Nonprofit
Imperative
…Your nonprofit browser
January
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:
Merrimack Education Center;
Newtown charity, again
Charity Check Up:
MA Charity Execs.
Lavish Comps
A Thought or Two:
Annual Note
Nonprofit News-In Case You Missed It:
UK Charity Commission; WV
Ver. Fraud; Komen, again…more
Political/Official Chicanery:
MO; CA; WI; TX; VT; WA; NM; FL…more
What Do You
Think?
Tampa Bay Times: “Agriculture Commissioner Adam Putnam Is
Proposing A Complete Rewrite of Florida's Charity Laws',” January 14, 2014,
" aiming to increase state oversight and transparency in direct response
to investigative reports published last year in the Tampa Bay Times [“America’s
Worst Charities”]. “[Agriculture Commissioner] Putnam, whose duties include
protecting Florida's consumers, said the changes will help Floridians make more
informed choices about the charities they patronize. The legislation will also
grant the state additional powers to regulate nonprofits and the professional
solicitors who raise money for charities.”
----------------
New
York Times: there is a new chief of the Charities Bureau, an agency of the
New York attorney general's office that supervises charitable organizations. He
will be “sensitive to
cases of fraud and ensuring that his bureau's work separates out a mission and
good people from bad things that happen.”
-------------
"I didn't have
any feelings about them one way or the other," Bernard Madoff's finance chief
said after being asked if he was remorseful about taking millions of dollars
from Holocaust survivor’s foundations, Wunderkinder Foundation and Elie
Wiesel’s foundation.
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 Took Years To Indict For A $37 Million Misuse of Charity
Funds
A man, who formerly served as chief
financial officer for the troubled Merrimack Education Center, was indicted on
allegations he defrauded the state and misusing $37 million of MSEC funds. Prosecutors say the
accused of "engaging in a scheme to defraud the state" by putting
ineligible MEC employees on the state's pension plan by making it appear the
employees worked for the state-run MSEC instead of MEC.
"The indictment alleges that
the purpose of the scheme was for Nystrom and the others who were fraudulently
enrolled in the pension to obtain pension payments that they were not entitled
to receive," U.S. Attorney Carmen Ortiz said in a prepared statement.
Some former employees have already collected nearly $300,000 in pension payments.
The Inspector General also accused one of misusing nearly $57,000 of MEC funds by charging shoes, dinners, furniture and a trip to the Kentucky Derby on MEC's American Express card.
The Merrimack Education Center is a private nonprofit company that provides educational and technological resources to schools, towns and other nonprofits.
Newtown Charity Missing 70% of Donations
Some former employees have already collected nearly $300,000 in pension payments.
The Inspector General also accused one of misusing nearly $57,000 of MEC funds by charging shoes, dinners, furniture and a trip to the Kentucky Derby on MEC's American Express card.
The Merrimack Education Center is a private nonprofit company that provides educational and technological resources to schools, towns and other nonprofits.
Newtown Charity Missing 70% of Donations
A charity formed
after the shooting massacre at Sandy Hook Elementary School has been unable to
account for more than $70,000 it raised through marathon running, one of its
co-founders said. The 26.4.26 Foundation raised $103,000.
One co-founder was in charge of the organization's finances but has cut off any inquiries. The other co-founder said the foundation, registered as a nonprofit corporation in Tennessee, had virtually no overhead or other expenses that would justify not giving the vast majority of the proceeds to the people of Newtown. (source)
One co-founder was in charge of the organization's finances but has cut off any inquiries. The other co-founder said the foundation, registered as a nonprofit corporation in Tennessee, had virtually no overhead or other expenses that would justify not giving the vast majority of the proceeds to the people of Newtown. (source)
A Charity Check Up:
Finally, AG Takes On Her Friends
Nonprofit groups in Massachusetts are paying
their chief executives huge amounts of money and giving them lavish perks
unavailable to most workers, according to a new report from Attorney General
Martha Coakley’s office that calls for reform in the way groups disclose
executive compensation.
