Friday, September 11, 2015

Mid-September Nonprofit Imperative E-Newsletter



Nonprofit Imperative
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September 2015
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:
Breaking the Silence:
Report: OK Representative Raids Charity for $1.8 million
Skunk of the Month:
American Red Cross (again):  Nonprofit Secretly Raised Compensation by 64%...more
Charity Check Up:
Subway Posterboy Charity; Homeland Foundation-$4.3 million misdeeds
A Thought or Two:
Serial Thief= $1.3 million
Nonprofit News-In Case You Missed It:
$10 million in Church Donations Unspent; Jewish Community Center (San Diego)…more
Political/Official Chicanery:
VA; MS; CA; NJ; NM; IN; CO…more
What Do You Think?
·       To do good, donors must do their homework
·       Give Without Being Taken
“…volunteerism has plunged to it lowest point since 2002…last year the Salvation Army had 200,000 fewer; Red Cross has 43% fewer than in 2009…largest problem is that most are busier, many with jobs… (Bureau of Labor Statistics)
Limited staff, tight operating budgets, and a trusting nature have helped to make nonprofits attractive targets for criminals, according to accountants and other fraud investigators. (source)
“…international charities and a public push for greater transparency on spending … are compelling some non-government organizations (NGOs) to hire a new recruit - the criminal investigator. (source) …. Fifteen suspects have been charged after an inquiry into an alleged £12 million  ($18 million) fraud against public and private bodies (source)
Medicare fraud in all its forms is rampant. … the government estimates that $60 billion to $90 billion is lost each year to Medicare fraud and abuse. In California, as many as 20% of fraud allegations investigated each year by the Senior Medicare Patrol involve durable medical equipment. (source)
Breaking the Silence:
Representative gets a great return on his stolen money
An Oklahoma two-term Republican Sen. Rick Brinkley is accused in a lawsuit of embezzling more than $1.8 million at the nonprofit agency where he once worked. He has entered into a settlement agreement over allegations he improperly used campaign funds where he paid nearly $50,000 in campaign funds.  Earlier this year he paid nearly $50,000 in campaign funds to the Better Business Bureau in Tulsa, where Brinkley is accused in a lawsuit of embezzling more than $1.8 million. Under the agreement, Brinkley agrees to forfeit the balance of his campaign account, about $81,000. 
Brinkley has submitted his letter of resignation and plans to step down from his state Senate post at the end of the year.
(source)
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).”
American Red Cross Tries To Spike Federal Investigation
The Government Accounting Office last year started a Congressional inquiry into the Red Cross’ federally mandated role responding to disasters and whether the group gets enough oversight.
American Red Cross CEO Gail McGovern wanted no such investigation so she asked Rep. Bennie Thompson, D-Miss. the ranking member of the homeland security committee to kill it. McGovern suggested that, in lieu of the investigation, the congressman call her directly with questions. She provided her personal cell phone number.
Thompson criticized McGovern’s request to spike the investigation. “Over time, the public has come to accept the American Red Cross as a key player in the nation’s system for disaster relief,” he said. “It is unfortunate that in light of numerous allegations of mismanagement, the American Red Cross would shun accountability, transparency and simple oversight."
One veteran observer of congressional investigations said he couldn’t remember another instance in which the subject of a GAO inquiry asked for the inquiry to be called off.
The GAO inquiry continued despite McGovern’s appeal. The agency’s final report is expected to be released next month, according to a GAO spokesman.
McGovern’s effort echoes other instances in which the Red Cross has resisted requests for more information about its work. Last year, the Red Cross fought a ProPublica public records request about its Superstorm Sandy response by hiring a law firm and citing “trade secrets.” (The group later reversed its stance.)
The Red Cross has also declined to detail its spending in response to the Haiti earthquake. Sen. Charles Grassley, R-Iowa, recently questioned the Red Cross for including rules barring the release of financial information in its Haiti contracts.
American Red Cross’ CEO McGovern has long portrayed her organization as a beacon of openness, once declaring “we made a commitment that we want to lead the effort in transparency.” (ProPublica)
California Nonprofit Insurer Increases Compensation By 64%, Secretly
LA Times reporter Chad Terhune reported on Blue Shield’s generosity to its top brass after learning about the pay hike in a confidential state audit. Blue Shield omitted their pay from a separate state filing that required 2012 compensation data on the company's 10-highest paid employees. The state requires companies like Blue Shield to submit information on annual pay.
Blue Shield paid $61 million to a group of executives in 2012, the most recent figure included in the audit. The company paid $37 million to its top officials the year before and $39 million in both 2009 and 2010.
