Wednesday, December 24, 2014

Mid-December-Nonprofit Imperative e-Newsletter



Nonprofit Imperative
Your nonprofit browser
December 2014
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:
Troubled American Red Cross, again
Charity Check Up:
Suing Director
A Thought or Two:
Charter School ‘trade secrets’
Nonprofit News-In Case You Missed It:
Fidelity Charitable; Annual Giving; N.Y. Telemarking Rules …more
Political/Official Chicanery:
CA; IN; NC; MN; OH; KY; MO; NH; CO; MI; IL; NY…more
What Do You Think?


State law still determines whether a given entity is “charitable,” State law continues to determine the propriety of a charitable fiduciary’s conduct.
There seems to be virtual consensus that in most states, enforcement of charity and the obligations of charitable fiduciaries has long been essentially nonexistent.

There is a steady decrease in the number of charitable organizations examined. In 2011, the examination rate was 0.81 percent; in 2013, it fell to 0.71 percent. This rate is half that of corporations (1.4 percent). (United States Government Accountability Office) (Paul Streckfus, editor, EO Tax Journal)

----------------
The second most common motive for embezzlement was gambling; the first “desire for a lavish lifestyle.” (Marquet International study of major embezzlement cases nationwide)
                                                --------------------

The term “toxic environment” has been used to describe so many boardrooms in Vermont… “It is no wonder so many capable Vermonters are just saying no thanks when asked to serve on local nonprofit boards.” Bennington Banner



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 (for themselves).”
American Red Cross Employees Doubt Nonprofit's Ethics and Future
A survey of American Red Cross employees shows a crisis of trust in the charity's leadership and deep internal doubts about the Red Cross' commitment to ethical conduct.
A summary of the survey results, obtained by ProPublica and NPR, was released internally in September. The survey was completed by a bit more than half of the Red Cross' roughly 25,000 employees.
In response to the statement, "I trust the senior leadership of the American Red Cross," just 39 percent responded favorably. 
About 4 in 10 respondents doubt the ethics of the venerable charity. The employee survey, which was conducted by IBM, notes that other companies scored better on the questions about trust. About 20 percent of respondents at other companies expressed concern about their organization's ethics, compared with nearly 40 percent for the Red Cross survey.
Most of the survey respondents do not believe the Red Cross has a bright future. In response to the statement, "The senior leadership of the American Red Cross has communicated a vision of the future that motivates me," 39 percent responded favorably. That compares with an average 61 percent of respondents from other companies in response to the same question.
                        ------------------------
Charity Check Up:
Rare Occurrence: Sue Directors and Officers…still monitoring 
A Pennsylvania Appellate Court has allowed creditors to sue directors and officers of a nonprofit nursing home for breach of fiduciary duty and deepening insolvency before bankruptcy. The debtor, Lemington Home for the Aged is a nonprofit, tax-exempt nursing home. In determining that the Home’s directors could be held personally liable, the Court relied on the fairly egregious facts and circumstances leading up to the filing of the bankruptcy petition.

A Thought or Two:

Nonprofit Charter School Opens Up On “trade secrets”

As ProPublica detailed last month, both a chain of charter schools and the company that manages them, were founded by a politically connected local businessman, Baker Mitchell. Millions of public dollars have flowed through the nonprofit schools to Mitchell's for-profit charter-management firm and another company he owns. A believer in the power of the free market to drive education reform, Mitchell makes no apologies about the arrangement. He has also fought to keep the financial details of his management firm secret.
After more than a month of wrangling with state regulators it turned over salary data for administrators working at the schools.
But the salary list has a curious omission. The son of the schools' founder, despite working as "Information Systems Admin" at one of his father's schools, is missing from the disclosures.
The salary list submitted to regulators last week is marked as containing "proprietary and confidential" trade secrets "owned by a private person, Roger Bacon Academy." The State Board of Education released the list. (source)