The 92-page study,
which covered 25 large charitable organizations in Massachusetts, mainly
hospitals, insurers and colleges, found all of them paid their leaders at least
a half-million dollars a year in total compensation. And many of the
organizations offered their executives an assortment of other benefits,
including bonuses, deferred compensation, auto allowances, financial planning,
life insurance and other benefits that are more commonly associated with
corporate leaders.
A Thought or Two:
My Annual Note:
Charity Fraud-A Remarkable Year
Interest in charity
fraud has swelled. The emphasis changed from the breath to the depth of the
problem leaving the donor with a better understanding that there is an
explosive problem.
First came the belated
admission by the Internal Revenue Service that there was a significant amount
of diversions of assets from charities. Despite promises that it would address
the issue in a timely manner nothing has been done for over two years.
Then came the unveiling
from several media sources that charity fraud had become a serious problem. (rest of article)
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News
Nonprofit
News…
In
Case You Missed It:
1.
It is rampant: Fraud,
financial abuse and financial mismanagement featured in nearly 80 per cent of
the UK Charity Commission's investigations into charities last year, according
to a new report published by the regulator. The UK Charity Commission is the independent regulator of
charities in England and Wales. The Commission's Chief Executive Sam
Younger said the new report showed that the Commission is getting tougher on
dealing with non compliance and abuse in charities. “Those serious cases must
be a top priority for us as regulator, as they are most damaging to the public
trust and confidence on which all charities rely.”
2.
Another Vet org.
troubles: a telemarketer got $33,386 for fund raising $37,706 in
one year while the organization spent only $506 on programs for veterans. This seems
to be the norm. The West Virginia Vietnam Veterans Foundation, in 2007, raised
$144,275, with approximately $10,000 going to charitable programs, the AP said.
The West Virginia Secretary of State’s Office, said the state does not mandate
what percentage of the contributions a nonprofit organization receives must be
spent on programs.
3.
Contributions to Susan
G. Komen dropped 22 percent in the 12 months after the controversy over the
breast-cancer charity’s quickly rescinded plan to cut off grants to Planned
Parenthood. The drop was most precipitous in the area of unrestricted
“contributions, sponsorships and entry fees,” adding up to a full $100 million.
The group also curtailed expenditures, primarily in the areas of research
(approximately a $20 million reduction) and Public Health education (a $30
million reduction). Last year, after finding that participation and
revenue had fallen off significantly, Komen cancelled seven
fundraising walks. The
affiliates have also taken losses, as can be seen here and here. Susan
G. Komen for the Cure paid out almost $400,000 in severance last year to four
executives who left the organizations, including nearly $270,000 to its former
president, while contributions and other revenue dipped by 22 percent last
year. The breast cancer charity also disclosed that its new president and CEO,
Dr. Judith Salerno, will earn $475,000, about 40 percent more than her
predecessor. Founder
Nancy Brinker’s annual salary will be $390,000 as chair, almost 30 percent less
than the $549,380 she earned last year as president and CEO. Brinker moved to
that a position after stepping down as president and CEO when Salerno was
hired. In 2012, Brinker earned $548,785, in addition to a bonus of nearly
$125,000 that pushed total compensation to nearly $700,000. No bonuses or
incentive compensation were reported for officers and directors on the most
recent Form 990. She had been CEO since December 2009 after the positions of
president and CEO were split. Komen announced in August 2012 that Brinker would
step down as CEO but remain on the board of directors, serving as CEO until a
permanent replacement was chosen.
4.
Southern District
United States Attorney Preet Bharara is taking the unusual step of going after
the pensions of four lawmakers convicted on corruption charges. Some included
are Manhattan Councilman Miguel Martinez, former Bronx Councilman Larry
Seabrook who are tied to charity fraud.
5.
Two additional former
executives of one of the largest and most respected nonprofit social service
agencies in the region were charged in connection with what prosecutors
describe as a long-running scheme to defraud the organization of more than $7
million. The accusations first drew attention in
August, when the board of the organization, the Metropolitan New York Council
on Jewish Poverty, fired its executive director, William E. Rapfogel, because
it believed he had been taking kickbacks from Met Council’s insurance broker.
Mr. Rapfogel was later charged with skimming over $1 million for
himself and more still to give contributions to the campaigns of politicians
who approved funding for Met Council, which received tens of millions of
dollars a year in government money.
