Wednesday, May 14, 2014

Mid May Edition-Nonprofit Imperative E-Newsletter


Nonprofit Imperative
Your nonprofit browser
May 2014
The 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:
Associated Community Services; Metropolitan New York Council
Charity Check Up:
Hurricane Sandy Relief Fund
A Thought or Two:
Medicare problems
Nonprofit News-In Case You Missed It:
 Boy Scouts, again; IU Study; Texas Bingo…more
Political/Official Chicanery:
WA; CA; MA; VT; IA; CT; OR; NY; FL…more
What Do You Think?


The Florida Department of Agriculture and Consumer Services found the need to partner with the state legislature to rewrite the laws that govern charities because of fraud and deception. The proposed legislation increases certain reporting requirements for charities. Some charities will be required to disclose financial transactions between board members and their family members, fund-raising expenses and travel expenses. The bad actors are a black eye on the network of reputable charities. (see #9 in Nonprofit News…In Case You Missed It) (Ivonne Perez-Suarez, Florida Department of Ag. And Consumer Affairs, Miami Herald)
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“…a culture of constructive self-criticism has yet to embed itself in the ethos of most nonprofits”…those that speak out could face ostracism from movers and shakers in the nonprofit world…” (Ken Berger Charity Navigator, Jeremy Kohomban, Children’s Village, Chronicle of Philanthropy)
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.”
Shame on nonprofit leadership, regulators, Congress and this horrible company
The company was accused of 430 violations. 
It owes the IRS more than $15.5 million and the state of Michigan more than $1.1 million.
It kept as much as 80 cents out of every dollar it collected for the charities it did telemarketing for. Tens of millions of dollars not distributed.
Last month, even though the Attorney General said “Michigan law requires honesty of our professional fund-raisers. We will not tolerate those that abuse the name of this office to deceive donors.” He settled with the company for a meager $45,000 for misleading senior citizens in their phone pitches. A mere slap on the wrist.
Now the Southfield (MI)-based Associated Community Services, one of the largest charity telemarketers in the U.S., has filed for Chapter 11 bankruptcy.
As if sticking it to the intended recipients of multiple charities was not enough, it intends to do the same to 39 creditors including AT&T, the cities of Dearborn (MI) and Southfield (MI), Ricoh, PNC Bank, Oakland County (MI), a Missouri law firm and a Syracuse, N.Y. headphones company.
Congress, state attorneys' general other regulators and charity leadership have failed to step up and control this detestable behavior.
Decades of Unchecked Abuse At Prominent Charity
The community leader who led the Metropolitan New York Council on Jewish Poverty for two decades, William E. Rapfogel, plead guilty in connection with a scheme to loot more than $9 million from one of New York City’s most influential social service organizations. Another defendant charged in the scheme, David Cohen, who was Mr. Rapfogel’s predecessor at the council, is also scheduled to plead guilty
Mr. Rapfogel was arrested in September and charged with grand larceny, money laundering, conspiracy and other crimes in a criminal complaint filed by the state attorney general. Both were accused of colluding with others to steal millions through a scheme that involved overcharging the council for insurance policies and then skimming off the margin in cash. He was also accused of manipulating the city’s matching-fund formula to fraudulently increase campaign contributions to politicians who gave government grants to his organization.
More than $400,000 in cash was recovered, including about $372,000 Mr. Rapfogel had hidden in his homes and turned over to investigators after they asked about the scheme, and an additional $48,000 that was recovered later during the execution of a search warrant. 
Charity Check Up:
Unregistered Sandy Fund Raised Hundreds of Thousands …Got Caught!
An unregistered Hurricane Sandy charity ended up actually donating a good chunk of the money that it raised—due to the intervention of the state government. 
A couple in Sparta, New Jersey adopted a great name for a disaster relief charity—the Hurricane Sandy Relief Foundation—and raised $334,000, but their organization was never a 501(c)(3). All the donor-education information produced by nonprofits doesn’t necessarily seem to have worked when it comes to preventing unregistered nonprofits from raising huge amounts of money under the guise of disaster relief.
