Nonprofit Imperative
…your nonprofit browser
May 2016
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:
Hershey Trust; Catholic
Diocese; National Veterans Services Fund…more
Breaking
the Silence:
Triangle Area Network
Charity Check Up:
Hindu Temple
A Thought or Two:
ONE
PRINCIPLE
Nonprofit News-In Case You Missed It:
Cleveland Browns Receiver;
Senate Finance Cmte…more…more
Political/Official Chicanery:
PA; MA; MI; WA; NC; CA; TX; VT; NM; FL;
NJ …more
What Do You
Think?
·
To do good, donors must do their homework
· Give without being taken
Despite what the
Independent Sector has said for decades:…”(the charitable sector) doesn’t have
one center of organization and imagination looking out at the far horizon to
inspire and guide all of the component parts to get to a place together that
none operating independently could ever get to on its own. It doesn’t have one
voice to tell the rest of the world where it is headed and what it requires to
get there. It has no coordinated analytical capability to help it understand
its progress.” (Harvard Business Review)
--------------------------------
"Board members of the New York’s nonprofits must
take more responsibility and become better stewards of their organizations,
says a new report released, the second self-examination of the sector to come
out in the past month, a recently released report from
the Human Services Council said.”
---------------------------------
o Fraud is on the rise at nonprofit organizations, and it’s increasing
frequency and cost;
o Nonprofit organizations account for 11% of all occupational fraud
recorded (nonprofits represent only 5.4% of GNP)
o Nonprofit organizations suffered the largest median losses in the study
o Most fraudsters (90%) have never been punished or terminated by an
employer for fraud-related conduct
Skunk of the Month…
“They came to
do good and they did very well indeed (for themselves).”
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:
Hershey Trust Still In Trouble
The chaos at the top
of the $12 billion Hershey charity continues.
Insider John Estey, a top official at the Hershey Trust Co., which manages the charity's finances, was charged by federal prosecutors with pocketing $13,000 that was to be used for lobbying state lawmakers as part of a sting.
In addition, Chuck Ardo, the spokesman for the Attorney General's Office, said that "we have not heard a satisfactory response from" the Hershey Trust on other outstanding concerns.
Before a 2013 agreement, there was no limit on board compensation. The 2013 agreement limited compensation to a base pay of $30,000 a year, but also includes more pay for attending meetings and heading committees. The attorney general’s office expressed "serious concerns regarding the apparent violations of the 2013 agreement."
In its latest filing with the IRS for the year ending July 31, 2014, the Hershey charity disclosed that Velma Redmond, the current chairwoman earned $97,500 in directors' compensation, Joseph Senser, the vice chairman earned $204,500, and long-standing board member and a former chairman who joined in 2001, Robert Cavanaugh, earned $332,500. The money could have come from multiple Hershey-related boards and may not be subject to the 2013 agreement.
The Hershey boards investigated the summer employment of Cavanaugh's son with "one of the trust's investment management firms."
Mark Pacella, the chief deputy attorney general, alleges the Hershey board's apparent "failure to exercise its best efforts in a timely manner to secure new board members" with experience in early childhood education and working with at-risk children. Several board members resigned as a result of the investigation.
The Attorney General's Office was seeking, by July 31, the resignation of board members who have served more than 10 years.
(philly.com)
Insider John Estey, a top official at the Hershey Trust Co., which manages the charity's finances, was charged by federal prosecutors with pocketing $13,000 that was to be used for lobbying state lawmakers as part of a sting.
In addition, Chuck Ardo, the spokesman for the Attorney General's Office, said that "we have not heard a satisfactory response from" the Hershey Trust on other outstanding concerns.
Before a 2013 agreement, there was no limit on board compensation. The 2013 agreement limited compensation to a base pay of $30,000 a year, but also includes more pay for attending meetings and heading committees. The attorney general’s office expressed "serious concerns regarding the apparent violations of the 2013 agreement."
