Thursday, December 29, 2011

Devolution Into A Sad Charity Fraud

by Gary Snyder


Over an 11-year period, Linda Duffy, a former longtime Saugus (MA) Library employee, allegedly stole more than $800,000. Duffy worked at the library; she was "entrusted with a progressively broader range of administrative tasks" and "actively sought to control certain aspects of the library's affairs, for example, handling incoming mail and processing donations by library patrons.” Instead, Federal documents allege, Duffy began depositing checks into the decoy account in November 2004 bearing memo lines such as, "library fees" or, in the case of donations, "Memory of [person's name]."

That same month, she wrote checks from the decoy account to her personal account at Eastern Bank and used the money to purchase jewelry, and pay off dental bills, car repairs, furniture and pay her home mortgage. Prosecutors allege she put a substantial portion of the money into an Eastern Bank account belonging to Duffy's daughter. Much of the funds Duffy used came from charitable donations, including $143,535 from January 2008 to January 2011 sent by Comerica Bank, as trustee for a charitable trust holding an account there. The statements from Comerica were sent directly to Duffy at the library, the court document states. Duffy also allegedly intercepted numerous donations from the GE Foundation between 2004 and 2011, and, according to the document, deceived the foundation into matching funds for donations that never actually occurred. In addition, the document states that Duffy or an accomplice also asked GE to match multiple donations allegedly made by Duffy's mother-in-law, who is the widow of a former GE employee on about 15 occasions between 2007 and 2010. 

In total, the GE Foundation sent the library more than $450,000 in matching funds, nearly all of which were sent in response to made-up library donations.
 


The scandal at the public library also prompted selectmen to move against the Library Board of Trustees, as many in town wondered how they could not have known what Duffy was allegedly doing. 

The Board of Selectmen voted unanimously last week to draft a letter to the Library Board of Trustees asking for their resignation. 

"We find ourselves in an unfortunate situation and we do appreciate the volunteers," said selectman Chairman Scott Crabtree last week. "With these situations everyone puts their time and energy into this, unfortunately, based on the findings, the board felt this was an appropriate action to restore the public confidence and trust." 








Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Wednesday, December 21, 2011

Fiesta Bowl Politicians Are Cleared


by Gary Snyder

A Maricopa County (AZ) Attorney Bill Montgomery has cleared more than 30 Arizona politicians and three lobbyists of criminal wrongdoing in the Fiesta Bowl scandal, saying the state’s laws just weren’t tough enough for him to press charges.

“Despite the public’s legitimate expectations that current laws ensure a reasonable degree of open and honest government, Arizona’s statutes governing receipt of gifts and reporting requirements fall short of meeting those expectations,” Montgomery said.

Leading the list of politicians who benefited from the college football game was former state Sen. Russell Pearce, who reportedly took about $40,000 in tickets and trips over several years. Pearce came to national attention in 2010 for being the chief sponsor of Arizona’s harsh immigration law. Last month, he was voted out of office in a recall election, in part because of his role in the Fiesta Bowl scandal.

Montgomery isn’t the only one who’s been investigating the Fiesta Bowl. A federal grand jury last month indicted a bowl employee on suspicion of making illegal campaign contributions to various Arizona politicians. The indictment revealed that other, unnamed people were also under investigation but no one else has been charged so far.

















Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Tuesday, December 20, 2011

A Note From Gary Snyder (Nonprofit Imperative)




Each year we give an update on the status of charity fraud.

Fraud in 2011 has unfortunately been consistent with previous reports. It continues to flourish… unabated. The New York Times had a story, in 2008, about a startling academic study that indicated that over $40 billion was stolen from charities. In mid-2011, the Inspector General in Texas said that amount had risen to $51 billion…a 27% increase, in just three years. That same trajectory continues based on the data collected for Nonprofit Imperative. Nonprofit Imperative has documented upwards of 5200 incidences of charity fraud.
In 2009, we saw a significant jump in such occurrences as well as a 50% rise in the amount of money stolen. In 2010, Nonprofit Imperative data showed that path had not subsided with a 25% increase and about $2 billion stolen from those to whom the money was intended to go. In 2011, almost $2.7 billion had been embezzled. This is 30% increase in malfeasance from the previous year. Because the documentation of these frauds are taken solely from public documents, members of the Association of Certified Fraud Examiners has suggested that this represents only 5-10% of the total amount of charity malfeasance.
                                              _______________________________
Postscript:  Practically every statement that I have shared in the past decade has been explicitly or implicitly been directed toward the betterment of philanthropy…and there have been many.

I have written or worked on well over a hundred articles; assisted in documentaries, television and radio shows as well as movies; published a twice-monthly e-newsletter for half-a-decade (the equivalent of 2-3 books or 1050 pages); authored two books; lectured; consulted; assisted in numerous thesis on fraud; and served on over 25 boards (many in a leadership capacity).

I have proffered practices to force the acknowledgement and discussion of some the charitable sector’s most pressing problems, while seeking at least minimal change. I readily acknowledge the results could have been better.

Needless to say, I have received considerable pushback. In truth, some was appropriate. But more often than not, I have found incredible support from people, mostly unknown to me, who coaxed me to carry on or just do better.

