Nonprofit
Imperative
…your nonprofit browser
May
2013
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:
Cleveland Academy of
Scholarship, Technology and Leadership Enterprise; Prescription Addiction
Really Kills Foundation (PARK)
Charity Check Up:
Donated Gifts
A Thought or Two:
Coalition Against
Breast Cancer
Nonprofit News-In Case You Missed It:
IRS, IRS, again; Bronx
Community Pride Center, again; Susan G. Komen, again…more
Political/Official Chicanery:
CA; WA; RI; IL; NY; VA;MT;TX
What Do You
Think?
“…the charity’s business model was simple: pick a sympathetic
issue and lie and mislead donors about how donations” (Attorney General Eric Schneiderman on Campaign Center Inc. told donors contributions to
the Coalition Against Breast Cancer)
_________________
_________________
“The sad truth is that charity
fraud is on the rise. Serious incidents reported to the Charity Commission
almost doubled in 2010/11” (HM Revenue & Customs (HMRC) presentation about
UK Charity Commission)
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.”
It Was So Easy…Until Someone Started
Watching
All five of the school's board members have been accused of
stealing almost $2 million from The Cleveland (OH) Academy of Scholarship,
Technology and Leadership Enterprise (CASTLE).
- With undisclosed ownership
and/or financial interest he laundered approximately $858,000 from
CASTLE in the following companies: Educational Management Alliance
(EMA), Kids 2000, Leadership Training Institute (LTI), Cross Tech
EduServe, and 2K2 Technologies. He used these companies to launder
approximately $858,000 from CASTLE. He
was CEO.
- CASTLE paid $478,785 in excess of the stated lease terms with no
evidence of additional arrangements or board approval for the excess
payments to these that he was partial owner. He was board chair.
- He used shell companies and laundered and stole $367,344 from
CASTLE. He was a business associate
of the CEO.
- CASTLE issued 30 checks to his companies totaling $200,000 without
evidence that goods or services were provided. He was a board member.
- He withdrew money from the company that the aforementioned board
member stole.
- He laundered and stole $144,905 from CASTLE through his position as
treasurer of CASTLE.
- He laundered and stole $8,829 from CASTLE. He was the brother of the CEO.
- He gave a kickback of $5,000 to the CEO on the sale of a bus.
- They laundered and stole 33
checks from CASTLE totaling $106,625. She was the wife of the CEO.
- He was the owner of a real estate management
company and negotiated the lease for CASTLE. On five separate
occasions, he gave kickbacks to the CEO totaling $6,425.
What Is Wrong With This Charity--Everything
Sarasota (FL) Police have started a criminal
fraud investigation into the embattled Prescription Addiction Really Kills
Foundation. The nonprofit uses the acronym PARK.
Board members and donors overlooked some very elementary practices:
The founder faked her credentials: Linda Ballou, who stressed her medical experience while courting donors, obtained her doctorate from a diploma mill. Two universities she claimed had awarded her advanced degrees had no record of her receiving any academic credentials. She has touted an “extensive medical background,” including decades of work as a registered nurse in surgeries, delivery rooms and a psychiatric facility, she told the newspaper she never had a nursing license, and worked as a certified nursing assistant, or CNA.
Efficacy of her nonprofit: despite constant fundraising, PARK offered no viable programs to the community.
There were no background checks: The Herald-Tribune revealed that the U.S. Securities and Exchange Commission accused Ballou in 2001 of playing a role in a multistate Ponzi scheme by a Florida company that bilked investors out of millions of dollars.
Board members did not attend meetings: State Attorney Ed Brodsky, who serves on PARK's board, said: “I have never attended a board meeting, and do not plan to attend this week's meeting,”
Had Board members that were prominent, but did not exercise due diligence: Beside having one of the regulators of charities on its board, other board members included treasurer Dan M. Smith, a certified public accountant and tax manager and board member Robert W. Browning Jr., a Sarasota attorney.
