Soft on Nonprofit Crime

       by Gary Snyder

They took  $19,127.70 (over 4 years) from Cub Scout Pack 70. They embezzled $4,743.88 from Cub Scout Pack 1 (over 2.5 years). They misused an Action Family Network debit card for personal use to the tune of $2954.21. 


These serial thieves were given two-year probation (until June 25, 2014). If the probation requirements are fulfilled, the charges will be dropped in two years. Kimberly and Kevin Clark are to pay a monthly $50.00 probation supervision fee, a $90.00 victim witness assessment fee, and also pay restitution (which is to be determined at a later date; July 18, 2012). They wrote an apology letter to Judge Kunis and expressed regret for their actions. (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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

The Incredible Implosion of the Susan G. Komen Foundation

                  By Gary Snyder

Drip, Drip…

The current continuing drumbeat at the Susan G. Komen foundation would seem implausible just over one year ago. Few outsiders would have believed that their beloved foundation had so many systemic problems. But apparently insiders knew that that the organization was devoid of leadership, full of conflicts of interest, practices that were problematic and very questionable financial procedures.

Once the public got a peek at the organizational practices as a result of poor decision-making, the staff started to bail en masse. Virtually all of the staff in prominent positions has left, either voluntarily or otherwise. Many board members have vacated their roles as well.

The very latest loss is pivotal. The development vice president just left. This one is particularly damaging because the turnout at pink-ribbon fundraising is substantially down, some by as much as 40%. Sponsors also took flight with important stalwarts such as U.S. Congressman Mike Honda, who packaged up over $10,000 in contributions last year leaving. The amount is not consequential, but quite symbolic.

But the fading pulse of the organization remains in place and keeps her tight reign. Nancy Brinker, Susan G. Komen’s sister, continues to make most of the decisions from her perch as both the principal staff member and board member. According to insiders, little goes on without “madam Ambassador’s approval”. Under Brinker’s leadership a controversial decision was made to de-fund Planned Parenthood. Her personal response as the head of the organization to the public outcry enveloped the Komen foundation with even more bad publicly. She exacerbated the clamor by hiring a public relations firm that had a history of attacking Planned Parenthood. Since then, Brinker has not been heard from. There is no spokesperson for the agency.

The organization’s defense of conflicts of interest (the board was stacked with family and close confidantes), poor business practices (Brinker’s use of charity funds for her own personal use; boosters buying Brinker’s endorsement; paying hundreds of thousands of dollars in severance; huge travel expenses, office, and consulting fees), her leadership (the use of intimidation and firing those that did not follow her directives precisely) have never been addressed.

The stonewalling at Susan G. Komen is legendary. When Brinker was working full-time for the federal government, the agency paid $133,000 for her personal expenses. To date, there has not been a full explanation of the expenditures. There is a remarkable bunker mentality within the leadership as management continues to turn over rapidly.

The puzzling vacuous leadership at Susan G. Komen has lead to a catatonic state for the foundation. I was asked if there is any possibility of reversing the direction of the beloved and revered pink ribbon from what is now said to be pink slime? I am bewildered.

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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

A Multi-million Dollar Flurry of Charity Fraud

It is reaching epidemic proportions. In just the past three hours 4 examples of cheating vulnerable children have surfaced.

At Fired Up for Kids in Colorado the agency’s founder is charged by the district attorney with stealing $243,399.22. She has been arrested by Glendale  Colorado authorities and charged with multiple theft and fraud counts.  The hunk-laden firefighter calendars proceeds she sold were earmarked for The Children's Hospital for children burn victims.  Bank statements that allegedly show her ringing up a $700 bill to 24 Hour Fitness, charges related to a trip to Disneyland by the founder and her children, payments for the kids' private-school tuition, and cash expended on car repairs and a shopping trips to Saks Fifth Avenue, Whole Foods and Comedy Works and Nordstrom.

