Monday, November 9, 2015

November Nonprofit Imperative E-Newsletter







Nonprofit Imperative
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November 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:
Skunk of the Month:
Car Donations; More Than $2.6 million stolen from cancer charities
Breaking the Silence:
Chicago Public Schools; Detroit Public Schools
Charity Check Up:
$2 million embezzled from children’s charities
A Thought or Two:
Cop suicide after charity theft
Nonprofit News-In Case You Missed It:
MI charity lotto; Susan Komen (again)…more
Political/Official Chicanery:
NV; VA; PA; DE; IN; MI; GA; OK; CA…more
What Do You Think?
·       To do good, donors must do their homework
·       Give without being taken

One in three fraud victims are aged 65 or over, analysis by the UK charity Victim Support suggests”… (bbc)

This month’s Chronicle of Philanthropy has a series of articles under “Confidence Gap,” referring to a survey that found 1 in 3 Americans lacks faith in charities.
·       % of agencies that do a good job of helping people has fallen
·       top donors concern: “how organization uses my money”
·       35% said that they have “not too much” in confidence in charities or “none at all”
·       only 15% say they have a “great deal” of confidence in charities
The lead article notes the lack of oversight by the IRS and by state charity regulators and the voluntary nature of codes of conduct -- and the lack of any expectations that government oversight will be improving in the foreseeable future. The sector leadership believes that oversight should remain the same. A worrisome trend.

the gains and losses in giving are increasingly driven by a smaller percentage of the population.” Rob Reich, associate professor of political science at Stanford University, takes it a little further: “The favored charities of the wealthy are gaining in share in the philanthropic economy. The total amount of money given away by the very wealthy is going up, not because they’re giving away a greater share of their income [but because] their total income and wealth itself has grown. (nonprofitquarterly magazine )
Cancer Fund of America and The Breast Cancer Society used about 97% of donations on fundraising, trips and other perks for the executives running the charities. Only 3% of the donations were used to help cancer patients. Donors were bilked out of more than $187 million. (FTC) 

