Friday, April 12, 2013

Early April edition: Nonprofit Imperative e-newsletter



Nonprofit Imperative
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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:
Fraternal Order of Police (FL); St. Thomas Parish (MI)
Charity Check Up:
Brighter Choice Foundation (NY)
A Thought or Two:
Historic Downtown North Wilkesboro; Institute of Internal Auditors (DC)
Nonprofit News-In Case You Missed It:
The Poorvs Wealthy Giving; Cancer Prevention and Research Foundation…more
Political/Official Chicanery:
SC; OH; DC; CA; NC; NY; LA; VA
What Do You Think?
                          
"In the last decade or so, you've seen more and more cases where the FBI has gotten involved in with the Catholic clergy, in variety of criminal areas" said Kathleen McChesney, formerly the third highest ranking FBI agent in the U.S.

                                           _________________
Fred W. Robinson was quoted as telling a police officer working undercover for the FBI: “I own this school,” and, “That board really serves at my pleasure.” (Convicted felon who stole almost a quarter-million dollars from a struggling charter school) 
                    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.”
This $300 Million Charity Fraud Has Almost Everything. No Sex Yet!
The head of the local Fraternal Order of Police union and the commander of a St. Augustine-based veterans organization were among those caught up in a national racketeering investigation.
Allegations against Allied Veterans include money laundering, using money from a nonprofit for personal gain and misrepresenting the amount donated to charities. 
Investigators searched 51 locations in Florida, from Yulee to Naples, according to the warrant application filed in U.S. District Court in the Western District of Oklahoma. Most of the locations were current or former sites of sweepstakes centers operated by Allied Veterans.
Allied Veterans operates dozens of First Coast sweepstakes centers, which have long been at the center of controversy about their legality, both locally and in Tallahassee.
The warrant application said Allied Veterans claimed it was a member of the Veterans Administration and that 70 percent to 100 percent of the profits were used for charitable purposes. However, authorities said, the centers are actually gambling operations, with charitable purposes getting just 2 percent of the $290 million earned from 2007 to January 2012. Charities are considered to be operating effectively when they spend at least 60 percent on programs.
Instead of raising funds to benefit charities, investigators said, the primary purpose of the sweepstakes centers was to make a profit of at least $250 million for Allied, International Internet Technologies and other for-profit companies and their owners.
Investigators said the centers transferred money to Allied Management, a wholly owned subsidiary of Allied Veterans. The subsidiary then moved the money through other entities and used it for improper purchases, including buying property for former president Johnny Duncan.
Although federal law prohibits individuals from unreasonably benefiting from charities, the warrant application says Duncan received more than $1.5 million and another officer more than $250,000 from the organization. Both men also used money to purchase condos, commercial buildings and homes, including two parcels in St. Augustine. One of those properties houses Allied’s headquarters. 
Update: The national probe of a Florida-based non-profit that operates a chain of internet cafes has led to the arrest of several of the organization's leaders and the heads of Jacksonville's police union. Lt. Gov. Jennifer Carroll owned a firm that once handled public relations for the company, Allied Veterans of the World. Now, Lt. Gov. Jennifer Carroll abruptly resigned after law enforcement officials questioned her about ties to a purported veterans charity at the center of a $300 million illegal gambling investigation.
Florida law enforcement officials would not say whether Carroll is facing possible criminal charges in connection with the case. 
Federal Government Takes Lead In Massive Church Fraud
The FBI has taken over a criminal investigation into whether a popular Catholic priest in Troy Michigan embezzled over $400,000. "In the last decade or so, you've seen more and more cases where the FBI has gotten involved in with the Catholic clergy, in variety of criminal areas" said Kathleen McChesney, formerly the third highest ranking FBI agent in the U.S.
Nonprofit Imperative has followed the removal of Rev. Edward Belczak, the pastor at the St. Thomas Parish. Belczak is accused of misappropriation of at least $429,000 using the money to pad his salary. He is also being investigated for paying a ghost employee $240,000 over six years, accepting $25,000 that should have been deposited into parish accounts and providing improper medical and dental coverage to a parish member and employee, among other accusations.