In New York, an upstate company improperly diverted more than $800,000 from Important Steps Inc., preschool special education program for Special-needs 3- and 4-year-olds. Billings grew from $1.6 million in 2006-7, its first school year in the program, to $5.7 million a year later. An audit office of the company’s 2007-8 records found that it had overbilled by hundreds of thousands of dollars that year. The company’s owners spent several thousand dollars on floor tiles, trees and shrubs to renovate and landscape their second home in the Poconos. The owners were arraigned on five felony charges, including grand larceny, tampering with public records and filing false documents.

An audit at Special Education Associates Inc. of Brooklyn, which was one of the city’s busiest SEIT providers this year, with 170 children receiving instruction showed that the company’s owner paid his wife $150,000 a year as his assistant executive director, while she was earning $90,000 a year as a full-time professor of speech, language and hearing sciences at Lehman College of CUNY. He pleaded guilty to defrauding the government, a felony, and was sentenced in December to five years’ probation. He also paid $610,000 in a civil settlement with the Manhattan district attorney’s office, agreed to a lifetime ban from the pre-K special education program, and sold the business. His wife is due in Bronx Criminal Court to face felony charges of grand larceny and defrauding the government.

A another company, Capital District Beginnings of Troy, N.Y., will have to pay back $831,244 in disallowed expenses. The company, which serves 800 children in a 12-county area that includes Albany, charged government $240,000 for salaries for its two co-owners, though they performed little work, auditors said.

One of them had moved to South Carolina for health reasons but still received full-time pay and a company car.

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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Pennies Add Up To Over $150,000 In Charity Embezzlement

by Gary Snyder    

Yonkers (NY) public libraries collected fines by the pennies---10 cents for most books, 50 cents for new seven-day ones. A well-liked longtime employee was responsible for taking the money collected by the branches. 

For seven years, she would regularly alter the collection paperwork to reflect a lower amount of fees and pocket the difference after taking money out of the library deposit bag and she made off with $163,582. Only after a new business manager was hired were the thefts discovered. The library had reviewed its procedures and made sure more people were involved with monitoring accounting issues.

She needed the money because she had a gambling addiction — including gambling in Atlantic City and playing the lottery.  She pleaded guilty to felony charges of grand larceny and filing false tax returns and was sentenced six months in the Westchester County Jail and the rest of the next five years on probation. She will also have to make restitution for the amount of the theft. Prosecutors had sought a state prison sentence, which would have meant at least a year in prison. (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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Another CNN Investigation Unfolds

By Gary Snyder

CNN has been in touch with Nonprofit Imperative as its investigations have unfolded. Last month, NI   reported on how the Disabled National Veterans Foundation squandered and wasted millions of dollars in donations. Here we go again with the latest example of charity malfeasance that CNN has unveiled. My bet is that this is going to be a virtually never-ending issue.

Another Fundraising issue:

SPCA International raised $14-million raised in 2010, according to the charity’s informational tax filings, but it reported that it spent less than 0.5 percent—roughly $60,000—on animal-shelter programs in the United States. More money—about $450,000, or 3 percent of the total raised in 2010—was spent on a “Baghdad Pups” program, intended to bring back dogs used by the U.S. military in Iraq and Afghanistan. However, the charity says only 26 of the nearly 500 animals returned to the United States from the region were actually service animals, with the rest being stray dogs. SPCA International, CNN found, is in debt to the fundraising company according to a company spokeswoman. According to publicly available Internal Revenue Service 990 tax records. In 2010, SPCA International owed $8.4 million to Quadriga Art LLC and its affiliated company, Brickmill Marketing Services.