In its latest filing with the IRS for the year ending July 31, 2014, the Hershey charity disclosed that Velma Redmond, the current chairwoman earned $97,500 in directors' compensation, Joseph Senser, the vice chairman earned $204,500, and long-standing board member and a former chairman who joined in 2001, Robert Cavanaugh, earned $332,500. The money could have come from multiple Hershey-related boards and may not be subject to the 2013 agreement.
The Hershey boards investigated the summer employment of Cavanaugh's son with "one of the trust's investment management firms."
Mark Pacella, the chief deputy attorney general, alleges the Hershey board's apparent "failure to exercise its best efforts in a timely manner to secure new board members" with experience in early childhood education and working with at-risk children. Several board members resigned as a result of the investigation.
The Attorney General's Office was seeking, by July 31, the resignation of board members who have served more than 10 years.
(philly.com)
Priest Took $300,00,000 Meant For Refugees
A former
high-ranking priest in the Roman Catholic Diocese of Manchester (NH) was
granted parole on a theft by unauthorized taking conviction but still must
serve a consecutive sentence in a case that involved the embezzlement of about
$300,000. The priest was ordered to repay $300,000 restitution to the diocese,
Catholic Medical Center and the estate of Msgr. John Molan.
The thefts took place when he was involved with a gay composer and recording artist on whom he lavished gifts including trips to San Francisco and New York.
He created fake invoices of $15,000 from a Boston psychologist, submitting them to the diocese for reimbursement. He never was a patient of the doctor's and was ordered to repay the man's legal bills incurred as part of the criminal investigation.
The thefts took place when he was involved with a gay composer and recording artist on whom he lavished gifts including trips to San Francisco and New York.
He created fake invoices of $15,000 from a Boston psychologist, submitting them to the diocese for reimbursement. He never was a patient of the doctor's and was ordered to repay the man's legal bills incurred as part of the criminal investigation.
He remains a priest
but is on administrative leave.
Another Vet Charity Raided
A former bookkeeper who siphoned nearly $800,000 from a Darien-based (CO)
and was sentenced to two years in prison and ordered to pay back the money,
which she stole over five years.
She worked for the National Veterans Services Fund and was accused of
writing checks to herself and to family members and then altering the
nonprofit's ledger to make it appear the money was given to veterans.
Investigators said that in 2013 alone, The bookkeeper wrote 135 bogus checks
totaling $185,000. Authorities said money stolen from the organization was used
to pay personal expenses for herself and her family, including car-loan
payments and vacations.
High Priced Nonprofit Care
Seven of the 10 most profitable U.S. hospitals each
cleared more than $160 million in 2013 from patient care services despite their
having nonprofit status, according to a new report.
Researchers from the Johns Hopkins Bloomberg School of
Public Health and Washington and Lee University drew on 2013 data from the
Centers for Medicare and Medicaid Services to analyze 3,000 acute care
hospitals, of which 59 percent were nonprofit, 25 percent were for-profit and
16 percent were public.
The study, published in the journal Health Affairs, led lead researcher Gerard
Anderson of Johns Hopkins to believe that the most profitable hospitals in the
country establish monopolies in their communities, allowing them to mark up
prices charged to private insurers.
"The system is broken when nonprofit hospitals are
raking in such high profits," Anderson said in a press release.
Breaking the Silence:
A Serial Charity Thief
Of Almost $500,000
When former Triangle Area Network (TAN) director Peggy
Lynn Gibson pleaded guilty to embezzling more than $200,000 from the nonprofit
in front of Jefferson County’s 252nd District Court Judge Raquel West many were
surprised that the charismatic and energetic executive would be morally capable
of such indiscretion. However, this isn’t the first time Gibson has absconded with
tens of thousands of dollars meant for the healthcare of those she was paid to
assist.
“It did not show up on any of the background checks,” TAN
board of directors president Jeff McManus said of eventually learning that
Gibson had embezzled from her last employer before finding a new victim in the
nonprofit TAN, staffed mostly by volunteers. “From what I know now, she was
barely out of that when she started with us.”
