Friday, May 15, 2015

Mid-May Nonprofit Imperative E-Newsletter


Nonprofit Imperative
Your nonprofit browser
May 2015
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:
United Mid-Coast Charities; St. Jon’s Children’s Hospital
Charity Check Up:
West Harlem Community Organization; National Relief Charities; Operation Tribute
A Thought or Two:
Perley Fund
Nonprofit News-In Case You Missed It:
FASB; Increased Demand For Charity Services; NFL; FEGS (again)…more
Political/Official Chicanery:
MI; MA; VT; NY; TX; TN; NC; CA; KY; PA; OR…more
What Do You Think?
“To do good, donors must do their homework,”
"Fraud at nonprofits is arguably much more common than most organization leaders would suspect." A third party analysis of federal filings that shows that more than 1,000 nonprofits said they had discovered a "significant diversion" of assets between 2008 and 2012. And another study concluded that nonprofits and religious organizations accounted for one-sixth of all major embezzlements, placing the nonprofit sector second only to financial services. (source)
…only 20% of leaders said their organizations have a "facilitated fraud risk assessment process (Nonprofit Pulse)

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).”

Charity President Embezzles Upwards of $5 million
United Mid-Coast Charities (ME) and its former longtime president have reached an agreement in which he will pay the group more than $4.6 million in connection with his alleged embezzlement of funds from the organization.
United Mid-Coast Charities President Stephen Crane announced in a news release that Russell “Rusty” Brace admitted to breach of duty, fraud and conversion of money belonging to the charity after his theft of hundreds of donation checks made payable to the charity.
The settlement is for $4,646,636, according to the news release.
In order to partially satisfy the judgment, Brace has agreed to sell properties that he owns and turn over his interests in the sale proceeds to the charity. He also has agreed to turn over all the money that he holds in bank accounts as well as his interest in certain items of personal property that will be sold.
Jay McCloskey, attorney for the charity, said “in order to settle this case, the charity required Mr. Brace to agree to liquidate virtually all his assets and turn over the proceeds to UMCC. At the end of the day, I think the charity will recover a substantial portion of the money that was stolen from it.”
No criminal charges have yet been filed against Brace although Brace’s attorney Peter DeTroy has said they will be filed.
Hospital Director Finally Caught After Six Years
An attorney for a former children's hospital director in central Illinois says she will plead guilty to at least one of several felony charges in an embezzlement case.
Margaret Curtin is accused of stealing $700,000 from the nonprofit HSHS St. John's Children's Hospital in Springfield. She has previously pleaded not guilty.
Curtin was earning more than $180,000 a year at her job. She's accused of stealing money from 2008-2014 and using it to pay off a credit card and for mortgage bills and home improvements. (source)
Charity Check Up:
Politician Gains Control of Charity and Hundreds of Thousands of Dollars
Rev. Andre Soleil, a former aide to Mayor Rudy Giuliani and Gov. George Pataki, joined the West Harlem Community Organization board in 2011 and stuffed his pockets with organization funds meant to house and educate the poor, a new lawsuit charges.
The Brooklyn attorney and political operative quickly gained control of the nonprofit’s seven apartment buildings, which were deeded to the group by the city in the 1990s for affordable housing, according to the lawsuit, which was filed by the organization. Soleil, 47, sold one of the buildings, 218 W. 116th St., without required permission from the state attorney general, to a Miami-based company for $1.4 million in December 2013, the suit says.
“Where the majority of the proceeds from this unlawful sale have to personally enriched himself,” the nonprofit’s lawyer, William Fried, says in the court papers. Soleil has refused to account for all the proceeds, though the suit alleges he put $489,000 in his law firm’s escrow account “with the intent to convert those funds for his own use.” Court papers allege another $70,000 went to pay consultant Joednee Copeland’s salary, even though the nonprofit’s board refused to authorize the payment. (source)
Six hundred deprived of schooling by $4 Million Embezzlement
A former charity president who stole $4 million from the nonprofit, National Relief Charities (OR), depriving 650 desperately poor Native American students of a chance for college scholarships, was sentenced to a little more than three years in prison.