Leadership and Background Check Failure:

SPCA International spokeswoman Terri Crisp appeared on CNN's sister network, HLN, last year. Crisp once headed a California-based animal rescue charity, Noah's Wish, which reached a settlement agreement in 2007 with the state of California. In that settlement agreement from the summer of 2007, Crisp agreed not to "serve as an officer, director or trustee or in any position having the duties or responsibilities of an officer, director or trustee, with any non-profit organization for a period of five (5) years from the date of the execution of this Settlement Agreement." Yet in a filing with the North Carolina secretary of state's office last year, SPCA International named Crisp in its list of officers and directors. Crisp did not admit any wrongdoing in the California settlement, but the charity agreed to return $4 million in donations to California officials out of the $8 million raised by Noah's Wish.

Pierre Barnoti, who founded U.S.-based SPCA International in 2006, also has a questionable record as a charity manager. Three years after he founded SPCA International and became its president, Barnoti was fired as the Montreal SPCA's president after leaving the Canadian charity deeply in debt to Quadriga Art, according to Nicholas Gilman, Montreal SPCA's executive director.

Gilman said that the Montreal SPCA still owes Quadriga Art nearly $2 million and that the American fund-raising company has a lien on the Montreal organization's headquarters building.

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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Addictions Seem To Be Driving Up Charity Fraud

by Gary Snyder

Within the last twenty-four hours there have been several reported frauds at charities by leadership that have addictions. In my decade of monitoring charity fraud there is a startling increase in addictions that have lead to the increasing rate of nonprofit embezzlement.

In Tulsa Oklahoma a director at the H.O.W. Foundation Recovery Center is charged with defrauding the nonprofit corporation of more than $1.3 million. He is accused of using checks drawn on the foundation’s bank accounts to pay personal credit card debts for almost 8 years. He maintained exclusive control over the foundation’s bank accounts and the deposit of the foundation’s daily receipts. It is alleged that the executive had battled substance-abuse problems earlier in his life before letting a gambling addiction lead him astray.

This scenario is not uncommon.

Previously, the executive pleaded guilty to stealing $177,000 from the Asperger’s Association of New England and was placed on five years of probation and ordered to pay restitution. Now as head of the Maynard (MA) Retirement Board he is charged with ­embezzling more than $521,000 from the pension fund. The thefts are attributed to an addiction to substance abuse.

Last month a Carson Valley Medical Center accounts payable coordinator got five years probation and restitution for stealing $85,000 from the institution. She had a drug, alcohol and gambling addictions.

A few weeks ago an accountant for the South Carolina Hospitality Association pleaded guilty to embezzling $500,000 to support a gambling addiction.

In York Pennsylvania, two months ago, an office manager at the York Symphony Orchestra pleaded guilty to stealing $221,000 to prop his gambling addiction.

The chief Financial officer at the Philadelphia Archdiocese took more than $900,000 to, in part, payoff his gambling debts.

At JaxCare in Florida an employee stole $500,000 ($800/day addiction). The charity folded as a result.

The Boy Scouts Clovis chapter in California had a treasurer that was arrested for stealing $73,000 to support a gambling habit.

For more than eight years an employee pleaded guilty to stealing $815,000 from the Colorado Association of Executives because of a gambling addiction.

The Colonel responsible handing out money to National Guard families in Arizona is charged with stealing as much as $2 million over 13 years to support a gambling addiction.

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 (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Is This a Nation Trend in Charity Funding?

by Gary Snyder

In my community, the United Way readjusted its funding priorities much to the dismay of several large agencies. Since I was on the board of an agency, I am privy to the bad taste that the process left. Aside from the effects on the agencies, many volunteers that were rather large supporters of the United Way and were board members of affected agencies could not support the process.

I guess the process elsewhere has lead to similar results.

In York County, Pa. one agency, Habitat for Humanity, expected to receive grants from the fund, and its board was "highly upset" and offended to be omitted, according to Executive Director Debbie Krout-Althoff. The agency took the unusual step of issuing a press release, under the heading "Breaking News," to highlight the perceived snub.