Blue Shield's former public policy director, Michael Johnson, who left this year and is now a company critic, said senior officials at the insurer told him that former Chief Executive Bruce Bodaken received about $20 million as part of his 2012 retirement package, on top of his annual pay.
Johnson resigned in March to mount a campaign calling on his former company to act more like a nonprofit. "There shouldn't be any mystery."
Auditors criticized the insurer for stockpiling "extraordinarily high surpluses" of $4 billion and for failing to offer more affordable coverage as a nonprofit. 
Blue Shield is California's third-largest health insurer with about 3.4 million members and $13.6 billion in annual revenue.
Telemarketers Continue To Drain Donations
The Chicago Tribune has had two articles in recent days, “Telemarketers Keep Dollars Raised for Charity,” August 28, and “Donations to Illinois Veterans Charity Mostly Go to Pay Telemarketers,” August 31. Nothing new; only the names change, and a lot of the time the names don’t even change -- same con artists constantly reinventing themselves.
According to the first article, a for-profit telemarketer named Safety Publications Inc. gave its nonprofit clients about 15 cents of every dollar it raised during the period 2008 - 2014. This example typifies “a money-draining sector of American philanthropy that frustrates government authorities and reputable nonprofits alike,” according to the article. A former floor manager for one fundraiser summed up the business thusly: “Keep in mind, professional fundraising is hustle.” But the fact of the matter is that “scores of American nonprofits depend almost exclusively on for-profit call centers, drawing millions of dollars annually and spending most of it on the companies that brought in the money.” 
Paul Streckfus noted we can thank Judge Richard Posner, a revered leader of the Chicago Bar, for his opinion in United Cancer Council v. Commissioner, 165 F.3d 1173 (7th Cir. 1999), reversing 109 T.C. 326 (1997), for allowing these scams to continue. The IRS was so discouraged by Posner’s opinion -- and left hanging by the Department of Justice -- that it doesn’t even try anymore to go after these type fundraising cases that reek of inurement and private benefit. (source)
Charity Check Up:
Subway Pitchman Foundation A Sham
Jared Fogle’s (Subway posterboy) foundation, set up to help fight childhood obesity, is big bust. Reports show Fogle promised to provide school districts with $2 million to battle childhood obesity. Instead, between 2009 and 2013, the foundation handed out less than $75,000 while executive director Russell Taylor raked in 60% of the money. 26% of the cash remains untraced. Records further show that the foundation hasn’t paid its registration fee to the state of Indiana since 2008. (source)(usatoday)
Charity On The Rebound
The charity that lost more than $4.8 million in donations over the past two decades at the hands of its former president is rebounding well a year after the theft was uncovered.
The United Mid-Coast Charities Board of Directors decided at its annual meeting to distribute more than $535,000 to area nonprofit organizations. The total distribution is 60 percent more than what UMCC distributed in 2014, Board President Steve Crane said in a news release issued Tuesday.
“With all that United Mid-Coast Charities has gone through in the past year, we’ve been blessed with an overwhelming response from donors in our communities,” Crane said. “This has allowed us to give more in 2015 than we originally thought possible.”
The former board president, Russell Brace, 81, of Rockport, faces up to 30 years in prison after he pleaded guilty May 29 to one count of mail fraud affecting a financial institution and two counts of tax fraud and making false statements. His sentencing is scheduled for Oct. 9 in U.S. District Court in Portland.
Foundation Leadership Raids Charity’s Assets
The Homeland Foundation and its former officers admitted to $4.3 million in misdeeds — which included raiding $700,00 in life insurance funds and showering millions of dollars on elite schools attended by officers or their family members
The foundations accounted dwindled from $39.8 million to $17.4 million over five years. Nearly $3 million was awarded to the former president’s alma mater, Duke University — much of it targeted towards the basketball program. In return, he received special perks and recognition from the school, including dining with basketball coach and travelling to China with the team. And $1.5 million was directed to University of Michigan Law School, which he also attended. The private schools attended by the former president’s children also received $1.5 million.
A Thought or Two:
Serial Thief: Four Embezzlements and $1.3 million
A woman was sentenced to three years in prison for embezzling more than $1.3 million from nonprofit organizations designed to help the homeless and foster children, according to the U.S. Attorney for the District of Maryland.
She worked as a bookkeeper for four nonprofit organizations that received federal assistance, the statement said.
According to her plea agreement, she took the following:
  • $133,178.04 from Reservoir Hill Improvement Council; 2012–2014
  • $161,750.14 from Jobs, Housing & Recovery (JHR); 2013–2014
  • $784,781.17 from Between Friends; 2008–2011
  • $226,888.34 from Health, Education, Advocacy, Life (HEAL); 2005–2011
Where were the boards, enforcement?