We thank you for your support.                                                   

I wish you a Happy Holiday







Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Charity Fraud: Money for the Children’s Hospital Burn Unit Taken

by Gary Snyder


She used the nonprofit, Fired Up For Kids,  to solicit donations through the sale of calendars to raise money for the Children’s Hospital Burn Unit. Shortly after the nonprofit was formed Kristin Hamling, president and sole board member, began using its accounts and assets for personal uses, including gym memberships, airline tickets, and at nail and hair salons, according to the attorney general's complaint. Hamling resigned from the organization but refused to turn over to a successor organization the intellectual and physical property of the organization, including its bank accounts and inventory. The Denver (CO) District Attorney’s office won’t say how much money was allegedly stolen. A former volunteer with the group estimates the theft in excess of $50,000.












Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, December 19, 2011

Who Was Watching Out for the Charity Sector’s Best Interests?


by Gary Snyder

Rick Cohen of Nonprofit Quarterly reminds us that when there was considerable infighting regarding the charitable sector‘s tax deduction, the nonprofit sector was not attentive  to what was happening on other fronts. There were important changes in the Omnibus Spending bill. It seems that there were considerable cuts that were missed by those that are charged to represent the charities best interests.

Some that were picked up by Cohen:

§  cut in the Weatherization Assistance Program (WAP) by 60 percent, the lowest funding level since 1977;
§  reduction the Low-Income Home Energy Assistance Program (LIHEAP) from $4.7 billion in FY2011 to $3.5 billion in FY2012;
§  spending was raised the Pentagon’s budget by 1 percent, but cut the budget of the Environmental Protection Agency by 6 percent which will affect nonprofits;
§  spend will knock 100,000 students out of one or another aspect of the Pell Grant program; spending was  reduce the number of years a student can use Pell Grants from nine to six years.





Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Thursday, December 15, 2011

Charity Fraud Bad Guy Wants Out of Prison


by Gary Snyder

He pleaded guilty to embezzling more than $1.8 million from Hartville Homes Inc., a nonprofit organization that operates residential care facilities and other services for the mentally disabled. Court records show Rohr stole the cash between 2001 and 2007 while serving as Hartville Homes’ chief financial officer. Rohr also embezzled $100,000 from St. Barbara Catholic Church in Massillon and $21,769 related to rental property owned by the church while serving as the church’s financial advisor. In a separate case, Rohr was convicted in Summit County for felony theft in connection with his former Cuyahoga Falls-based business, Falls Consumer Credit Management. He now wants an early release after having served three years and three months of a nine-year prison term he received in October 2008. What do you think?  (link)    





Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Fundraising Nets 37% For Charities, NY AG Says


by Gary Snyder

According to the New York attorney general’s Pennies for Charity, Where Your Money Goes: Telemarketing by Professional Fundraisers, in 2010, an average of just 34.6 cents of every charitable dollar raised by these professional telemarketing companies in Western New York actually went to charity. By comparison, just 36.9 cents per dollar go to charities statewide. Many charities across the state received even less – and in 61 of the 564 telemarketing campaigns, the charities actually lost money. In total, 63 percent, or $157 million, of the funds raised by 81 telemarketers in 2010 was paid to fundraisers for fees and/or used to cover the costs of conducting the campaigns. By comparison, charities retained 37 percent, or $92 million, of the total funds raised in the campaigns. (link)









Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Tuesday, November 29, 2011

Nonprofit Abuse…Another Appalling Example


by Gary Snyder

The astonishing story of a Santa Ana (CA) charity – which claims to help burn victims after catastrophic fires--is all too typical. The Association for Firefighters & Paramedics was sued by the California attorney general in 2008, but was not shut down. Instead, it settled with the AG last year, paying the AG’s office $100,000 ($67,000 for the AG’s costs, and $33,000 for burn victims), and agreeing that the AG would monitor its fundraising and spending for four years. After settling with the AG the charity filed its tax returns for the previous year, showing that:
§  86 percent of its spending was on fundraising – $1.9 million out of total spending of $2.2 million (the experts like to see no more than 10 percent spent on fundraising);
§  while 11 percent was spent on management  – $228,837;
§  and the very smallest slice of the pie, 3 percent, went to programs that actually helped burn victims. That was a measly $65,280. (The experts like to see 75 percent spent on programs).

The Orange County Register asked the charity for a copy of its latest tax returns, by email, since its phone number has been disconnected. It also left a message with the CPA who prepared its last tax returns, saying it wanted to know how the oversight thing was working out. They have not heard back.
Its website and the “donate now” button – still appear to be in fine working order.

Since 2005, the Association for Firefighters & Paramedics has raised $15.2 million for charity, while spending just a fraction of that on the burn victims for whom it purportedly raised the money. 
The Orange County Register chronicled how Mitch Gold (the king of telemarketing fraud in Orange County) built a network of dubious charities that preyed on unsuspecting donors.  Gold did time behind bars, but his protégés (including the current President of The Association for Firefighters & Paramedics), subcontractors and former clients carried on, raising more money with less scrutiny than Gold ever did.

