Thursday, October 16, 2014

Mid October Edition-Nonprofit Imperative E-Newsletter

Nonprofit Imperative
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October 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:
PBS; Little People’s World
Charity Check Up:
Beaumont Independent
A Thought or Two:   
St. Louis County Health Department
Nonprofit News-In Case You Missed It:
The Feast of San Gennaro in Little Italy; Hurricane Sandy Funds: Lydon State College…more
Political/Official Chicanery:
NJ; TX; IL; MN; MI; NV; MS; OH; LA; CA; …more
So, What Do You Think?

Thefts from charitable organizations are fairly common, usually because they do not have the resources and structure for strict oversight, Marquet said. One in six major embezzlement cases in 2012 involved charities or religious organizations, according to Marquet’s study. (Chris Marquet, the owner of Marquet International, a Boston investigative firm that publishes an annual report on white-collar fraud)
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 (for themselves).”
No Monitoring Cost PBS Over $2 million
The former finance director of a Public Broadcasting Service’s arm in Boston is alleged to have stolen more than $2 million. It took about four years to find it. He deposited more than 200 checks meant for PBS.  A lawsuit alleges he forged a PBS endorsement on the checks and presented the checks to Citizens Bank for deposit into his own account.
PBS contends that Citizens should have been aware of the fraud.  “Citizens Bank did not conduct any reasonable inquiry or question the appropriateness of the deposits when the checks were presented to Citizens Bank and accepted,” Federal Insurance said in the lawsuit.
No charges have yet been brought in the case, according to court records.
The alleged embezzlement came to light in a lawsuit filed in late September.
Federal Insurance, which covered PBS for employee theft, paid the nonprofit $2 million, the limit of the policy’s liability. The insurer is seeking to recover that money from Citizens, plus legal and other costs.
WGBH, a PBS station, was the victim of employee theft a few years ago. In 2010, a former accounting manager at WGBH-TV pleaded guilty to stealing nearly $500,000 from the station over nine years.
Such thefts deliver a blow to the reputations of charities, because they are built on trust and the expectation that the money they receive is used appropriately, said Chris Marquet, the owner of Marquet International, a Boston investigative firm that publishes an annual report on white-collar fraud.
“It’s never a good thing,” Marquet said. “They are probably no doubt going to have show the world that they have safeguards in place.”
Thefts from charitable organizations are fairly common, usually because they do not have the resources and structure for strict oversight, Marquet said. One in six major embezzlement cases in 2012 involved charities or religious organizations, according to Marquet’s study.
No Governance, No Enforcement But Who Cares?
A husband and wife have been charged with embezzling $460,000 from a taxpayer-funded nonprofit agency, Little People's World, hired by Los Angeles County to help abused and neglected foster children, the district attorney's office announced. A county audit three years ago concluded that CSJ Kidogo, executive director of the nonprofit Little People's World, and his wife, Hitaji Kidogo, assistant executive director, used public money to purchase personal real estate, pay personal loans and collect exorbitant salaries. According to the district attorney, the misuse of funds began in 2008 and continued into 2013. 
A Confortable Board Leads To Substantial Embezzlement
Former Townsperson of the Year by the Camden-Rockport-Lincolnville Chamber of Commerce and a board president for 17 years is being investigated for a $3.8 million embezzlement of donations to the United Mid-Coast Charities Inc. A public relations firm hired by the organization said the embezzlement came to light when a member of the executive committee detected discrepancies. The discovery of the embezzlement has touched off a discussion by the board about its policies and procedures.
Charity Check Up:
Texas School District ‘Vulnerable’ Resulting In $4 Million Theft
The two former Beaumont Independent School District employees who embezzled more than $4 million from the school district were sentenced in federal court. Former chief financial officer and the district's former comptroller, pleaded guilty in April.
The CFO was sentenced to 68 months (more than 5 years) in federal prison. He must also make more than $4 million in restitution to the district. The controller was sentenced to four years in federal prison and will have to pay more than $1 million in restitution.
These two were two of the three BISD employees who had the authority to conduct wire transfers of district money without notifying anyone else, according to the stipulations. Both "exploited this vulnerability" and transferred approximately $4 million in 18 separate wire transfers to personal bank accounts.
The state took over following the 19-count federal indictment of the two school officials. 
The Texas Education Agency issued a damning report that found a near-complete lack of accounting controls at the district, not to mention school administrators who obstructed the investigation by disappearing for the entire time state investigators were in Beaumont.
Perhaps more stunning was the district’s failure to set up basic internal controls — for example, having one person make transactions and a different person review them and their refusal to set up those controls after the investigations and the indictment of its finance officials made the problem obvious to all.
“The person responsible for the embezzlement told the TEA that he was able to embezzle substantial funds over a significant period of time because no one was watching his activities,” according to the report. The district insisted it started implementing some controls in August 2013, after one review, but the CFO was able to embezzle $570,925 after that date, according to investigators.
Among other findings, the TEA reported that Assistant Superintendent Patricia Lambert approved some $454,000 worth of printing contracts for a small business owned by her son, who was not an approved vendor. The district’s defense, which TEA rejects, is that Lambert somehow doesn’t qualify as a “local government official” under the law, so it wasn’t technically a violation of federal law. (source)
A Thought or Two:

Sad…At Many Levels

It began with a finance officer’s seeking additional details about a $187,450 invoice for goods and services submitted to the St. Louis County Health Department by a company called Gateway Technical Solutions.
A little over a month later, the questions led to the suicide of a top agency official, the unmasking of a $3.4 million embezzlement scheme and an ongoing investigation that helped end the career of longtime County Executive Charlie Dooley.
Curiosity about the firm that had received millions of county dollars for leased laptop computers and technological consulting services since 2006.
It soon became clear that few health department workers, beyond the handful who had cut checks to the company, had ever heard of Gateway Technical Solutions.
The inquiry gradually pointed to a single office: that of Edward Mueth, the division manager for administrative services.
“He was very smooth, very smart,” said one colleague.
Mueth also possessed a secretive side — a large amount of personal wealth for a public official earning $86,000 a year.
There was his Webster Groves mansion once featured in a local magazine on upscale lifestyles. Not to mention the luxury automobiles, the motorcycle and the access to a private aircraft.
As their investigation moved forward, the investigation team uncovered a connection between Mueth and David Neff, the president of Gateway Technical Solutions.
Officials cut off Mueth’s access to the county computer system and summoned him to a meeting the next morning, Sept. 20, in the office of Chief Operating Officer Garry Earls.
A few hours later, at 9:46 p.m., Mueth pulled into a parking lot near his Webster Groves home, put a .40 caliber Glock handgun to his head and pulled the trigger.
His survivors included a preteen son.
Update: A copy of the FBI audit regarding a $3.4 million county (Saint Louis) health department embezzlement has been released to the ACLU of Missouri, showing that a county government official used public money to buy, among other things, landscaping, fast food, dog kennel services and child care. The health department received $60,000 in laptops from Mueth’s firm, called Gateway Technical Solutions. Mueth took the remainder of the money and bought a $1.5 million Webster Groves mansion, landscaped it for $200,000, acquired $100,000 in firearms, and bought expensive cars.
More Sadness: Where Is The Punishment?
A year probation and pay-back restitution of four thousand dollars was the sentence handed down to Gary Peterson, the former pastor of Wellspring Church north of Hudsonville. He didn’t contest an attempted larceny count in a plea deal. Peterson, who will remain the leader of Grandville’s The Rock Church, had been charged with using a Wellspring-issued credit card for personal luxury expenses.

