Tuesday, October 15, 2013

Early October Edition---Nonprofit Imperative E-Newsletter

Nonprofit Imperative
Your nonprofit browser
October 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:
Fraud Examiner Caught In A Fraud
Charity Check Up:
Metro. Council on Jewish Poverty; CEO Compensation
A Thought or Two:
China Donations Down; DC Assault Director
Nonprofit News-In Case You Missed It:
Forbes Insight Survey; Girl Scouts of USA…more
Political/Official Chicanery:
CA; IL; VT; NY; NY; WA; MI; WV…more
What Do You Think?

In public testimony before the Moreland Commission to Investigate Public Corruption, some of New York’s top prosecutors called for significant changes including increased oversight of the nonprofit organizations that have been the nexus of numerous corruption schemes. Investigations by federal prosecutors have exposed, through subpoenas and wiretaps, the seedy underbelly of Albany deals exempt from disclosure under current law, and politicians’ personal relationships with nonprofit organizations receiving state funding.
Nonprofit organizations are experiencing an upsurge in unethical practices on par with those found in the for-profit sector, according to the Stanford Social Innovation Review.

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.”
Fraud Examiner Caught In Charity Fraud
She was a fraud investigator with the Department of Work and Pensions in Wales. She said she had separated from her childhood sweetheart after realizing he was guilty of defrauding HM Revenue and Customs through his charity, The Welsh Independent School of Climbing and Mountaineering, which was set up to help disadvantaged young people in the South Wales Valleys.
Elizabeth Lewis denied being involved in the fraud with her husband. She told the jurors she was busy with her job and with her own charity that builds schools in Uganda.
The jury thought otherwise and found her guilty of all four charges. The money in question went into a joint bank accounts in the couple's names.
A Charity Check Up:
“The Scale and Duration Of The Nonprofit Fraud Is Breathtaking”  
"It's always sad and shocking when we discover that someone used a charity as their own personal piggy bank—but even more so when that scheme involves someone well-respected in government and his community," said Attorney General Eric Schneiderman, who led the investigation along with state Comptroller Thomas DiNapoli
The former head of the Metropolitan Council on Jewish Poverty and a longtime friend of Assembly Speaker Sheldon Silver, was arraigned on charges he and others stole more than $5 million from the organization over 20 years. William Rapfogel is accused of conspiring to inflate insurance payments made by his organization, while pocketing the difference in cost. He allegedly received approximately $1 million in envelopes filled with cash, or via checks for personal expenses, such as contracting work on one of his homes. Prosecutors said he also directed an insurance company involved in the scheme to make donations to several political campaigns in the hopes of obtaining favorable legislation for his group. He was fired from his position in August. "The scale and duration of this scheme are breathtaking," Mr. DiNapoli added. 
Mr. Rapfogel received hundreds of thousands of dollars in cash from the Century Coverage employee, most of which he kept at his home, the state alleges. One kickback was delivered in the form of a $27,000 check for a contractor working on Mr. Rapfogel's home. More than $400,000 in cash was recovered from his home over three days in August, after the criminal investigation was first publicized.
Is Charity CEO Compensation Too High?
CEO compensation has become such a hot-button topic that several states ---including New York, New Jersey, Florida, Massachusetts, New Hampshire and Illinois --- have considered regulations that place limits on compensation for charity CEOs. And the IRS, the entity responsible for regulating charities at the federal level, continues to prioritize CEO compensation as one of its main areas of focus in uncovering fraudulent nonprofit practices. 
Charity Navigator has collected a wealth of data on CEO salaries. Their analysts have examined tens of thousands of nonprofit financial documents, giving them insight into the real-world financial practices of America’s mid to large sized charities. It will help donors, policymakers, charity Boards and others understand how leadership pay varies by the charity’s location, size and mission.
Its all 
A Thought or Two:
China Donations Down Because Of Scandals
The donations from home and abroad made in China were down for the second year according to the China Charity and Donation Information Center (CCDIC) report.
The center's statistics showed that the total amount donated is down 18.1 percent from the previous year. An official with the Ministry of Civil Affairs attributed the dip, in part, because of the lingering "public trust crisis" toward the country's charity sector.
The reputation of charity groups, especially the Red Cross Society of China, took a major hit in 2011 when a woman calling herself Guo Meimei used social media to claim she managed an organization under the charity and openly flaunted her wealth and extravagant lifestyle.
The incident and ensuing scandals among its local branches over the past year have triggered public concern about embezzlement and improper management within the charity.
Why Is This Guy Watching Over Our Kids?
D.C. Assault youth basketball program co-founder Curtis Malone’s appeal for bond was denied in U.S. District Court.  He will remain in jail until the completion of his trial on federal drug trafficking charges. DC Assault Inc. is a non-profit, 501 (c)(3) organization dedicated to providing young athletes (ages 8-17) with the opportunity to develop their basketball talents.
In her ruling, Judge Ellen S. Huvelle said, “there is credible evidence that [Malone] is a large-scale supplier” after prosecutors alleged he played a leading role in a drug conspiracy that may have spanned the entire East Coast.
Prosecutors wrote, “Malone’s drug dealing activities have been extensive and long-standing, contrary to the picture of him as portrayed in letters from his friends and his family.” DEA investigation suggests Malone was part of a network of drug traffickers along the East Coast who received “hundreds and hundreds of kilograms” of narcotics on a monthly basis from the same supplier since at least 2009.
Malone was arrested on Aug. 9 and indicted by a grand jury on charges of conspiracy to possess with the intent to distribute large quantities of heroin and cocaine as well as carrying a firearm during a drug-trafficking offense. 
In 1990, police found 17 grams of crack cocaine, a .38-caliber revolver and ammunition in a search of his home. Malone pleaded guilty in Prince George’s County Circuit Court and was convicted the following year on charges of possession with intent to distribute and manufacture controlled substances. He served three months in jail and was given three years of probation.
In 1993, Malone pleaded guilty to reckless driving and eluding police in a chase near his parents’ home in Landover. He received six months unsupervised probation.
In 2006, prosecutors in Prince George’s County District Court chose not to pursue a disorderly conduct charge levied against Malone. Last year, he was acquitted on charges of second-degree assault in a case involving a fight with the coach of another AAU team.
Last month, the Prince George’s County Circuit Court ruled that Malone owed $12,178.96 in tax liens. In 2008, he was also ordered by a Prince George’s County judge to pay $9,257.39 in back taxes.
Malone has pleaded not guilty to all the charges and faces a mandatory prison sentence of at least 15 years. (source)