According to information obtained by The Examiner, Gibson
was charged with embezzling at least $108,000 from Texas Home Health in Hardin
County while she was employed by the healthcare provider in 2009. At the end of
2010, she agreed to pay back the money in exchange for the complainant
dismissing charges. By January 2012, it appears she still had yet to make good
on her end of the bargain as a Hardin County grand jury indicted Gibson on
second-degree theft charges for the 2009 embezzlement. A little more than a
year later, in July 2013, Hardin County prosecutors moved to dismiss the charges
because “the defendant has paid restitution in full.”
Where she got the money to pay off her $100,000-plus
bounty is open to speculation, but according to the Jefferson County indictment
that charges she went on to embezzle more than $363,000 from TAN, her crimes
against the Beaumont nonprofit.
An out-of-state criminal background check may have alerted
someone to at least some of Gibson’s prior bad acts, but they would have to
know some of her many other names – such as Peggy Coker, Peggy Redmond and
Peggy Doan.
It was under the name Peggy Doan that the admitted
embezzler was first convicted of theft. According to a criminal background
check, Gibson (Doan) pleaded guilty to two counts of theft and one count of
forgery in El Paso County, Colorado in 1996. She was given deferred
adjudication and a fine.
Gibson later went on to register a string of businesses –
some of which are still in operation, according to filings made with the state
of Texas. It is alleged that one way she was able to embezzle from past employers
was by opening up similarly named companies and depositing checks meant for the
legitimate firm. (source)
Charity Check Up:
Another Serial Fraudster: Hindu Temple Hit With Embezzlement
He led major
renovations of a Flint-area (MI) Hindu temple and embezzled more than $400,000
while he was its director, according to authorities. Investigations revealed
that the director was writing checks to himself and his businesses from the
temple's account. He said his investigation into temple finances only went back
six years due to the statute of limitations. He was the primary person in
charge of temple finances
The executive also has another case open in Genesee County Circuit Court, where last
year he pleaded no contest to two charges stemming from writing bad checks. A
no contest plea is not an admission of guilt, but is treated as such for the
purposes of sentencing. Sentencing in that case is pending a resolution in the
embezzlement and larceny case, court records show. (source)
A Thought or Two:
RAY DALIO at Bridgewater Associates shares some
thoughtful fundamental life principles that are certainly applicable to today’s
charitable environment. We will present one principle each newsletter. (principles)
Trust
in Truth
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News
Nonprofit
News…
In
Case You Missed It:
1. A Michigan couple announced a $1 million donation
to Livestrong, the Austin-based cancer nonprofit — the biggest single donation
the group has received since 2010. Livestrong’s fundraising efforts had
suffered in recent years after revelation that its founder, Lance
Armstrong, used performance-enhancing drugs during his record seven consecutive
Tour de France wins. This year, the group’s high-profile CEO Chandini
Portteus resigned suddenly after less than a year at the helm of the
organization.
2. A trustee for Waco-based Life Partners
Holdings, a company that sells life insurance policies on behalf of the
terminally ill, has filed suit against more than two dozen local, state and
national nonprofit agencies seeking the return of $2.1 million in donations
made before the company filed for bankruptcy protection last year.
Organizations such as Fuzzy Friends Rescue, Rapoport Academy, Baylor Waco
Foundation, the Greater Waco Chamber of Commerce and 23 others have been named
in the filing in U.S. District Court in Fort Worth. Trustee H. Thomas Moran
asserts that longtime Life Partners CEO Brian Pardo made the donations from
funds he fraudulently received.
3. Former
Cleveland Browns receiver Reggie Rucker has pleaded guilty to embezzling roughly $100,000 from various
nonprofit groups. Rucker now plans to cite his concussion history in
connection with the sentencing phase.
4.