One of the two founders, John Sandberg, told the Star-Ledger by e-mail that the organization distributed over $500,000 in goods throughout the tri-state area affected by the Hurricane. An AG’s court-appointed administrator, however, just recently awarded four grants totaling $225,000 of the Foundation’s money to O.C.E.A.N. in Toms River (which is building single-family homes), a food bank in Neptune to assist in rebuilding its food pantries, the Alliance Center for Independence in Edison for post-Sandy projects to help people with disabilities, and a fourth group in Rockaway, N.Y., called Graybeards. The court administrator plans to award another $100,000 soon.
According to the complaint filed by the Division of Consumer Affairs, Sandberg and Terraccino were no slouches. One day before the state’s emergency order and three days before Hurricane Sandy actually hit, Sandberg registered 110 Sandy/Relief domain names including words like “Sandy,” “Relief,” “New Jersey,” and “Fund.” (This wasn’t his first time; he did it 2011, too, registering domain names in Hawaii after a tsunami hit the islands.) In setting up his Hurricane Sandy website, Sandberg coded the site so that it would outrank other similar organizations in Google searches.
This shows how easy it is to convince donors to donate generously during times of emergency and disaster even if the charity isn’t on the level. In this case, the state government was on top of this situation within months, but that didn’t stop the group from raising more than half a million under the guise of disaster relief. (source)
A Thought or Two:
Medicare: A Poor System With Limited Resources Leads to Billion Lost
An administrative judge cited him for “gross negligence” and “acts of dishonesty or corruption” as an expert witness and has done “financial harm to various parties”. This has not hasn’t stopped him from legally continuing to bill Medicare, the federal health insurance program for older Americans. He was paid $538,742 in 2012. Eight doctors whose medical licenses have been suspended or revoked collectively billed more than $7 million that year, according to a trove of Medicare records the government released
Bloomberg News, the New York Times, USA Today, and ProPublica, among others uncovered tens of millions of dollars’ worth of questionable billing practices, as well as payments to doctors whose checkered records the federal government may not have been aware of. Yet Medicare has had this information in its files for years.
The U.S. recovered $4.3 billion in health-care fraud judgments and settlements in 2013, according to an annual report from HHS and Justice. Yet that’s likely a sliver of what it loses. A 2012 article in the Journal of the American Medical Association by former Medicare chief Donald Berwick, estimated the cost of fraud to Medicare and Medicaid at between $30 billion and $98 billion a year.
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Nonprofit News…
In Case You Missed It:
1.     Not unusual: A Standish (MI) funeral home owner faces felony embezzlement charges for allegedly embezzling $112,000 from his customers' prepaid funerals. The funeral home owner allegedly failed to escrow funeral contract funds.
2.     The suspended pastor and the onetime parish manager of Troy (MI) St. Thomas More Catholic Church were indicted Wednesday for allegedly embezzling nearly $700,000 in parish money, pilfering from special holiday collections, the church's travel group and the bequest of a deceased parishioner.
3.     Mark Gelvan, a telemarketing consultant for some of America’s worst charities, agreed, 2004, to a lifetime ban on raising funds for charity in New York while admitting no wrongdoing. The Tampa Bay Times/Center for Investigative Reporting report ranked America’s 50 worst charities based on the money they spent hiring professional solicitors. Gelvan got caught as he acted as a fundraising consultant with several of those charities last June. Regulators fined him $50,000.
4.     A Union City (NJ) operator of a bogus charitable organization that was used by some of the defendants in the biggest corruption sting in New Jersey history pleaded guilty to tax evasion and operating an unchartered bank, federal authorities said. The Gemach Shefa Chaim charity was purportedly created to provide interest-free loans to needy members of the Sanz community in Union City, officials said. During his guilty plea proceeding, He admitted he operated GSC as a bank, with more than 350 client accounts by July 2009. He admitted that he used his own GSC account and a false identity to conceal his income and assets from the IRS, causing a $74,889 tax loss.
