Saturday, February 26, 2011

Regulators Know About Fraudulent Fundraisers; Do Nothing

by Gary Snyder

At the more than 1,100 employee Associated Community Services offices they raise money for dozens of charities nationwide. But little goes to the charities that the contributors think it is going to. ACS is one of the largest professional fundraisers in the country and is big business. Take the “Children’s Cancer Fund of America.” The Powell, Tennessee charity says it provides aid and financial assistance to children struggling with the disease. They raised over $4 million in 2009 and ACS kept 83% of it. Or take the “Firefighters Assistance Fund,” a charity to help fire departments buy water trucks, high volume nozzles, and other fire fighting gear. The charity, received only 20% of every dollar raised. Or the charity, “Children with Hairloss," which provides wigs for children who have suffered through chemotherapy and radiation. They were able to keep under 20%. All told, Associated Community Services reported taking $17,713,325 in donations, according to a 2009 report by the New York Attorney General. But only $5,966,173 made its way to charities. Imagine how big this fundraising problem is.This is just one company. The high-pressure sales tactics employees are trained to use generates $1 million a month.

State regulators, typically the attorney general, do not have resources to do their job. In some states, student interns are reviewing filings. In the past the attorneys’ general were to enforce the fiduciary duties of charity managers but have fallen short of their stated intentions. Most regulators are inactive, ineffective and overwhelmed. Most do not see any improvement in the foreseeable future with the current budgetary crises.

Friday, February 18, 2011

Convicted in a $834 million Fraud

by Gary Snyder

The former CEO, Robert "Bob" Jones, of the El Paso charity, now defunct National Center for the Employment of the Disabled, has been sentenced to 10 years in prison and ordered to pay $65 million restitution to his victims for embezzling government funds and corrupting elected officials. The judge also sentenced Patrick Woods, a former board member, to three years in prison and ordered him to pay $1.7 million in restitution, according to a statement from the U.S. Justice Department. In 2006, NCED, a clothing company, was once the primary supplier of chemical-warfare suits for the military. It was raided by federal officials to see if was in compliance with regulations which required that at least 75 percent of NCED workers filling government orders be blind or severely disabled. It was concluded that only about 7 percent of workers were handicapped while Jones ran the company. Jones pleaded guilty in 2009. Prosecutors said he admitted lying about the number of blind or severely handicapped NCED workers to qualify for no-bid government contracts. Jones also admitted that between late 1998 and March 2006, he paid cash and other bribes in the form of campaign contributions and gratuities to secure vendor contracts between Access Healthsource, a subsidiary of NCED, and El Paso County and the El Paso, Ysleta and Socorro Independent School Districts. The company had been awarded contracts totaling about $834 million in the previous decade.

The Unwinding of the Fund's Massive $34 Million Fraud

by Gary Snyder

The past month has been horrid for the Global Fund to fight Aids, Tuberculosis and Malaria. Now it is getting worse. One story claimed that up to two-thirds of some grants went astray, with “astonishing” corruption in some cases. It cited faked invoices, phony training events and other abuses, chiefly involving health ministries in some African countries. That was nothing new with evidence of the misuse of $34 million paid out in Mali, Mauritania, Djibouti and Zambia . Germany, Spain, Sweden and the European Union said they would freeze payments into the Global Fund pending their own inquiries. But few stories have shared the good side of the Global Fund to fight Aids, Tuberculosis and Malaria efforts. It claims to have saved at least 7 million lives, and many more millions of lives have been improved, and mortality rates in the diseases it targets have dropped sharply. The fund’s approach to allocating aid wins plaudits too: it makes countries compete for money based less on their needs than on their ability to get things done. Undoubtedly the plan will stall as a result of the corruption worries, but all are trying to right the ship.

Thursday, February 17, 2011

Trusting Amish Out Millions

by Gary Snyder

Monroe Beachy is a 77-year-old Amish man who built up much trust with the Amish people. Beachy spent a quarter-century raising $33 million from 2,600 investors, the overwhelming majority of them fellow members of the Amish community. But Beachy's investment approach allegedly had more in common with the timeless methods of Charles Ponzi and Bernard Madoff. He became treasurer of the Amish Helping Fund, a nonprofit that takes in money from investors and makes loans "in an effort to preserve the Amish way of life," the group said in a court filing. They entrusted him with $2.6 million for the charity. It all collapsed last year when Beachy filed for personal bankruptcy. He said he had lost nearly half of his investors' money. It turned out that he had been running a Ponzi scheme, a bankruptcy trustee alleged, and that he had put the money into speculative investments. As early as 1998, Beachy was insolvent, but he continued to solicit investments from new investors to repay earlier ones, the trustee said. The SEC is investigating.