We got an email from Sen. Chuck Grassley’s office noting that the Senate Finance Committee is suggesting mandatory e-filing
by tax-exempt organizations for greater transparency. In general, only the largest and smallest
tax-exempt organizations are required to electronically file their annual
information returns. Tax-exempt corporations that have assets of $10 million or
more and that file at least 250 returns during a calendar year must
electronically file their Form 990 information returns. Private foundations and
charitable trusts, regardless of asset size, that file at least 250 returns
during a calendar year are required to file electronically their Form 990-PF
information returns. Organizations that file Form
Returns filed
electronically can be processed more rapidly and at much lower cost than paper
return filings. Therefore, the provision extends the requirement to
electronically file to all tax-exempt organizations required to file statements
or returns in the Form 990 series or Form 8872 (“Political Organization Report
of Contributions and Expenditures”). The provision also requires that the IRS
make the information provided on the forms available to the public in a
machine-readable format as soon as practicable. The goal is to increase
the transparency of, and enhance public access to information about, public
charities. (Grassley Press Release)
5. Seven of the nation’s 11 largest
donor-advised funds controlling more than $30 billion in assets don’t report
the pay of their highest executives, according to an analysis by The Chronicle.
Donor-advised funds belong to a special
category of charity that is growing fast. The funds are subject to federal
pay-disclosure laws like every other tax-exempt group in the United States.
Experts say the funds probably aren’t
doing anything illegal by not reporting executive pay, but many say they are
violating the intent of federal rules and laws intended to bring transparency
to the nonprofit world.
"This is not transparency. The
public should know what’s going on," says Dean Zerbe, a former aide to the
Senate Finance Committee, where he investigated charities.
Donor-advised funds collect money from individuals
who get an immediate tax deduction and then can channel that money to any
charity they want at any time.
The Schwab Charitable Fund and the
Vanguard Charitable Endowment Program (the second and third largest commercial donor-advised
funds in the country by revenue) reported paying their presidents $600,000 and
$314,000, respectively, in calendar year 2013, according to the organizations’
2014 Forms 990. Renaissance Charitable Foundation, which is affiliated with
Renaissance Administration LLC, a for-profit charitable-services provider in
Indianapolis, reported paying its leader $89,292 in 2014. The Ayco Charitable
Foundation reported paying John Mastriani, its president and a member of the
Board of Directors, $8,500 in 2015, during which time he reported working two
hours a week at the charity.
Representatives of the Morgan Stanley Global Impact
Funding Trust, U.S. Charitable Gift Trust, the Bank of America Charitable Gift
Fund, and the Raymond James Charitable Endowment Fund declined to comment or
did not respond to repeated requests for comment from The Chronicle. Mr. Zerbe, who left Capitol Hill to be
National Managing Director at Alliantgroup, which helps businesses find tax
credits and incentives, also is skeptical that volunteers lead the
donor-advised funds. "These things aren’t running on autopilot," he
told The Chronicle. Mr.
Zerbe, who helped craft the 2006 Pension Protection Act, which overhauled many
of the laws governing nonprofits, says executive pay should be reported even if
it isn’t necessarily legally required. If it isn’t listed on the 990, Mr. Zerbe
says, it should be posted on the nonprofit’s website. "Salaries and
compensation are a cornerstone of the 990," he says.
7.
The executive director
of Healing Arts Initiative, who was attacked with drain cleaner last year, was
fired by the board of the charity, along with the financial officer who helped
her unearth what the authorities have called a $750,000 embezzlement scheme.
8.
A former FBI special agent pleaded
guilty to stealing more than $136,000 that was seized during drug
investigations. Scott M. Bowman admitted in a Riverside, California, courtroom
to using the money for a three-week spending spree on things such as a car,
plastic surgery for his wife, and a Las Vegas boxing match, prosecutors
said.
9.
Two former employees of
Bay Area Recycling for Charities are accused of funneling more than $25,000
intended for the nonprofit to another company.
We flagged these few
examples of charity misdeeds:
1.
Visit Philadelphia
$200,000
2.