Board members and donors overlooked some very elementary practices:
The founder faked her credentials: Linda Ballou, who stressed her medical experience while courting donors, obtained her doctorate from a diploma mill. Two universities she claimed had awarded her advanced degrees had no record of her receiving any academic credentials. She has touted an “extensive medical background,” including decades of work as a registered nurse in surgeries, delivery rooms and a psychiatric facility, she told the newspaper she never had a nursing license, and worked as a certified nursing assistant, or CNA.
Efficacy of her nonprofit: despite constant fundraising, PARK offered no viable programs to the community.
There were no background checks: The Herald-Tribune revealed that the U.S. Securities and Exchange Commission accused Ballou in 2001 of playing a role in a multistate Ponzi scheme by a Florida company that bilked investors out of millions of dollars.
Board members did not attend meetings: State Attorney Ed Brodsky, who serves on PARK's board, said: “I have never attended a board meeting, and do not plan to attend this week's meeting,”
Had Board members that were prominent, but did not exercise due diligence: Beside having one of the regulators of charities on its board, other board members included treasurer Dan M. Smith, a certified public accountant and tax manager and board member Robert W. Browning Jr., a Sarasota attorney.
A Charity Check Up:
Donated Goods Continue To Be Controversy
World
Help, a Christian relief charity that last fall ranked No. 77 on The Chronicle’s list of the country’s largest nonprofits, now says its revenues were
only 7 percent of what it previously reported to the Internal Revenue Service.
The
revised numbers, which appear in the group’s audited financial statements for
2012, could have implications for other nonprofits that say they received goods
from the charity.
World
Help grew rapidly in recent years thanks to donated medicines. The organization
said its revenues totaled $239-million in the informational tax return it filed
for 2011.
But in
its latest audited financial statement, World Help says the accurate figure is
much smaller—just $17-million. In 2012, the group says, it raised $25-million. The
nonprofit said it grew 940 percent over five years.
The Chronicle found that World Help’s big donors said they never gave the
medicines it claimed. Three charities—Catholic Medical Mission Board, Cross
International, and Direct Relief International—told The Chronicle that they did not
donate roughly $350-million worth of medicines over three years to World Help,
as listed in the Virginia charity’s tax filings.
Donated
medicines have been a source of controversy. Charities sometimes record the
goods as revenue when they play only a small role in their procurement or
delivery, like helping to pay some of the costs of shipping them abroad.
It can
also be difficult to determine the value of the donated medicines, making it
easy for nonprofits to say the items are worth more than they are.
A Thought or Two:
One Less Breast Cancer Charity To Steal
A judge has shut down a
fundraising firm that heartlessly duped donors into giving $10 million to a
sham Long Island breast cancer charity.
Campaign Center Inc.
told donors contributions to the Coalition Against Breast Cancer would help
eradicate breast cancer through research, mammogram screening and other
programs.
But the firm, which made
6,000 calls per day on behalf of the bogus charity, kept 85 cents of every
dollar it raised.
Of the $10 million
raised between 2005 and 2011, only $48,000 went toward the cause, paying for 40
women to get mammograms.
Nonprofit News…
In
Case You Missed It:
1. S.E.C. officials have indicated that they could
propose a new disclosure rule-- to require publicly
traded corporations to disclose to shareholders all of their political
donations. This is a move that could transform the growing world of secret
campaign spending.
2. Thirty-four colleges audited recently by the Internal Revenue
Service underpaid their
taxes on unrelated business income by nearly
$90-million, and nearly 20 percent of the private
colleges in the group violated rules for nonprofit organizations in determining
the compensation of their
chief executives.
3. Follow-up from last
edition: The foundation in charge of disbursing the largest
chunk of donations to victims of the Sandy Hook Elementary School shootings
will nearly double the amount it doles out next month and has named a former
federal judge to lead the distribution effort. The Newtown-Sandy Hook Community
Foundation, which oversees about $11 million, said it would increase the amount
of money going to the 40 families most affected by the tragedy from $4 million
to $7.7 million.
4. A New Jersey woman is facing charges after lying
about her son having cancer. Susan Stillwaggon told friends, family, community
members and even her own elementary school age son that he had lymphoma.
