Nonprofit
Imperative
…Your nonprofit browser
September
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:
Kids Wish Network; W. K.
Kellogg Foundation
Charity Check Up:
CA Department of
Child Support Services
A Thought or Two:
Gambling: A Major
Factor In Charity Fraud
Nonprofit News-In Case You Missed It:
Westfield State University…more
Political/Official Chicanery:
SC; CT; MI; PA; FL; CA; IN; MO; MS; WV;
TX…more
What Do You
Think?
Florida’s top charity regulator said he would
ask state lawmakers to back a series of measures to crack down on nonprofit
organizations that spend heavily on professional solicitors (Tampa Bay Times)
"Oversight of charities is very
weak," … "We're long overdue to have better transparency and stronger
consequences for bad behavior." (Ken Berger, president and chief executive of Charity Navigator, a
nonprofit watchdog group (Tampa Bay Times)
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.”
Only 3% Going To Kids…No One Cares
CNN, the
Center for Investigative Reporting and the Tampa
Bay Times have identified Kids
Wish Network as the nation’s worst charity. .It
is spending $109 million out of $127 million raised ( less than 3 percent) on payments to fundraisers—including a firm related
to the charity’s founder.
Outraged?
Not a single peep
from the charitable sector leadership. Not from our highest court, either…maybe
an endorsement…where the Supreme Court case in 2003, Madigan v. Telemarketing Associates,
concerning the telemarketing activities of a veterans charity called Viet Now,
which spent less than four percent of its fundraising on actual services to
veterans, that was exactly part of the argument used by the amici curiae: There
was an educational function to the telemarketing pitches, and to regulate the
telemarketing would be an infringement on the nonprofits’ First Amendment
rights.
Charity Fraud Hits Some of the Biggest
A Grand Rapids-area man has been
sentenced to six years in federal prison for his part in the embezzlement of
$850,000 from Battle Creek’s W.K. Kellogg Foundation. Two others, who were
employed by the foundation in South Africa, took money intended to aid children
in Africa. WKKF vice president for communications said the foundation changed
some procedures including no longer funding unsolicited proposals. “Now we
solicit proposals.” Assistant U.S. Attorney Timothy Verhey said that a
female employee is alleged to have approved fraudulent invoices and funneled
the money to two men who then sent some back to her.
The operation was uncovered during an
investigation of fraudulent passports.
The money was taken between May 2006
and May 2008, when the fraud was discovered, and none was recovered.
A defense attorney says the case has
brought his client a “great deal of shame.”
A Charity Check Up:
A Lesson In Protecting Public Taxpayer Support
Background checks are essential
(seems like a monthly plea): A woman who embezzled $320,000 from the California
Department of Child Support Services was later hired by the state’s High-Speed
Rail Authority. The authority never asked
about a criminal past when she was hired to make travel plans for officials.
She
was fired after the authority noticed her wages were being garnished for
restitution. Carey Moore spent two years in prison for stealing
the money in 2007 before applying for the rail position in 2011.
“She Died Thinking That
Her Money Was Going Charity”
A increasing theft
route from charities…from estates. Pamela Ann Oriente estate was supposed to donate
to East Carolina University’s Joyner Library, Deborah Heart and Lung Center,
Greenville Community Shelter, the Pitt County Human Society and the American
Diabetes Association, but her attorney raided the estate of $158,000. He
transferred $198,000 from a trust account he shared with his partner. He is
serving a three-year federal sentence after pleading guilty to conspiracy to
commit mail, wire and bank fraud and subscribing to a false income tax return
for his role in a mortgage fraud scheme.
The attorney’s wife left him and moved with their two children to
another state, and his home had been foreclosed.
He said he regretted hurting his family, banks and charities.
“In the beginning I felt like what I was doing was victimless, as if
there was no harm done to anyone,” he said. “ ... As it turns out, the victims
were all around me.”
A Thought or Two:
Gambling Is A Major Factor In Government, Nonprofit Fraud
This month, a temporary employee who was managing
the Bloomfield (NM) Motor Vehicle Department stole more than $25,000 to feed
her gambling addiction.
She applied and was accepted into a pre-prosecution diversion program the
San Juan County District Attorney's Office offers. To be accepted into the
program, defendants must pay back half of what they stole. They have to pay the
entire restitution to complete the program. Defendants can have criminal
charges against them dropped if they complete the two-year program.