He bought a $500,000 luxury condo from his longtime church manager, who was removed after the investigation was initiated. It is unclear how the the priest paid for the home when Catholic priests' annual salaries are about $27,500 to the $30,000 range. (
Free Press)
A Charity Check Up:
Poor Background Check Cost Schools $200,000+
The chief financial officer of the Brighter Choice Foundation (NY) pleaded guilty to ripping off close to $203,000 from the organization, which funds 10 Albany public charter schools. He is an old hand at embezzlement having pleaded guilty to swindling  $202,837 from KeyBank in Albany, where he was employed as a manager in the Community Development Lending Group. At the time of his January arrest, Ronald Racela was still on probation for the KeyBank conviction. Racela, who earned $120,000 a year, made false payroll entries at the Brighter Choice Foundation that allowed him to get extra payroll checks over a roughly 15-month period. Brighter Choice officials said they were unaware of Racela's felonious background when they hired him as financial director of Brighter Choice Foundation. The reason was that the agency failed to check. It was only after some 18 months when the state Education Department sent written notice of Racela's criminal history to Brighter Choice did they find out. The department denied the school's request to clear Racela for employment. The Education Department conducts criminal background checks on public and charter school employees.
A Thought or Two:
This How Nonprofit Fraud Happens When No One Is Watching
As a part-time employee she ended up facing charges that she bilked a civic nonprofit group out of huge chunks of its budget. Aisha Little, formerly the executive director of Historic Downtown North Wilkesboro, was arrested on 46 felony counts of embezzlement, two felony counts of forgery of an endorsement and four misdemeanor counts of accessing a computer to defraud or obtain property. 
Arrest warrants list 274 improper transactions totaling $46,115.48, the majority of which came from 168 unauthorized ATM withdrawals for $38,385. Police say forged checks and bank statements and documentation from multiple accounting firms show a range of improper expenses, from five payments totaling $613.63 to television provider Dish Network to a $7.11 purchase at a Wendy’s fast-food restaurant. Little abruptly resigned from the nonprofit in late January. She has no previous criminal record. Historic Downtown North Wilkesboro has an annual budget of around $60,000
As executive director, she was entrusted with the group’s checking account. Checks from the account required two signatures, one of which she would forge. Little also got a debit card that allowed her to retrieve cash directly. She was also creating false bank statements from Suntrust Bank to inflate the amount of money in the organization’s account and to indicate that the funds were going to appropriate places.
Little had two different accounting firms at her disposal — one for the group’s taxes, another for payroll. She is accused of telling one firm she was waiting for information from the other. And bounced checks didn’t get back to the organization’s volunteer board because banks would call Little.
“When you’re dealing with volunteer boards, as that one is, it’s so easy to build trust in folks,” North Wilkesboro Town Manager Larry Smith said. “You’re relying on your paid employees, and it’s easy to not pay real close attention to them. Everything seems to be going OK and the bills, you assume, are getting paid.”
This Embezzlement Takes The Cake!
A top MARTA (Atlanta, GA) official tasked with helping overhaul the transit authority’s finances and business model has been indicted by a grand jury on charges of embezzlement. The victim: the Washington, D.C., chapter of the Institute for Internal Auditors, an association whose members guard their employers against fraud. MARTA was unaware of the indictment until The Atlanta Journal-Constitution alerted them. They verified that Howard still heads internal audits at MARTA. MARTA officials are investigating how its chief auditor was hired despite a history of financial red flags. He was under indictment in Virginia on charges of embezzlement and had a history of five-figure liens. The authority now plans to look at its own books to make sure that funds are in their proper place..
Nonprofit News…
In Case You Missed It:
1.     A new SEI survey found that wealthy Americans who make $200,000 or more give 2.8 percent of their income to charity. That figure can compare to those who take home $50,000 to $75,000 per year which average of 7.6 percent of their discretionary income to charity.
2.     In a related story, The Atlantic (March 20th) noted the rich do not give like the less fortunate: “One of the most surprising, and perhaps confounding, facts of charity in America is that the people who can least afford to give are the ones who donate the greatest percentage of their income. In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income. The relative generosity of lower-income Americans is accentuated by the fact that, unlike middle-class and wealthy donors, most of them cannot take advantage of the charitable tax deduction, because they do not itemize deductions on their income-tax returns.