5. The lawyer overseeing the Boston Marathon bombings victims'
fund says the families of three people who died could each receive more than $1
million. Kenneth Feinberg says he plans to unveil a tentative compensation
proposal in advance of meetings with victims. Feinberg, the Massachusetts
native who oversaw the 9/11 compensation fund, tells the Boston Globe victims
who lost more than one limb in the April 15 attack would receive a similar
amount, while those who lost a single limb would probably receive close to $1
million each. People who suffered other physical injuries would receive smaller
amounts based on the extent of their injuries and the length of their hospital
stay. The One Fund had more than $28 million.
6.
Follow-up: The former head of the
Bronx Community Pride Center who pled guilty to embezzling $143,000 from the
nonprofit--leading to its demise--is now soliciting donations online for her
pet rescue operation, the Daily News learned. Using her wife's last name, Lisa
Winters asks animal lovers in cyberspace for cash for “A Winter's Tail,” which
she bills as a cat rescue and shelter operation. Although Winters refers to it
as an all-volunteer organization and it has a .org web domain, it is not listed
with the state Attorney General’s Department of Charities.
7.
An
indictment filed accuses Assemblyman William Boyland Jr. of directing that some
of the more than $200,000 in state money he secured for a nonprofit senior-care
facility be spent on community events that promoted the Brooklyn politician.
8.
Rhode
Island authorities have arrested Dan Doyle on charges of embezzling $1 million from his charity. The Irish American was deeply involved in peace process work in Northern
Ireland and who played a leading role in fundraising for the national
basketball stadium in Dublin. In all he received $5 million in taxpayer
funds in past years. A former basketball coach at Trinity College in Hartford,
Doyle was the founder and executive director of the Institute for International
Sport at the University of Rhode Island.
9.
After running the agency
into chaos, we now have found out who and why she did not respond to demands
for her to step down. Nancy Brinker,
the founder of Susan G. Komen for the Cure, was paid quite a pretty
penny last year. She received a whopping raise, bringing her salary to $684,717
for fiscal year 2012. That amounts to an hourly rate of roughly $240. Her raise
was upped even in the face of declining contributions, decreasing grants and
increased fundraising expenses.
10.
A woman
in Michigan's Thumb has been charged with fraud. Beside saying that she, Sara
Ylen, was raped which lead to the sentencing
of a man to fifteen to thirty-five years, the maximum the law allowed. She
also claimed that she had cancer. That led to various benefit functions on her
behalf with The Port Huron Police Department, the St. Clair County Sheriff's
Department, Safe Horizons and Michael's Car Center all chipping in as sponsors
of a fundraiser. She put forth the bogus claim that she was under hospice care.
She also lied about being paralyzed and had to take a leave of absence from her
job at the Sandusky Michigan State Police Post.
11.
Pennsylvania Attorney
General Kathleen Kane has ended a two-year-plus investigation into the $10
billion Hershey charity for orphans and poor children with a settlement that
imposes rules that lower board compensation and tightens board governance. Kane
did not find that the charity's board members violated their fiduciary duty by
purchasing and developing a $17 million golf course or buying the adjacent
Pumpkin World roadside market for $8.6 million. The settlement, announced and
submitted to Dauphin County Orphans' Court, is the third agreement between the
charity and the Attorney General's Office in the last 11 years related to
governance reforms at the institution, founded as an orphanage by chocolate
magnate Milton S. Hershey and his wife, Catherine, in 1909.
Under
the terms of the settlement, the Hershey Trust Co., legal trustee of the
Hershey charitable assets, must inform the Attorney General's Office a month
before a real estate transaction of more than $250,000, according to the court
filing. The new annual retainer
for a director at the Hershey Trust Co. will be $30,000. The chairman may earn
an additional $10,000 a year, and committee chairs may earn an additional
$5,000 each. Board members also will be paid $4,500 for each daily session of
the board that lasts more than four hours. The settlement places some limits on
Hershey Trust Co. board members serving on other paying boards in the Hershey
organization. LeRoy S. Zimmerman, a politically influential, former Republican
two-term state attorney general and former chairman of the Hershey charity,
held positions on the three paying boards in the Hershey organization, earning
about $500,000 a year. Those boards are for the Hershey Trust Co., the Hershey
Co. (the chocolate company), and Hershey Entertainment & Resort Co. The new
rules say that no board member may hold positions on the three paying boards.