When Gold went to prison, his money machine chugged along without him.
• Ex-convict Joe Shambaugh, one of Gold's legal advisers, set up shop as a charity administrator. Until last summer, he managed four closely linked charities from a rundown office in Santa Ana. The Shambaugh charities raised $16 million from 2001 through 2004. They spent about 1 cent on the dollar for charitable projects.
• Robert M. Friend Jr., who had formed one of Gold's last big charity clients in May 1999, spun off four charities that raised $8 million. Amount spent on charitable works: 8 cents on the dollar.
• Former Gold clients David Dierks and Phil LeConte raised more than $27 million for three police charities. They spent 13 cents on the dollar for programs. Dierks and LeConte paid themselves $1.1 million.

Most of the money donated to these charities actually went to the fundraisers, many of whom once worked for Gold.

Gold was partial to charities with veterans, firefighters, cops or children in their names. Of 24 charities that he represented in the late 1990s, 22 traded on one of these causes. Among them: American Veterans Network, American Veterans Relief Fund and Help Hospitalized Veterans. His followers have stuck to that strategy.

Former aide Shambaugh managed the Association for Disabled Firefighters and the Disabled Firefighters Fund. Former Gold client Friend runs the Disabled Firefighters Foundation.
After 911 a sweeping nationwide transformation of law enforcement that has left donors with few places to turn for help. The FBI quickly shifted agents and money to terrorism. About 300 FBI agents were reassigned from white-collar crime to terrorism. 

Two other former Gold associates were charged after lengthy investigations. Former Gold apprentice Joe Shambaugh was indicted on federal fraud charges. He is now a fugitive. Onetime Gold subcontractor Duane Kolve was accused of criminal racketeering by Wisconsin prosecutors.
"There needs to be a more concerted effort to rein in and regulate charitable solicitation fraud," said Eau Claire County, Wis., District Attorney Richard White, who prosecuted Kolve. "If it's happening here, how many other places is it happening, and at what level?"

A prosecutor had wanted to do more. "I tried to get any investigators I could find to work charitable fraud, and I can't find an investigator," she said. "You have a willing prosecutor and nobody to investigate the crime. It's depressing."




Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, November 28, 2011

Wycelf Jean’s charity under scrutiny....again

by Gary Snyder


You may remember that Wycelf Jean’s charity was in the headlines for not filing the legal docs. Then the next year it also lost nearly $250,000 in 2009 for reasons that are unclear. Now Yele Haiti is showing less than one third of the $16 million in donations from 2010 was used for earthquake relief efforts. While overspending is not that uncommon, the spending raised some interest. 


Based on the charity's tax filings from 2010, $1 million was paid to a non-existent  firm, Amisphere Farm Labor Inc. to distribute food, but records do not show its existence. Another $353,983 was doled out to P&A Construction, a company headed by Jean's brother-in-law Warnel Pierre. The charity also gave $250,000 to a Haitian television station run by Jean. Yele Haiti also paid $577,185 to a company called Samosa SA, based in the Haitian capital of Port-au-Prince, as a “bulk water supplier.” But some of that money went to rent a house for Yele Haiti volunteers on Samosa’s property at the inflated price of $35,000 a month.






Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Wednesday, November 23, 2011

Audit the Auditors


by Gary Snyder

In Silence: The Impending Threat to the Charitable Sector, we strongly suggest that all charities should ‘audit the auditors.” We believe that nonprofit auditors are a weak link in the watchdog process. We have further evidence that is the case. The Public Company Accounting Oversight Board, the watchdog for U.S. accounting firms, has taken issue with audits performed by two of the "Big Four" auditors. In reports posted on the PCAOB website, PwC was found to have shortcomings at 28 of 76 audits inspected by the PCAOB. That's up from nine in the prior inspection. Problems were found at 12 of 54 KPMG audits reviewed, up from eight. While the review was a look at for-profit companies, there is no reason to believe that such problems could not occur with charity audits.

PwC chairman and head partner Robert Moritz noted the rise and said the firm was "working to strengthen and sharpen the firm's audit quality…” A spokesman for KPMG, said the PCAOB's inspection process "has played an important role in improving audit quality, and their insights have measurably helped KPMG as we work to continuously improve our audit performance and strengthen our system of audit quality control."









Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Thursday, November 17, 2011

Fiesta Bowl Nonprofit Fraud Continues

by Gary Snyder


As readers of Nonprofit Imperative will recall, investigators of the Fiesta Bowl abuses reported spending of $33,000 for a birthday bash in Pebble Beach, Calif., $13,000 for the wedding of one of his aides and a $1,200 tab at a Phoenix strip club. The report also outlined junkets and free football tickets for many Arizona legislators who had not revealed the gifts as required by state law.

