Nonprofit Fraud: Is the Salvation Army Worthy of Our Contributions?

by Gary Snyder

The former executive director of a Salvation Army facility has been recently charged in a massive theft of thousands of toys and donations from the charity's Toronto warehouse. The Salvation Army announced the theft just weeks ago, saying up to 100,000 items worth about $2 million were allegedly stolen from the facility. The executive had been fired. In January 2005, an employee of the Toronto Salvation Army was charged with stealing in excess of $1 million.

This is on the heels of a tidal wave of similar frauds, over the years, at the Salvation Army:

• ·       The Salvation Army embezzlement at the New Philadelphia citadel ended in a no contest plea thus admitting that the facts in the charges are true. She was a Salvation Army captain. She had a previous conviction for altering a prescription for pain medication. She was placed on probation. The Dover/New Philadelphia Corps Officers have replaced staff  and restructuring at the Dover facility in under way. 
• ·       In Tulsa, A former finance director at the Salvation Army took $205,468 in an embezzlement case. It took over three years to catch her.
• ·       In Atlanta, a Salvation Army employee was indicted on charges she stole $200,000 in financial aid funds. The alleged crimes occurred from 2004 to 2007.
• ·       The financial manager of the Salvation Army's Newark in New Jersey pleaded guilty to tax evasion and conspiring to embezzle. He admitted to cutting 585 checks worth approximately $385,000, which were supposed to be used for charity purposes. It took seven years to catch him.
• ·       A human resources director and an office manager for the Salvation Army, in Montgomery, Al was arrested and charged for embezzlement.
• ·        A prison escapee landed a position as planned giving director at Salvation Army Hawaii.  He had deposited at least $150,000 in Salvation Army checks to an account he controlled and received deeds to properties valued at over $200,000.
• ·      An accountant had been indicted on charges of stealing $166,914 from the New York Division of The Salvation Army. His principal responsibility was keeping the financial and administrative records of two Salvation Army programs. The money he stole from the Salvation Army homeless shelters went to pay restitution on an earlier fraud committed against another Manhattan non-profit organization, the Jewish Telegraphic Agency, a news service for the Jewish community.  For about three years, Keaton worked for JTS organization as an accountant and stole over $24,000.
• ·       The pastor of a trucking ministry in Oklahoma was charged with taking money from a Salvation Army thrift store while employed as its manager. The investigation led to his 1981 sentence for a felony theft conviction in Maryland. He was extradited to Maryland on a governor's arrest warrant issued in 1984 for violating his probation.
• ·       Ottawa’s Salvation Army has fired its executive director following an internal audit. Toronto-based Major John Murray of the organization’s public relations and development division, said $240,000 has gone missing from the George St. Booth Centre
• ·       The operations manager of the Redding Salvation Army thrift was charged with embezzling $98,000 over a period of eight years. 

In the late 1990s, the American Institute of Philanthropy communicated its concern that The Salvation Army’s governing body is rather insular for such a large charity, Lieutenant Colonel Tom Jones, Community Relations and Development Secretary of The Salvation Army said that to get to the position that The Salvation Army is in they must have the absolute integrity and that considerable checks and balances have been put in place over 30 years. Ouch.

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)

Who Is Watching Japan's Diaster Relief Funds?

By Gary Snyder

An accounting of Japan’s Board of Audit revealed that about half of the country’s reconstruction budget of nearly $239 billion has yet to be spent amid confusion and indecision. The audit cast a harsh light on money that was spent on outlays to many projects seen as unrestrained pork-barrel spending. Another study found that a quarter of the amount raised was allocated to projects unrelated to directly benefit anyone in the disaster zone.

Meanwhile hospitals in the area remain closed and the communities affected by the disaster are chasing finances. Despite the government’s explanations, anger remains high. (NYT)

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)

Nonprofit Fraud: Are Colleges and Universities Worthy of Your Support?

By Gary Snyder

My exploration as to the magnitude of college and university fraud was precipitated when I learned of a former St. John’s University dean committing suicide after being convicted of stealing more than $1 million from the university. In the wake of the allegations, authorities said that she might have killed her husband over a decade ago. 

Although most are not as interesting as the St. John embezzlement, the number of instances of higher education fraud is overwhelming.  It is basically an epidemic. Many of the examples are taken from the twice-monthly e-newsletter, Nonprofit Imperative.

Consider this as a partial list of embezzlement cases. This sampling of only 20 thefts totals more than $28 million.