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Nonprofit News…
In Case You Missed It:
1.     The N.Y. charity running one of the biggest tourist attractions in the city — the Feast of San Gennaro in Little Italy — gave away only a tiny fraction of the more than $4 million it raised from 2007 to 2012, a Daily News investigation has found. Over those years, the group Figli di San Gennaro took in $4.4 million in gross revenue, but gave up only $210,500 of that to charity. That’s about 4.7%.  This is better than when the Mafia was running the feast. Back in 1996, then-Mayor Rudy Giuliani kicked out the previous charity, saying it was giving out only 3% of what it took in to charitable causes.
2.     The New York Mayor de Blasio administration is moving to hire new contractors in an effort to quadruple the pace at which homes wrecked by Hurricane Sandy are being repaired or replaced. The Build It Back program has now started construction on 573 homes and sent out reimbursement checks to another 591 homeowners, said Amy Peterson, the city’s director of post-Sandy housing recovery efforts. That’s up from zero at the beginning of the year, but still a fraction of the 19,000 who initially applied.
3.     A judge has dismissed an embezzlement charge against a former Lyndon State College (VT) varsity baseball coach after ruling the state could not prove he converted any money to his own use.
4.     A longtime Philadelphia television personality admitted in court to stealing $317,000 from some 200 victims who purchased phony travel packages ostensibly sold to benefit charities, The Philadelphia Inquirer reported. Don Tollefson was arrested in February after buyers of the sports-related excursions began coming forward with allegations that the flight and game tickets they purchased were not delivered. Mr. Tollefson was a longtime fixture in local news, at one time drawing the highest salary among Philadelphia sportscasters, and gained additional renown for his charity work.
5.     A poll conducted for the good government group Public Citizen and the conservative Hudson Institute suggest that vast majority of voters want rules to clearly state how much political activity non-profits can carry out. In all, 86 percent of voters believe strong rules are important, including almost six in 10 who think that’s very important.
6.     Jessica Strasser's embezzlement case is particularly notable because she and husband Matt Strasser of Rose Hill (Iowa) have on several occasions been the public face of military families and their struggles. The couple was even featured in a 2010 segment on "NBC Nightly News with Brian Williams." Matt Strasser has been deployed with the Iowa National Guard twice to Afghanistan and once to Kosovo. She has now taken responsibility in an embezzlement case involving at least $279,345 in public money, saying, "… I am a coward and took advantage of those that care for me."
7.     As the recession lifted, poor and middle class Americans dug deeper into their wallets to give to charity, even though they were earning less. At the same time, according to a new Chronicle analysis of tax data, wealthy Americans earned more, but the portion of the income they gave to charity declined.
8.     Adrian Peterson’s All Day Foundation has filed some contradictory financial reports. Their 2011 financial report showed $247,064 in total revenue, with just three organizations listed as receiving money. A fourth outlay, entitled simply “clothing for needy families,” said “unknown” for the number of recipients. Their 2009 report said its largest gift of $70,000 went to Straight From the Heart Ministries in Laurel, Md. But Donna Farley, president of the organization, said it never received any money from Peterson’s foundation. “There have been no outside [contributions] other than people in my own circle,” Farley said. “Adrian Peterson — definitely not.” The 2009 tax filing also listed a donation to a food bank in Dallas, but that group said it hadn’t received any money from Peterson.
We flagged these few examples of nonprofit mischief 
1.     HalloWayne (MI) <$20,000
2.     National Postal Mail Handlers Union Local 314 (MO) $41,000
3.     Painted Sky Elementary School parent teacher organization (AZ) $15,000
4.     Knowlton Township (NJ) schools $70,000
5.     Lohn school district (TX) more than $500,000
6.     SELF Inc (PA) $198,000
7.     Holy Cross High School Limmer Open (NJ) $20,000
8.     Tri-County Community Services (NM) $26,000
9.     Congregation Beth El (CA) $543,000 
10.  The Jimmy Miller Memorial Foundation (CA) $250,000
11.  Points of Light Foundation of Atlanta $195,000
12.  College of Southern Idaho unknown
13.  St. John's Children's Hospital (IL) $500,000+
14.  Quaker Hill Rod and Gun Club (CT) $32,000+
15.  Kennewick American Legion Baseball/ Kennewick High School Booster Club $15,000
16.  Island Hospital Foundation $300,000