6. With low morale, contributions to the Combined Federal Campaign
(CFC) of the National Capital Area have fallen by 35%.
7.
Eighty greedy NYPD
and FDNY retirees, whose departments suffered devastating losses on 9/11,
collected millions of dollars in disability-pension benefits by pretending they
were at Ground Zero and suffered emotional trauma, authorities said. They were among 106 alleged scammers
arrested in a $400 million Social Security rip-off — one of the largest in
history — that also included city Correction officers and a former Nassau
County cop. Many of them claimed they couldn’t sleep, do simple arithmetic or
even leave their own home — but investigators found that they’d been piloting
helicopters, riding Jet Skis, teaching karate, deep-sea fishing and even
running half-marathons. Four ringleaders,
including an 81-year-old ex-FBI agent and an 89-year-old pension adviser, instructed retirees how to pocket $20,000 to $50,000 a
year in bogus claims. Their kickback fee was 14 monthly Social Security checks.
The group netted more than $21 million since 1988, and authorities said that’s
just the tip of the iceberg.
8.
Federal officials are
investigating whether NJ Gov. Christie improperly used relief funds to produce
tourism ads that starred him and his family…federal auditors will examine New
Jersey’s use of $25 million in Sandy relief funds for a marketing campaign to
promote tourism at the Jersey Shore after Sandy decimated the state’s
coastline. More: U.S. Senator Chris Murphy is asking the IRS to investigate a
charity set up in the aftermath of the tragedy at Sandy Hook. The Attorneys'
General in two states are already investigating something called the
"26-for-26 foundation" in Nashville because the majority of the money
'raised' is now missing and so is the man that started it.
9.
Federal prosecutors filed a record number
of health care fraud cases last fiscal year. Because such fraud is believed to cost the Medicare program between $60
billion and $90 billion each year, Attorney General Eric Holder and Health and
Human Services Secretary Kathleen Sebelius partnered in 2009 to increase
enforcement by allocating more money and staff and creating strike forces in
fraud hot spots around the country. Medicare fraud has morphed into complex
schemes over the years, moving from medical equipment and HIV infusion fraud to
ambulance scams as crooks try to stay a step ahead of authorities. The scammers
have also grown more sophisticated using recruiters who are paid kickbacks for
finding patients, while doctors, nurses and company owners coordinate to appear
to deliver medical services that they are not.
We
flagged these few examples of nonprofit mischief
1.
Girl Scouts of Greater
Los Angeles (CA) $370,000
2.
ArtSplash (CA) unknown
3.
Portland Kollel (OR)
$15,000
4.
United Way Of Allegheny
County (PA) $800,000
5.
Emmanuel Evangelical
Congregational Church (PA) $81,000
6.
Dunbarton Historical Society (NH)
$15,000
7.
Idaho County Food Bank
$50,000
8.
Plymouth Community Renewal
Center (KY) $3500
9.
Beaumont Intermediate School District
(TX) $4 million
10. Readsboro Central School (VT) $4000
11. Carlsbad (NM) Soccer League $15000
12. Lake View High School (IL) $420,000
13. Swamp Boys and Fishing to Fight Cancer Foundation (NC)
$10,300
14. Harambee
Institute of Science Technology Charter School (PA) $79,000
15. Po’Ka Project (MT) $195,000
16. Imperial Volunteer Fire Department (PA) $5,779
17. Southwest Idaho Resource Conservation and
Development Council (RC&D) (ID) Unknown
18. Orleans Community Health/Medina Memorial Hospital
(NY) $500,000
19. Antioch Missionary Baptist Church of Brownsville
(FL) $70,000-100,000
20. Bethlehem YMCA Affordable Housing (PA) $103,000
21. AcroSports (CA) $150,000
22. Watertown School District (SD) $100,000
23. Doc Hurley Scholarship Foundation (DHSF) (CT)
$200,000
Political/public official chicanery (just a few):
1.
A former top
administrator for the St. Louis city parks department who pleaded guilty to
embezzling 500 thousand dollars. He is set to be sentenced.
2.