Does somebody keep forwarding you this newsletter? Get your own copy. It's free! Sign up here. Send tips/stories to Nonprofit Imperative. Follow us on our blog or on Twitter---Nonprofits News

Nonprofit News…
In Case You Missed It:
1.     A flood of contributions to donor-advised funds pushed assets of the charitable accounts to a new high of nearly $54-billion in 2013, according to a new report. Donors poured more than $17-billion into the accounts, an increase of 23 percent, according to the report. The surge of contributions, along with healthy growth in the stock market, helped assets in the accounts grow by nearly 20 percent. But the study also found that those accounts distributed a slightly smaller share of assets to charities last year than in 2012.
2.     People are feeling more generous in 2014: for example, Fidelity Charitable made $1.6 billion in total donor-recommended grants for the first nine months of this year, up 27% from the year-ago period.
3.     With its budget falling and its workforce shrinking, the Internal Revenue Service lacks the resources to go after suspect charities or sufficiently assist state regulators of nonprofits, the citing a report released by the U.S. Government Accountability Office, a federal watchdog agency.
4.     The United States climbed into the top 10 on an annual ranking of the countries with the most charitable people but still lags behind smaller and poorer nations like Myanmar, Malta, and Thailand. The World Giving Index 2014 report released today puts the United States ninth for giving to charity, up from 13th place on the 2013 index. According to the report, 68 percent of Americans surveyed last year said they had made a charitable donation in the previous month. That figure—the highest reported for the United States by the five-year-old index—is up considerably from the 2011 low of 57 percent. The increase may reflect that Americans are acutely aware that the recession’s effects linger even as the economy rebounds, says Ted Hart, chief executive of the U.S. office of the Charities Aid Foundation, which released the index. "The scars from the Great Recession are still here," says Mr. Hart. "A lot of people are still hurting, and Americans want to help." The United States also scored in the top 10 on the index’s two other measures of altruism: helping strangers in need (first) and volunteering (fifth). Seventy-nine percent of Americans surveyed said they had helped a stranger in the previous month, while 44 percent said they had volunteered. The United States was the only country in the report to rank in the top 10 on all three measures.
5.     Attorney General Eric T. Schneiderman today called upon the Federal Trade Commission to update the Telemarketing Sales Rule in order to reflect realities of today’s marketplace and better protect consumers from unscrupulous telemarketers. As detailed in Attorney General Schneiderman’s most recent “Pennies for Charity” report, for-profit telemarketers often retain a very high percentage of charitable donations they raise from the public. In 2012, an average of only 37.5% of funds raised by telemarketers were retained by the charities. In 50.3% of the campaigns, the charities retained less than 30% of the funds raised, or the expenses exceeded contributions. Since that report, the Attorney General has taken action against eight entities under investigation for fraudulent fundraising.
6.     The Korean Social Service Center in Manhattan will be shuttered after authorities say the president of the nonprofit has pleaded guilty to grand larceny, fraud and tax fraud charges in a scheme to prey on elderly Korean-Americans by taking money and falsely promising placements in preferred housing. He fraudulently collected $780,000
7.     Lenient justice, in Texas: He fraudulently took $780,000 and pleaded guilty, but will serve no jail time. (source)
8.     Nonprofit organizations saw the assets they manage that are committed to social-impact investments increase 77 percent in 2014 compared with their 2012 level, according to a new report. Foundations, pensions, educational endowments, and religious groups managed $4.04-trillion in such investments at the beginning of this year, according to a study 
9.     The former accountant for the Agape Family Worship Center has been indicted for embezzling more than $4 million from the church over a period of seven years, church officials said. The thefts were hidden in 900 separate transactions.
