Indictment. He "would contact persons or entities who had business before the Legislature or State agencies, including union officials, exploiting his official position for personal compensation and enrichment, knowing and believing that his reasonably perceived ability to influence official action would, at last in part, motivate those he contacted to enter into financial relationships beneficial to his personal financial interest."

10. Florence South Carolina mayor is now charged with Social Security fraud. He had his salary checks issued in his wife's name so he could receive Social Security disability checks from 2004 to 2008.
Gulfport (MS) Mayor Brent Warr has been indicted after federal officials say he filed a false claim of nearly $250,000 for disaster assistance for a home he did not live in and was not his primary residence.

11. An Arkansas police sergeant was sentenced to five years in federal prison after having pleaded guilty last year to embezzling almost $51,000 from his Van Buren department over 3 1/2 years.

Charity Check Up:

A Stockton (CA) woman sent to prison five years ago on charges she embezzled hundreds of thousands of dollars from the United Way of San Joaquin County awaits a court hearing on charges from prosecutors who say she's at it again.

Corinne Cervantes, 52, was arrested on charges she embezzled from Family Connections Foster Care, a Stockton nonprofit organization that places emotionally disturbed children into loving homes. Prosecutors have filed a 72-count criminal complaint charging Cervantes with embezzling $58,206 through forged checks in the past two years.

Cervantes has a long history of embezzling money from small businesses and charities, according to court records. Cervantes stiffed Human Services Agency, which she owed $17,000 after a conviction for welfare fraud. She made headlines as she was sentenced to eight years in prison after she admitted embezzling $247,000 from United Way. She also stole money from three small businesses she worked at in the early 1990s, in addition to an apartment rental management company and two shops in a Mall. Judges have been a quandary in sending her to jail because she says she wants to pay restitution and if she is in jail she can't do so. So that keeps her out of jail in the hope that victims will see restitution. She's never paid back any of the money she has stolen. She has never abided by the terms not to handle other people's funds.

Her boss, the executive director, said the agency did background checks on Cervantes before she was hired and called her references but to no avail. Cervantes concealed her criminal past from them, she said. CEO of United Way's local chapter, declined to comment on Cervantes but offered heartfelt advice to employers at small businesses and charities — perform extensive background checks. Those checks should delve into the California Department of Motor Vehicles, criminal records, income and financial databases. It could be worthwhile making a call to the local police department

What do you think??? : gary.r.snyder@gmail.com

Don't miss Gary Snyder's latest contribution to the National Committee on Responsive Philanthropy website (ncrp.org)

Nonprofit Imperative gathers its information solely from public documents...some of which are directly quoted. Virtually all cited are in some phase criminal proceedings; some have not been charged, however.

Recent (cites) Comings and Goings:

The Accountants and Regulators Role in the Current Collapse (ncrp.org)
Veterans Whine as Executives Dine (ncrp.org)
Government agency Monitoring: Indifference and Hush (ncrp.org)
Veterans Whine as Executives Dine (Ethics World)
The Suffering Nonprofit Sector (ncrp.org)
Has all that money lead to decay of the nonprofit sector? (ncrp.org)
Nonprofit Crisis—A Terrible Thing to Waste (ncrp.org)
Aspen Philanthropy Newsletter (October 2008; Report #149)
Board Room Insider (December, 2008)
One Perspective on Nonprofits, Nonprofit Board Crisis (November 24, 2008
Fraud Baron NRB media blog
Growing Nonprofits Consider Increased Government Involvement, Current Affairs
How to Check Out a Job Candidate's Background (The Chronicle of Philanthropy)
Right Man for Job Gets Top Pay (Atlantic Journal Constitution
Son is hired despite arrests (St. Petersburg Times)
Is Leadership Denial Feeding the Charitable Sector Crisis? (Responsive Philanthropy Magazine)
Report sketches crime costing billion: theft from charities (New York Times)
Does Charity Give Back? (Portfolio Magazine)
"Tax Records Show No Staff, No Controls", The Virgin Islands Daily News
"Nonprofit Roles and Responsibilities of the United States based on a comparative analysis of perspective" (NANKAI (China) BUSINESS REVIEW)
'Despite What Some Might Say, the Catholic Church Has a Big Problem: Embezzlement…The Charity Governance Blog
"Board quit, but trouble persists", The Sun News
"Corruption Thrives as Nonprofit Boards Forfeit Oversight Role", Palm Beach Post
"Board Not Consulted on Wages, The Sun News
"Reviving Charities Will Take Some Trust", Oakland Press
"Local Authors…Nonprofit Consultant to Appear", Detroit Free Press
"N.Y. Program Denies Giving Funds Reported on Tax Return", The Sun News
"Conflicts of Interest at Five Points", The Sun News
"Nonprofit Pay Rises Under Little Oversight" The Sun News
"Self-Regulation Needed by Charities", The Chronicle of Philanthropy
"Watchdogs? What Watchdogs?" Nonprofit World
"Socially Responsible Business Isn't Just for Business", Socially Responsible Business Forum
"Hear No Malfeasance, See No Lapses, Speak of No Misconduct", Nonprofit World
"Deceit and Managing the Broken Nonprofit Sector", PNNOnline,
"Nonprofit Boards can learn from Travails of Corporate Counterparts", Ohio Nonprofit Resources.net
Have a Strong Nominating Committee, Nonprofit Good Practice Guide
"Who's Minding the Store", Nonprofit World
Job Responsibilities, Nonprofit Startup Guide, Dorothy A. Johnson Center for Philanthropy and Nonprofit Leadership, Grand Valley State University
"Will You be the Other Victim in the Tsunami", PNN Online
"Turnaround Needed! How to Get Started" Nonprofit World
"What's all the Buzz About? Nonprofit World
"How to Safeguard Your Nonprofit Organization", National Coalition of Homeless Newsletter
Governance Chapter, The Michigan Nonprofit Management Manual, fourth edition
"Initiating a New Board Member", MichiganNonprofit.com
"Boards Must Change the Way They Do Business", Nonprofit World
"Crisis in the Boardroom-Can We Avoid Catastrophe?" Nonprofit World,
"Did Anyone Do Anything Right", CORP! Magazine
""Nonprofit Boards Can Learn from the Travails of Corporate Counterparts", Crain's Michigan Nonprofit
"Agreeing To Serve", CORP!, Magazine
Nonprofits: On the Brink (iUniverse, 2006)

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Email: gary.r.snyder@gmail.com

6584 Pleasant Lake Court, West Bloomfield, Michigan 48322, 248/324-3700

Website: www.garyrsnyder.com

Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. The book can be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store) and iUniverse.com (publisher).



© Gary R. Snyder, All Rights Reserved, 2009




















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Gary R. Snyder
248/324-3700
www.garyrsnyder.com

Nonprofits: On the Brink, Editors Choice and now Readers Choice...available at Amazon.com, Borders.com, Barnesandnoble.com, Barnes and Noble (stores)