17.  Advancement of International Education (FL) $150,000
18.  Baldwin Hockey Club (PA) $2400
19.  Cancer Service Network (NY) $360,000
20.  Albion District Library (MI) <$14,000
21.  Brotherhood of Locomotive Engineers and Trainmen, Division 261 (KS) $17,000
22.  Mills Action Club, the PTA at Mills Elementary (OK) $4000
23.  St. John’s Children’s Hospital (IL) $700,000
24.  Chatham Fire Protection District (IL) $50,000
25.  Southeast High School (IL) $100,000
26.  Parent Teacher Organization at Sun View Elementary School (CA) $22,000
27.  Santa Paula High School Band Booster (CA) $22,000
28.  Lay Mission-Helpers (CA) $869,000
29.  Huntington Area Food Bank (VA) $32,000
30.  East Tennessee Attendance Supervisors Association (ETASA)/Tennessee Attendance Supervisors Steering Committee (TASSC) $400,000
Political/public official chicanery (just a few):
1.     The Knowlton Township school board's former business administrator pleaded guilty to embezzling about $70,000 from the Warren County (NJ) school district.
2.     The former business manager of a Central Texas school district has been sentenced to two years in federal prison for embezzling more than $500,000 from the Lyon (TX) district.
3.     A one-time deputy chief of staff to former Chicago Mayor Richard M. Daley, Gene Lee, has been sentenced to five years' probation for a scheme in which he cashed checks made out to a charity, then pocketed part of the money. A federal judge cited Lee's decades of helping his community in choosing not to give the 65-year-old prison time. U.S. District Judge John also ordered that Lee repay the stolen money and do 240 hours of community service. Lee admitted he cashed more than 160 charity checks and took some of the money. Prosecutors said that in 2008 alone, Lee stole more than $26,000 of $38,000 donated to his charity, Chicago Dragons.
4.     The Star Tribune reported that Community Action, which drew board members from high-profile Democratic ranks, a (MN) Human Services Department audit found " the organization’s longtime chief executive, Bill Davis, misspent hundreds of thousands of dollars from 2011 to 2013." The audit’s findings put Community Action at risk of losing at least $2.8 million in aid. Chuck Johnson, DHS’s deputy commissioner. Johnson said the organization might have to pay back more than $870,000 that was misspent. “There were decisions made about how dollars were spent that are quite frankly pretty egregious,” Johnson said. The agency was subsequently raided and closed.
5.     Former Kent County (MI) Commissioner Michael Wawee, 44, pleaded no contest to charges related to embezzlement from the Diocese of Grand Rapids. The records also show he took $11,000 from widows and widowers by overcharging them for grave stone related services at Holy Cross Cemetery.
6.     Melissa Marie Heyden was sentenced to 60 months probation after she pleaded guilty to misappropriating $35,000 and falsifying the financial accounts of the Nevada State Board of Podiatry, according to the Nevada Attorney General
7.     A Warren County (MS) Circuit Clerk pleaded guilty to three counts of embezzlement. She was sentenced to serve five years in prison. She transferred $12,000 to her personal account from various court funds. She was removed from office in May for violating state law governing residency requirements for elected officials. 
8.     The sole employee was sentenced to a year in prison for embezzling more than $42,000 from the Central Illinois Enforcement Group, a drug task force of local and state police officers.
9.     The Washington Township (OH) Fire Department has identified the man behind an alleged embezzlement. The amount is unknown. 
10.  The University of New Orleans Research and Technology Foundation was created to support research at the University of New Orleans has accounted for only $5.3 million of the more than $19 million it received from the Federal Emergency Management Agency for damage sustained during Hurricane Katrina, according to an audit by the Office of the Inspector General at the Department of Homeland Security.
11.  A retired Los Angeles police detective is accused of embezzling more than $150,000 from a foundation that represents black LAPD officers and employees-Oscar Joel Bryant Foundation.
Readers, weigh in as to what you think…please continue the tips (they are very helpful)
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,, 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,, 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,, 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, VPR News,
  • 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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Phone: 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 books can be bought at,, Barnes and Noble (store)
© Gary R. Snyder, All Rights Reserved, 2014

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