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Nonprofit News…
In Case You Missed It:
1.     The world’s wealthiest philanthropists say the main goal of their giving is to alleviate global poverty, and the best way to do that, they say, is through greater collaboration between charities and other organizations, according to a study released. Of the richest people in the survey—those with $50-million or more in investable assets—40 percent said they focus their philanthropy on global issues. Twenty-nine percent said they direct their donations to international groups, and another 29 percent said they give to both local and international charities. The study surveyed 317 individuals from around the world who hold investible assets of $1-million or more. Forbes Insights produced the report.
2.     Data gathered from 140 private foundations for the 2012 Council on Foundations–Commonfund Study of Investments for Private Foundations (CCSF) show that these organizations’ endowments returned an average of 12.0 percent (net of fees) for the 2012 fiscal year (January 1 – December 31, 2012), a significant improvement over the FY2011 return of -0.7 percent.
3.     Girl Scouts of the USA, plagued by continuing membership losses, has cut its national staff by about one-fourth in recent months, chopping 85 positions through voluntary buyouts and layoffs.
4.     A financial planner embezzled almost $1.7 million from a camp for special-needs children, including his own, and from three other victims, using the money to dine out, golf and travel at their expense, Nassau District Attorney Kathleen Rice said. Drew Morgan used his leadership positions at two nonprofits to steal almost $1.1 million intended for Camp ANCHOR in Lido Beach and another $130,558 intended for the camp and a group that helps people with autism.
5.     U.S. Attorney’s Office (WA) says sloppy accounting and poor management were evident in operation of The Genesis Project, but that an investigation showed no crime was committed by those involved
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 former American Red Cross (PA) employee who stole nearly $34,500 from the nonprofit organization must repay the money and will serve seven years of probation.
2.     After taking thousands of dollars as the former Virginia chef at the Executive Mansion a judge accepted a plea agreement that also called for received a one-year suspended sentence and pay $2,300 in restitution to the state, plus court costs.
3.     A retired Virginia Commonwealth University professor convicted of embezzlement has received a suspended sentence. James E. Hardigan had pleaded guilty in May to embezzling more than $137,000 from the VCU Dental Faculty Practice Association. The 69-year-old retired dental professor was fined $2,500 and given a 10-year suspended sentence.
4.     A once prominent Tucson financial adviser must serve more than two years of probation and perform 1,000 hours of community service after being sentenced in a charity theft case. James Murphy was also ordered to pay $115,000 of restitution and a $46,000 fine. Murphy had pleaded guilty previously to stealing tens of thousands of dollars from the Elizabeth Ann Parkman Foundation, a nonprofit that gave millions of dollars to countless groups.
5.     A Tewksbury (MA) woman who is accused of embezzling more than $5,000 from a nonprofit that helped special needs children pleaded not guilty to stealing $349 in popcorn sales her son raised for his Boy Scout troop. In the first case the former treasurer for the Tewksbury-based Friends of Special Education Kids (FOSK), is accused of using the groups ATM cards for savings and checking to steal $5,152 to pay for her personal expenses such as her car loan, gas, groceries and pizza. She has pleaded not guilty to a charge of an association officer embezzling from the association. That case is still pending. In the most recent case, the Committee Chairman for the Boy Scouts of America -- Troop 41 in Tewksbury -- notified police on March 20 that his troop held a popcorn fundraiser in March of 2012, where Boy Scouts went door-to-door selling specialty popcorn.
6.     A Columbus (MT) woman who pleaded guilty to embezzling from the Stillwater Golf Club has been given a three-deferred sentence after paying more than $43,000 in restitution.
7.     She was convicted of embezzling more than $63,000 from Kingwood Christian School in Alabama.  She was sentenced to three years of jail, but suspended the sentence and placed her on five years of probation. She also must pay $1,000 month restitution to Kingwood Christian School for 36 months.
We flagged these few examples of nonprofit mischief 
1.     South Arsenal Neighborhood Development Corp (CT) $200,000
2.     Southeast Arlington Little League (TX) Over $20,000
3.     Depew Saints Hockey Club more than $100,000
4.     Otsego County (MI) Senior Citizens Housing Association <$20000
5.     Costa Mesa High School (CA) $51,000
6.     Autistic Society of Washington $26,000
7.     Belle River Elementary School PTO (MI) <$20,000