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).”
Car Donations Aren’t What They Appear
Minnesota Attorney General Lori Swanson issued a report that finds that the largest car donation enterprise in the country is little more than a self-dealing, profit-making enterprise. Car Donation Foundation, which has a presence in 40 states, is accused of passing along only 20 percent (of $108 million) what it raises to the charity it claims to support, the Make-A-Wish Foundation.
Meanwhile, she says, the foundation passed along nearly $36 million to two for-profit corporations owned by William Bigley and Randy Heiligman, who founded and manage the charity. The two firms in question are National Fundraising Management Inc. and Metro Metals Corp., which the Car Donation Foundation uses as its scrapyard and auction house.
The report covers the four-year period from 2011 to 2014. “Approximately 80 percent of the revenue that Car Donation Foundation received from charitable vehicle donations was spent on payments to these companies and other fundraising and administrative costs during these years, with only about 20 percent going to charity.”
In 2014, the Car Donation Foundation ended up on the “Scrooge List” published by the South Carolina secretary of state and the Oregon AG’s “Worst Charity” list, so we have to assume that they had some awareness that there were problems afoot.
The CEO of Make-A-Wish Minnesota resigned in June in the midst of an independent probe. Reportedly, “the charity told Swanson’s office he was paid $70,000 by the private companies to help line up deals between local chapters around the country and the car-donation charity, receiving $5,000 for every contract arranged.” (nonprofitquarterly)h (startribune)
Fundraiser for Cancer Took $2.6 million
Fun-run operator—Frederick Bradley Kellogg and his company, Fresh New Taste LLC—is being sued by the MN Attorney General for violations of charity and consumer protection laws.
Kellogg and his companies are accused of false and misleading solicitations for donations, deceptive trade practices, acting as a professional fundraiser without the required state registration, and failing to file solicitation notices with the state. According to the complaint, Kellogg hasn’t paid anything this year to the small cancer charity that these runs were ostensibly meant to benefit—moreover, they have ignored requests by that charity to stop using their name in solicitations. AG’s office has been making it their business to hold accountable those for-profit companies that scam the public and nonprofits in these kinds of ways.
According to the Star Tribune, Kellogg and Fresh New Taste have racked up more than 60 unpaid judgments over the years and owe at least $2.6 million. Kellogg, in fact, is serving 20 years’ probation for a 2012 conviction of felony theft by swindle.
Breaking the Silence:
The previous head of Chicago Public Schools, a Mayor Rahm Emanuel appointee, was Barbara Byrd-Bennett, was the subject of a federal indictment for bribery recently announced. She allegedly steered more than $23 million in no-bid CPS contracts to SUPES Academy (with an affiliate called Synesi Associates) “in exchange for an expectation of hundreds of thousands of dollars in bribes and kickbacks,” according to the indictment. The kickback money went to accounts in the names of Byrd-Bennett’s relatives, but a later modification to the scheme had the kickback funds structured to be paid to Byrd-Bennett directly as a “signing bonus” on her return to employment at SUPES after leaving CPS.
At one point, she emailed SUPES owner Gary Solomon that she needed the money because she had “tuition to pay and casinos to visit.” According to the Chicago Tribune, Solomon has been a longtime advisor and consultant to Mayor Emanuel himself. 
This touches the upper echelons of state and national leadership. The investigation of SUPES also led to a federal subpoena for records from the Chicago Public Education Fund, which in 2011 made a $380,000 grant to SUPES for a pilot program of training for “CPS network chiefs and their deputies.” Now that SUPES has morphed from investigation target to indicted co-conspirator, the CPEF seed grant to SUPES takes on a new role, given Solomon’s connection with both Byrd-Bennett and the mayor himself. Among the CPEF board members are Governor Bruce Rauner, U.S. Secretary of Commerce Penny Pritzker, Barbara Malott Kizziah of the Malott Family Foundation, Helen Zell of the Zell Family Foundation, and Elizabeth Swanson of the Joyce Foundation, along with a host of bankers, investors, and others. Swanson was chief of staff for education under Emanuel before joining Joyce, the Zell Family Foundation is the philanthropic arm of billionaire real estate developer Sam Zell who is close to the Mayor and a funder of his PAC, and the Malott family is widely connected to many mainstream Chicago institutions.