A 276-page report of an investigation conducted by Fiesta Bowl board members and a retired Arizona state Supreme Court justice found an “apparent scheme” to reimburse at least $46,539 for employees’ political contributions.
The probe also found “an apparent conspiracy to conceal the reimbursement scheme from the bowl’s Board of Directors and state officials. The Chief Operating Officer was indicted on charges over allegations she solicited campaign contributions from bowl employees for federal, state and local political candidates and arranged for the bowl to repay them. Natalie Wisneski resigned from her job in March, shortly after bowl president and chief executive officer John Junker was fired after the apparent campaign-donation scheme was made public. The indictment alleges Wisneski twice signed tax returns for the nonprofit bowl that stated it did not give money to political campaigns or pay for lobbyists, both barred practices for tax-exempt entities. She also allegedly collected political donations from co-workers and later wrote checks from Fiesta Bowl accounts to reimburse them.
The investigation into the Fiesta Bowl’s conduct under Junker is ongoing and the organization under its new leadership is cooperating. The Arizona attorney general is also involved in the probe, and an investigation into numerous state politicians who took free tickets from the bowl is also under way.



Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, November 14, 2011

A Trusted Charity Fails at Penn State. It Is Not The Only One

by Gary Snyder


We have been bombarded by stories about the happenings on the Penn State University Campus. The horrific tales are beyond belief. But there is a subtext that few people know about and it involves a charity.

This incident only scratches the surface.

We know about Joe Paterno. We know about the Nittany Lion. Recently we have been introduced to Jerry Sandusky, the former veteran defensive coordinator of the revered football team. Sandusky is accused with sexually abusing untold numbers of young boys.

For decades Sandusky had been associated with a charity, The Second Mile, he started it in 1977. It was this organization that elevated Sandusky to national prominence. It was his forum to help at-risk youth. But in 1998, he publicly admitted showering with an 11-year old boy. He admitted hugging the boy but others suggest a different accounting of the incident. The charity was notified.

In 2002, the Pennsylvania Attorney General alleges that that Penn State University notified The Second Mile that Sandusky was banned from bring children onto campus because of another incident. Sandusky continued to be involved with the program until November of 2008. During that time the agency paid Sandusky an annual consultant fee amounting to a total of $456,000 starting in 2001 for the next 8 years even though the organization knew that Sandusky was under investigation in 2008.

Only after being confronted with allegations against him from an adolescent male, in 2010, did Sandusky step down. The Grand Jury charges note that Second Mile program children were the victims. The long standing CEO of Second Mile has resigned.

Many institutions failed the children and their families. This is not first time.
We all are familiar what was going on in the Catholic Church. But few realize that a very similar circumstance continue to surface in another trusted charity.
  
For years Nonprofit Imperative has followed the inability of the Boy Scouts of American to protect its scouts. It seems that the latest chapter of its problems is beginning to close. Earlier last year a jury faulted the Scouts for failing to protect the young boys from a convicted pedophile and assistant Scoutmaster.

The Scouts never required criminal background checks on all applicants to be Scout leaders. Six men who were molested by the Scout leader, as children, have settled their cases with the Boy Scouts of America. The settlement prevents the attorneys and the men from talking about how much money each received in compensation for abuse that happened in the 1980s. The amount, however, likely reaches into the multiple millions of dollars, considering the Boy Scouts of America also have agreed to pay the state $2.25 million in punitive damages as part of the settlement. The men, who are now in their 30s or early 40s, were all members of the same Southeast Portland troop.

Key to the case were so-called red-flag files that the Boy Scouts of America have fought to keep out of the public eye. The Judge allowed them to be used during trial. The files amounted to 20,000 pages of information collected by Boy Scout executives from 1965 to 1985 on 1,247 Scouting volunteers who were suspected of molesting boys or other unbefitting behavior. Fourteen other clients are suing the Boy Scouts for sexual abuse, two of those men are alleged victims of that same scoutmaster, but say they were abused while in a different troop.

It took over 80 years for the Texas-based organization to make youth-protection training mandatory for all registered volunteers. This only took place six weeks after the verdict in this case. A sex abuse prevention program was put into place decades ago, but had never been evaluated or analyzed to determine its effectiveness. The implementation of the program is after 6,000 to 18,000 children who had been abused in a 20-year period, experts suggest. Estimates also suggest that's a fraction - maybe 10 to 20 percent - of the true number of victims because most sexual abuse isn't reported.

Because the Boy Scouts have settled some lawsuits out of court, it is difficult to say where the total awards imposed by the Portland jury rank with those of the past. In a 1987 sex abuse case, an Oregon jury awarded more than $4 million to the victim, including $2 million in punitive damages against the Scouts that were thrown out when the case was appealed. A jury in San Bernardino, Calif., awarded $3.75 million to three sex abuse victims in 1991. From 1984 through 1992, the Scouts were sued at least 60 times for alleged sex abuse with settlements and judgments totaling more than $16 million.

This has been its biggest challenge in its 100th anniversary year. Is it ironic that the Boy Scouts of America fought all the way to the Supreme Court to exclude an assistant scoutmaster from a leadership position who professed and practiced a homosexual lifestyle and never checked the records for a convicted pedophile? Presumably, the litigation cost the organization millions of dollars.

Three terrible scenarios in which trusted leaders used their position to take advantage of our youth. The consequences are incalculable. The hurt around the nation is palpable.













Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Father of Charity Fraud Dies

by Gary Snyder


An early mentor for charity fraud has died. William Aramony, who built United Way of America into one of the nation’s premier charities but was forced out as president and went to prison for six years for misusing funds to support a lavish lifestyle and a teenage mistress. Twenty-two years as chief executive, from 1970 to 1992, donations quadrupled. He strengthened the United Way (and as was example in many ways for other charities), but his legacy will be his criminality. 




