Academics Have Their Hand In The Till, too

By Gary Snyder


Karen L. Pletz, a 63-year-old Kansas City, Missouri woman, was the president and CEO of Kansas City University of Medicine and Biosciences (KCUMB) from 1995 until the end of 2009. She is now facing embezzlement charges. The F.B.I. is alleging that she was also pocketing over $1.5 million by embezzlement from that university. KCUMB appears to have taken the biggest hit with nine 'leadership stipends' that generally were in $65,000 lump sum payments. Pletz is alleged to have created minutes for nine fake KCUMB executive committee meetings authorizing these payments for October 2002 until December 2009. The total sum of these payments was $1,409,500.
In addition to these payments it is being alleged that the CEO submitted fraudulent vouchers to obtain reimbursements from the university for business purposes that were in fact for her personal travel and entertainment. These vouchers included trips to visit her parents, friends and an $11,846 reimbursement for items purchased at a Vera Wang boutique at Halekulani Hotel in Honolulu, Hawaii. Pletz did not include these payments that totaled $1,074,917 as part of her income on federal income tax reports. The tax loss to the nation was at least $280,000.

New Yorkers-See Where Your $$ Is Going

by Gary Snyder

The New York Independent Service Operator -- the nonprofit in charge of the state's power grid—is inflating salaries, first-class travel and lobster luncheons for the fat cats in charge. Facing a possible 12 percent boost in electricity costs next month, its leadership is not hurting. Its president and CEO, Stephen G. Whitley, pulled down $875,000 in salary and $489,000 in benefits in 2009, according to its most recent IRS filings. Board Chairwoman Karen Antion, a former Port Authority executive, raked in $377,700 in pay and perks. Six of NYISO's nine board members make more than $100,000 a year -- for just 14 hours of work a week, the tax filings say. At least 20 of NYISO's 500 employees were paid more than $200,000 in 2009, up from 16 in 2007, the IRS filings show.

Fiesta Bowl: More Sad Stories

by Gary Snyder

If you can believe it, there is more on the Fiesta Bowl front...and it is not good.
With the out-of-control spending and improper practices that led the Fiesta Bowl to fire its top executive, a recent internal report on influence-peddling and spending abuses suggests that at least some board members neglected their duty of care, ignored warning signs and failed to impose checks or balances that might have prevented the scandal.
On page after page, the report describes key board members overlooking or even taking advantage of the bowl's lax controls. The report documented numerous instances in which individual board officers turned their backs on possible abuses or conducted business with apparent conflicts. Many of the failures involved financial practices.
According to investigators, the Fiesta Bowl had no rules requiring advance board approval for expenses and barely any system to verify billing claims. Even though board members believed much was "excessive" and "had absolutely no business purpose," they attended events and never challenged the expenditures.
Board members also received repeated warnings about unlawful political activity. One chairwoman was warned that the Fiesta Bowl employees were reimbursed for political contributions and a cover-up was under way and she did nothing.
The Fiesta Bowl adopted conflict-of-interest policies, but they were not enforced. The construction company of a former chairman in 2008 obtained four Fiesta Bowl contracts worth over $2 million without having to compete for the business. Another former board member and chairman received $5,000 per month to serve as liaison between the Fiesta Bowl and the Bowl Championship Series. There was no written contract. The report says two other board chairs authorized the agreement.
Don Meyers, a Fiesta Bowl founder and critic of the current board, says: "They didn't ask enough questions," Meyers said. "The excuse that we didn't know isn't sufficient."
Some board members are comfortable that current leaders are doing everything they can and should to repair the organization. This sounds quite similar to the fiasco at the Smithsonian Institution.

