Public Charity for the Rich?

by Gary Snyder

They earned close to $1 million a year each as the two top executives running a Medicaid-financed nonprofit organization serving the developmentally disabled. The New York League for Early Learning, had paid them consulting fees of about $50,000 a year from 2007 through 2009, on top of their salaries and other expenses, including lunches and dinners for executives and the $1,468 that was spent to stay for two nights at the Beverly Hills Hotel in 2008, which was said to be for a meeting with a possible donor. They are to receive deferred compensation totaling about $1.8 million for 2008 and 2009.

The Nonprofit organization paid $50,400 for his daughter’s living expenses one year when she attended graduate school at New York University. That money paid not for a dorm room, but rather it helped her buy a co-op apartment in Greenwich Village. In one year, the program provided $132,611 to cover tuition for four children of three executives.

A New York Times expose details the escapades of the brothers, Philip and Joel Levy and the compromised practices in New York’s $10 billion system for caring for the developmentally disabled.

More than half of that money goes to private providers like the Levys, with little oversight of their spending. And the providers have become so big and powerful that they shape much about how the system operates, from what kinds of care are emphasized to how much they will be paid for it. The organization run by the Levys, the Young Adult Institute Network, has been among the most aggressive, and is now the largest operator of group homes for the state, collecting more than $1 billion from Medicaid over the past decade and running homes with a total of 700 beds, along with day programs, a school, dental care and transportation for the developmentally disabled.

Two days after The New York Times asked about the spending for his daughter’s apartment, Philip Levy, 60, abruptly retired as chief executive. Joel M. Levy, 67, also departed in June, after serving as a $250,000-a-year part-time consultant following his departure from the chief executive’s position in 2009.

The prosecutors, from the United States attorney’s office for the Southern District of New York, with assistance from the New York attorney general’s office, brought a federal false claims lawsuit under seal in 2009 against the organization for the practices, which were brought to their attention by a whistle-blower, Richard Fagan, the nonprofit group’s longtime budget director. Mr. Fagan, who was involved in the preparation of the documents, told prosecutors that for years expenses had been pumped up on annual financial reports to win higher reimbursements from Medicaid.

Over all, the organization’s rates for group homes at the intermediate care level, which require higher levels of care and supervision, rose by 48 percent from 2004 to 2010. Rates for similar group homes run by nonprofit providers around the state increased by 37 percent during the same period, while inflation was 15 percent.

Last January, the organization agreed to pay $18 million in restitution and penalties to settle the suit, denying wrongdoing and saying it had made errors “under the complex cost-reporting rules that apply to Y.A.I.’s residential services.” A spokesman last week added that the organization had decided that the settlement would be less costly and disruptive than protracted litigation. In June, the nonprofit group submitted a plan to the state, saying it would repay the money in part by keeping its executive salaries flat for a period of years.

Last month, the state rejected that proposal, saying it expected executive pay to be reduced. No organization in the field in New York has paid its executives as well. Four of its executives received compensation in excess of $500,000 in 2009; none of its competitors had more than one executive at that level, according to a review by The Times of tax returns of the 100 largest providers. The Young Adult Institute also pays for its top executives to lease vehicles for personal and professional use. Accounting obtained by the state showed leases for two Lexuses and a Volvo. A spokesman declined to provide details about the cars, except to say the executives are allowed to select their own vehicles within certain price ranges. Returns filed by every nonprofit organization in the country shows nothing close to the Levys’ compensation.








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)