10.  The SUNY Research Foundation will pay $3.75 million after federal prosecutors found that the troubled agency manipulated audits of its health-care programs. It's the latest black eye for the secretive Research Foundation, which is a nonprofit wing of SUNY and often used to help fund salaries of SUNY leaders. In 2012, an audit found it misused money; it was accused of giving a no-show job to former Sen. Joseph Bruno's daughter. Its current president is leaving.
11.  The Rev. Timothy Kane, convicted of stealing money from the now-discontinued Angel Fund to help the poor of Detroit, was sentenced to 12 months in jail served over 5 years during the months of June and December plus about 8 weekends. Kane was also sentenced to pay $131,400 in restitution.
12.  Two-timer: The former executive director of the Peninsula Symphony (CA) is facing up to 16 years in prison after being convicted of embezzling $272,000 from the orchestra of volunteers, Santa Clara County prosecutors. Also, about 20 years ago, Carlton was convicted of voluntary manslaughter in the strangulation of his wife.
13.  84-year-old FEGS Health & Human Services recently announced that it had an unexpected $19.4 million loss in FY 2014.  A  newly appointed CEO informed staff of the crisis saying that the loss “is particularly sobering, and demonstrates the immediate imperative for change… Our intention is to create a smaller and more focused portfolio of services.” A network utilizing over 350 locations throughout metropolitan New York area.  FEGS is one of the largest Jewish charities in the country, with annual expenditures of $252 million. The organization provides a range of social services $94 million in government grants in the 2013 fiscal year and receives major funding from UJA-Federation of New York.
We flagged these few examples of nonprofit mischief 
1.     Cancer Screening Services (NY) $25 million
2.     Domestic Violence Intervention Project (WI) $116,000
3.     National Science Foundation thousands, plus
4.     Department of Justice's Violence Against Women program (WI) $130,000
5.     Duke University $8100
6.     Bethany College (WVA) $1 million
7.     HalloWayne (MI) <$20,000
8.     National Postal Mail Handlers Union Local 314 (MO) $41,000
9.     Serenity Home of Fredericksburg (VA) $90,000
10.  Jobs Housing & Recovery; Health, Education, Advocacy, Life; the Reservoir Hill Improvement Council; and Between Friends (MD) $1.3 million
11.  Hereditary Disease Foundation $1.8 million
12.  Between Friends (MD) $100,000
  1. Health, Education, Advocacy, Life Inc. (HEAL); Between Friends, Inc; Jobs, Housing & Recovery, Inc. (JHR) (MD) $1.8 million
14.  Birmingham (AL) Health Care $11 million  
15.  West Medford Hillside Little League (MA) <$100,000
16.  Rockford elementary school Parent-Teacher Council $19,000
17.  Summit Association of Realtors (CO) $415,000
18.  Cache Valley for Hope Foundation/Cache County Cares for Cancer  (UT) unknown
19.  We Stay/Nos Quedamos, and two related entities, NQ Development L.L.C. and NQ Management Inc. (NY) $900,000
20.  Cleveland Clinic Foundation Nursing Anesthesiology School $215,760
21.  Lawrence Family Jewish Community Center in La Jolla (CA) unknown
22.  Grady Memorial Hospital Corporation (GA) $500,000
23.  Aish Hatorah $237,000/
24.  Oregon RISE / National Indian Parent Information Center $80,000
25.  Minidoka County Beet Growers Association (ID) $14,000
26.  Wyoming Youth Sports Association $12,000
27.  Exploration Station (CA) up to $16,000
28.  The Enrichment Center (NC) $118,000
29.  CDC 58:12 (LA) $90,000
30.  Sierra Young Family Institute and Agape House for Mothers, (MN) $460,000
Political/public official chicanery (just a few):
1.     After more than a year of bitter legal battles, Los Angeles city leaders have approved a deal with the powerful Department of Water and Power union that promises the first detailed, public look at how two controversial nonprofits affiliated with the utility spent tens of millions of ratepayer dollars. The agreement gives city officials "unfettered access" to financial records held by the Joint Training Institute and the Joint Safety Institute, which will be used to produce the first independent public accounting of the groups' expenditures.
2.     A longtime Fort Wayne police officer was charged this week with one felony count of theft after allegations arose that he stole several hundred dollars from a police nonprofit organization. The allegations against him span from 2012 to 2014, according to the probable cause affidavit.
3.     A former Clare County Sheriff’s Department employee was charged with embezzling a large sum of money from the jail’s inmate account.