Bowl Games Nailed...more to come

by Gary Snyder

Nonprofit Imperative told you about the free spending leaders of the Bowl Games. There has been a shake up in at least one. The chief executive of the nonprofit that runs college football’s Fiesta Bowl was fired after an internal investigation alleged that the charity’s leaders urged employees to make political contributions and reimbursed them with bogus bonuses. John Junker, who has led the Tempe, Ariz., game for three decades, had been on administrative leave since February for refusing to cooperate with an investigative panel commissioned by the organization’s board of directors. Natalie Wisneski, the chief operating officer, and Jay Fields, the vice president for marketing, have resigned. The investigators’ report, released Tuesday, also details alleged use of Fiesta Bowl funds on trips for Arizona politicians, a lavish 50th birthday party for Mr. Junker, and a $1200 visit to a Phoenix strip club. The Arizona attorney general’s office is investigating whether the allegations warrant a criminal investigation, and legal experts said it is possible the organization’s tax-exempt status could be at stake. We are confident that more heads will roll at other bowls in months to come.

Lack of Enforcement Costs State $250 million

by Gary Snyder

Nonprofit Imperative constantly tells you that restitution is seldom discharged (3.2% is):

In a Michigan auditor general's report, the agency—the Department of Energy, Labor and Economic Growth—failed to collect tens of millions of dollars in overpayments and failed to assess and collect hundreds of millions of dollars in restitution and penalties for fraudulent claims. Rather than cutting off benefits immediately to claimants suspected of fraud, the agency continued to make payments while it referred the case to a fraud unit that had a one-year backlog. The audit found $72.5 million in overpayment of benefits and unassessed penalties of between $120 million and $236.6 million. In a response included with the audit, the agency attributed some of the problems to the huge caseload increase that resulted from the lengthy recession in Michigan.

What Took So Long?

by Gary Snyder

The board of trustees at the nonprofit MediSys Health Network fired its indicted chief executive. What took so long? The board acted this month when David Rosen was charged with bribing three politicians: the late Assemblyman Anthony Seminerio, State Sen. Carl Kruger and Assemblyman William Boyland Jr. Mr. Rosen has pleaded not guilty. They declined to suspend or fire Mr. Rosen after he was implicated in the bribery and corruption indictment of Mr. Seminerio in September 2008. Some board members' unusually close ties to Mr. Rosen may be the reason. There are four interrelated boards of trustees connected to the indicted executive—MediSys and Jamaica Hospital Medical Center—the system also includes Flushing and Brookdale hospitals. The boards have a higher-than-usual concentration of trustees who also work at the hospitals, making them dependent on Mr. Rosen for their paychecks. Others have been board members for decades.
The MediSys-related boards are unusual. Crain's New York noted one member, Queens restaurateur Anthony Federici, is described in media reports as a captain in the Genovese crime family. The boards include a notable number of doctors working at the system, including Brookdale's Dr. Alvin Kahn. He is listed in the hospital's 2009 tax forms as chairman under a section for trustees, directors and officers, with compensation of $307,412. Dr. Kahn is 82, and his salary has puzzled state officials, who believe that he is being paid for his role as trustee. Dr. Kahn's daughter also is on one of the four boards. Another board member, businessman Alex Rovt once offered to loan Brookdale money to meet its operating expenses. He asked for hospital real estate as collateral. The chairman of Mr. Rovt's company, Steven Plotnick, and one of its attorneys, Irina Benfeld, also are on MediSys-related boards. A former counsel, Margaret Johnson, claims that trustees “vote the way Rosen directs.” The trustees “are a mere alter ego of Rosen (and a few others).”
MediSys are the subject of a 2009 lawsuit by a former Brookdale general counsel who seeks $100 million in damages, alleging wrongful termination and claiming that conflicts of interests were rampant at the boards under Mr. Rosen's control.
Mr. Rosen, earned about $1.8 million in 2009 and two associates earned $1.4 million each.

A Pastor: $2 million + Zoo, Church and Parishioner Fraud

by Gary Snyder

An evangelical pastor in Montreal, Canada whose ex-followers say he fleeced them of hundreds of thousands of dollars was arrested in connection with a nearly $1-million fraud case at a zoo. He faces fraud charges in connection with $978,000 allegedly diverted from Parc Safari Zoo from 2005 to 2008. He faces a string of lawsuits for unpaid bills, bounced checks and bad debts. Last July, a group of former church followers allege that he had talked them into loaning him cash - $142,000 in one case - and never paid them back. They said some members of the multiethnic congregation mortgaged their homes or borrowed with high interest credit cards to meet his requests for money. He is also charged with embezzling $734,734 over three years on behalf of Actions Bethel du Canada Inc., a charity based at the church.