In 1992, he resigned when an internal investigation and news reports disclosed his expense-account living and luxury travel, including trans-Atlantic flights on the Concorde. Federal investigators began examining accusations that for years Mr. Aramony had also spent lavishly on a young Florida woman with whom he had begun an affair in 1986, shortly after her high school graduation at 17 years old. He was indicted and accused of stealing $1 million from a United Way corporate spinoff. Some $80,000 was said to have been given to his lover, Lori Villasor. He lavishly spent money on vacation trips with her to London, New York, Egypt and Las Vegas, and for Champagne, flowers and even a fax machine for him to send love notes. He also had an affair with his secretary as well as Ms. Villasor’s older sister. 


In his day charity fraud was considered a rarity in contrast today when it is a daily (hourly?) occurrence. Aramony simply can be considered the father of today’s charity fraudsters.














Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, October 31, 2011

Boards Are Lacking in Meeting Executive’s Needs

By Gary Snyder


With a seventy-five percent turn over of executives of charities predicted, recruiting will be fast and furious in the next couple of years. Just as boards will be interviewing executives, executives will be interviewing boards.

According to a report by the Urban Institute, governing bodies had better shape up if they want to bring on the top tier candidates. Many executives are concerned about the board’s failure to become active in carrying out its obligations.

Here are some steps that boards can immediately take to become more engaged:

• Develop a procedure for the board to regularly monitor its own performance. Identify and correct weaknesses and train board members to strengthen the board. Strong boards make strong organizations; a selling point in recruiting.
• Develop criteria that can be used in the recruiting new board members that will make the board more engaged with a skill set and backgrounds that make the board more influential. Boards partnering with an executive show the ground rules that the exec. will have to live by.
• Assist the executive in the recruitment of new board members. Teamwork engenders a joint responsibility.
• Share authority with the executive by helping to set the boards agenda and giving the board in involvement. Bring both board and staff perspectives to the boardroom.
• Keep the decision-making at the board level and not making the executive a voting member. The demarcation of responsibilities is easier without a board vote by the executive.
• With the increased public scrutiny of agencies, board members should be active in the submission of their IRS Form 990, public relations and policy making.
• Board members should share in the assessment of determining if it is accomplishing its mission. Remember the ultimate authority is the board, not the executive.
• A partnership should be developed between the board and executive in setting fundraising goals and raising funds. It will lift a major burden from the shoulders of the executive, giving s/him some additional time to complete operational responsibilities.

These small but very important board responsibilities will lead to a collaborative relationship, avoiding the discontent that is seemingly so pervasive. It will ensure a climate that will be more to the liking of the new executive.






Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Wednesday, October 5, 2011

Pay a Charity to Play in Chicago?

by Gary Snyder

Fine print of financing agreements negotiated during Mayor Richard Daley’s tenure for projects in special taxing districts required grant recipients to donate to particular charities, including After School Matters, which was founded and chaired by Maggie Daley, the Mayor's wife.

Sixteen out of 27 included contributions to After School Matters or an affiliate, accounting for about a quarter of $3.7-million in donations and making it by far the biggest charity recipient. This represents more than $915,000 from companies subsidized by much-criticized special taxing districts.

Since 1995, the city has made payments to After School Matters of more than $54 million, according to the city’s web site. In its recent article the Chicago Tribune noted that just days before Rahm Emanuel took over the Mayor's office, the city awarded After School Matters a one-year, nearly $6.5 million contract to oversee summer-jobs and after-school programs.

The program also has been the recipient of millions in funding from Chicago Public Schools and state government. Just days after Daley leaving office, Raymond Orozco, who was Richard Daley’s chief of staff at the end of his 22-year tenure, was named CEO of After School Matters. Katherine LaMantia, who was Daley’s acting cultural affairs commissioner at the end of his term, was hired as the group’s chief financial officer, a position that previously did not exist.









Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Tuesday, October 4, 2011

Still More on Greg Mortenson

by Gary Snyder

NPR brings us an update where millions of people bought Greg Mortenson's book Three Cups of Tea about his work building schools for girls in Pakistan and Afghanistan. Many gave money to his charity. Then, earlier this year, a 60 Minutes investigation charged that Mortenson fabricated key parts of his story — and used funds from the charity for himself.

A group of readers is suing him for fraud. They were saying that because parts of the book are false, that people who bought the book basically did so under false pretenses. What they were reading is not what actually happened, therefore they should be reimbursed the money they paid for the books.

The state of Montana attorney general's office has also launched a civil investigation into this. Greg Mortenson has been silent on this. He did not come to a court hearing two weeks ago in Missoula. His schedule on his website has been unavailable for appearances. The reason may be that he has been recovering from heart surgery he had in June.






Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, October 3, 2011

As Charity Giving Drops, Fraud on the Rise

By Gary Snyder

The Giving USA Foundation says, "Our revised estimates show that 2008 and 2009 saw the largest drops in giving in more than 40 years as a result of the Great Recession, exceeding previous recession's impact on giving." Giving for the last years has been flat, at best. But charity fraud continues to rise. Former Texas Inspector General Bart Bevers says that charities across the country lose an estimated $51 billion up from $41 billion just a couple of years ago. The rate of fraud has gone from 13% to about 17%. That is not the only a startling statistic: fraud occurs at almost twice the rate than in the private sector.