Another Vet Charity Raided---$750,000

The award-winning founder of Operation Tribute was under investigation for stealing $750,000 from the nonprofit.  Federal investigation indicates that he used $24,000 of donated funds for his child’s tuition, more than $230,000 in cash,
A Thought or Two:

Board On The Hook For Governance Failures

A New York City nonprofit used a choir as part of a strategy to enrich its president, state Attorney General Eric Schneiderman's office said. "The breakdown in governance at the Perley Fund was shocking, bringing a longtime charity serving New York's underprivileged children to the brink of financial ruin," Schneiderman said. The more than 50-year-old Victor E. Perley Fund's problems started after trustee Richard Basini took over as president in 2009, the AG said. Basini helped secure the fund's purchase of a $1.1 million house in the Hamptons as a retreat for the choir — which he then used as a private residence, they said. An investment banker he recruited to manage the organization's funds also steered money into companies Basini had relationships with, the AG said. Basini committed suicide in 2013.
The attorney general went after the directors. Board members of nonprofits are supposed to prevent—or at least detect—looting of their organizations. In this case, they did not. The $1 million settlement will come from Philadelphia Indemnity Insurance Co., which provided coverage to the trustees.

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Nonprofit News…
In Case You Missed It:
1.     The U.S. Court of Appeals for the Third Circuit recently upheld a $2.25 million jury verdict against the directors of a nonprofit nursing home, holding them personally liable for breach of their duty of care. Their sin? Failing to remove the nursing home’s administrator and CFO “once the results of their mismanagement became apparent.” While the court overturned a punitive damages verdict against five directors (the jury had found nine other directors liable for compensatory damages but not punitive damages), it upheld punitive damage awards of $1 million against the CFO and $750,000 against the Administrator. The decision, while unusual, illustrates that serving on a nonprofit board is not risk-free even if as in this case, the directors do not breach their duty of loyalty or engage in any self-dealing. [In re Lemington Home for the Aged, 777 F.3d 620 (3d Cir. 2015). h] (source)
2.     Bad Months; Charity fraud in one community): Winslow (ME) Veterans of Foreign Wars ($7700); Winslow Travel Soccer Club ($15,000); Winslow Wrestling Sports Booster Club ($10,000); VFW Ladies Auxiliary ($1500); Coastal Enterprises Inc ($365,000)
3.     The Financial Accounting Standards Board has issued a proposed accounting standards update to improve the information provided in not-for-profit financial statements and notes to financial statements that could have major implications for nonprofit organizations. “The proposed ASU contains recommended enhancements to the fundamental reporting model for not-for-profit organizations—a model that has existed for more than 20 years,” said FASB member Lawrence W. Smith in a statement. “We believe that these changes will refresh the model in ways that will make not-for-profit financial statements even more useful to donors, lenders, and other users.”
4.     According to the 2015 State of the Nonprofit Sector Survey, 76 percent of the fifty-four hundred nonprofits surveyed reported an increase in demand for their services, while 52 percent said they couldn't meet the demand — the third consecutive year in which that figure was more than 50 percent. Of those respondents unable to meet demand for their services, 71 percent said that client needs go unmet when they are unable to provide services.
5.     The National Football League’s central office will become a taxable entity, ending its tax-exempt status in a move with minimal financial effect and significant symbolic value. The league’s decision pre-empts a move to revoke the tax break that had been led by former Senator Tom Coburn of Oklahoma. For the NFL, the costs of losing the tax break are minimal, an estimated $109 million over the next decade. There are benefits for the league, too, including the end of federal disclosure requirements that put Commissioner Roger Goodell’s salary and some other league information in the public domain. The commissioner Roger Goodell’s pay reached $44 million in 2012. The league will now be allowed to avoid many of those disclosures,
6.     The NFL’s move mirrors one made by Major League Baseball in 2007. The National Basketball Association never was tax exempt. The National Hockey League is now the only major professional sports league in North America with the status.
7.     Gail Magaliff, who was the CEO when the FEGS Health and Human Services, one of New York City’s largest social service agencies ran aground, is asking for $1.2 million in deferred compensation. Magaliff earned a total of $638,880 in base salary and additional compensation in 2012, other employees earning far less also have claims for unpaid severance and vacation time, and there will not be enough to pay all such claims off.
