Thursday, April 25, 2013

Late April Edition-Nonprofit Imperative E-Newsletter



Nonprofit Imperative
your nonprofit browser
April 2013
Follow us on Twitter: NonprofitsNews; Nonprofit Imperative Blog
The twice-monthly newsletter dedicated to:
  • exposing the crisis in nonprofit fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually; and,
  • seeking reforms that will restore the public’s lost confidence in the sector.
What’s Included:
Skunk of the Month:
LGBT Charity Fraud
Charity Check Up:
Vermont #1 in Fraud?
A Thought or Two:
Background Checks, Please
Nonprofit News-In Case You Missed It:
Newton-Sandy Hook Foundation; Salary Caps For Nonprofit Execs…more
Political/Official Chicanery:
CA; NC; TX; MS; MO
What Do You Think?
                          
It is the very rare and very unlucky nonprofit thief who gets caught. Less than one percent of all nonprofit tax returns are even reviewed. And nonprofit theft is pervasive. (author Ken Stern in With Charity for All)
                                          _________________

Charity fraud or charity scams is one of the newest forms of committing identity theft. Basically, it consists of an individual or a group of persons who willingly misinterprets their fundraising intentions to solicit money from their victims using their fraudulent causes. While legitimate charities aim to raise money to be given to those who they promised to give it to, charity scammers aim to get as much money as possible from people thinking their funds are going to for a good cause. (Source)
                                            _________________

 “Has embezzlement become part of our culture?” (VT Digger.org)