Zimmerman resigned his board positions in late 2011.
12. The Internal Revenue Service is apologizing
for inappropriately flagging conservative political groups for additional
reviews during the 2012 election to see if they were violating their tax-exempt
status. Lois Lerner, who heads the IRS unit that oversees tax-exempt groups,
said organizations that included the words “tea party” or “patriot” in their
applications for tax-exempt status were singled out for additional reviews.
13.
After
years of scams, fraud, oversight failures and even corruption in the charity
arena, the Cuomo administration and some legislative leaders are once again
seeking to crack down on bad actors and carelessness with sweeping changes to
New York’s not-for-profit laws. Attorney General Eric T. Schneiderman unveiled
his second attempt to overhaul the governance of charities and other
organizations, with a bill to address financial abuses and poor management
practices while making it easier for nonprofits to operate properly in the
state. The state’s top cop – whose
responsibilities already include oversight of nonprofits – wants to tighten the
rules governing how charities are managed, expanding transparency and
strengthening the fiduciary accountability for officers and directors to ensure
they’re doing their jobs. He also hopes to rein in what many critics say is excessive
compensation for some nonprofit CEOs and other top executives. The goal is to prevent the kind of
fraud, mismanagement and financial abuses that increasingly have come to light
in recent years. Such scandals have seriously damaged confidence and eroded
public trust in the nonprofit charitable sector.
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 secretary who
embezzled more than $12,000 from the Greater Fairbanks Area Hospital Foundation
has been sentenced to 200 hours of community service and two years of
probation.
2.
A former bookkeeper
at Northern Vance High School avoided active jail time through a plea agreement
on embezzlement charges of $38,000.
We
flagged these few examples of nonprofit mischief
1.
Arkansas City Senior
Citizens Center, $100,000 or more
2.
Phoenix Houses of New
York, $223,000
3.
United Paperworkers
International Local 1762 (GA) $100,000
4.
Local 709 Security,
Police and Fire Professionals of America International Union (LA) $16,400
5.
Grand Island Community
Foundation (NB) $40,000
6.
Indian Human Resources
Center (CA) $140,000
7.
Wayland Baptist
University (TX) $40,000
8.
Mission Nutrition (IN)
$13,000
9.
Jefferson Community College Bookstore
((NY) $65,000
10. Fremont Elementary School PTO (CA) $10,000
11. Louisiana Association of Community Action Partners (LA) $51,000
12. Middleboro PTA (MA) $30,000
13. The Cleveland Academy of Scholarship, Technology
and Leadership Enterprise (CASTLE) (OH) $1.8 million
14. Olive Branch Middle School (MS) $10,000+
15. St. Joseph’s Hospital (NY) $800,000
16. West Pelzer Elementary School PTO (SC) $3300
17. Louisiana Association of Community Action Partners
$51,000
18. American Federation of Government Employees Local 3840 (OH) unknown
19. International
Centre for Criminal Law Reform and Criminal Justice Policy (CN) $1 million
20. California
Rural Indian Health Board $5.1 million
21. Susquehanna House Inc. (PA) more than $530,000
22. FIFA $21 million
23. National Guard Foundation (CO) more than $350,000
24. Eastern New Mexico University $15,000
25. St. Bernard Parish (LA) more than $100,000
26. American Legion (TX) more than $15,000
27. Child Advocates II (FL) $90,000
28. Bon Temps Village Homeowner’s Assoc. (LA) more than
$200,000
29. Collettsville School (NC) tens of thousand of
dollars
30. Stratford homeowners association (GA) $250,000
31. YWCA Oklahoma City more than $280,000
32. Fraternal Order of Police (FOP) (MI) several thousand
33. Phony 911 Charity (NJ) more than
$200,000
34. School superintendent in Lawrence (MA) $10,000
35. The Arc Mercer (NJ) $100,000
36. Western North Carolina Down Syndrome Alliance $20,000
37. Compensation Advisory Organization of
Michigan $2.6 million
Political/public official chicanery (just a few):
1. A member of the board and
served as its President and Treasurer, Debra Ray is charged with embezzlement
of approximately $29,000 in funds from the Crowley Lake Mutual Water Company.