On the very subject of charity fraud, this article has shaken up many that thought that the charitable sector was pristine.




Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Friday, September 30, 2011

College Football Bowls Don’t Share Proceeds

by Gary Snyder

College football bowl games have long been identified with their charitable activities. A key supporter of the bowls boasted before Congress two years ago that as much as a quarter of the games’ revenues went to local charities. But public records show little charitable giving by the non-profits that run the events, either the four big games that host the sport’s championship or the many other postseason bowls.

At the Fiesta, Orange, Rose and Sugar bowls, charitable giving has amounted to roughly 2 percent of all revenue generated since the Bowl Championship Series began, records compiled by The Arizona Republic show. The most generous giving, records show, was by the Orange Bowl, which through 2009-10 had donated $7.9 million to charity since the BCS era started, the lion’s share of that in 2008-09 to restore a Miami park.

Since the BCS was formed in the 1998-99 season, records show:
- Its four bowls generated revenue of almost $759 million and gave to charity $14.8 million, roughly 2 percent. The figures do not include payouts to teams or spending that was not identified as charitable giving on IRS forms.
- Fiesta Bowl charity totaled about $4.65 million through 2009-10, according to the most recent records available. The bowl this year gave away an additional $1 million as a penalty assessed by the BCS after the bowl disclosed widespread financial mismanagement.
- The Rose Bowl donated about $1.9 million to charity.
- Giving totaled just more than $310,000 at the Sugar Bowl, most of that going to restore a city park in the past two fiscal years. The bowl, however, said its financial reports prepared for the Internal Revenue Service are misleading because it gave hundreds of thousands of dollars in recent years to numerous other causes but didn’t report it as charitable giving.

According to Sugar Bowl spokesman John Sudsbury, the bowl in recent years gave $800,000 for post-Hurricane Katrina renovations and upkeep at a local stadium, $115,000 to the New Orleans Police Department for a crowd-control system, $250,000 for student counseling after the mass shooting at Virginia Tech, and $130,000 to the Southeastern Conference’s postgraduate scholarship program. He added that the Sugar Bowl’s executive committee recently voted to commit $2 million to a major community youth project.

Although the bowls are operated by non-profit groups, they are not required by federal statute to make charitable donations. Still, bowls – the four in the championship series and others – have touted their charitable nature in the past.
Alamo Bowl Chief Executive Derrick Fox appeared before Congress in 2009 during hearings on bowl and BCS financial issues, saying bowls provide tens of millions of dollars to local communities annually.

“Since almost all the postseason bowl games are put on by charitable groups and since up to one-quarter of the proceeds from the games are dedicated to the community, local charities receive tens of millions of dollars every year,” Fox said.

The Republic’s examination of financial records for U.S.-based, non-profit organizations that ran 25 bowl games in 2008-09 and 24 bowl games in 2009-10 doesn’t support Fox’s claims.

The Republic found the non-profits that ran the bowls in 2008-09 generated about $216 million in revenue and gave away $6.4 million, roughly 3 percent of revenues. In 2009-10, the bowls generated about $202 million in revenue and gave away nearly $3.7 million, less than 2 percent.






Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Tuesday, September 6, 2011

An Extraordinary Charity Fraud Gets Lost By Regulators

by Gary Snyder

The media accounts, principally by the St. Petersburg times, of the final months of the U.S. Navy Veterans Association were marked by frantic attempts to fend off reporters and investigators who suspected the charity was a fraud. Though it had reported raising nearly $100 million to assist veterans, the non­profit's directors were nonexistent, its headquarters nothing more than mail drops. Run out of a dilapidated duplex in Ybor City but soliciting donations nationwide, the group sent much of its money to politicians, not needy veterans. the group's leader, a scruffy 60-something who called himself Commander Bobby Thompson, vanished from view. The last two board members resigned. The group's tricked-out pickup was sold. Private investigators and a PR person were hired. The Navy Veterans' long-time lawyer had severed her relationship with the group and gone to the authorities with serious accusations of wrongdoing. But Florida and federal officials took nearly a month to act on that tip. By the time authorities seized documents from the Clair-Mel home of one of Thompson's associates, some records already had been shredded.
As the the St. Petersburg Times' expose of the Navy Veterans in March 2010 unfolded, Thompson mounted a multipronged offensive intended to rally support and lash back at the Times and its nonprofit owner, the Poynter Institute, according to public records and documents filed in court cases in Florida and Ohio.
• "Brian Reagan," the purported head of the Navy Veterans who proved to be fictitious, filed complaints against Poynter in at least three states, including Florida, saying it was soliciting contributions without being properly registered. No states acted on the complaint.
• The group hired Christopher Szechenyi, a freelance journalist, paying him $24,000 between April and June 2010, according to records. Szechenyi, an adjunct professor of journalism at Emerson College in Boston, drafted letters to the editor on behalf of a Polk County man who received $1,700 from the Navy Veterans for a barbecue at the James A. Haley VA Medical Center in 2009. Although the letters were submitted, there is no evidence they were published in either the Times or the Tampa Tribune. Szechenyi, who previously worked for the Church of Scientology on an unpublished investigation into the St. Petersburg Times, did not return a call and e-mail seeking comment.
• Using another fake name and an accomplice's mailing address, Thompson created a new organization, U.S. Navy Veterans Support Group Inc. According the Navy Veterans website, the "private, for-profit" corporation would take responsibility for the group's online publications. The inaugural column was a lengthy attack on the St. Petersburg Times.
When Florida officials demanded that Thompson's new entity either reply to subpoenas or face fines of $1,000 a day, the group was dissolved.
• In the second week of June, Thompson met in New York City with one of the Navy Veterans' professional fundraisers. His mission, according to Ohio investigators, was to persuade the company to continue soliciting in the face of negative publicity. Despite a strong financial incentive — fundraisers kept 85 to 90 percent of all donations to the nonprofit — Thompson's pleas were rejected.
For more than six months, Helen Mac Murray, the Navy Veterans' general counsel, had been fielding queries from the Times, including one seemingly easy request: Prove that dozens of directors and officers exist. Of 85 officers listed for the group, the Times was only able to find one: Thompson. Mac Murray, who once headed consumer protection for the Ohio Attorney General's Office, said Thompson assured her all officers and members were real. Though she represented the group for four years, Mac Murray later said she only met a few volunteers and never met or spoke to any officials but Thompson.
A few weeks before the Times' first story, Mac Murray hired a private investigator in Ohio, according to an invoice in court files in a case involving the Navy Veterans in Hernando County. The subject: Bobby Charles Thompson. The investigator revealed what he had learned when he tracked a Social Security number that "was supplied as possibly belonging to Bobby Thompson." It belonged instead to a Louisiana man who never appeared to have lived in Florida, the investigator found. Mac Murray recently denied that Thompson had claimed the Social Security number as his own.
Florida's criminal investigation into the Navy Veterans is ongoing, but its civil action has been closed. With Thompson a fugitive, state officials say, there is no one to sue.
Ohio officials, who estimate their state's residents were bilked for more than $2 million by the Navy Veterans, have been the most aggressive in their prosecution of the case. Last month, a Thompson associate, Contreras was sentenced to five years in an Ohio prison after pleading guilty to aggravated theft and money laundering. In a separate civil action, Ohio investigators continue to hunt for clues that could lead to Thompson, who was last seen at an ATM in New York City on June 16, 2010.
This summer, an Ohio judge granted a motion to give authorities access to three e-mail accounts whose owners are believed to have a relationship with Thompson. Investigators said they "may have information pertaining to his whereabouts."






Gary Snyder is the author of the recently published Silence: The Impending Threat to the Charitable Sector and Nonprofits: On the Brink. Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Tuesday, August 30, 2011

Charities Are Threatened By Fraud


Gary Snyder

The recently released book, Silence: The Impending Threat to the Charitable Sector is a 5-year endeavor to bring to light painful facts that could lead to an imminent catastrophe. And that's not hyperbole – it's validated on virtually every page of this book.

Billions of dollars of donor´s contributions to charities are taken from those to whom it was intended. Fraud is omnipresent in the nonprofit sector and no one cares says watchdog Gary Snyder in his recent book, Silence: The Impending Threat to the Charitable Sector. One out of every $8 is embezzled; a rate almost twice that of the business sector.

Snyder asserts that the direction and future of the charitable sector has been hijacked by greed. "I am disturbed that fraud is sabotaging the underpinnings of giving," he writes. "Donors believe that government, sector leaders, boards and other watchdogs will control this overt pillaging…all have let them down. With no well-defined owners or overseers and few outside constraints, there is little interest is stopping this nonprofit contagion.

The problems are endemic; it is having a corrosive effect. Scandals have forced prominent institutions like the Smithsonian Institution, American Red Cross, many universities, United Way affiliates and hundreds more to undergo changes in operations and leadership and engage in years´ long campaigns to renew public confidence. Moreover, even the most prominent rebuilding campaigns have achieved at best cosmetic changes. The fundamental rot continues.

This book is a powerful depiction of deception of tens of billions of dollars a year. Silence: The Impending Threat to the Charitable Sector is the result of mining vast amounts of data from the largest repository of charity fraud anywhere, reviewing thousands of fraud cases. It also suggests ways to convert bad habits into best practices, averting a huge calamity.

Silence: The Impending Threat to the Charitable Sector is a deep, honest look into philanthropy and its practices and is seeking a broad and demonstrable change in beliefs and thinking. Silence attempts to produce a new commitment to honesty—both intellectually and behaviorally on which a foundation of trust and sustainability can be built.

Silence may be purchased at Amazon (amazon.com), Barnes and Noble (bn.com), or at retail book stores.







Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Monday, August 15, 2011

Hats Off to the Media in Detecting Charity Fraud


By Gary Snyder

It is so common. It is a tale that most law enforcement agencies see often, but it is a secret that most people do not recognize. As you read this, there is a major one happening now, but for a number of reasons you may not ever know about it.