A former Flathead
County Sheriff’s Office employee has pleaded guilty to felony theft after
embezzling $90,000 from the employees association
3. A Los Angeles man who stole $7.2 million worth of computers
from the government by creating fake nonprofit charter schools has
pleaded guilty. Charged in June, Steven A. Bolden concocted a series of fake
charter schools in a long-running scheme brought down following a federal
Inspector General’s Office investigation.
4. Where was the Board?-A
former Belleville school board member faces six counts of theft for allegedly
stealing $850,000 from a New Glarus (WI) nonprofit organization. Joyce Ziehli
worked full time for 31 years as the nonprofit’s administrative secretary, and
over the last 10 years of her employment, from 2003-2013, she used her position
to complete hundreds of fraudulent transactions. She was the only one that had
access to the accounts.
5. A federal judge has accepted a guilty plea from the
founder of a Sarasota nonprofit who admitted stealing more than $76,000 in
grant money with the city's help. The founder of the youth employment program
ManUp. Lyndon Jones, as executive director of ManUp, accepted more than
$100,000 federal grants administered by the city from 2009 to 2011 and has
admitted to fraudulently double-billing the government for tens of thousands of
dollars in wages.
6.
St. Louis County (MO) is looking to hire an
independent audit firm to determine how a high-ranking health department
official lined his company's pockets with more than $3 million for several
years before anyone noticed.
Edward Mueth, who was the director of administration for the St. Louis County Health Department, killed himself in September after county officials discovered his company had overcharged the department for goods and services.
Edward Mueth, who was the director of administration for the St. Louis County Health Department, killed himself in September after county officials discovered his company had overcharged the department for goods and services.
7. A former vice president at Fairmont State University will be
sentenced later this year for using a state-issued
purchasing card to steal hundreds of thousands of dollars from Fairmont State for his personal use. It is estimated that he
made $650,000 0n the scheme.
8. A Fairfax County schools employee was arrested on
charges that he stole hundreds of school system computers and put them up for
sale online. The arrest comes two months after a county middle school principal and a
schools finance secretary were
arrested on charges of stealing county funds and paying their own children for
work they allegedly never performed.
9.
Former San Diego Mayor
Maureen O’Connor, who embezzled $2 million from her late husband’s nonprofit to
feed her gambling habit, is closer to being able to pay restitution. A judge
approved a $7 million settlement to go to O’Connor and her sister, resolving an
unrelated legal battle over the family’s sale of a Mendocino coastal resort. O’Connor,
who is entitled to half of the settlement amount, has been waiting for the
funds so she can hold up her end of a deal made with federal authorities in the
embezzlement case. She has until 2015 to repay the $2 million to the R.P.
Foundation, started by her late husband, Robert O. Peterson, co-founder of Jack
in the Box. If she does, then the criminal case against her will be dismissed.
10. A federal judge in Albuquerque sentenced the former
executive director of the Taos County Housing Authority and her husband to
prison terms of more than two years in connection with a long-running $700,000
embezzlement scheme.
11. More than $1 million over the course of a decade was stolen
from the Cascade Metro and Arabian Acres
Metro water districts in Teller County, Colorado.
12. Jefferson Community Health Care
Center's former finance chief who investigators say transferred more
than $207,000 in clinic funds to her personal bank account has been indicted on
federal wire fraud and obstruction charges.
13. The former workers' compensation
claims chief for the Texas Association of School Boards admits to
stealing more than $500,000 from the group's insurance fund.
14. A former University of Vermont
employee has agreed to plead guilty to stealing more than $185,000 from
the Vermont
Institute for Artisan Cheese by altering tuition
checks from enrollees in the cheesemaking program to make herself a co-payee and
then depositing the checks in her own bank account.
15. A former Washington College Dining Services employee
to 15 years in prison for conducting
a theft scheme of more than $100,000.
16. A former fire chief was arrested for allegedly
embezzling $100,000 Ashford North Cove Volunteer Fire Department
17. The Marine Corps is tightening its travel and
expense policies in response to an embezzlement
scandal involving reservists. The Internal Revenue Service charged seven Marine reservists in November with conspiracy to defraud the
Defense Department to the tune of more than
$874,000.
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, The Patriot-News, 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, 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, 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, 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.
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)
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