Thursday, July 21, 2011

This Breast Cancer Fraud Has It All

By Gary Snyder

The Coalition Against Breast Cancer, Inc. seems to have all of the makings of a typical charity fraud that is so evident on these pages. This exempt organization is a sham charity that has diverted nearly all of the millions of dollars raised in the name of breast cancer to its officers, directors and fundraisers. Let’s look at a few of the issues as reported by several news sources as well as the lawsuit filed by Eric T. Schneiderman, Attorney General of the State of New York.

Background

The Coalition Against Breast Cancer falsely claims research affiliations with hospitals such as Memorial Sloan-Kettering and using other lies and exaggerations to gain donor’s confidence. Defendants deceived donors into believing that their contributions will help eradicate breast cancer through research, mammogram screening and other programs. In reality, CABC spent none of its funds on eradicating breast cancer, nor does CABC have any research affiliation whatsoever with Memorial Sloan-Kettering or any other hospital. IT does not conduct or fund any research on breast cancer or any other cancer. CABC does not perform any mamograms or other breast cancer screening nor is it affiliated with any mammography screening facilities and, as its own records show, CABC spends virtually nothing on breast cancer prevention. Andrew Smith and Garrett Morgan, longtime friends and business associates, launched the CABC fundraising operation in 1995 to exploit the breast cancer movement for their personal financial benefit, at a time when both were in need of cash. Smith was emerging from personal bankruptcy and Morgan was being investigated for his role in a fraudulent meals-on-wheels charity, which was later ordered permanently shut down.

Board Oversight

Smith appointed his family and friends and they all did handsomely. His former wife, Lori Smith, and then later, his girlfriend, Debra Koppelman, and her friend Patricia Scott were in leadership positions. None of them had any experience in the breast cancer cause or non-profit management, much less the capacity to fulfill their fiduciary responsibilities as director. Smith and his friends have all benefited financially from the CABC operation. Smith has paid himself generous compensation, despite being fully-employed elsewhere. Morgan became the outside fundraiser, and later arranged to be paid 80-85% of every dollar raised and an additional percent of every dollar raised from other professional fundraisers he recruited. that Defendants have diverted for their personal benefit, as well as its insurance broker for medical and insurance policies that CABC took out for the for the benefit of Smith and Koppelman. Smith has at all times controlled the composition of CABC's three-person board ensuring that there would be no independent oversight of the CABC operation. Smith, Koppelman and Scott have breached their fiduciary duties and are complicit in the scheme to defraud the public because they have permitted CABC's fraudulent fundraising to persist and have failed to exercise any appropriate oversight over Campaign Center or other professional fundraisers raising only in its name.

Fraudulent Fundraising

Prior to starting CABC, Smith had no experience running a charitable organization or involvement with the breast cancer cause. However, breast cancer was emerging as a national charitable cause and of particular concern on Long Island and Smith knew that his friend Morgan had a professional fundraising business that profited off of charitable causes. For years CABC has lied to and grossly misled the public about how donations will be used. Defendants falsely claim that CABC has research affiliations with such hospitals as Memorial Sloan-Kettering in New York and John T. Mather Memorial Hospital on Long Island, when it has never had any research affiliations with these institutions.. Defendants falsely claim that CABC is helping "women survive" through "research" relating to breast cancer and by providing a mammography van, when in fact it does not conduct any cancer research of any kind and it has no mammography van. CABC falsely claimed that it provides "constant" seminars and forums for women, when in fact it does not do so. CABC grossly exaggerated and mislead donors about the existence of a "mammography fund," claiming that donations into this fund will "help sponsor a mammography for women that have lost their insurance" and "help provide free mammographies for women that have no insurance." In fact, CABC has spent virtually none of its funds on mammographies. In the last three years alone, despite raising over $4 million, CABC funded mammographies for only 11 women. In 2008, a year in which the organization raised over $1.4 million from the public, a mere $374 went to underwriting mammographies.

Self-Dealing

The actions of Smith, Koppelman and Scott have not been in good faith or in the
best interests of CABC. State law prohibits loans to officers and directors of a nonprofit corporation. In 2008, CABC to made two loans to Smith, in the amounts of $100,000 and $5,000. These loans were completely unsecured, with no security, collateral or guarantee. Koppelman and Scott acquiesced in these unsecured loans to Smith. Koppelman wrote and signed the loan checks on CABC's corporate checking account. The loans were improper because the purpose of the loans was unrelated to CABC's purposes as set out in its certificate of incorporation. The purpose of the $105,000 in loans, as Smith has now admitted, was to provide him with funds to make an investment with Agape World, a Ponzi scheme, and Smith lost his entire investment. In 2008, Koppelman wrote a check to herself for $50,000 for a loan. Smith not only acquiesced in the loan to Koppelman, but suggested it. The loan was intended to help Koppelman purchase from Smith the 2 Patton Road residence, where the CABC operation is based. (The transaction ultimately did not take place.) Thus, both Smith and Koppelman had a financial interest in and stood to benefit from the loan. Michael Buonanno became the outside financial advisor for CABC's investment and retirement accounts funded from charitable contributions. Buonanno has a checkered past with having fraudulently raised funds for a sham meals-on-wheels charity based in Long Island. The meals-on-wheels fundraising operation was ordered shut-down. In January 2009, Smith acquired 2,500 shares of stock in Empire National Bank (ticker symbol "EMPK"), a start-up local bank that in October 2010 was found to have unsafe and unsound banking practices. Morgan was also an investor. Smith paid $25,000, or $10 per share for the securities. In 2009, after the value of the stock had declined, Smith decided to sell his holdings of Empire National Bank stock.

Other Operational Issues

CABC has never held elections for its officers or directors during the approximate
14-year period from the time of inception, until the commencement of the Attorney General's investigation. None of CABC's directors or officers had any training or experience in nonprofit management when Smith appointed them. In CABC's filings with the Attorney General's office, Scott is identified as President, Smith is identified as Treasurer, and Koppelman as VP and/or Director of Programs. These titles are meaningless. Scott has had no rights or responsibilities as a "President" or chief executive. Despite her lofty title, Scott has served only in a nominal support role with no decision-making authority or leadership responsibilities. Scott was not even aware until early 201O approximately three years after the practice began-that she was identified as "President" on CABC's filings. 53. Additionally, although Smith is identified as "Treasurer," in fact it is Koppelman who controls the checkbook and writes checks for CABC, including for fundraiser commissions and other expenses. Smith, Koppelman and Scott have used CABC as a personal piggy bank to subsidize their lifestyles, collectively paying themselves hundreds of thousands of dollars in salaries, retirement benefits, and medical and dental benefits. Year after year, the salary and benefits collectively paid to the three directors vastly exceeded the amount spent on charitable activities.

Whew!!









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)
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