3.     The Oregon legislature is again trying to pass a bill that would deny state tax breaks to charities with high fundraising and administrative costs. The legislation would apply to charities that devote less than 30 percent of their expenses to charitable programs over three years.
4.     The (CT) Attorney General and the Consumer Protection agency sent out letters with a short survey to 69 charities registered with the state or identified as having accepted donations related to the Newtown school shooting. Officials cited estimates that more than $15 million has been donated to Newtown-related charities since the Sandy Hook Elementary School shooting. The survey, which is voluntary, asks charities how much they raised, whether the money will be used solely for the victims or, if not, what portion will be used for other purposes. Officials want to know how much charities have spent related to the tragedy, what services have been provided and whether they've funded other organizations.
5.     Executives at nonprofit groups in New York City are feeling more confident about the future, with an increasing number saying they plan to add new programs and serve more people this year than they did in 2012, according to a new study. This year, 61% of nonprofits surveyed planned to boost services, while 57% expected to add clients, according to the study by the Nonprofit Finance Fund, which makes loans to charitable organizations. Last year, only 53% of the groups said they had expanded programs while 44% served more people. The executives' optimism likely stems from their organizations' improved financial picture. According to the study, 31% of nonprofits surveyed ended their 2012 fiscal year with a deficit while 22% broke even; yet 23% predict they will end their 2013 fiscal year in the red, while 38% believe they will break even. Despite the brightening picture, executives say many organizations are still struggling in the aftermath of the recession, which increased need and decreased funding.
6.     Texas Attorney General Greg Abbott is investigating what is happening to money raised by the foundation that supported the Cancer Prevention and Research Institute of Texas, and is reviewing how the foundation was transformed into a different entity last month. investigated for mismanaging at least $56 million in grants. Travis County prosecutors began investigating last year after it was disclosed the agency awarded an $11 million grant to a Dallas startup without any scientific or business review. The agency’s top three executives have resigned as the investigation continues.
7.     Some of you are really tired about hearing about the auto-revocation updates. I keep doing it because they do impact the rest of my work. As of March, we’ve had about 500,000 organizations that have shown up on the automatic revocation list for failure to file for three years. About 37,000 organizations have come back and requested reinstatement. What I find really interesting is about 44,500 private foundations were auto revoked for failure to file. That was a surprise to me. I did not expect that in the private foundation world. And about 400 of those have come back and regained their exemption. (remarks of Lois Lerner, Director, Exempt Organizations, as delivered to attendees of the annual Washington Non-Profit & Tax Conference as published in EO Tax Journal)
8.     There are new accusations against the late acting president of Southern Vermont College, James Beckwith. The Bennington Banner reports federal authorities now allege that Beckwith embezzled  $110,000 in addition to the $440,000 he's already accused of taking from the school. Beckwith was found dead at his South Londonderry home on February 20 from an apparent self-inflicted gunshot wound.
9.     More than seven in 10 nonprofits expect their donations to increase this year, even amid a challenging economic and political climate, according to a survey to be released this week. The Nonprofit Research Collaborative, a group of nonprofits and fundraisers that conducts polls on the state of giving twice a year, did the study of nearly 1,200 charities.
Among the other findings:
·       Half of the charities reported an increase in big gifts.
·       Six out of 10 said online giving rose as well last year.
·       Sixty-three percent of the organizations said they met their fundraising goals.
·       Of the 59 percent of the charities that strove for a higher fundraising goal for 2012 than in 2011, 77 percent hit the target.
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 father and daughter were sentenced for embezzling $680,000 from a local non-profit and it shows had bad things have gotten worse.  Phillip Field executive manager and Darlene Ocampo was the office manager for the Kern County Builders Exchange.  Field received five years probation and 750 hours of community service after he pleaded no contest to one count of grand theft property. He will also have to pay $50,000 in restitution to the Kern County Builders Exchange. The District Attorney's office says Ocampo was originally sentenced to eight years in prison, but that was reduced to only one year because she's battling breast cancer. Along with jail time, she was given 10 years probation and will have to pay $630,000 in restitution to the organization. The District Attorney's office says Ocampo used company money on items such as a new motor home, a truck, diamond earrings, taking extravagant trips to Las Vegas, and going on cruises to several destinations. “Darlene Ocampo can't be trusted with money, so she was ordered not to have a checking account while on probation”. Studies indicate that there is little likelihood that the restitution will be discharged.
