Nonprofit
Imperative
…your nonprofit browser
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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News
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
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.
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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