4.     A former Raleigh assistant city manager was indicted on an embezzlement charge in connection with money missing from the Raleigh Business and Technology Center. The Business and Technology Center was left to repay $48,000 in principal and interest within six months.
5.     A Hugo City (MN) Council member resigned abruptly amid allegations that he stole nearly $75,000 from the Minnesota State Fire Department Association. Association officials recently discovered unauthorized purchases on the organization's account dating to at least 2011, including concert tickets, plane tickets, pet store purchases, flowers and campaign signs.
6.     Brian T. Hatfield, chief of the Harrison Township (OH) EMS from 2008 to 2012, was sentenced to 6 1/2 years in prison and ordered to pay $345,000 in restitution on charges of theft and money laundering. His family members, who spent time on the EMS board, also were sentenced for their roles in the scheme. Investigators with the Ohio Attorney General's Office found that these individuals misspent hundreds of thousands of dollars from 2008 to 2012. Brian Hatfield was accused of selling the ambulances, the EMS building, and the building’s contents, and using the money for personal purposes, such as buying a new car, big-screen TVs, and computers.
7.     Southeast Bullitt (KY) Fire Department chief about taking in about $1 million a year and spending only $375,000 to run the district.
8.     The FBI is looking into what happened to millions of taxpayer dollars an influential Pennsylvania congressman, Representative Chaka Fattah, a senior member of the House Appropriations Committee, steered to a nonprofit run by former members of his staff, reports The Philadelphia Inquirer. Investigators are examining spending by the now-defunct Education Advancement Alliance on a project to turn a former apartment building into a center for needy schoolchildren to study math, science, and technology.
9.     A northwest Missouri who was just re-elected Harrison County prosecutor this month has admitted to embezzling money from an elderly client.  Richard Turner pleaded guilty to charges of wire fraud and lying on his return, admitting he took more than $500,000 from a 94-year-old retiree who suffers from memory loss. He said that over the past decade, the victim's life savings funded personal and even helped to dig himself out of bankruptcy. The victim is the widow of a federal judge, prosecutors said. Turner spent $327,000 to pay off his mortgage and install a swimming pool. He also spent $23,000 at  Wal-Mart store and bought $19,000 worth of clothes.
10.  FBI agents seized 20 boxes of documents from Los Angeles Unified School District headquarters as part of an investigation into the district’s failed plan to put Apple Inc. (AAPL) iPads into the hands of students and teachers. The documents taken yesterday by federal investigators related to the technology project’s procurement practices, Superintendent Ramon Cortines said in a statement on the district’s website. The iPad initiative, spearheaded by former Superintendent John Deasy, earmarked as much as $1.3 billion in bond money for the tablets, infrastruture and curriculum software in the second-largest U.S. school system. The school district’s inspector general had criticized the rollout of iPads in schools, noting in July that $2.1 million in equipment was missing or unaccounted for.
11.  The bookkeeper for Mokelumne Rural Fire District was arrested Monday on suspicion of embezzling more $8,000from the fire agency.
12.  An employee for the town of Troy, New Hampshire, is facing theft charges after allegedly taking at least $15,000 of town funds and using them for personal bills.
13.  A former Eagle County (CO) employee was arrested Friday on a warrant accusing her of embezzling $124,239 from the Eagle County Clerk and Recorder’s Office.
14.  Berrien County (MI) Board of Commissioners member is accused of taking more than $150,000 from his job at the North Berrien Senior Center.
15.  The alleged theft of about $100,000 from the union representing McLean County sheriff's deputy’s means causes such as holiday food baskets for families in need and mentoring services for children won't receive their usual funding.
16.  A couple's involvement in a $5 million fraud scheme rocked the Illinois Department of Public Health. An employee joined in by taking money that was moving between approved nonprofit organizations from $11 million in federal public health grants
17.  The former treasurer of an upstate New York fire department--- Le Roy Fire Department--- has pleaded guilty to stealing $46,000 to finance a gambling habit.