Tuesday, February 15, 2011

A Million $ A Year From Charity Is Not Enough

by Gary Snyder

Educational Housing Services, a nonprofit, controls more than 5,000 student rooms in Manhattan and Brooklyn. The company has certainly been charitable to its founder and president, George Scott, and his family. The nonprofit has paid him an average of $1 million a year since 2007 and loaned him $55,000 to pay off personal expenses on his American Express card—a year he raked in $926,334 - without a written agreement, filings show. The five-member board approved it and that board has done alright for itself, too. Three directors got consultant jobs, including one who was paid $143,000 for "financial consulting." The company paid Scott’s wife's firm $4.9 million in 2009 for cable, phone and Internet service to his dorms. His wife, Yun (Suki) Scott, sole owner of Student Services Inc., has reaped $15 million from her husband's charity since 2003. Educational Housing Services, which Scott founded in 1987, is the largest provider of off-campus college dorms in the city, with eight facilities.
State Attorney General Eric Schneiderman is looking at EHS' finances in an inquiry that records show began last year. His charities bureau has ordered EHS to provide "clarification and documentation" on "various issues." A spokesman for CUNY, which refers students from six colleges to EHS dorms, said the school was "deeply concerned about the allegations."

Monday, February 14, 2011

Postal Going Postal?

by Gary Snyder

According to a Postal Service Inspector General, Postal Service employees "did not comply with prescribed travel policies resulting in over $600,000 in excessive travel costs for lodging and airfare in FYs 2009 and 2010." One Postal Service employee used his government travel card at adult entertainment establishments more than 50 times. Another paid for an Apple computer and his mortgage. Three others purchased airfare tickets (including tickets to Spain and Italy) for family and friends. At the time of the audit, there was more than $37 million in open credit associated with cards of former employees.

Thursday, February 10, 2011

A Shameful Police Association Needs Policing

By Gary Snyder

Lt. Paul Page, the former chairman of the Las Vegas Metropolitan Police Managers and Supervisors Association is accused of misappropriating tens of thousands of dollars in union funds. One example, Page, the union's chairman since 2004, would buy computers and luxury office equipment annually, use them at his home and, after a year, turn them over to the union. His union placed him on paid administrative leave in November and in January his union members voted against filing a criminal complaint against him. In December after working 18 years as a police officer, the Public Employees’ Retirement System approved Page for disability retirement. No doubt, Page was a member of the PERS board, but now his position with PERS is listed as vacant. His disability has not become public.
Page knows a little something about fraud, since he is a certified fraud specialist. Prior to taking over the full-time job at the union, his assignments included working as a detective with the special investigations and criminal intelligence sections. With what they have paid for lawyers and auditors, the union, which represents 450 sergeants, lieutenants and captains, wants restitution. Despite the union members vote, the new union board chairman said that he remains undecided, after several months, whether to ask for prosecution as the internal investigation continues. (ReviewJournal)

Wednesday, February 9, 2011

Earmarks…good or bad for charities?

Earmarks, that dirty word, may be a relic of the past. If so, what will the effects be on charities? Nonprofit groups are waking up to the fact that when Congress stamped out earmarks, it was talking about their projects. That coupled with a proposed five-year freeze on domestic spending that would cut tens of millions of dollars that they counted on. Thousands of charities will have far less money to spend on legitimate projects. There will be far more applicants scrambling for a smaller pot of grant money. The ban on earmarks to private industry led to an eruption of non-profits closely tied to for-profit companies. Critics portray earmarks as synonymous with wasteful pork-barrel spending and there have been many sizeable abuses that have enriched an elected official. Many have been noted in Nonprofit Imperative. Many charities are struggling and do not know what they are going to do. Some lawmakers have been known to get around the earmarking process by practices known as lettermarking and phonemarking -- in which the offices of members of Congress write or call agencies to get money spent on specific projects. Only time will tell.

A Fraud With a Different Twist!!

by Gary Snyder

Newport-Mesa (CA) School Superintendent Jeffrey Hubbard and Karen Anne Christiansen are an interesting couple. Prosecutors have accused Hubbard of two counts of misusing public funds by allegedly giving Christiansen an illegal $20,000 stipend and improperly increasing her monthly car allowance. Christiansen faces more serious charges, including conflict of interest and misappropriation of funds that allegedly netted her $2.2 million. Both were former employees in the Beverly Hills (CA) Unified School District. In addition to their criminal charges, they have bantering back and forth with one another flirtatiously with sexual undertones. In his e-mails, Hubbard's last year with Beverly Hills, he called Christiansen "sweetheart," "hottie" and said "I love you" and "I adore you," according to media reports. There were also sexual references in the e-mails to Christiansen. Christiansen called herself Hubbard's beck-and-call girl, to which he replied "I love that … you can give me head (s up)." In a Sept. 29, 2005, exchange, Christiansen asks for time off because her mother died and Hubbard replies "whatever." He apologized repeatedly after she responded with "Nice sympathetic response!!!! I'm grieving for god sake." Hubbard is accused of giving her the $20,000 stipend that day. Newport-Mesa board chair, Martha Fluor, "I take it with a grain of salt," said. "They are consenting adults." They used official district channels to communicate at both school districts. What do you think? Update: A judge in Los Angeles ruled that there is enough evidence for Newport-Mesa Unified School District Supt. Jeffrey Hubbard to stand trial for alleged misappropriation of funds during his previous job as superintendent in the Beverly Hills schools district.