Framingham United
Soccer Club (MA) $175,000
3.
Keeler
Emergency Services Support Association (MI) <$4000
4.
Skyline High School
Boosters’ Club (WA) $107,000
5.
Western
Michigan Christian High School $208,000
6.
Charlotte Catholic
High (NC) $300,000
7.
You Are the Difference Foundation (CA)
$200,000
8.
Foothill Farms Little
League (CA) $5000+
9.
Triangle Area Network
(TX) $363,000
10. Hunger Free Vermont $165,000
11. Newark Street
School (VT) unknown
12. Ruidoso Board
of Realtors (NM) $200,000+
13. Palma Ceia United Methodist Church (FL) $147,000
14. Anne Moncure Elementary School (VA) unknown
15. Community Clothing Center (MI)
$1700
16. Pleasant Lake Elementary PTA (MI) $6100
17. ComServ Inc. (NC) $300,000
18. Detroit Metro Stars (MI) $21,4000
19. Vista Pop Warner Football and Cheer (CA) $100,000+
20. United Security and Police
Officers of America (NJ) $250,000
21. Dexter Community Schools (MI)
$100,000
22. St. John Lutheran Church (MI) $200,000
23. Northboro-Southboro School District (MA)$450,000
24. Stockton Junior Colts Hockey Club (CA) $27,000
25. Universalist Society Church (VT) $8000
Political/public official chicanery (just a few):
1. Federal authorities have indicted a New
York town supervisor and assistant town attorney, alleging fraud and deceit
connected to an affiliated nonprofit, the Ramapo Local Development Corporation.
They sold over $150 million of
municipal bonds on fabricated financials.
2.
A former Hilo
supervisor for the state Department of Human Services faces charges she
embezzled more than $200,000 in public assistance, or welfare benefits, from
the office.
3. Former Summers County (WV) Commissioner
Jerry Berry was sentenced in Summers County Circuit Court Friday to at least
one year and no more than 10 in state prison for embezzling funds earmarked for
promoting tourism. Judge Robert Irons also ordered Berry to pay $41,699 in
restitution.
4.
A former Oak Brook Park
District employee faces misdemeanor theft charges for allegedly stealing nearly
$30,000 from the Oak Brook Park District Foundation.
5. The former director of the Downtown Pasco
Development Authority (WA) who admitted to embezzling more than $90,000 from
the agency has been sentenced to one year in prison.
6. Federal authorities arrested Sauk Village's (IL) treasurer
for allegedly looting more than $21,000 from the village's police pension fund,
according to the U.S. Attorney's Office.
7.
The former assistant
director of Montgomery County Social Services pleaded guilty to felony
embezzlement for using a department credit card to pay for $200,000 worth of
personal purchases.
8.
Authorities have
arrested a Greenville County (SC) fire chief and accused him of taking $23,000
in public funds to purchase appliances and RV parts.
9.
Former McAlester (OK)
Public Schools Superintendent and her husband are facing embezzlement charges
in Pittsburg County District Court. Her card charges were to a purchase a hotel
room at a resort casino and three meals while her husband accepted roughly
$5,100 in travel allowances during the 2015 calendar year — paid incrementally
each month — also while using a district-issued a fleet card to purchase gas.
10. Former Beaverton City (MI) Clerk was charged in
80th District Court after a police investigation revealed alleged
embezzlement of less than $100,000
police say she committed during her time as clerk.
11. Delaware State
Police arrested
Justin K. Oakley, 36 after an audit of the Millville Fire Department showed he
stole $190,433.61 while he was treasurer for the company. Oakley turned
himself in to detectives
12. Authorities say
a woman who oversaw finances for the former Show Low (AZ) Fire District embezzled nearly $1.8
million over several years. Her father, former Show Low Fire District Chief Ben
Owens Sr., also is accused of financial crimes.
13.
A
67-year-old town clerk is accused of embezzling thousands of dollars from the
small town of Slick, Oklahoma.
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, 2016
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