18.  Take a look at headlines about New Direction, a nonprofit sometimes called New Direction Local Development Corporation. A New York Post exposé on January 31, 2010, apparently prompted a series of often overlapping investigations. Among other irregularities, the group raised money for Hurricane Katrina victims who never received the money. Here is a summary:
·  New York State Senator John Sampson is facing trial in January 2015. A former Senate Majority Leader, he is charged with embezzlement, obstruction of justice and making false statements to the FBI. He allegedly embezzled $440,000 from escrow accounts on foreclosed properties. Sampson is reportedly also under investigation for his role in the Aqueduct bid-rigging scheme, described below. The investigations of Meeks reportedly led to Sampson.
·       New York State Senator Malcolm Smith is facing trial in February 2015, along with several Republican Party officials. The arrests resulted from a scheme to bribe Republican officials to allow Smith to run for New York City mayor as a Republican. The Smith investigation was reportedly prompted by media coverage of New Direction, in which Smith was also involved.
·       On September 10, 2014, Melvin E. Lowe, a New York political consultant, was found guilty of conspiring with State Senator John Sampson of Brooklyn to defraud the New York Senate Democratic Campaign Committee out of $100,000. The Sampson investigation apparently led to Lowe.
·       On August 11, 2014, Albert Baldeo, a Meeks associate and Democratic Party leader in New York City, was convicted of obstructing justice. He reported phantom donors to his unsuccessful 2010 City Council campaign in order to qualify for taxpayer matching funds. The scheme was described in a New York Post story of October 2011, based on information provided by NLPC.
·       New York City Councilman Ruben Wills was arrested on May 7, 2014. He is accused of looting a nonprofit group he controlled that was the recipient of taxpayer funds. At the time, Mills was Chief of Staff to former State Senator Shirley Huntley (D-Queens) who was convicted and imprisoned for a similar scheme that was exposed by NLPC.
·       On December 5, 2013, Dr. Dorothy Ogundu was arrested on the basis of information provided to the New York Post by NLPC. A Nigerian-born physician, Ogundu ran a fake health clinic in Queens, New York. She was accused of stealing $370,000 from twelve separate government grants. She is a donor to Meeks, who secured $380,500 in earmarked funds for the fake clinic.
·       In January 2013, Huntley was convicted of fraud. In March 2011, a New York Post article exposed a sham charity she founded called The Parents Workshop, to which she steered taxpayer money. An aide and her niece helped her siphon off $87,000. Huntley was arrested in August 2012 and spent a year in prison.
·       On July 28, 2012, the New York Times published a front-page story. The article spotlighted a "mysterious donor" named Bob Williams who made $900,000 in political contributions despite having no visible means of support. To date, Williams has not been prosecuted.
·       The media coverage of New Direction resulted in scrutiny of a successful bid by Aqueduct Entertainment Group (AEG) for a lucrative gaming franchise at Aqueduct Raceway. Some of the same individuals involved in New Direction also were involved with AEG. The franchise was revoked and an investigation is reportedly underway into a bid-rigging scheme. According to media reports, the Aqueduct controversy was a major reason Governor David Paterson did not seek re-election.

Readers, weigh in as to what you think…please 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. On rare occasions, there may be duplicates.

Cites in various media:
Featured in print, broadcast, and online media outlets, including: Charity Navigator, Washington Post, National Enquirer, The Patriot-News, Vermont Public Radio, Miami Herald, New York Times, National Public Radio, Huffington Post, The Sun News, In Touch, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, msnbc.com, Marie Claire, Ethics World, Tactical Philanthropy, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, , 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, 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, VPR News, National Enquirer,
  • 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.
Email: gary.r.snyder@gmail.com; 248/324-3700;
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, 2014




























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: 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, 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, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)