2.     Former state Sen. Shirley Huntley‘s accomplices in a scam that bilked taxpayers out of nearly $30,000 through a do-nothing nonprofit received light sentences in State Supreme Court in Nassau County. Each received probation and agreed to pay restitution after pleading guilty to pocketing the state funds.
3.     A former business manager who embezzled funds from Torrington (CT)-based nonprofit LARC received a suspended prison term and probation. She took $31,589.  She charged to LARC’s credit card at grocery stores, Macy’s and Staples, the cost of forensic accounting used to discover the malfeasance and the cost of LARC’s attorney’s fees related to the incident.
4.     A former Chicago Public Schools teaching assistant was sentenced to four years of probation after she admitted stealing more than $24,000 from a Northwest Side school to pay off credit card bills, prosecutors said. Sonia Lopez pleaded guilty to one count of felony theft before Judge Maura Slattery-Boyle. In addition to probation, Slattery-Boyle ordered Lopez to repay $24,544.69 to the school that she stole from, said a spokeswoman for the Cook County state's attorney's office.
5.     Christiana M. Fisher, was the executive director of the Ridgewood Bushwick Senior Citizens Council, which provides home health care assistance, job training and other services. In 2010, the New York City Department of Investigation began inquiring about her salary after tax documents showed that it rose to $659,591 from $235,135. Ms. Fisher “created or caused to be created three false documents purporting to be resolutions” from the organization’s board of directors and raising her salary, prosecutors for the United States attorney’s office said. Those documents were given to federal prosecutors in response to a grand jury subpoena. Assistant U.S. Attorney said Ms. Fisher had not simply provided an untruthful answer when questioned unexpectedly, but had engaged in a more deliberate deceit.  In spite of insurmountable evidence against her, the judge gave her a year of probation, and ordered that Ms. Fisher forfeit $170,659, which prosecutors said was the amount she received as a pay increase “pursuant to the false board documents.”
We flagged these (few) examples of nonprofit mischief 
1.     Houston Athletics Foundation $550,000 
2.     Tahoe SAFE Alliance $15,000
3.     Lions (International) Education Foundation (CA) $275,000
4.     ARC of Prince George's County $166,000
5.     United Transportation Union Local 1205 (TX) $64,110
6.     Metropolitan Campus Police Officers Union (DC) 28,504.27.
7.     Miami Beach Community Health Center $6 million
8.     Coachella Valley Unified School District  (CA) Unknown
9.     Millburn Recreation Department (NJ) $8,000 
10.  Angels of East Africa $60,000
11.  Rehabilitation and Visiting Nurse Association (CO) $518,000 
12.  Nigerian Foundation (TX) $47,000
13.  Mason Square Veteran's Outreach Center (MA) more than $30,000
14.  Farmington Convention and Visitors Bureau (NM) $500,000
15.  Open Arms of Minnesota $155,000
16.  People Against Rape (SC) $80,000
17.  St. Patrick's Seminary & University  (CA)  $200,000
18.  Jefferson County workforce development program (AL) $37,000
19.  National Arts Club (NY) up to $2 million
20.  Olympia Tumwater Foundation (WA) $101,000
21.  The Phoenix Futbol Club (NB) $150,000
22.  Ivy Academia (CA) more than $200,000
23.  Insulators Political Action Committee (PAC) fund (MD)  $502,586
24.  Arc of Bismarck (ND) $7525
25.  Sandy Youth Football (OR) $23,000
26.  Family Crisis Services, Inc (CO) $73,435
27.  Shenandoah Area Agency on Aging (VA) unknown
28.  Local 32 of the Laborers International Union of North America (WI) over $190,000
29.  Wolverine Lion's Club (MI) approximately $4000
 Political/public official chicanery (just a few):
1.     A former South Carolina lottery employee has been indicted on accusations he stole more than $200,000 from the agency. The indictment accuses him of taking the money between 2010 and 2012 by using a scheme that involved overcharges, computer changes, bank account sweeps and the redirecting of funds.