Such A Deal: Another Ripoff

by Gary Snyder

Cleve L. Killingsworth, who abruptly resigned last March as chief executive of the nonprofit Blue Cross Blue Shield of Massachusetts, collected $8.6 million in compensation from the state’s largest health insurer in 2010. The $8.6 million that Killingsworth, 58, took with him is a combination of the $273,040 salary he received for his 2 1/2 months at the insurer last year; a $922,480 bonus for his work in 2009; and $7.4 million in additional compensation, according to the regulatory filing. That additional money represents the severance and retirement payments that accrued over his six years at Blue Cross, including almost five years as chief executive.

To show the strength of its governance,in 2009,the health insurer's membership declined, its net income fell 49 percent, it laid off employees, and received of double-digit premium increases, Killingsworth was rewarded with a 26% increase in salary and bonus.

But this is a deal compared to his predecessor, William Van Faasen, who received $16.4 million in retirement benefits in 2006. Van Faasen, who took over again as acting chief executive after Killingsworth departed, is currently the company’s chairman. Can’t wait to see the remuneration for Van Faasen for his latest roles.

As is frequently the case, the state attorney general is monitoring compensation practices at health care companies and done nothing.

Regulators Know About Fraudulent Fundraisers; Do Nothing

by Gary Snyder

At the more than 1,100 employee Associated Community Services offices they raise money for dozens of charities nationwide. But little goes to the charities that the contributors think it is going to. ACS is one of the largest professional fundraisers in the country and is big business. Take the “Children’s Cancer Fund of America.” The Powell, Tennessee charity says it provides aid and financial assistance to children struggling with the disease. They raised over $4 million in 2009 and ACS kept 83% of it. Or take the “Firefighters Assistance Fund,” a charity to help fire departments buy water trucks, high volume nozzles, and other fire fighting gear. The charity, received only 20% of every dollar raised. Or the charity, “Children with Hairloss," which provides wigs for children who have suffered through chemotherapy and radiation. They were able to keep under 20%. All told, Associated Community Services reported taking $17,713,325 in donations, according to a 2009 report by the New York Attorney General. But only $5,966,173 made its way to charities. Imagine how big this fundraising problem is.This is just one company. The high-pressure sales tactics employees are trained to use generates $1 million a month.

State regulators, typically the attorney general, do not have resources to do their job. In some states, student interns are reviewing filings. In the past the attorneys’ general were to enforce the fiduciary duties of charity managers but have fallen short of their stated intentions. Most regulators are inactive, ineffective and overwhelmed. Most do not see any improvement in the foreseeable future with the current budgetary crises.

Convicted in a $834 million Fraud

by Gary Snyder

The former CEO, Robert "Bob" Jones, of the El Paso charity, now defunct National Center for the Employment of the Disabled, has been sentenced to 10 years in prison and ordered to pay $65 million restitution to his victims for embezzling government funds and corrupting elected officials. The judge also sentenced Patrick Woods, a former board member, to three years in prison and ordered him to pay $1.7 million in restitution, according to a statement from the U.S. Justice Department. In 2006, NCED, a clothing company, was once the primary supplier of chemical-warfare suits for the military. It was raided by federal officials to see if was in compliance with regulations which required that at least 75 percent of NCED workers filling government orders be blind or severely disabled. It was concluded that only about 7 percent of workers were handicapped while Jones ran the company. Jones pleaded guilty in 2009. Prosecutors said he admitted lying about the number of blind or severely handicapped NCED workers to qualify for no-bid government contracts. Jones also admitted that between late 1998 and March 2006, he paid cash and other bribes in the form of campaign contributions and gratuities to secure vendor contracts between Access Healthsource, a subsidiary of NCED, and El Paso County and the El Paso, Ysleta and Socorro Independent School Districts. The company had been awarded contracts totaling about $834 million in the previous decade.