5.     An Indiana University report has found that Between 2007 and 2011, Indiana-based membership organizations lost more than 1,000 staff members and over $15.6 million (adjusted for inflation). The rate of employee loss is high relative to many charitable nonprofits. Healthcare nonprofits, for instance, showed steady growth, from 126,000 employees in 2007 to 138,000 employees in 2011. Arts and recreation nonprofits, however, showed even a higher rate of employee loss than membership groups.
6.     The Boy Scouts of America has revoked the charter for one troop because its sponsoring (UT) church refused to discriminate. The troop has stood by its openly gay Scoutmaster in the face of the national organization’s attempt to remove him for being an “avowed homosexual.” Last year, the Boy Scouts of America (BSA) lifted its ban on openly gay youth — but reaffirmed its ban on openly LGBT adults serving as volunteers or professionals in the organization.
7.     Prolanthropy oversees 21 nonprofits that have been active in two dozen states. Prolanthropy proclaims itself the "largest and most successful" philanthropy management firm in pro sports. It is suppose to address some of the soft-spots we have heard about over the past decade. Unfortunately, it too needs some schooling. Some of the charities it oversees have not registered with state authorities, and Jeff Ginn and his for-profit firm were not registered to raise money in states where the charities sought funds, records show. Some of the charities claimed to be federally tax-exempt when they had yet to be recognized by the Internal Revenue Service. And Prolanthropy is often paid a percentage of a charity's revenue, a compensation model that some experts say goes against industry's best practices. Ken Berger, president of Charity Navigator, a watchdog group that evaluates charities weighs in: "If you don't have the basics in place, it's an indicator that you're probably going to run into problems at some point.”
8.     Watch Out For Charity Bingo:  The Texas Lottery Commission runs charity Bingo in Texas but resources are scarce. In most instances in Texas, playing bingo, doing it right, and bringing in money for great causes. But in some cases that is not the case. Some management companies use dead or incapacitated veterans to play bingo; they pocketed profits for themselves and left the charity high and dry. In the case of the Cen-Tex African American Chamber of Commerce in Waco, it brought in nearly a $1 million in gross receipts, but its organization’s cut was only about $1,600. After two years of playing charity bingo, The non-profit owed more than $26,000 to the Lottery Commission and the management company running bingo for them. In another instance, the Dallas-based Sad Sacks charity claimed bingo made more than $1 million in 2011. But after prizes, rent, and those other expenses, they were in the red for more than $13,000.
9.     The Florida House voted 133-3 for comprehensive legislation to combat fraud and deceptive practices by charities in Florida. The law needed improvement because of the widespread abuses chronicled in an investigation by the Tampa Bay Times and the Center for Investigative Reporting called "America's Worst Charities," which exposed rogue charities that pocketed millions of dollars in profits under the pretense of raising money for veterans or sick children.
10.  The oldest operating monastery in America where 42 monks live (KY) is being rocked with accusations that one of its lay employees, an accountant, embezzled what could total tens of thousands of dollars or more from its mail-order business
11.  These are warning signs from the Better Business Bureau Serving Eastern Michigan for donors: Watch out if the solicitor:
·       refuses to provide written information about its identity, its mission, its costs, and how the donation will be used
·       will not provide proof that a contribution is tax deductible
·       uses a name that closely resembles that of a better-known, reputable organization
·       thanks a potential donor for a pledge the person doesn't remember making;
·       asks a potential contributor for bank account or credit card information before the person has reviewed the organizations information and agreed to contribute
·       uses high-pressure tactics to secure a donation before the potential donor has had a chance to make an informed decision about giving
·       asks for donations in cash
·       offers to send a courier or overnight delivery service to collect the donation immediately;
·       guarantees sweepstakes winnings in exchange for a contribution.