8.     Update: Donors are starting to give again to the Central Asia Institute after contributions plummeted over mismanagement allegations against the charity founded by "Three Cups of Tea" author Greg Mortenson, its executive director said. More than 1,270 donors who stopped giving money to the Bozeman-based organization over the past two years have contributed this year, and total donations are about $100,000 higher than the $1.7 million at this time in 2014, according to Central Asia Institute officials. The charity builds schools and promotes education in Pakistan, Afghanistan and Tajikistan.
We flagged these few examples of
1.     Sons of Malta (MI)/ EZ Memorial Ride unknown
2.     North Berrien Senior Center (MI) $317,000
3.     North East Collegiate Lacrosse League (MA) $6000
4.     Caledonia Central Supervisory Union Schools (VT) $3000
5.     Monroe County Child Advocacy Center (MI) $30,000
6.     Dexter Community Schools (MI) $100,000
7.     Mighty Oaks Children's Therapy Center (NY) $44,000
8.     Covenant Presbyterian Church (TX) <$100,000
9.     Saint George Greek Orthodox Church (TN) $400,000
10.  Jamestown Elementary School’s PTA (NC) $5000++
11.  Live Oak Schools PTA  (CA) $12,850
12.  Toys for Tots (KY) $40,000
13.  Hunting Park Neighborhood Advisory Committee (PA) $85,000
14.  Reedsport School District (OR) $25,000
15.  Eastminster Child Development Center (MI) $20,000
16.  Irvine Regional Hospital/ Hoag Hospital Foundation  (CA) $220,000
17.  Boys & Girls Clubs of Sonoma Valley (CA) $8000
18.  Tet Parade (CA) $118,000 
19.  Muhlenberg Township Athletic Association (PA) $60,000
20.  Northwood High School (NC) $81,000
Political/public official chicanery (just a few):
1.     The former executive director of a Chicago-based charity, the Organization of New City, pleaded not guilty to using thousands of dollars in donations for personal expenses. He is charged with theft of more than $100,000, and misuse of charitable trust funds, according to court records and Attorney General Lisa Madigan’s office. The agency helps low-income homeowners pay their mortgages on time to avoid foreclosure, Madigan’s office said.
2.     A former Clay Township  (MI) clerk pleaded guilty to a 15-year felony. The case of former Titusville Area Leisure Services director Michael Rice, who is charged with stealing more than $4,500 in city pool earnings during his brief tenure in 2013, will proceed to Crawford County Court .
3.         New York State’s political power player Carl Heastie’s mother plead guilty in 1998 for embezzling money from a nonprofit organization she was employed by, according to the New York Times. Prosecutors say she used the stolen money to purchase their family home in 1995 at $165,000. To avoid jail-time she agreed to sell the home, co-owned by her son, and forfeit all revenues to her former employer. However, three weeks after being sentence Mrs. Heastie passed away at the age of 60. Going against the judge’s stipulations, Mr. Heastie retained the three-story Bronx rowhouse and didn’t sell it until six years later, using the profit of over $200,000 to finance his current home.  Duncan Levin, who reviewed the case for The New York Times, stated Mr. Heastie was “sitting on stolen money” that prosecutors should have recovered during the case or following his mother’s death.
4.        A former Michigan State University employee charged with embezzling more than $100,000 from the College of Osteopathic Medicine could stand trial next month. She used her position at the university to make unauthorized personal purchases, including gift cards, iPads, Apple computers and computer accessories, in addition to cash, according to court records.
6.         A former Clay Township  (MI) clerk pleaded guilty to a 15-year felony. He will pay the township a total of $131,225 in restitution.
7.         Former Berrien County Commissioner Robert Wooley was sentenced to a minimum of nearly three years in prison after pleading guilty to embezzling more than $300,000 from the North Berrien Senior Center, where he was the director.
8.        The former Elm Creek city clerk (NE) is charged in Buffalo County District Court with felony theft for allegedly embezzling $10,518 from the village.

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.
We’re noticed: 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, New York Times, 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, , 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.
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, 2015






























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, 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, Finance and Administration Roundtable Newsletter, 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, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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