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Nonprofit News…
In Case You Missed It:
1.     Nearly $10 million donated by Californians to charity via check-off boxes on their tax returns over the past decade is sitting unspent in government accounts, and much of the money never reaches the intended target, reports the Associated Press. Of the $35 million donated by California residents since 2005 through the nation's largest state-level voluntary tax contribution program, more than quarter remained in state coffers at the end of last year, the news agency writes, citing a review of the financial records of 29 funds for education, cancer care, veterans services, and other causes included on state tax forms.
2.     As the chief financial officer of the Lawrence Family Jewish Community Center she pilfered at least $412,000. She wasn’t the only one stealing from the center. The center’s former accounts payable clerk was also embezzling, using the same method for several years. She admitted to taking $152,000. The CFO was sent to prison; the latter will be sentenced next month.
3.     A prominent Newport Beach (CA) doctor pleaded guilty to charges that he evaded taxes on $220,000 he was accused of embezzling from a hospital fund earmarked for charity. Immediately after the plea, an Orange County Superior Court judge sentenced him to a year in jail and three years' probation, according to court records. He also was ordered to pay about $250,000 to the charitable fund and about $100,000 in back taxes.
We flagged these few examples of charity misdeeds:
1.     Colstrip wrestling club (MO) $19,000
2.     Tri-County Volunteer Fire Department (NC) $28,000
3.     Teamsters Local 783 (KY) $18,000
4.     Louisville Archdiocese (KY) $500,000
5.     Fanconi Anemia Research Fund (OR) $25,000
6.     Rhode Island Fast Pitch Softball Coaches Association $13,000
7.     The Journey Church of the Triad (NC) $41,000
8.     Mancelona Food Pantry and Resale Inc (MI) <$20,000
9.     American Federation of State, County and Municipal Employees Local 652 (MI) unknown
10.  Peter Young Housing, Industries and Treatment (NY) $1 Million
11.  Bristol Library Foundation (VA) $20,000
12.  Wyoming Sportsmen for Fish and Wildlife $6000
13.  Enclave Homeowners Association (CO) $160,000
14.  School charities:
·       Meridian Community College (MS) $203,000
·       Northeastern University (MA) $2.7 million
·       UCLA Department of Pathology and Laboratory Medicine $80,000
·       Charlotte Catholic High School (NC) $160,000
·       Northeast Elementary School (NM) parent teacher organization $15,000
·       W.B. Beam Intermediate School (NC) $690
Political/public official chicanery (just a few):
1.     A former town police officer pleaded no contest to seven counts of embezzlement after authorities said he stole close to $35,000 from the Virginia Bloodhound Search and Rescue group.
2.     A department chairman at Wilkes Community College has been charged with five felony counts of embezzlement and seven felony counts of obtaining property by false pretense.
3.     A former Gunnison town clerk (MS) has been arrested for allegedly embezzling $70,300 from the town where she worked. She was arrested.
4.     A recent investigation noted that the former office manager of the Oconee County Sheriff’s Office was involved in a 2007-09 embezzlement of more than $500,000 from narcotics fund accounts.
5.     A San Francisco police officer was arrested on three counts of embezzlement, one count of vehicle theft and two counts of grand theft.
6.     The former treasurer of North Brunswick  (NJ) Volunteer Fire Co. 3 resigned after admitting that he embezzled at least $89,000 from the fire company since last year.
7.     New Mexico secretary of state is facing 64 misdemeanor and felony charges, accused of misusing campaign money to cover gambling and other personal expenses. Allegations include $13,000 in illegal transactions, including campaign checks deposited into her personal bank account, from which she withdrew $282,000 at eight Indian casinos in the state in 2014 — more than three times her annual salary of $85,000.
8.     A former Howard Township (IN) office assistant was arraigned in Cass County District Court on charges that she embezzled more than $25,000 from the township.
9.     A former employee of the Hamilton Creek Metropolitan District (CO) is accused of stealing $627,000 over 15 years. He probably would not have been caught had he not been convicted in another case which prompted authorities to investigate is work habits. 
10.  The financial officer and executive director of Moore's Cottage are accused of embezzling more than $100,000 from the charity and damaging or destroying property in excess of $65,000. The lawsuit also accuses them of filing false personal tax returns in 2011, 2012 and 2013 — the same period in which they failed to file tax forms for Moore's Cottage. In total, Moore's Cottage owed $460,000 in delinquent federal payroll taxes as of September 2013.

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, 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
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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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