• ·      Two North Carolina Central University administrators were charged when they were caught diverting over $1 million from a state program.
• ·      Drake University’s student accounts director was stealing more than $470,000.
• ·      A former Penn State Professor was charged in a $3 million federal research grant fraud that took place for over a 5 year period.
• ·      A coordinator of the equine industry program at the University Louisville pleaded guilty to stealing $463,636. She was sentenced to 37 months in prison.
• ·      An administrative manager at the Vanderbilt University Law School pleaded guilty to a theft of $535,000 and was sentenced to 22 years in prison.
• ·      An accountant for the Mississippi University for Women was charged with embezzling over $30,000.
• ·      Five former employees at the University of North Texas, including the College of Information budget officer, were charged with stealing more than $75,000 from the university.
• ·      Former Portland State University vice provost pleaded guilty to stealing more than $4500.
• ·      A project manager at Vassar College is accused of embezzling almost $2 million over a 5 year period by setting up a phony construction company and charging the college for work not performed.
• ·      Former president, CEO, and trustee of Kansas City University of Medicine & Biosciences embezzled more than $1.5 million over a 5-year period.
• ·      Former residence life employee at the University of Montana is accused of embezzling over $300,000 over a seven-year period.
• ·      A former administrative assistant at the University of Vermont Extension program is accused of embezzling  $48,800.
• ·      An office manager at the New Jersey City University pleaded guilty to embezzling $502,000 from the university student government organization.
• ·      Electronic transfers were made at Columbia University in the amount of $4.5 million by a former employee.
• ·      Former head of the Department of Surgery at Duke University embezzled $267,000.
• ·      A former vice president of finance at Iona College pleaded guilty to embezzling $1.2 million.
• ·      Former community outreach coordinator at Virginia Commonwealth University pleaded guilty to embezzling more that $144,000.
• ·      Former director of food services at LaSalle University (PA) embezzled over $5 million over at least a 20-year period.
• ·       An accounts payable clerk at Naropa University is accused of stealing nearly $600,000 over a two-year period.
• ·      At Oklahoma State University a university’s chemistry department embezzled $80,000 over nearly a two-year period. She filed bankruptcy a month before claiming more than $150,000 in debt.

Watch out before donating. Make sure that you are confident that the charity that you donate to is honest. Exercise due diligence:

• · ensure the charity is effectively governed; is it transparent, accountable and fiscally responsible?
• · go to GuideStar, if available; and review the charity’s IRS 990 form; look at other watchdog websites such as Charity Navigator.
• · go to the charity’s website and scrutinize the annual report and try to see if there are conflicts of interest (such as family members on the board);
• · check the financial statements both at GuideStar and at website;
• · examine to see if programs are in sync with organization’s mission;
• · ask if the agency has internal financial controls in place to avoid fraud and misapplication of funds.

A thanks to Christopher Marquet of Marquet International for information used in this article.

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)

In Good Taste, Lance Armstong. What About Susan G. Komen?

by Gary Snyder

Lance Armstrong, the seven-time Tour de France cycling winner stripped of his titles on cheating allegations, has cut his last official tie to the cancer charity Livestrong by resigning from its board. Armstrong, who stepped down as the group’s chairman on Oct. 17, was the target of a report released by the U.S. Anti-Doping Agency in October that alleged he was part of the largest sports cheating ring in cycling history.

“Lance decided to resign from the board of the foundation to spare it any negative effects as a result of controversy surrounding his cycling career", said an agency spokesperson.

Armstrong’s action is admirable. This, however, is in contradistinction to what is happening at Susan G. Komen for the Cure.

Founder and current leader of the Komen foundation, Nancy Brinker, continues to hold on to her last and omnipresent vestiges of power.  While Armstrong saw that a bad name was interfering with the mission of Livestrong, he graciously stepped down. 

At a salary approaching $450,000-plus, Nancy Brinker sits atop her perch at Komen as agency declines precipitously. Calls for her resignation come far and wide. Her presence continues to be a lightening rod to donors and sponsors. Although internal results have been questioned, external sources suggest that participation at events is down as much as 40% at various venues.

Under Brinker's iron clad direction, staff and board turnover have reached nearly 100%. That includes Brinker's closely held, hand picked board. Both at the national and regional levels, senior staff has either been terminated with severance totaling over $1 million or have vacated because of the decision-making at the national level. In the midst of the Planned Parenthood controversy, local offices were directed to forward all complaints to the national office. By any standard, the national office’s response was an abysmal failure. Many strong bonds with donors were destroyed. 

The beat continues for Brinker to step down. Maybe with some reflection as to the commendable action by Lance Armstrong, she will reconsider her damaging presence.   

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)