                    Skunk of the Month…
                             Skunk of the Month is the twice-monthly designation made by Nonprofit Imperative, the organization dedicated to eliminating waste, fraud, abuse and mismanagement in nonprofits and government. The Skunk of the Month award is given to charities and government officials who show blatant disregard for the interests and trust of contributors and taxpayers. This month’s example is:
“They came to do good and they did very well indeed.”
LGBT Charity Organizations Caught in Frauds
Charity fraud is so pervasive, but few areas evidence it more than with LGBT organizations according to the Edge which points out the magnitude of problem.   
With outsiders throwing their donations behind organizations leading fights on various fronts, insiders are pilfering tens of thousands of dollars. In recent years, gay organizations have been the victim of embezzliment. Those who were supposed to be husbanding the organization's resources were instead using the money to pay for lavish lifestyles that ranged from Caribbean vacations to pricey dog walkers.
The most recent malfeasance was the former director of the Bronx Community Pride Center in New York City. Lisa Winters was sentenced to at least two years behind bars for embezzling more than $338,000. Court documents show that she used the money for vacations with her partner, $15,000 to a dog walker, and thousands on fine restaurants and shopping trips. The center was forced to close last June after 16 years serving a diverse population in desperate need of its services. This recent case, The Bronx Community Pride Center, is the most recent and one of the largest such incident of embezzlement at LGBT and AIDS organizations.
Here’s a depressing litany of such cases of LGBT people preying on their own:
·       A few months ago, a federal investigation found that a former employee at the Nebraska AIDS Project may lost in an embezzlement over $60,000 of federal grant money.
·       In 2011, the former executive director of Boston Living Center, an AIDS service organization, pleaded guilty to embezzling more than $125,000. Only a merger saved the organization from disappearing altogether.
·       Also in 2011, the volunteer treasurer and board member at the Billy DeFrank LGBT Community Center in San Jose, Calif. was caught embezzling $40,000.
·       In 2009, the former executive director of Philadelphia’s largest black LGBT organization was found to have embezzled $138,000 in government-allocated funds.
·       In 2011, the former executive director of Verbena Health, a Seattle health clinic and health center that catered largely to lesbians, was convicted after having gambled away $500,000 in Las Vegas. The clinic was forced to close its doors.
·       From 2007 to 2008, the head of People of Color in Crisis, an AIDS service group in Brooklyn, N.Y., spent $80,000 on items that included gym memberships. POCC was forced to close in 2008.
The swindling happens in a number of ways: bogus payroll claims, skimming, inflated reimbursements, and kickbacks with vendors. 
The ramifications nonprofits face after embezzlement scandals nearly always put their future in jeopardy. As was the case in the Bronx, Brooklyn and Seattle, the organizations simply can’t recover and must close their doors.
A Charity Check Up:
A Snapshot of Fraud In Just One State
Vermont Bar Journal ( Spring 2012 issue):
"Vermont is the number one state in the nation for embezzlement thefts from corporations and nonprofits. It appears that living well on other people’s money has become a way of life for some Vermonters."
·       Iona College, saw Sister Marie Thornton (yes a nun) plead guilty to having embezzled $850,000 from Iona where she had been the college’s V.P. of Finance
·       The treasurer of the Richford (VT) Parent Teacher Organization took an estimated $3,500. She was relieved of her teaching job in the same district.
·       Dartmouth College’s former auditor, 79-year-old Vermonter, Bruce McAllister, allegedly betrayed his fellow employees at the New Hampshire college by stealing over $800 thousand.
·       Southern Vermont College’s CFO/COO, allegedly embezzled over $500,000 from the college. Much about this embezzlement will never be known. The 58-year-old alleged embezzler took his life with a self -inflicted gunshot wound 
·       A long serving Weybridge Town Clerk and Treasurer admitted that over a six-year period, she stole $400,000 from her town.
·       A lady was given an 18-month prison sentence for embezzling $80,000 from the Algiers Fire District.
·       Nor are Vermont’s neighboring towns immune to the wrongful deeds of employees. The former Treasurer of Charlton, N.Y. (near Saratoga) admitted embezzling nearly $500,000 from the Charlton volunteer fire department.
·       In nearby Troy, N.Y. the former executive director of a nonprofit agency, was charged with allegedly stealing $200,000 from his employer, Father Young’s Rehabilitation Center. (source)
Fraud Examiners and Your Church
Association of Certified Fraud Examiner’s 2012 Report to the Nations
The information is particularly insightful for church leaders who are focused on minimizing the risks of fraud and embezzlement with church money. It was in Managing Your Church.
ACFE releases its report every other year. Of note from the latest one:
1.     Between January 2010 and December 2011, ACFE tracked 1,388 cases of “occupational fraud” worldwide:
2.     Of the cases, 10.4 percent occurred within a not-for-profit organization, up from 9.6 percent in 2010, but down from 14.3 percent in 2008;
3.     The median theft involved with the cases was $100,000, up from $90,000 in 2010, but down from $109,000 in 2008;of all the cases, 87 percent involved first-time offenders with no prior criminal records.
These details are interesting because they validate several things we consistently observe in the church world: 
4.     At least two to four media headlines nationwide each month involve an arrest or prosecution of a bookkeeper, accountant, or pastor suspected of embezzling from their church.
5.     An average theft amount of at least $100,000, and usually between $200,000 and $400,000, all stolen over a period of several years.
6.     A perpetrator who has no prior criminal record. Personal debt, a medical crisis, or the unexpected loss of a spouse’s job creates unexpected pressure, with many rationalizing their acts as “temporary loans” that they intend to repay—but never do.
7.     Or, some believe they are underpaid and are “owed” the additional compensation.
 A Thought or Two:
Please…Please Do Background Checks…Another Sad Example
