Thursday, June 19, 2014

It Took 8 Years, A Diligent Press, To Call Attention To A $3.4 Million Charity Fraud

by Gary Snyder

As part of a 2013 investigation, a Washington Post reporter saw that the American Legacy Foundation had marked a "significant diversion of assets" on its tax form.  The Post was informed that its former information-technology director and vice president, Deen Sanwoola, embezzled $3.4 million from 1999 to 2007, the years Sanwoola worked at the foundation's headquarters.

An employee reported that inventory was missing in 2007 or 2008, but the supervisor receiving the report didn't take action because Sanwoola had been a trusted employee who was well-liked, according to Legacy officials interviewed by The Post.

The same employee reported to a different supervisor three years later. That time, the report was taken seriously. CEO Cheryl Healton ordered a forensic audit. When the investigation indicated fraud, Legacy called the local U.S. attorney.

Because Sanwoola controlled ordering and inventory in the department, no controls were in place to tip off other Legacy executives that money from the nonprofit's $50 million annual budget was disappearing, Idaho Attorney General Lawrence Wasden, then the foundation's chairman, Wasden said. Wasden said that he also served on an auditing committee while the embezzlement took place. He said he asked auditors if they received cooperation from managers and was told they had the access they needed. The audits did not detect the embezzlement, and Wasden said he received no hints that anything was wrong.
Sanwoola was operating a video-game emporium in Nigeria when the article ran. He was incredulous when The Post contacted him for comment, saying he knew nothing of the embezzlement.

No charges were filed. The U.S. Attorney's Office told The Post that Legacy had taken too long to report the missing inventory and lacked records of its inventory.

Legacy was one of more than 1,000 nonprofits nationwide that checked the "significant diversion" boxes on their annual tax reporting forms from 2008 to 2012. The top 10 diversions alone totaled more than a half-billion dollars.

Most nonprofits are reluctant to disclose fraud because they fear they'll lose trust of the agencies and donors that support them, said Denise McClure, owner of Averti Solutions, a forensic accounting service in Boise. She said nonprofits that come clean usually come out ahead, as the Boise affiliate of the Susan G. Komen for the Cure did in 2008 after admitting an employee stole more than $170,000 intended for breast cancer research, screening, education and treatment. McClure said Komen regained donors it lost after the disclosure because it re-established trust. (source)

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,, 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,, CORP! Magazine, Crain’s Michigan Nonprofit,, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner,, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today,, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization),, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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