It is estimated that less that 15% of the estimated $40 billion in charity crimes are reported publicly. Many are kept under wraps by keeping them in the executive suite or a benefactor or insurance company makes the charity whole or the board (when they know about it) suffocates any publicity, all so that there is no embarrassment that would not reflect poorly on the agency or them.

In those few instances in which we get to see the unwinding of charity fraud, it is often the result of the diligent work on the part of the media. Although few in number, those very heartbreaking stories show the importance of the printed media and the message that they can depict.

I have been deeply involved in uncovering a number of very important stories. All would never have been uncovered were it not for the arduous and tenacious work of some terrific reporting.

Many times a major expose results by initially trying to uncover a small story. A few years ago, the Charlotte Observer became interested in some programs, but ultimately unearthed a major story about the United Way of Central Carolinas, its board and its executive. In reviewing financials submitted by the agency, the reporters found “dubious accounting practices”. When the President’s $1.2 million salary and $2 million retirement plan of this relatively small agency was exposed in the press, the board fired the CEO. This is the second time the press uncovered the board’s incompetence with the salary and benefits that exceeded virtually all of the other United Ways. A couple of years prior, the same board’s ineptitude was questioned when the Observer questioned accounting practices and the agency reclassified about $2 million in salaries and benefits.

In a similar vein, the Atlanta Journal-Constitution uncovered that the United Way of Metropolitan Atlanta chief executive secured a seven-figure retirement package of nearly $1.6 million in addition to a roughly $106,000 pension for life.

The American Red Cross has a rich history of deception. This stalwart agency has been dogged, for more than a decade, by the press, particularly the Washington Post. The Post chronicled the board’s failure to properly oversee its leadership with only a small number of members involved in the transitions of its chief executives. There has been substantial turnover—seven CEOs in as many years. This coupled with bureaucratic issues between the Federal Emergency Management Agency and the American Red Cross, its troubling handling of blood donations (with millions of dollars in FDA fines), its misuse of cash both at the local and national levels (misuse of Katrina funds and millions of dollars in charity fraud) lead to a wide-ranging Congressional inquiry. All this media exposure lead to the American National Red Cross Modernization Act of 2007 (Pub. Law 110-26), a bill to strengthen the governance structure and provide the first major overhaul of the organization since its 1947 congressional charter.

Only after federal and media investigations did the Smithsonian Institution rework its policies, procedures and practices. Again the Washington Post startled the public in expose after expose on how the board has mishandled virtually everything from the boardroom and it failed to employ “tone at the top” ethics and compliance. The Post showed how the Smithsonian Institution disregarded an inspector general’s report that stated that there was massive malfeasance, that the agency was devoid of implemented policies and procedures, that the institution was overtly secretive and lacked transparency, that it was rampant with conflicts of interest, that it destroyed documents to cover up its weaknesses and failed any positive standard in its management and governance.

To be sure, these are only a few examples of judicious journalism that is takes large resources to offset substantial pushback from those in power. We have seen it from the Detroit Free Press in its uncovering of Mayor Kwame Kilpatrick’s multitude of indictments including personal use of charity funds. The National Journal and others highlighted how political money is driving charities and benefiting elected officials. There was a series of incredible stories by the St. Petersburg Times about a person that was given the IRS and state approvals to collect over $20 million for a non-existent charity by a person that does not exist, nor can be found. The phantom “Bobby Thompson” used the contributors dollars for political donations and became so well-connected that he was able to have his picture taken with the President of the United States and other national leaders.

There was the compelling series in the Atlantic Constitution-Journal of the Angel Food Ministries minister that abused the public’s confidence by receiving a $2.5 million salary for his family and million dollar loans to family members…all money that was to be used to feed the hungry.

Local media can set things in motion, nationally. There were two stories in the Worcester Telegram & Gazette when the paper shed light on the misuse of funds at the local Boys & Girls Clubs and resulted in a Congressional reaction; the other, was on living accommodations at the Salvation Army which was follow up by other national media including the Los Angeles Times and electronic media. The Sun News in Myrtle Beach uncovering the power of hospital debt collectors filing more lawsuits against patients than any other business and the unveiling of massive corruption at Five Rivers Community Development Corporation forcing a federal and state investigation and the ultimate closing of the agency.

This is not an exhaustive list, but just a few contributions of the large and small print media organizations doing what they do best. However, with the U.S. newspaper industry entering a period of precipitous decline, the public good is going to suffer. Investigative journalists have consistently been way ahead of the authorities, the IRS, state attorneys’ general and watchdog agencies included, in uncovering the charitable sector’s foul play. But with the retrenchment at the newspapers comes the scarcity of journalists that are assigned to charitable investigative reporting. With the loss of the reporters the ability of papers to break great stories is gone.

Even those reporters that occasionally write stories on nonprofits do not have the unique skills to plow through the piles of documents to decipher nonprofit corruption. Without courageous newspapers and journalists and the alarms they generate, charity misbehaving will increasingly become the norm. But one of the bright spots on the horizon is the proliferating number of nonprofits and investigative centers that are, in part, moving into the vacuum.

Here’s hoping!


















Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)