Not all
are happy though. Bloomfield Mayor Scott
Eckstein, a veteran of 20-years in law enforcement as a patrol sergeant and
detective, said he thinks defendants who commit serious thefts should not only
have to pay back what they stole but face criminal charges.
Understandable. The area has been plagued with a series of charity fraud
in recent years.
Other
recent gambling related nonprofit frauds include an employee
at the Cancer Service Network (NY) who was charged with stealing $700,000 to
feed a gambling habit. In the District of Columbia the executive director of
Keely’s District Boxing and Youth Center pleaded guilty to absconding with
$205,000. In Pennsylvania, $713,000 was lost at the Allegheny Health Network
because of a gambling addiction. In Illinois, a police commander stole $140,000
to bankroll his gambling. In New York (again), an executive embezzled money
intended for youth hockey to feed his wife’s addiction.
Also,
fifty-seven people have been charged amid a $300 million gambling operation
allegedly masked as a charity, Allied
Veterans of the World.
An Australia and New Zealand study revealed that 53% of the money
stolen in the sector was to fund gambling. People working in the not-for-profit sector who stole to fund their
gambling took an average amount of $180,643 which is significantly higher than
for any other reason. On average $45,556 was stolen by people to maintain
a desired lifestyle and $13,150 stolen because of financial pressures.
Nonprofit News…
In
Case You Missed It:
1. Another donor is pulling his pledge to a
university. Last month NI updated you
on the pledge at Princeton University where
the pledge was not used as the donor intended. Now at Westfield State
University in Massachusetts a major donor has withdrawn a planned $100,000 gift
saying he was “appalled at the lavish spending” by the university president.
The president, Evan Dobelle, is charged with using the school’s private
fund-raising arm to foot the bill for luxury hotels, limousine rides, and other
high-end purchases, including a trip to Asia. A review, part of which was obtained
by the Boston Globe this week, of Dobelle’s spending habits, shows that Dobelle
freely mixed personal spending with official business in credit card charges of
more than $180,209 billed to the Westfield State College Foundation over a
30-month period. Even after months of analysis, however, the accountant who
conducted the review said it was impossible to tell whether many of the
expenses were legitimate.
2. Niger’s government has made tackling corruption a priority
since taking office in 2011. It has arrested 20 doctors suspected of embezzling
funds from a charity promoting vaccination in poor countries set up by the Bill
and Melinda Gates Foundation. The new investigation centers
on $1.5 million donated between 2007 and 2010 by the GAVI Alliance, backed by
the Gates Foundation, the World Health Organization, the World Bank, UNICEF,
donor governments and others. The charity, which aims to improve access to
immunization in poor countries, was launched in 2000 with a $750m grant from
the Gates foundation. (this approach is distinctly different from that of the
U.S.)
3. To date, the Red Cross has awarded or
pledged a total of $260 million for Sandy relief and recovery efforts, or about
85 percent of the $307 million donated to the relief organization in the days
and weeks after the storm hit. The Red Cross expects that the remainder of the
funds will be shared among its move-in assistance program, community resiliency
programs, and other local groups assisting Sandy survivors.
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. She has been arrested and charged with grand theft
after investigators say she embezzled nearly $30,000 from the Carl Hill
Galloway Pioneer Club. Just months before, she was charged with grand theft and
unemployment fraud after investigators learned she made over $65,000 while
cashing $11,400 in unemployment checks.
We
flagged these few examples of nonprofit mischief
1.
Stephen C. Parish Jr.
Memorial Fund (OH) $8100
2.
PTA at Margaret Pauline Brown Elementary
School (CA) $14,000
3.
Sierra Nevada
Children’s Services $6000
4.
Missouri State
University bookstore $1.1 million
5.
The ARC of Prince
George's County (MD) $166,000
6.
Bethlehem (PA) YMCA up
to $50,000
7.
Healthcare Charities
(MN) $50,000
8.
East Central Ohio
Education Association $185,000
9.
