Tuesday, November 30, 2010

Finally, the Punishment Fits the Crime!

by Gary Snyder

As readers of Nonprofit Imperative have followed, former Virginia Secretary of Finance John W. Forbes II had admitted stealing $4 million in tobacco-region economic development money designated Literary Foundation of Virginia -- an organization Forbes established ostensibly to promote adult literacy. In the following years less than $1 million was used for literacy and the rest for personal uses such as an expensive home and $1 million in salaries for himself and his then-wife, Tina. He transferred the money from the foundation to two shell companies he created before spending it. Facing a federal subpoena for records earlier this year, he manufactured minutes from meetings held by the board of directors of the Literary Foundation to make himself look less culpable, and he asked Tina, by now his ex-wife, to hide documents. In an atypical ruling in which the Judge fit the sentence with the crime, he put Forbes in prison for 10 years. Forbes must make $4 million in restitution to the commission. In all too many instances, judges give convicted criminals a slap on the wrist and merely ask for restitution (which is seldom paid). In only 50% of the restitution cases is one penny paid.

From Nonprofit Imperative, a twice monthly e-newsletter. To subscribe, email gary.r.snyder@gmail.com

Saturday, November 27, 2010

Are Reporters The Only Ones Watching?

A St. Petersburg Times Editorial
Multiple failures mark Navy Vets' scam
Saturday, November 27, 2010

The more that is learned about the U.S. Navy Veterans Association, the clearer it is that no government agency takes responsibility for making sure charities are who they say they are and do what they say they do. The latest example: When the IRS scrutinized at least one arm of the Tampa-grown group in 2008, it didn't dig very deep and allowed the tax-exempt nonprofit to continue its high-level scam with impunity. It's also clear now that one man did not perpetrate this fraud alone. At least three lawyers lent his ruse an air of legitimacy, facilitating his exploitation of Americans' desire to help veterans.
The IRS will not comment on its one-day examination two years ago of the Connecticut chapter of U.S. Navy Veterans Association. It appears to be the only agency to ever examine the group's operations before the St. Petersburg Times raised questions in March. But the IRS, like a host of regulators in various states including Florida, failed to uncover the deception. As the Times' Jeff Testerman and John Martin reported last week, a man posing as the group's development director, "Lt. Cmdr. Bobby Thompson," evaded IRS scrutiny using a box of likely fraudulent documents and with a lawyer standing by.
Apparently the IRS didn't care that the three officers listed on the Connecticut group's tax forms weren't in attendance. It appears the IRS never checked if they lived at the addresses listed. The Times has been unable to verify the men exist at all.
Such fake names are at the heart of Thompson's grift and should inform future regulations regarding validating charities' filings. The practice also raises questions about whether those who worked with the group, including lawyers, were ever suspicious or complicit in the massive fraud being perpetuated. Thompson claimed the volunteer group raised $27.6 million in 2009, had 66,000 members and included an impressive list of officers across the country.
But after months of searching, the Times was unable to verify more than a handful of people tied to the group. Others said their names had been used without their knowledge. And Thompson stole his identity from a Washington state man. Now most of the money and Thompson — who disappeared late last year after the Times began asking questions — cannot be found.
The group's attorneys — including two high-profile lawyers who worked doggedly in recent months to protect the group from scrutiny — say they were duped. General counsel Helen Mac Murray of Ohio even went so far as to tell the Times that e-mail and voice mail messages left for the group might be regarded as criminal "stalking." And special counsel Samuel F. Wright lobbied the Virginia Legislature to pass a law exempting veterans groups from state registration and defended the group's reputation to the U.S. Department of Veterans Affairs — after Thompson's charade had been exposed in Florida.
Lots of people, apparently, were looking out for the U.S. Navy Veterans Association. But no one was looking out for hardworking Americans who parted with their money to help veterans. That's embarrassing and unacceptable. Congress and the Florida Legislature should change that by improving the regulation and policing of charities.

Friday, November 26, 2010

Incredible Betrayal

By Gary Snyder
Seventeen people have been arrested on charges that they faked stories of Holocaust survival to profit from money meant for survivors of Nazi persecution…a purported $42 million fraud on the nonprofit group, the Conference on the Jewish Material Claims Against Germany. Federal prosecutors say they have already uncovered more than 5,500 fraudulent claims, many of them containing altered birth dates and faked stories of suffering. At least 35 people have returned the money or agreed to repay it on an installment plan. Four of the 17 arrested in the case have pleaded guilty. Greg Schneider, the organization's executive vice president, warns against passing judgment on this community. While he believes most or all of the 5,500 allegedly fraudulent claims were made on behalf of real people, he says large numbers of applicants may have been unknowingly involved by unscrupulous middlemen. (AP)

From Nonprofit Imperative, a twice monthly e-newsletter. To subscribe, email gary.r.snyder@gmail.com

Monday, November 22, 2010

Be Warned: Watch Your Donations!

