Up To 200 Charities May Be Hurt By This Nonprofit Fraud

by Gary Snyder 

The FBI is investigating the apparent disappearance of an estimated $1 million in donations from the International Humanities Center.

Humanities Center handled the finances of about 200 nonprofits. It abruptly shut down this year, forcing some groups to curtail their charity work.

A tally by 49 groups that used the center lists their losses at $928,064, although the figure could go higher when the other organizations are added. Some nonprofit directors said they suspect that many of their on-line donations went directly to the center and that some funds were never credited to them, leaving them uncertain of their losses. This despite the fact that Center was supposed to keep the groups' funds separate from money used to operate the umbrella organization. 

The center, which closed its office and took down its Web page in February, served as an umbrella organization for small nonprofits, enabling them to accept tax-deductible gifts. It handled donations, took care of administrative chores, paid bills and acted as a bank, in exchange for 10% of the donations.

The center's founder and executive director, Steve Sugarman, sent a Jan. 16 email to some of the nonprofits telling them the center was closing its doors and that all funds had been properly spent. Sugarman has not responded to emails and his phone is disconnected.

There are indications that the center had been having trouble for at least 18 months before it shut down.

Lynnclaire Dennis, whose group Centre for Social Architecture and Reweaving Harmony banked its donations with the center, wrote an email this year to other nonprofit directors that Sugarman, "in a panic," talked with her in mid-2010, seeking her help in lining up "an investor."

Sugarman, she said in her email, indicated he needed $5 million, $1 million of it within 10 days.

He also told her that a partner had "fled the country," taking all but a few thousands dollars of the donations the center was handling, she said in the email, which she has now passed along to the FBI.

Her comments were similar to those in a letter David DelGrosso, a consultant to the center, sent to project directors earlier this year, saying a former Humanities Center official had cost the center $200,000 "on a deceptive email scam" but had since left the country. DelGrosso said he has been interviewed by a deputy attorney general.  (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)