8.     Caledonia High School (MS) unknown
9.     Shagbark Homeowners Association (TN) over $10,000
10.  Special Olympics (PA) $150,000
11.  Bakersfield Police Benefit Association (CA) $45,000
12.  Overland Park Regional Medical Center Medical Staff Dues Foundation (KS) $1 million
13.  Yolo County Homeless Shelter (CA) $30,000
14.  East Central Ohio Education Association $185,000
15.  Rialto Unified school board. $1.8 million over eight years, and more than $3.1 million over 14 years.
16.  Knoll High School (SC) $135,000
17.  The One Fund (MA/NY) almost $500,000
18.  Wyoming Area School District teachers union $30,000 
19.  Bethany College (WV) $500,000
20.  Honor Flight Network of Kansas City $39,000
21.  Norco High School Band Booster Club (CA) <$45,000
22.  Fourth & Hope Food Bank $30,000
23.  Tazewell Middle School (WV)  $300,000
24.  SEIU Local 6434 (CA) $150,000
25.  Kids’ Club (DC) $236,000
Political/public official chicanery (just a few):
1.                A former employee with the Alamance County Tax Department was charged with embezzlement by a public official and accessing a government computer with the intent to defraud $3400
2.                The treasurer of the Corona Community Volunteer Ambulance Corps (CCAC) funneled $300,000 into his personal account, using it for vacations, limo service and fancy dinners. Conspiring were board members that also pocketed a combined $20,000.
3.                   An honored, former Naperville (IL) police commander who became chief of the Edwardsville (IN) Police Department was sentenced to 18 months in prison, after being convicted of embezzling nearly $140,000 from the Illinois city’s coffers to bankroll what he said was a gambling addiction
4.                Former Glendale Councilman John Drayman is now scheduled to begin his criminal trial for embezzlement, perjury and tax fraud charges for taking more than $900,000 from the Montrose Shopping Park Assn. between 2004 and 2011.
5.                Former Weybridge (VT) town clerk Karen Brisson caught stealing $475,980.
6.                The former head of a Democratic Party fundraising committee in Washington state has been charged with embezzling up to $300,000 in campaign contributions to feed a gambling habit.
7.                Maimonides Medical Center has been subpoenaed in a state probe of advertising payments made to a company owned by Brooklyn Assemblyman Dov Hikind, a hospital spokeswoman confirmed. the longtime Borough Park powerbroker who is Maimonides' local assemblyman, had routinely failed to disclose payments made to his advertising company, DYS Production. The company is paid for advertisers' commercials and promotion on the assemblyman's weekly radio program, The Dov Hikind Show. Other advertisers besides Maimonides also pay Mr. Hikind's production company and could be subjects of the commission's scrutiny as well.
8.                A former engineer with Seattle Public Utilities, has pleaded guilty to embezzling more than $1 million from the city. The Seattle Times reports he pleaded guilty to embezzling $1.1 million — the largest embezzlement of public funds in King County's history. He allegedly diverted customers' payments for water-main-extension projects into his private bank account and used the money to buy real estate and a car, and to pay credit-card bills.
9.                Sheridan Township (MI) treasurer will serve up to five years probation for stealing thousands of dollars from the township. Calhoun County Circuit Judge sentenced her to the probation term and ordered her to pay $15,000 in restitution, her attorney said.
10.             A former Illinois Department of Corrections accounting employee will serve 21 months in federal prison after admitting to embezzling more than $50,000 from a fund meant to benefit prison workers killed in the line of duty.
11.             The former chief of the Smithers (WV) Volunteer Fire Department is heading to prison after being convicted of embezzlement charges.
12.             Two Stanislaus (CA) Superior Court clerks are accused of about $6000 from court fee payments made with cash.
13.             A super PAC formed by the powerful city teachers' union paid more than $370,000 to an apparently fictitious political consulting firm, which was actually the well-known New York firm the Advance Group, records and interviews show.
14.             An arrest warrant has been issued for the former manager of Rattlesnake Ridge Water District. He allegedly took 29 checks totaling $29,239.93 from the water district, according to the indictment.
15.             The former assistant court manager of the Humboldt County (CA) Superior Court's operations department has been indicted for embezzling almost $100,000 over 5 years.
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 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
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Email: gary.r.snyder@gmail.com; 248/324-7000;
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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