By Gary Snyder

The evidence is irrefutable. Charity criminality is rising…at a significant rate. So watch out before you make your donations because there is no one else watching on your behalf.

This advice is particularly important as you make decisions as to your seasonal or end of the year giving which amount to a significant amount of money that charities receive.

Donors have a false impression that watchdog agencies and government regulators are monitoring the charitable sector. Unfortunately that is not the case.

Charities are the new personal piggy bank for those close to donor money. This includes executives, fundraisers, board members and other leaders in the sector that rack up billions of dollars in fraud. In one such study in the Nonprofit and Voluntary Sector Quarterly (2007), the authors put embezzlement at $40 billion for 2006, or some 13 percent of the roughly $300 billion given to charity that year. That is at a rate almost twice that of the for profit sector.

Charity malfeasance is big business and growing. Based on data collected by Nonprofit Imperative, the twice-monthly e-newsletter that I author, last year the increase of lost revenue to malfeasance was up 50%. Based on current trends, charity fraud will increase another 25%. It is startling!

With shortage of staff, charity watchdogs and government regulators are overwhelmed by the increases and cannot keep up. There are some well-known charities that have received some recent attention.

The Oklahoma-based Christian charity, Feed the Children, is a notable example of poor governance and mismanagement. Charity Navigator, a watchdog group, said that Feed the Children spent just 21% of its cash budget on programs for the needy. It spent 55% of its contributions on fundraising. FC is a family affair. In 2007 the founder’s daughter lived in a $1.2 million house owed by FC. At the time she was paid handsomely as an employee. The founder’s son received a Feed the Children $950,000 loan for his business. Despite all of this (and more), FC continues be one of the top fundraising agencies in America.

Another food agency, the Atlanta-based Angel Food Ministries, , shared its donor’s offerings with family. A couple of years ago, Angel Food Ministries paid $2.5 million in executive and family compensation. Put in perspective, the Chronicle of Philanthropy data indicated that the compensation for this agency was many times the median for agencies its size. In addition it made loans to the family of about $1 million. The family drew a combined 40% of the nonprofit’s budget.

These are only two examples of malfeasance that is a systemic problem. There is an explosion of comparable misdeeds by stalwart organizations such as the American Red Cross, Smithsonian Institution and thousands of others. This has resulted in billions of dollars not going toward fulfilling the charitable agency’s mandates…or your wishes. Instead it is lining the pockets of an insider.

If surveys of public confidence are any indication, some 70 percent of general public thought charities wasted “a great deal” or “a fair amount.”

So be careful in making what is typically an impulsive decision. Good luck in your deliberations. Some useful websites are Charity Navagator.org, Givewell.org or the Evangelical Council for Financial Accountability. (ecfa.org)

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Friday, November 19, 2010

A Case For Investigative Reporting: Reporter Found That One Watchdog Was Not Watching

Jeff Testerman of the St. Petersburg Times called our attention to the latest wrinkle on the U.S. Navy Veterans Association fiasco. After IRS agents spent hours poring over records and gave the charity a "clean bill of health." That left the Navy Veterans free to continue a nationwide telemarketing campaign which, according to tax returns, brought the group another $27.6 million in 2009 — donations the public was led to believe would help veterans and America's fighting troops overseas. What the IRS did not know — and its tax audit did not uncover — was that Thompson had stolen his identity from a civilian in Washington state, was impersonating a Navy commander and using his elaborately constructed but phony Navy Veterans charity to swindle the gift-giving public.
The IRS, which by policy does not comment on "any examination of any entity,'' declined to comment for this report, and the agency refused to address how it gave a thumbs-up to a charity that used fictional offices and falsified tax returns to collect donations from the public. IRS agents, who missed the chance to stop Thompson's fraud in its tracks in 2008, opened a criminal investigation this summer.
Thompson was assisted by a trio of well-credentialed lawyers who were paid nearly $400,000 by the Navy Veterans from 2007 until Thompson disappeared last summer. All three attorneys said they believed the Navy Veterans Association was a legitimate charity and that Thompson was the Navy commander and veterans advocate he held himself out to be. One, Darryll K. Jones, tax counsel for the Navy Veterans and a professor at Florida A&M University College of Law and an expert on nonprofits, had no idea that the total income reported to the IRS by the Navy Veterans exceeded $99 million.
Along with the IRS, the three attorneys never realized that the Navy Veterans used a phony CPA to seek accreditation from the Better Business Bureau, a fictional legal expert to claim the group was exempt from making tax papers public and political cronies to pose as Navy Veterans members at political gatherings. The Times found out! It was the newspaper investigation that exposed the Navy Veterans as a phantom group that Thompson used to funnel donations from the public into dozens of political campaigns.