A convicted felon who became chief financial officer of the Brighter Choice Foundation pleaded guilty to ripping off close to $203,000 from his own organization, which funds 10 Albany public charter schools.
Ronald A. Racela, whose 2011 conviction for stealing $53,000 from Key Bank somehow did not deter the foundation from hiring him, faces five to 10 years in prison when he is sentenced May 17. Brighter Choice officials said they were unaware of Racela's felonious background when they hired him as financial director of Brighter Choice Foundation---just seven months after his bank conviction. The agency first flagged the problem 18 months after he had started working. His background checking process was obviously not exemplary because it is possible that the convicted intercepted a warning mailed to the charity. Clearly the procedure did not work. This is a warning for others in like circumstances.
Nonprofit News…
In Case You Missed It:
1.     California’s state campaign watchdog agency, Fair Political Practices Commission, is supporting sweeping changes to California’s political finance laws, including proposals to lift the veil of secrecy from nonprofit groups that are spending record amounts of money on political campaigns in the state. They voted to back pending legislation that would address concerns about an Arizona nonprofit organization that contributed $11-million contribution to a ballot measure campaign fund before November's election. The bill would require nonprofit groups that spend 10% of their money in a year on California elections to disclose contributions they make and the names of the original donors who provide $10,000 or more to the group. “It is important to the public to know who is funding campaigns,” Commission Chairwoman Ann Ravel said in a statement. ``Disclosure of political contributions and expenditures is the essence of the Political Reform Act, which was enacted to restore confidence in government through such disclosure.’’ (see related story #4 below)
2.     An overwhelming majority of the relatives of those slain at Sandy Hook Elementary School in Newtown say an independent, single administrator should be brought in to oversee the distribution of more than $11 million donated to the United Way after the tragedy. The revelation comes on the heels of an announcement this week that the Newtown-Sandy Hook Community Foundation established to distribute the money will immediately begin, under pressure from the governor's office, allocating $4 million to families and others affected by the shooting. A letter from the Governor suggested an administrator, "like Ken Feinberg, to ensure that the process would be swift and fair." Feinberg states in the letter that while the United Way "has great credibility and a track record of success in assisting citizens of local communities," it may not be the best vehicle to distribute the money because of possible conflicts with the nonprofit's "ongoing charter and mission."
3.     According to the Internal Revenue Service (IRS) Data Book for 2012, there were 10,000 fewer registered tax-exempt organizations in 2012 than in 2011. There were 1,484,818 501(c) organizations for the fiscal year ending in September, compared with 1,494,882 in 2011 – a decrease of 10,064, or about 0.68 percent. The IRS approved 52,615 organizations for tax-exempt status, out of 60,793 applications – an approval rate of 86.5 percent. The overwhelming majority of applications came from 501(c)3 organizations, classified as religious and charitable, which numbered more than 1.081 million last year. By comparison, there were 909,574 501(c) 3’s in the 2002 data book – a difference of 170,546, or 18.75 percent.
Overall, the number of tax-exempt organizations and nonexempt charitable trusts dropped by more than 13,000 (or 0.8 percent), from 1,629,149 in 2011 to 1,616,053 in 2012. Nonexempt charitable trusts were down by 3,000, or 2.26 percent, to just less than 131,000. The number of 501(c) 3 organizations climbed by 0.163 percent, or 1,761, from 1,080,130 in 2011 to 1,081,891 in 2012.
4.     Sen. Sheldon Whitehouse, D-Rhode Island, said at a campaign finance hearing yesterday that there were “numerous instances” in which nonprofit groups may have made false statements to the IRS about whether they planned to be involved in federal or local elections. He is pushing for an investigation of nonprofit groups that told the Internal Revenue Service they would not engage in political activity — and then spent millions attacking or praising candidates in 2012 elections.
5.     A group of N.C. legislators introduced a bill that would call for a commission to study $100,000 salary caps for employees at state-supported nonprofits, as well as research into whether lawmakers should ban the use of tax dollars for salaries. The assault continues after the governor proposed a budget that bundles sharp cuts, about $85 million worth, for powerful economic nonprofits: the Golden LEAF Foundation, N.C. Rural Economic Development Center and the N.C. Biotechnology Center. The latter two were among the state-funded nonprofits with the highest-paid leaders, according to data provided. Furthermore, an October 2010 report from the left-leaning N.C. Justice Center found overall state funding for nonprofits plunged more than 25 percent in the 2009–2010 fiscal year, roughly 10 times greater than overall cuts in the state budget that year. According to a 2011 survey by advocates at the N.C. Center for Nonprofits, more than 60 percent of nonprofits reported cuts in state grants in 2009, 2010 and 2011.
6.     The D.C. and Massachusetts Catholic Charities organizations failed to provide adoption services to same-sex couples; a the lawsuit filed in Illinois accusing the organization of discriminating against gay couples; and now, the Palo Alto Community Development Block Grant (CDBG) $500,000 to the local Catholic Charities seems to be in jeopardy. Just the tip of a big iceberg. 
7.     The Internal Revenue Service issued a warning to taxpayers in Watsonville, Santa Cruz County, and across the United States to avoid charity scams in the wake of events in Boston and in Texas. "It's sad but true," IRS officials said in a statement. "Following major disasters and tragedies, scam artists impersonate charities to steal money or get private information from well-intentioned taxpayers. Fraudulent schemes involve solicitations by phone, social media, email or in-person."
Justice Watch
Judges, prosecutors and others have coddled criminals convicted of charity fraud in their sentencing…and it is rampant. All use jail overcrowding and other spurious excuses for lenient prosecution and sentencing. Restitution is frequently ordered in lieu of prison, but it is seldom discharged with less than 50% of the criminals even paying one penny. This result is a free pass for the criminals. We are watching!! (just a few examples).