In Cleveland when she was in charge of the Cleveland public schools, Byrd-Bennett was president of the Barbara Byrd-Bennett Foundation for Cleveland’s Children, which had its 501(c)(3) status revoked by the IRS in 2011 for failing to submit 990s (the last one was from 2005). 
Byrd-Bennett has served on numerous prestigious boards---nationally, in Illinois and in Ohio.
She generously rewarded herself and her business associates from the assets of a public school district that is in financially disastrous shape. (rick cohen, nonprofitquarterly)h (chicagoreader.com)
Officials familiar with the FBI corruption probe in Detroit say Byrd-Bennett also is under investigation for similar activity here, drawing scrutiny for allegedly helping to steer a contract to a textbook publishing company she once worked for. (Detroit Free Press)
…more school fraud
A former principal at Detroit’s Mumford High School said she cut a deal to plead guilty to (accepting $58,000) federal bribery and tax evasion for her role in a kickback scheme that is under investigation by the FBI.
Others are under the radar in yet another public corruption scandal in Detroit, this one targeting officials and contractors with the Detroit Public Schools and the fledgling Education Achievement Authority, set up by Gov. Rick Snyder to help certain failing Detroit schools get ahead, the Detroit Free Press has learned from multiple sources
even more school fraud
Another ex-Detroit Public Schools principal also is in trouble with the law. In June, the Wayne County Prosecutor’s Office charged Rudolfo Diaz, the former principal at Western International High School, and a woman named Cecilia Zavala with embezzling thousands of dollars from the nonprofit agency Esperanza Detroit. Zavala was the group’s chief operating officer.
Charity Check Up:
Three Children’s Charities Out More Than $2 Million, By Embezzlement
1      An indictment alleges between December 2008 and May 2012, that two men ran Children and Family Services Inc. (later called Children’s Charitable Services Inc.), a telemarketing company that fraudulently solicited charitable donations via telephone calls from an office in Florida. They allegedly instructed employees to fraudulently tell potential donors living in other states that the employees were volunteers and that all proceeds helped children in the state where the potential donor lived. The indictment further states that they intentionally used a charity name that was similar to a state agency and failed to disclose that their organizations had been previously sanctioned in other states for fraudulent solicitations. The indictment alleges that more than $1.2 million raised as charitable donations went to pay the defendants’ and employees’ salaries, business expenses, and one’s personal expenses.
2      Robert Mays was the executive director of the Jersey City Child Development Centers from Sept. 2013 to May 2014.  He stole more than $200,000 from a Jersey City nonprofit that aids underprivileged children, the U.S. attorney charged. The nonprofit has received more than $8 million from the U.S. Department of Health and Human Services.
3      A North Carolina woman and her mother have been indicted on federal charges that they defrauded more than $574,000 from a charity, Send Thee Community Outreach, designed to feed low-income children. Cindy Hall and her mother, Stephanie Almond, falsified documents and exaggerated the number of children being fed through their Suffolk nonprofit in order to get more federal funds, which they used to buy vehicles and pay personal expenses, according to the indictment unsealed in U.S. District Court. The women falsely claimed they served more than 80,000 breakfasts, 117,000 lunches and 6,000 dinners during that time, according to the indictment. Then the women altered the tally sheets, forged signatures and inflated the number of children served, according to the indictment. The indictment says the women sometimes submitted meal counts for reimbursement even when they didn't feed any children at a given site. The nonprofit also asked for reimbursement to pay employees. If there were any employees, they were never paid, the document says.
4      See below: a fourth children’s charity fraud
A Thought or Two:
Cop’s Suicide Related To Charity Theft
After committing "extensive criminal acts" at the Fox Lake police Explorers program, a youth group, an Illinois cop" carefully staged his suicide." He had been stealing and laundering money through the program, funneling "thousands of dollars" for personal purposes — including gym memberships, adult websites and loans to associates, Lake County Major Crimes Task Force Commander George Filenko said. His death came amid increasing levels of personal stress from scrutiny of his management of the youth group. (source). Cops now say he certainly wasn’t acting alone. And according to reports, both his wife and his son are now reportedly under criminal investigation.