Annunication Greek Orthodox
Church (WI) $60,000
10. Minneapolis Area Synod of the Evangelical Lutheran
Church in America nearly $318,000
11. Morgan Hill Downtown Association (CA) $29,000
12. University of Louisville Department of Family and
Geriatric Medicine more than $2 million
13. YWCA (WA) $300,000
14. San Francisco School Alliance (CA)
$250,000
15. St. Vincent de Paul Society (WI) <$20,000
16. Project Genesis (CT) $348,000
17. Virginia FFA Foundation $722,000
18. Big Sky Homeowners Association (CA) $900,000
19. Whitcom 9-1-1 Employee Guild (WA) $14,000
20. ALS ASSOCIATION (PA) $102,000
21. Southwest
Research Institute (TX)
more than $500,000
22. Parent Club (CA) $1000
23. International Longshoremans’ Association
(SC) $55,000
24. Ashland Little League/Canton Goodman Fund (VA) $24,000
25. Cy Twombly Foundation (NY) $750,000
26. Cullowhee
Valley (NC) School school library unknown
27. Midwestern Intermediate Unit IV (PA) $73,000-$175,000
28. Norman Board of Realtors (OK) $147,000
29. Mid-South PTA (TN) $22,000
30. Depew Saints Hockey Club (NY) tens of
thousands of dollars
31. Victory Fellowship Church (PA) $150,000
Political/public official chicanery (just a few):
1.
Former
White Knoll High School (SC) athletics director pleaded guilty to embezzling
money raised to help equip sports teams. He took over $135,000.
2.
The Sheldon (CT) former
assistant finance director is charged in the theft of nearly $1 million in city
funds
3.
A Central Michigan University psychology
professor is accused of embezzling less than $50,000 by creating fake
participants in research and pocketing the money.
4.
Charges have brought to
the former executive director of the Jefferson County Committee for Economic
Opportunity and her daughter in connection with the theft of close to $500,000
from the nonprofit organization
5. The former executive director of the Apalachicola
(FL) Housing Authority has pleaded guilty to embezzling more than $11,000.
6. The former Santa
Barbara (CA) police business
manager who pleaded no contest to embezzling from the department's parking
citation fund was sentenced to 10 years in prison. Karen Flores, who worked for
the Police Department for 22 years, was arrested
in August 2011 and accused of stealing more
than $500,000 in parking revenues over
seven years.
7.
The state of Indiana
has frozen the assets of former LaPorte County deputy auditor who it says
embezzled about $150,000 in public funds.
8.
The Ross Valley (CA)
Sanitary District's former manager has been charged with nine felony counts
including misappropriation of public funds, embezzlement and multiple counts of
money laundering. He is accused of taking a $350,000 housing loan from the
district that he never used for housing.
9.
Two St. Louis parks
employees pleaded guilty of embezzling money from the department in a scheme
built on inflated invoices.
10. The Cole’s Point (MS) Volunteer
fire department’s bookkeeper faces prison time to taking about $30,000.
11. The National Science Foundation is a federal agency responsible for
promoting science and engineering through research programs and education
projects. The agency funded research and awarded Small Business Innovation
Research (SC) grants to Innegrity. Its chief executive officer and major
shareholder has been indicted with embezzling over $300,000
12. The Pennsylvania attorney general's
office has announced criminal charges against a former high-ranking official in
the Pennsylvania Department of Public Welfare and two executives of a
Philadelphia nonprofit. The former director of DPW's disbanded Bureau of
Employment and Training Programs Division was charged. He allegedly enabled the National Comprehensive
Center for Fathers to operate with no fiscal oversight. Prosecutors said the
nonprofit's chief executive officer, and chief financial officer, misused $1.25
million in state and federal grant funding that had been designated to help
fathers improve their lives for the benefit of their children.
13. State
Assemblyman Al Coutinho (D-Essex) resigned today amid a criminal investigation into his dealings with his family's
nonprofit foundation. Coutinho is facing
potential criminal charges involving his dealings with the Bernardino Coutinho
Foundation.
14. Mark
Harris was indicted by the Hancock County grand jury this week and faces three
embezzlement charges and one conspiracy charge. Harris is accused of taking
more than $16,000 while he was in office. The attorney for the city of
Weirton (WV), Vincent Gurrera, said that Harris served as the Weirton mayor
from 2007-2011.
15. A Fort Worth (TX) police officer has been fired
after being accused of stealing more than $20,000 from a business bank account
to pay his personal bills.
16. Four former Bassfield (MS) officials have been indicted on embezzlement
of over $300,000 following a state auditor’s investigation into allegedly
fraudulent purchases
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 Gazette, 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, 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, Northwest Herald,
The
HelpWise Daily, The
#Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Las Vegas Sun,
- Silence:
The Impending Threat to the Charitable Sector (Xlibris, 2011)
- Nonprofits:
On the Brink (iUniverse,
2006)
- The Michigan Nonprofit Management Manual, Governance Section
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
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