1.     A woman who said that she was duped into stealing more than $60,000 from two volunteer groups to pay for a Jamaica-based mail scam will spend two years on probation. Ethel Andrews, the former treasurer for both the Institute Volunteer Fire Department and the Kanawha chapter of the West Virginia State Alumni Association, pleaded guilty earlier this year to two felony counts of embezzlement.
2.     It is clear. He betrayed the community’s trust. Former Highland Park (MI) emergency financial manger Arthur Blackwell II was accused of improperly paying himself about $264,000 after agreeing to be paid $1 a year as emergency financial manager. He also was accused of refusing to turn over the city’s financial records. Nevertheless, he pleaded down from embezzling from the city to pleading no contest to one count of safe keeping of public money, a misdemeanor. A no-contest plea is not an admission of guilt but is treated as such for sentencing. The judge ordered Blackwell to a two-year probation term and restitution. Based on studies, the chance of fully discharging the restitution is 5%.
We flagged these few examples of nonprofit mischief 
1.     Grand Island Community Foundation (NB) $27,000
2.     Arkansas City Senior Citizens Center, $100,000 or more
3.     Next Stage Inc. (TN) more than $360,000
4.     Salvation Army (LA) more than $30,000
5.     Historic Downtown North Wilkesboro Inc. (HDTNW) (NC) $45,546.
6.     Glendale Elementary School District (AZ) more than $14,600
7.     Sandy Youth Football (OR) $23,000
8.     Workforce Investment Act (WIA) (AL) $52,539
9.     Training Thru Placement (TTP) (RI) unknown
10.  Lakewood Police Independent Guild (WA) $151,000
11.  Junior Waverly Warrior Football League (MI) over $17,000
12.  Porter Foundation (MO) $19,500
13.  Ashland Little League (VA) $20,000+
14.  United Medical Center (DC) $400,000
15.  Wake Forest Baptist Medical Center (NC) $100,000
16.  Frontier Culture Museum (VA) $40,000
17.  Bronx (NY) Community Pride Center more than $338,000 (see story above)
18.  PTA at Blue Hills Elementary School (KS) $22,000 
19.  Aliviane (TX)  $100,000 
20.  Youth Services America (DC) $1 million
21.  Blue Hills Elementary School's Parent Teachers Association (MO) $22,000
22.  Lusher Charter School (LA) $25,800.
23.  Roseville Youth Soccer (CA) $173,000
24.  Idaho County Food Bank $50,000
25.  Milwaukee (WI) Health Services, Inc. $5,935,960
26.  Cedars HOPE (IN) $30,000
27.  Benicia Old Town Theatre Group (CA) <$15,000
28.   Woodruff Arts Center (GA) $1.4 million
29.  Indian Knoll Elementary PTA ($12,500); the Sequoyah High School Girls Soccer Booster Club ($5900) (GA)
30.  Virginia Angus Association at least $40,000
 Political/public official chicanery (just a few):
1.     A former Santa Barbara County firefighter is under investigation for allegedly embezzling funds from Santa Barbara County Firefighters Local 2046. 
2.     The City of New Bern (NC) tax clerk has been charged with embezzlement. The warrants alleged that she embezzled $5,766.22 in 2011, and $3,270.05 in 2012.
3.     Ross Valley (CA) Sanitation District's executive director has disappeared. He is wanted on nine counts including money laundering and embezzling. There is also a $1 million warrant out for his arrest.
4.     The elected chief of police in Sallisaw (CA) is charged with embezzling public funds after he admitted to taking cash last year.
5.     A former Love County (TX) under sheriff has been charged with embezzlement.
6.     Southaven (MS) Mayor Greg Davis' trial for embezzlement and false pretense has been scheduled
7.     The ex-finance director of San Mateo (CA) County's Mosquito and Vector Control District pleaded no contest to 10 felonies for stealing at least $450,000 from the agency's coffers.
8.     The former treasurer for Multifest will spend the next 21 months in federal prison after admitting to stealing more than $300,000 from the long running multi-cultural festival to fuel a gambling addiction and failing to report that money on her tax returns. 
9.     Former Edwardsville (MO) Police Chief James Bedell pleaded guilty to federal charges and admitted stealing roughly $138,000 from the city, prosecutors said. Bedell pleaded guilty to four counts of embezzlement and theft and admitted that from July 2009 through September 2012, he took cash and money orders from a department lock box that contained vehicle impound fees, prosecutors said. The city charges a $300 fee for towed vehicles.
10.  A former Pontiac (MI) school associate superintendent and acting chief financial officer for the district has been sentenced to a year in federal prison for using $236,000 of district money to buy a luxury vehicle and travel, according to the FBI. Upon the initial investigation in Pontiac, he resigned to take the second highest position at the Inkster school district. The FBI is currently investigating mismanagement of $157 million reported in an audit ordered in fall of 2009 for the Inkster district by the Superintendent that hired the Pontiac accused.
11.  A member of the St. Johns (MI) City Commission, a member of the board of the Clinton County Chamber of Commerce and its former president as well as a board of St. Johns Mint Festival Steering Committee has been charged with embezzling more than $250,000 from a funeral home where he worked as a consultant. The discovered discrepancies are from pre-paid funeral accounts. Investigators say he embezzled the money over a six-year period
Tell us what you think and continue the tips (they are very helpful) gary.r.snyder@gmail.com
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 there is money missing.
Cites in various media:
Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, The Michigan Nonprofit Management Manual, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer
  • Silence: The Impending Threat to the Charitable Sector (Xlibris, 2011)
  • Nonprofits: On the Brink (iUniverse, 2006)
Our intent is to keep you informed.... You may be removed from our contact list and future mailings by emailing to garysnyder4@gmail.com with the word "remove" in the subject line.
Email: gary.r.snyder@gmail.com; 248/324-3700; Website:http://www.garyrsnyder.com
Gary Snyder is the author of Silence: The Impending Threat to the Charitable Sector (Xlibris, June, 2011) and Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. The book can be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store)
© Gary R. Snyder, All Rights Reserved, 2013
















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)
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