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Tuesday, November 16, 2010

Administrator Stealing From Children...again

With the San Francisco Unified School District facing a $113 million deficit, administrators, including an associate superintendent, engaged in a long-running scheme to funnel tens of thousands of dollars of district money into their personal bank accounts via nonprofit community organizations. The money was to provide students with health education, substance abuse counseling, violence prevention, after-school activities and other services. Some fabricated overtime reports and falsified signatures on district contracts. The records also include copies of checks and invoices, suspension and termination notices and contracts bearing signatures that the district says were falsified.

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Monday, November 15, 2010

Embarrassing Your Children

by Gary Snyder

What could be more shameful and humiliating than to get caught stealing from your child’s piggy bank? Maybe the only thing worse is to have your children see you in court for stealing from his/her little league/soccer/ PTA piggy bank. Unfortunately it is happening with more frequency.

In a matter of days, several separate instances have been reported where parents were caught embezzling tens of thousands of dollars from league coffers. In Central California, a 43-year old mother and coach admitted to stealing $24,000 from the Turlock Youth Soccer League. At virtually the same time, in Michigan, the treasurer of the Livonia City Soccer Club stood mute at his arraignment for stealing over $100,000. In Washington, father and treasurer of the Spartan Baseball Club, a select baseball club for teenagers, was arrested and charged with embezzling over $21,000. In Pennsylvania, the treasurer took $12,000 from the coffers of the Coplay Sports in Allentown. In Wisconsin, the former president of the Green Bay Swim stole $47,000 over a three-year period (she had been serving a six-month jail sentence for a previous offense and also was convicted in 2001 of stealing $3,000). In Michigan, the treasurer of the Marine High School Booster Club was charged for stealing $35,000. In Ohio, the president of the Springdale Youth Boosters Inc. is charged with stealing $76000. In South Carolina, more than $13,000 was allegedly stolen by its vice president/treasurer from the Pinch Elementary School PTO. In most instances the boards were not aware of the illegal activity for about 3 years.

These are just a few examples of an exploding amount of criminality in which parents have access to substantial amounts of money with virtually no checks or balances. In preparation for an upcoming book, I have been able to document 60 instances in which over $350 million has taken from schools and programs. The children are not only being robbed of their opportunities, they are being robbed of their innocence by watching their own parents disappoint them.

Embarrassment does not seem to be a disincentive.

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Thursday, November 11, 2010

Taking care of himself…through scare tactics

by Gary Snyder

Steven Emerson raised $3,390,000 for his nonprofit, Investigative Project on Terrorism Foundation by telling donors they're in imminent danger from Muslims. He then dumped the money into his private, for-profit company. His management company, SAE Productions, received the $3.3 million. Emerson is the sole/employee/trustee/contractor for the nonprofit, according to the IRS 990 Form. It incorrectly states that the nonprofit did not delegate its management to a management company. The Form readily admits that that the board (solely Emerson) does not have to disclose conflicts of interest (even though the two entities, SAE and Investigative Project on Terrorism Foundation, share a Washington, D.C., address). "Basically," Ken Berger, president of the renowned Charity Navigator said, "you have a nonprofit acting as a front organization, and all that money going to a for-profit. It's wrong. It's off the charts."

Boy Scout Failure to Do Checks Is Costly

By Gary Snyder

For years, Nonprofit Imperative has used a lot of ink on the need to do background checks. Failure to do so has cost charities hundreds of millions of dollars. It has cost the Boy Scouts of American perhaps $40 million in settlements and judgments, the animal rights movement up to $5 million, child related charities, such as parent teacher associations, soccer and little leagues more than $100 million---all of which have been spotlighted in the last two editions of NI. With more that $100 million of dollars in claims and settlements, the church and religious community is starting to commit to conducting background checks in the wake of the sex abuse and financial scandals.
LifeWay Christian Resources, the Southern Baptist Convention’s publishing and research arm, launched a partnership with backgroundchecks.com to offer background screenings. There is a $10 basic-level background check option that includes a national criminal and sex offender search, said Jennie Taylor, a marketing coordinator at Lifeway. With nearly 16.2 million members, the Nashville-based SBC is the largest Protestant denomination in the U.S. More than 900 different churches or organizations have conducted 11,277 background checks through Lifeway with backgroundchecks.com since 2008. Of those, 40 percent returned a hit — which is any kind of incident, ranging from minor traffic violations to felony convictions.
About 21 percent — or 2,320 searches — returned records with misdemeanor or felony results. More than 600 of those 2,320 returned felony offenses. Background information is then reported to Lifeway customers using the backgroundchecks.com service, and customers decide whether to hire job candidates.