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)

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)

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)

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)

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 100^th 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)