Thursday, January 23, 2014

January Edition-Nonprofit Imperative E-Newsletter



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.”
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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.”
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"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
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)
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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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.
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.
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. 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.
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)
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