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Nonprofit News…
In Case You Missed It:
1      The former head of United Mid-Coast Charities, a Camden-based charity for the needy, embezzled more than $4.6 million from the nonprofit – the largest amount stolen from a charity in Maine history – was sentenced to serve four years in prison and ordered to repay the money.
2      Breast cancer charity Susan G. Komen seems to continue to lose financial ground, ranking 127th in the new survey of top nonprofit fundraisers, sliding from 41st in 2011. Komen’s volunteer base and its fundraising took a severe hit in 2012 when it ran into the buzz saw of its own activist constituency, a good proportion of whom were angered by Komen’s defunding of the breast cancer–related work of Planned Parenthood clinics. (nonprofitquarterly)  In this past year, as large charities contributions went up 5%, Komen dipped about 13%. Since having a critical eye on the organization in the wake of the Planned Parenthood debacle coupled with abuses over 5 years ago, donations slipped 35%.
3      Thrift Land USA has agreed to pay $650,000 to Big Brothers Big Sisters of Rockland County and I Love Our Youth, Inc., charities located in Westchester County (NY), to settle an action brought by the New York attorney general’s office alleging that the for-profit enterprise was operating a charity scam. The names of both charities were displayed on the company’s collection bins, leading the public to believe that donations were going to support those organizations when they were not. Instead, the donated items were sold.  
4      The Department of Justice says that there is no evidence that any IRS employee, including Lois Lerner, intentionally discriminated against Tea Party groups.  However, the Justice Department investigation uncovered substantial evidence of mismanagement, poor judgment, and institutional inertia, leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints. But poor management is not a crime.
5      The recently released DeKalb County corruption report has called into question commissioners’ use of county funds to donate to local charities. Former Attorney General Mike Bowers, hired by the county to investigate allegations of corruption, said state law prohibits doling out tax money to charities.  A decade’s worth of campaign expenditures across the state found about $1.5 million in charitable giving from the campaign funds.
6      The Michigan Lottery’s Veterans Day 50/50 Raffle only gives 3% of the gross proceeds from the raffle to support veterans, through the National Guard Association of Michigan. State Rep. Harvey Santana, D-Detroit, a U.S. Navy veteran who took part in Operation Desert Shield/Desert Storm, said the fact only 3% of the Veterans Day raffle is going to help veterans is "another smack in the face." Veterans "don't ask for a lot of help" and are frequently honored through parades and other symbolic gestures, but "when it comes to getting the help we need, there's always another excuse," Santana said.
7      New York Attorney General Eric T. Schneiderman announced that his office has reached a settlement ($650,000) with Thrift Land USA of Yonkers, Inc. (“Thrift Land”), a for-profit company that operates more than 1,100 clothing donation bins placed in shopping center parking lots, gas stations and other locations throughout the New York metropolitan area. The settlement resolves allegations that Thrift Land used a charitable veneer to trick and mislead the public into believing that the clothing it collected would benefit the charity whose name and logo appeared on its bins.  However, Thrift Land sold the clothing at a huge profit and the charities named on the bins -- Big Brothers Big Sisters of Rockland County and I Love Our Youth, Inc. -- received only a small, monthly fee for the use of their name and logo.

