Nonprofit
Imperative
…Your nonprofit browser
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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News
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) 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, 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
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.
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 amazon.com, barnesandnoble.com, Barnes and Noble (store)
© Gary R. Snyder, All Rights Reserved, 2014
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