Wednesday, December 23, 2009

2009 Was Quite a Year for Nonprofit Fraud

2009 Was Quite a Year for Nonprofit Fraud

Subscribers of the twice-monthly e-newsletter, Nonprofit Imperative (NI)---a four-year-old journal that tracks and collects data on billions of dollars of charitable and nonprofit-political fraud at thousands of charities--- should know that this was a record breaking year. There was a significant jump in the incidents of malfeasance. Each year there has been an increase with 2009 ending with the largest of over $1.5 billion in fraud---a 50% rise over the previous year. It should be noted that health-related and education charities are not typically a NI focus and they represent about 69% of the nonprofit assets. That makes the $1.5 billion loss even more startling! This year will exceed the generally accepted fraud cost estimates to charities of $40 billion in 2006.

Here is just a sampling of the constellation of frauds from Nonprofit Imperative (collected from public sources):

Skunks of the Month (the award is given to charities and government officials who show blatant disregard for the interests and trust of contributors and taxpayers.)

The administrator of Local 147 of the Compress Air and Free Air Foundations (AFL-CIO) was paid $540,000 salary and took $42 million from union accounts over an 8-year period. Where was the board and auditors?

Martin Luther King Housing Development Association executive kept pulling down a salary of $141,000 as the agency was sinking and the board, fully aware of the situation, gave him a 22% increase in salary. The reason: “I wanted him to clean up the mess, not leave it for us (the board) to clean up.” After three years of going into substantial debt, the board fired the executive because of “a lack of financial controls and oversight.”
Some notable ones
• Bernie Madoff- loss to the charitable sector- $5.1 billion
• Smithsonian Institution-$12.3 million (property)
• Smithsonian Institution-$550,000 (misappropriation)
• D.C Health Department-$25 million (over 4 years)
• Trust fraud by funeral homes and cemeteries- to exceed $100 million
• Tarzana (CA) Treatment Center- $22 million (over last 11 years)
• California Organization of Police and Sheriffs-$25 million misappropriating
• NASA official-$9.6 million
• 21st Century Community Learning Centers -$35 million
• Ann Arbor (MI) Amateur Hockey Assoc.- $1 million
• United Homeless Organization-$1.55 million
• Only after the Charlotte Observer caught Franklin Graham, son of Billy Graham, receiving compensation of over $1.1 million from two charities did Franklin Graham withdraw his request for additional contributions to his retirement plan.
• Conference of Catholic Bishops-$2.6 billion in settlements (over decades)
• Wilmington (DE) Catholic Diocese- $6.2 million
• Spinka Orthodox Jewish group-$8.5 million in a tax evasion scheme
• Darien, Conn. Priest-$1.4 million
• Reverend took $850,00 from school and order of Franciscan Friars.
• West Palm Beach priest took money for a lavish lifestyle in Bahamas and Las Vegas
• VA. Catholic priest-$432,000-$1million
• Two Palm Beach priests-$800,000+
• St Barbara Greek Orthodox Church (CT)- $1 million
• Indiana pastor and sons raised $120 million from 11,000 congregation members, friends and relatives and used the money for an airplane, cars and vacations.
• A company with roots in a Georgia Presbyterian Church was to build old folks homes. They took up to $142 million from more than 3600 investors.
• Targeting local church groups and senior citizens to aid Third World groups, the SEC said they probably lost $6.5 million.
Public officials/Charity
• PA Senator Vincent Fumo-$4 million
• Fmr NC congressman channeled $2.3 million to a foundation controlled by family
• S.C. Department of Social services-$5.5 million
• Lucerne County court administrator and two judges-$2.6 million in kickbacks
• Lawrence (MA) District Court Probation Department-$2 million
• OK Commissioners of Land Office-$1.16 million
• MN Department of Human services $1 million
• Court Appointed Special advocates (OK) $550,000
• Housing Authority of New Orleans-$900,000
• Navy Exchange at Naval Amphibious Base-$750,000
• Mt. Vernon (NY) Planning Commission- $2 million
• VA-Prince William County-$4-9 million
• San Jose –CA Water Services-$9 million
• Kentucky Association of Counties-$3 million
• NY Telemarkters-$124 million
• Cancer Fund of America-$20 million in donations, $54,000 (3/10 of 1 percent) in giving
• CA telemarketer collected $25 million and gave less than 50% back
• National Veteran’s Business Development Corporation-received $17 million; spent 15%
• Ecorse (MI) Schools-$7.3 million
• Carnegie Mello U./University of Pittsburgh-$114 million
• Philadelphia Academy Charter School-$1 million+/-
• Earth Charter School (MN)-$1.4 million
• Fresno Unified School District$-$234,000
• Alamo Community College-$900,000
• UCLA School of Medicine-$140,000
• U of Fl. Nuclear Space Power and Propulsion Institute-hundreds of thousands of dollars
• Royce learning Center-$505,000
• Orange Center School District-$400,000
• Tufts University-$1 million
• Davis County (UT) School District -$1 million
Sentencing Missteps
• Three fundraising groups perpetrated “badge charity frauds” amounting to $19 million. They were fined $19 million, but the FTC waived the penalty because of inability to pay---they incurred high costs!
• Taylor County (WV) Sheriffs Department-$114,000-probation
• UCLA School of Medicine-$140,000-Restitution; no penalty
• Davis County School Disrtrict-$1 million-pay a $500 fine and forfeit $800,000 from bank accounts
• Sacred Heart Catholic Church (KS)-$74,000-3 years probation/restitution
• Secretary, PA State Senate-$1 million-no prison time
• Adoption by Choice-$178,000-restitution/probation
• Fraternal order of Eagles (MI)-$53,000-probation
• Most Holy Redeemer Parish-$213,732-no jail
• Meals on Wheels (WV)-$81,000-probation/pay $5000
• Congressional Aid (Rep. Sanchez)-$7000-probation
• Amer. Postal Worker Union-$16,500-probation
• Concord (NY) Town Clerk-$20,000-probation
• East/West Shrine Football Game-$40,000-6 year suspended sentence
• Idaho State University Softball Coach-$70,000-probation
• South Berkeley Little League (WV)-$9000-probation
• Pleasant Valley Boosters (CA)-$60,000-probation/restitution
• Marmaduke Schools Superintendent from pension plan-probation
• Warrenwood Elementary PTA-$10,000-probation/restitution
• WV U Dental Hygienist Assoc.-$4000-Suspended sentence
• Mercy Medical Ctr.-$210,000-Suspended sentence/probation
• Belington (WV) Little League-$13,000-probation
• S. Elyria Neighborhood Development-$111,000- restitution
• Durham County Sheriff’s Office (NC)-$113,000-probation/restitution
• Marion Township-$10,000 restitution
• Bellaire (PA) PTO-$29,000-restitution
Kudos to Gail McGovern of the American Red Cross for streamlining the organization, paying down debt, increasing contributions, and most importantly, not showing up in screaming headlines for poor governance.