We flagged these few examples of charity misdeeds:
1.     North Lamar Education Foundation (TX) over $100,000           
2.     International Brotherhood of Electrical Workers (PA) $22,184 
3.     New York Gotham's Little League (NY) $90,000.
4.     Rawl Springs Volunteer Fire Department (MS) Unknown
5.     Lakes of the North Community (MI) <$20,000
6.     Newaygo Area District Library (MI) unknown
7.     North Carolina Health Information Management Association (NC) $344,000
8.     2fer: Kennewick American Legion Baseball / Kennewick High School Booster Club $30,000
9.     St. Patrick's Seminary & University (CA) $200,000
10.  Forestbrook Elementary School (SC) $5000
11.  Easter Seals El Mirador  (NM) $30,000
12.  Disabled American Veterans Inc (MA). $125,000
13.  michigan.com (MI) over $500,000
14.  Family Visitation Center (SD) $40000
15.  Princeton Triangle Club (NJ) nearly $250,000
16.  Indio Youth Sports Association (CA) $3800
17.  Franklin Community Cooperative (MA) $75,000
18.  Montana State Counseling Association $56,000
19.  Laborers International Union of North America (LIUNA) Local 657 $1.7 million
20.  Norfolk Society for the Prevention of Cruelty to Animals (VA) $135,000
21.  Fairland Parent Teacher Council (FL) $5000 
22.  Stockton Jr. Colts Hockey Club (CA) $27,205 
23.  Hoffman-Boston Elementary School PTA (VA) thousands of dollars
24.  Frazier Park School PTSO (CA) thousands
25.  St. Vincent de Paul Society Stores (AZ) $543,000
26.  Jaycees (IN) $100,000
27.  United Steelworkers Local 5-887 (WV) $7000
28.  Fort Campbell Thrift Shop (TN) $54,000
29.  Happy Hands LLC; Standing Tree LLC; Action Point LLC (AZ) $750,000
30.  Grand Valley State University (MI) <$100,000
31.  Enclave Homeowners Association (CO) $160,000/ Hamilton Creek Metropolitan District $500,000+
32.  Tri-County Youth Sports League and Red Cedar Basketball (MI) $100,000
33.  Blanchard Community Library (CA) $200,000
Political/public official chicanery (just a few):
1.     Nevada Republican Party Chairman finds himself mired in a $2.2 million loan scam involving a local children’s charity and a sketchy medical lien business. He served on the board of the Miracle Flights for Kids nonprofit when it voted to make a high-interest loan to Med Lien Management—where he was a confidential part-owner—in April 2013.
2.     Linda Diane Wallis, aka Lynn Wallis Miller pleaded guilty today for her role in three fraud schemes totaling over $1 million in losses, including embezzling $653,000 from Virginia State Senator Richard Saslaw’s campaign fund. Wallis participated in three separate fraud schemes from in or around January 2013 through in or around February 2014.
One scheme involves misuse of funds from a non-profit charitable organization, of which Wallis was Executive Director and co-conspirator D.M. co-founded. The non-profit, known as The Community College Consortium on Autism and Intellectual Disabilities (CCCAID), claimed to provide assistance to community colleges for program development and implementation and information on the availability of resources for sustainability of programs. In April 2010, Wallis established CCCAID’s bank account, and between April 2010 and April 2013, community colleges located around the country contributed approximately $293,000 to CCCAID.  Additionally, a Bulgarian businessman associated with co-conspirator D.M. donated $500,000 to CCCAID.  The funds contributed to CCCAID were to be used to further the mission of the organization and not to enrich Wallis or co-conspirator D.M.  Despite these restrictions, from April 2010 to August 2014, Wallis authorized approximately $482,000 in transfers from CCCAID’s account to other bank accounts Wallis and co-conspirator D.M. controlled.  A significant percentage of the $482,000 CCCAID was used to pay Wallis’ and co-conspirator D.M.’s personal expenses, such as mortgage payments, expenses related to food/restaurants, and merchandise purchases.
4.     The administrative assistant for the Schuylkill Conservation District admitted that she embezzled more than $450,000 over a 7-year period. The District has now instituted measures to ensure a similar situation will not occur again.
5.     A former site manager for the Wilmington (DE) Housing Authority has pleaded guilty to embezzling more than $179,000 from the agency.
6.     A former administrative coordinator for the Monroe County Correctional Center (IN) was arrested for allegedly stealing approximately $264,000 from the Monroe County Cash Bond Fund.
7.     City of Petoskey (MI) officials continue an investigation into a city employee's alleged embezzlement of $30,000.
8.     The former finance director at Latin Academy Charter School, an Atlanta charter school, is being accused of using the school's money for personal use.
9.     New Mexico Secretary of State Dianna Duran resigned from her post just before she was due in court on fraud charges. She faces fraud, embezzlement, money laundering and other charges related to abusing the state’s campaign finance reporting system. She had pleaded not guilty. Attorney General Hector Balderas filed a criminal complaint accusing her of misusing campaign donations by funneling some $13,000 into personal accounts and filing false campaign finance reports with her own office. She pleaded guilty to charges including felony embezzlement for taking campaign donations and using them to gamble at local casinos.
10.  A former Yemassee (GA) town clerk is accused of embezzling money, $1270.
11.  A former employee of the Oklahoma Department of Career and Technology Education in Stillwater had been ordered to pay $25,295 in restitution for embezzling funds from the New and Related Services Division of the Oklahoma Vocational Association while she was its treasurer between August 2013 and March 2015
12.  A former Oroville (CA) Mayor and certified public accountant has been sentenced to jail for embezzling more than $400,000
13.  The Michigan Attorney General's Office announced embezzlement charges against Augusta Township Deputy Treasurer. Authorities did not specify how much was allegedly stolen, although there is more than $800,000 in taxpayer funds unaccounted for. His grandmother, Augusta Township treasurer, appointed him deputy treasurer in November 2012. 
14.  Former longtime Eau Claire County Treasurer pleaded no contest to five counts of felony theft and three of misconduct in office at a hearing and $625,000 theft. 
15.  A former Grayson County (VA) School System employee was indicted on embezzlement and forgery charges.

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 media sources...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. These incidents include only a fraction of the estimated $40 billion of charity crimes. 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)
…”This book should be read by everyone. It will send a shiver down the reader's spine to think that people with little money to spare have given generously…”
  • 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  






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