We flagged these few examples of nonprofit mischief 
1.     P&G Mehoopany Federal Credit Union (TX) $37,000
2.     Princeton Elementary School (NC) $2600
3.     U.S. Agency for International Development (USAID) $500,000
4.     Allen Temple Baptist Church (CA) $600,000
5.     Springtree West Cove Homeowners Association (FL) <$100,000
6.     Chester’s Fourth of July festival (WV) $2500
7.     Vista Free Will Baptist Church/Van Buren Christian Academy $94,000
8.     Wellspring Church (MI) <420 span="">
9.     Santa Barbara County Fire Fighters Union (CA) $124,000
10.  Huntington Area Food Bank, (WV) $24,000
11.  Annie B. Jones Community Services (IL) unknown
12.  Girl Scouts of Virginia $23,000
13.  Breckenridge Festival of Film (CO) $250,000
14.  Accrediting Council for Independent Colleges and Schools (DC) $144,000
15.  Falmouth College (M A) $3 million+
16.  Lake Ridge Schools in Northwest Indiana more than $134,000
17.  Martin de Porres School (NY) $485,000
18.  Crisis Ministry (SC) more than $440,000
19.  Rocklin Academy Parent School Partnership (CA) $37,000
20.  Home at Last (KY) $69,000
21.  Peace and Joy Care Center (CA) $700,000
22.  ArtSplash (CA) $200,000
23.  Horsham Soccer Association (AL) $64,000
24.  Southeast Missouri Health Network unknown
25.  Huntington Area Food Bank (WV) $25,000 
26.  Wake Forest Baptist Medical Center (NC) $114,000
27.  Del Oro Junior Golden Eagles (CA) $20,000
28.  Santa Paula High School band program (CA) $22,000
29.  Indian River Lion's Club (MI) <$20,000
30.  Indian River Lion's Club (NC) $115,000
31.  Livingston Manor Central School District (NY) $15,000
32.  Boston Veteran’s Administration Research Institute $69,000
33.  Kosair Charities (KY/IN) $2.4 million
34.  Court Appointed Special Advocates (CASA) (IA) $9000
Political/public official chicanery (just a few):
1.     Chelan County (WA) is suing its former bank, Bank of America, for over $600,000 in losses from an international cyber theft last year. Hackers stole password information from Cascade Medical Center in Leavenworth. The Chelan County Treasurer's Office handles accounts for the nonprofit hospital.
2.     The former general manager of Village Ambulance Service who allegedly stole $240,000 (over 5 years) from the nonprofit -- with the help of his wife -- was sentenced to probation and ordered to pay back the money.
3.     An attorney in CA is accused of taking more than $1.3 million from a foundation dedicated to housing elderly citizens.
4.     Brimfield's (MA) former town treasurer was arraigned in Hampden County Superior Court after being indicted on charges of embezzlement and larceny filed when an audit showed $80,000 missing from the town's coffers
5.     A former Compton (CA) Fire Department battalion chief pleaded no contest to felony charges of arson of property and embezzlement by a public official.
6.     A Detroit Public Library chief administrative office and technology officer pleaded guilty to committing bribery. He was charged with taking $1.8 million in bribes and kickbacks from library contractors.
7.     A long time employee of the state of Vermont is accused of stealing about $75,000 in state funds last year in checks she wrote to pay for personal expenses. Her embezzlement scheme likely stretches back at least as far as 2009.
8.     The former treasurer of Mayetta Rural Fire District No. 1 was sentenced to 30 months in prison for embezzling over $400,000 from the district’s bank accounts. He was also ordered to pay more than $427,000 in restitution to the district.
9.     The clerk in Grange Township (IA) pleaded guilty to taking $64,000
10.  A former Hartford (CT) Police Detective pleaded guilty in federal court in Hartford to embezzling $30,000 over 5 years from gun permit fees.
11.  The former city treasurer of Healdton (OK) is charged with stealing $800,000.
12.  NY City Councilman Ruben Wills is charged with stealing $33,000 in state money for a nonprofit called NY 4 Life, which contracted with the state to create programs for “single mothers.” He is also charged with stealing $30,500 worth of campaign funds, and filed false paperwork to conceal a fraud, between 2008 and 2012.
13.  The founder of a Sarasota (FL) nonprofit, ManUp, is now serving a prison sentence after being convicted of stealing more than $76,000 in grant money administered by the city.
14.  A warrant has been issued from the Arenac County (MI) Prosecuting Attorney’s Office for the arrest of former Arenac Township Treasurer Bonnie Campbell, formerly known as Michelle Mackenzie, alleging she embezzled up to $50,000 from the township.
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, 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, 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
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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






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