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)
-------------
“…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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News
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)
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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
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
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