The release caught United Way Executive Director Bob Woods off guard. He said Habitat, a new partner agency in 2010, isn't eligible until next year for Community Fund donations, which are distributed through three-year cycles. However, a report in The York Dispatch from 2010 on the new partnership quotes Woods as saying Habitat could receive Community Funds in 2011-12, but noted it would have to submit a proposal, competing with 77 programs under then-34 partner agencies. Woods said, "... It doesn't do anyone any good to air this out in the public."

In Dayton Ohio, the Area Chapter of the American Red Cross faces a 76 percent reduction in funding from the United Way of Greater Dayton in the next fiscal year. About 18 percent of the local chapter’s $3.7 million in revenue last year came from the United Way. Tom Fodor, CEO of the local chapter, said he was shocked by the United Way’s decision to cut his group’s funding so deeply. “Nobody anticipates a 76 percent cut,” he said.

Fodor said the Red Cross was aware that the United Way’s funding priorities had changed and his group tried to tailor its application to reflect the shift in focus. The shift in the formula has left the American Red Cross with a big hole in its budget. During the past three fiscal years, the Red Cross has seen its funding from United Way steadily fall from $751,800 to $657,000, and now tumble to $156,500.

The Red Cross has started to consider the ramifications of the funding cuts, but the organization plans to appeal the funding decision. Fodor said Red Cross will see the appeal process through before deciding how to cope with the loss in revenue.

It seems that in all three cases communications were the problem. Although the shifting priorities are meant to address some very acute problems, the process left a hole in the transmission.  

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)

Possibly the Best Reason To Insure Your Charity

By Gary Snyder

  

As the subscribers of Nonprofit Imperative have read, Jerry Sandusky, the former Pennsylvania State University assistant football coach is accused of sexually abusing boys. Sandusky was charged in November with 52 criminal counts related to the alleged abuse of 10 boys he met through the Second Mile, a charity he founded for needy children.

Federal Insurance Co. issued an insurance policy to Second Mile, covering the charity and all of its directors and officers, which included a section stating that the company would indemnify any "'loss' which an insured person becomes obligated to pay for a wrongful act committed, attempted, or allegedly committed by an insured person. The policy was issued on March 2011 for the period April 1, 2011 to April 1, 2012. In December the insurer advanced $125,000 to Sandusky’s defense attorney. Federal sued that month seeking a court order saying it isn’t required to provide the coverage.

Pennsylvania public policy bars enforcement of insurance contracts that indemnify the insured against damages arising from “certain reprehensible conduct,” said U.S. District Judge Yvette Kane in Harrisburg, Pennsylvania. It’s unclear whether the policy makes Federal’s duty to provide Sandusky with a defense unenforceable, Kane said in court papers.

Without the factual background that would come with discovery, Kane declined to answer a question that would have such broad implications: whether or not the insurance company was obligated to cover Sandusky's defense costs.

The Second Mile announced last month that it planned to transfer its assets and programs to a similar nonprofit, called Arrow, because after the allegations against Sandusky, "there would not be adequate support, including financial, from donors, volunteers and referring social service agencies to continue The Second Mile as its own entity." (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)

Finally!! Authorities Address Charity Fraud...But Not In U.S.

by Gary Snyder

A consortium of agencies elsewhere is looking at charity fraud…in earnest. They think it is important.  A number of charity sector bodies including Charity Finance Group, Charity Commission and NCVO have joined together with the National Fraud Authority (NFA), Fraud Advisory Panel, in Great Britain, and other public sector and law enforcement organizations to produce a guide to help charities prevent, detect and report fraud. Charity Fraud: A guide for the trustees and managers of charities, is launched, along with tailored guidance for donors produced by the Fraud Advisory Panel. The charity fraud guide is one of the outputs of the Charity Fraud Project that unites the charity sector with the aim of reducing fraud in charities. The Charity Fraud publication has been written by the sector, for the sector, and pulls together information from various sources to produce an accessible, easy to read guide for charities. (link) A truly novel idea for the U.S. that has a fraud rate estimated to be four times that of Great Britain.

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)