2. Montcalm County sheriff’s
detectives are investigating an embezzlement of funds from the Fraternal Order
of Police (FOP) union, Montcalm County Chapter, by one of their own.
3. A jail sergeant for the
city of Wapato (WA) is accused of embezzling more than $5,000 from the Wapato
Youth Athletics League in 2011 when he served as the league's director.
4. A nonprofit company,
California Rural Indian Health Board, that received federal funding for drug
and alcohol treatment of thousands of American Indians in rural Northern
California will forfeit $5.1 million and give up two years of eligibility to
settle a government fraud suit, the U.S. attorney's office in San
Francisco announced.
5. The founder, Daniel E. Doyle, Jr., of the Institute for International
Sport… once located at the University of Rhode Island… used more than $1 million
of the organization's money for unapproved compensation and personal expenses,
according to a criminal indictment. Some of the money allegedly was paid
to Oberlin College, where Doyle's daughter was a student.
6. Chicago Mayor Rahm
Emanuel received national attention for working to revoke waivers that exempted
city nonprofits from paying water fees. Some city and county officials saw
the effort elsewhere as a sign that nonprofit resources were becoming fair game
to fill budget holes. Nonprofits, led by Donors Forum and others,
correctly pointed out that the amounts charged for water fees exceeded costs
and were essentially a tax on tax-exempt entities. In response to pressure, the
Mayor is now offering a compromise that would reinstate water fee exemptions
for nonprofits with net assets of less than $1 million and phases in discounts
of 60 percent for nonprofits with between $1 and $10 million in assets and 25
percent for nonprofits with between $10 and $250 million in assets. Museums
would maintain a 20 percent exemption regardless of net asset level. Religious
leaders in Chicago remain dissatisfied with the Mayor’s offer and
are pushing for a broader reinstatement of the exemptions.
7. New York State officials
have filed new charges alleging charity-related fraud by a state legislator
acquitted in 2011 of accepting bribes for steering taxpayer funds to a
nonprofit hospital system. An indictment filed accuses Assemblyman William
Boyland Jr. of directing that some of the more than $200,000 in state money he
secured for a nonprofit senior-care facility be spent on community events that
promoted the Brooklyn politician. The charges were added to an existing
indictment alleging mail fraud, bribery, and extortion by Mr. Boyland. The
original version of that document was filed in December 2011; a month after the
lawmaker was found not guilty in a corruption case involving the MediSys Health
Network.
8. Virginia
"Ginny" DeCapria pleaded guilty in March to stealing money from
the Ballsto Spa (FL) fire department she
worked for. DeCapria stole $500,000 while serving as secretary treasurer of
Charlton Fire District No. 1. She also pleaded guilty to failing to pay taxes
on the stolen money. She just learned that she'll spend at least three
years, and a maximum of nine years in prison for stealing from the fire
district.
9. A former Gilroy (CA)
school board member already accused of bilking a charity out of tens of
thousands of dollars is now being charged with using campaign donations for
personal use and lying about it on official forms. He is being accused of
overbilling South County Collaborative between $10,000 and $50,000 for work he
was supposed to be doing with a drug-aversion program for kids. He has been
arrested and out on bail.
10. A former Flathead County
(MT) sheriff's office employee is charged with embezzling at least $90,000 from
the sheriff's office employees association.
11. A preliminary
investigation by the Texas county Auditor’s Office gave reason to believe about
$750,000 of taxpayer money that should have been in county coffers was missing
from the Tax Assessor-Collector’s Office, District Attorney Omar Escobar said.
The unaccounted-for money may have been taken by “several” tax
assessor-collector’s employees through a scheme that lasted at least 15 months
and perhaps more than five years, Escobar said.
12. Former New York State
Senator Shirley Huntley was sentenced to a year and a day in prison for
stealing $87,700 from nonprofit education organization she controlled.
13. The mayor of Benton
Illinois town faces up to 80 years in federal prison and $1 million in fines
now that he's admitted using bogus invoices to skim money from his community.
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.
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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