2.     A woman has been charged with embezzling more than $10,000 from Prairie Ridge Addiction and Treatment Services of Mason City. She allegedly misappropriated funds she had access to and control of as an employee of Prairie Ridge from June 2006 through October 2012, according to the criminal complaint.
3.     Federal prosecutors accused a bookkeeper of stealing more than $650,000 in federal funds from a nonprofit housing community in Mayfield Heights (OH), according to court documents.
4.     Remember just under a year ago when former D.C. Councilman Harry Thomas Jr. was sentenced to more than three years in prison for stealing public money meant for youth sports? Now two of his former leaders of the non-profit have been sentenced for looking the other way. Both were sentenced to three years of supervised probation and ordered to pay full restitution for helping conceal the misuse of $392,000 in grants from the D.C. government. These were among five people to plead guilty to charges in an ongoing investigation into activities involving Thomas.
5.     Laini Harris was employed at the Upper Eastside Lofts, a California State University Sacramento (CA) student apartment complex. She was arrested and is accused of misappropriating residents' rent payments.
6.     A Bay Area man and a China resident have been charged in federal court on allegations they routinely bamboozled NASA and the National Science Foundation into giving them more than $1 million in research grants, the U.S. Attorney announced. Prosecutors say the two ran a scientific-research company called Atlas Scientific, which specialized in adhesive tape based on carbon nanotubes. From 2008 to 2011, despite having received grant funding from the National Science Foundation, they applied for NASA grants for the same research, violating application requirements that they disclose whether they were receiving other grants, presumably to ensure funding was fairly distributed among applicants. They are accused of intentionally flouting the requirements by lying to each agency about not getting funds from the other. One is also alleged to have misrepresented her employment with UC Berkeley when applying for the grants, though details on that element were not disclosed. All told, the two received about $1.2 million in grant money.
7.     Federal authorities last month charged a man with siphoning $70,000 in city money into secret accounts at a credit union and spending $31,000 of it on himself. His lawyers say he will plead guilty to that and to failing to file tax returns for four years.
8.     A North Topsail Beach (NC) deputy fire chief has been charged with embezzling more than $60,000 from the fire department.
9.     The former fiscal officer of two taxpayer-funded Bronx charities (the Christian Community Benevolent Association and Christian Community in Action) has been sentenced to two to six years in prison for embezzling more than $500,000 from them over eight years.
10.  A former employee of the St. Louis Treasurer’s Office stole almost $250,000 from a struggling charter school and enjoyed a no-show public job worth more than $175,000 in salary over five years, a federal jury in St. Louis decided. After two hours of deliberation, jurors convicted Fred W. Robinson of all charges. One count of wire fraud and two counts of federal program theft involved embezzlement of money from the Paideia Academy, a failed charter school. 
11.  Two former Housing Authority of New Orleans employees have pleaded guilty to charges they embezzled $661,904 from the agency over two years. They face a maximum of five years in prison, a $250,000 fine, and three years of supervision after their release. They will be required to make full restitution for the money stolen.
12.  A former Bedford County  (VA) supervisor convicted of embezzlement and money laundering will spend a year in jail. A Bedford County Circuit Court judge sentenced Earl Anthony Ware to 11 years on each of six embezzlement counts and six money- laundering counts. The judge then suspended all but one year on each count. The sentences will run concurrently. Ware also must pay more than $295,000 in restitution.
13.  An account entry clerk in the Finance Department in the city of Wilmington (DE) surrendered to police today to face charges that she embezzled $31,000 from city coffers in the last year
14.  Cathedral City's (CA) mayor pro tem allegedly used funds from the city's employee computer loan program for personal purchases. He was arrested
15.  Tulelake’s (CA) former clerk/treasurer who embezzled over $10,000 of city funds was sentenced in the Siskiyou County Superior Court. Superior Court Judge Karen Dixon sentenced Kim Marie Keiser to 180 days in jail followed by three years of probation. She was ordered to pay $15,000 in restitution to the city of Tulelake. In addition, she is barred from ever taking public office in the state of California.
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
  • Silence: The Impending Threat to the Charitable Sector (Xlibris, 2011)
  • Nonprofits: On the Brink (iUniverse, 2006)
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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














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