By Gary Snyder
The City of Austin has enacted rules to better scrutinize nonprofits, for good reason. The aftermath of $1.2 million embezzlement by Louanne Aponte, executive director of Family Connections, has reverberated throughout the city. The nonprofit closed in April 2010 after discovering it owed hundreds of thousands of dollars to the Internal Revenue Service and credit card companies. Aponte is also accused of stealing $183,000 from the Texas Association of Child Care Resource and Referral Agencies , where she served as volunteer treasurer, and about $6,700 from Hyde Park Christian Church , where she volunteered on the grants committee. Austin has enacted rules to better scrutinize nonprofits. Executive directors at nonprofits are reviewing their financial policies. And board members are flocking to classes to learn how to do a better job of overseeing how their organizations are run.
The city has changed the way the Austin/Travis County Health and Human Services Department handles its contracts with nonprofits. The department has hired an internal auditor to, among other things, help city staffers identify theft, fraud and other problems with contractors; ordered nonprofits to buy at least enough crime insurance to cover the loss of a city grant because of theft or fraud; and forced them to buy liability insurance to protect board members and officers from being held personally responsible for such crimes.
The city has also started verifying the licensing status of certified public accountants who perform audits for nonprofits. It now contacts auditors directly to confirm that documents submitted in their names are authentic and that they were presented to the board of directors. Investigators allege that Aponte forged audits to hide her theft, and Family Connections board members have said they received audit reports directly from Aponte rather than an auditor. The city is also requiring board chairmen to provide signed copies of minutes from a nonprofit's board meetings.
Saturday, January 15, 2011
Thursday, January 13, 2011
Is Haitian Fundraising Helpful or a Rip-off?
by Gary Snyder
Nonprofit Imperative has been monitoring the finances of the relief efforts in Haiti. In the last issue of NI it was noted that roughly 38% of the more than $1.4 billion donated to relief agencies and others was spent. Some charities attribute the slow expenditures to a lack of leadership from the Haitian government and the international community. Give Well (givewell.org) has done an admirably analysis and has a grade card on major disaster relief organizations based on their transparency and accountability to donors. The series of articles provides a framework for the donor to make decisions as to which agency to contribute. You may be surprised as to the results. The study’s admonition is worthy of consideration since it is general overview and not an assessment as to the quality of any organization.
Nonprofit Imperative has been monitoring the finances of the relief efforts in Haiti. In the last issue of NI it was noted that roughly 38% of the more than $1.4 billion donated to relief agencies and others was spent. Some charities attribute the slow expenditures to a lack of leadership from the Haitian government and the international community. Give Well (givewell.org) has done an admirably analysis and has a grade card on major disaster relief organizations based on their transparency and accountability to donors. The series of articles provides a framework for the donor to make decisions as to which agency to contribute. You may be surprised as to the results. The study’s admonition is worthy of consideration since it is general overview and not an assessment as to the quality of any organization.
Monday, January 10, 2011
Oh No, Not the Bowl Games, too
by Gary Snyder
Corruption and deceit seem to be watchwords for the Bowl Champion Series (aka BCS) according to the authors of Death to the BCS: The Definitive Case Against the Bowl Championship Series. In just one chapter (#3) charges are leveled on the CEO of the Alamo Bowl Derrick Fox’s testimony in front of the House Energy and Commerce subcommittee in May 2009. Fox stated before Congress, “Almost all postseason bowl games are put on by charitable groups, and since up to one-quarter of the proceeds from the games are dedicated to the community, local charities received tens of millions of dollars a year.”
The book’s authors, Dan Wetzel, Josh Peter and Jeff Passan, who used a two-year investigation of tax records, bowl contracts, university documents, and dozens of interviews with the power players of college football, to go to town destroying this argument with facts and figures:
“*The 23 tax-exempt bowls produced $186 million in revenue, including $141 million in net assets, but combined to give just $3.2 million (1.7 percent of revenue) to charity. More than half of that charity came from just two bowls, the Orange and Chick-fil-A.
*27 bowls enjoy not-for-profit status and do not pay taxes
*Not a single bowl game is run by a group that can be considered a charity. They are businesses first and foremost.
*23 bowl games with public records received $7.5 million in direct government handouts.
*The Sugar Bowl received $3 million in funding from Louisiana in 2007 and has its own lobbying firm to ensure its public financing. The organization brought in $34.1 million in revenue and gave ZERO money to charity, despite pulling $11.6 million in tax-free profit and $37 million in assets.
*Sugar Bowl executive director Paul Hoolahan received $607,500 in compensation for fiscal 2008. Associate executive director Jeff Hundley took in $375, 732.
*The Sugar Bowl cronies live lavishly spending thousands of dollars every year including, $494,177 for “entertainment” in 2005, $201,226 for “gifts and bonuses” in 2007, $330,244 for “decorations” in 2007, plus many, many more.”
The rest of the chapter deals with the ”corruption that is starting to spring up as bowls like the Fiesta are reportedly contributing to political friends and allies to protect the Cartel system.” The Fiesta acknowledges spending $4 million since 2000 “on lobbyists, trips, dinners, and golf retreats to build relationships with athletic officials who control the BCS and to garner support from politicians.” The Arizona attorney general is currently investigating the matter. The authors deride this and claim the $4 million could be sitting in coffers of colleges and universities, but instead it is wasted to protect the current BCS.
Update from EO Tax Journal: In an IRS complaint against the Orange Bowl Committee, an organization affiliated with the BCS, the BCS's Orange Bowl, which is organized as a public charity, used its charitable funds to treat Orange Bowl executives and college athletic directors to a four-day "complimentary getaway" aboard Royal Caribbean's Majesty of the Seas earlier this year. As shown by the detailed agenda, this Caribbean cruise was a junket. No business meetings were held. Attendees were instead occupied with full-day excursions to Atlantis Resort and CocoCay, a private island, according to Playoff PAC. Also there is more information on bowl spending:
Recent Orange Bowl Spending Examples
-- $331,938 on "parties" and "Summer Splash" in FYE 2004;
-- $1,189,005 on unspecified "entertainment" and "catering" in FYE
2009;
-- $1,017,322 on undifferentiated "event food" and "entertainment"
in FYE 2008;
-- $756,546 on Bowl personnel travel in FYE 2009;
-- $535,764 on "gifts" in FYE 2006;
-- $472,627 on "gifts" in FYE 2008;
-- $111,492 on "postage and shipping" in FYE 2008;
-- $75,896 on "recruitment" in FYE 2008;
-- $60,000 on "governmental relations" in FYE 2008; and
-- $42,281 on "golf" in FYE 2004 and FYE 2006.
Fiesta Bowl Spending
The Fiesta Bowl spends $331,438 per year on "Fiesta Frolic," a golf weekend for college athletic directors and Bowl officials.
• The Fiesta Bowl has doled-out $124,500 in interest-free loans to its executives.
• The Fiesta Bowl has paid $1,217,081 to Arizona lobbying firms.
• The Fiesta Bowl spent $91,020 for "travel and entertainment expenses for public officials" in FY 2009.
Another update from Rick Cohen @ NonprofitQuarterly.org where he summarizes Time Magazine and Business Week articles in which he says bowl organizations are nonprofits – and they pay their CEOs exceptionally well for their nonprofit service. Some examples include Paul Hoolahan of the Sugar Bowl at $645,386, John Junker of the Fiesta Bowl at $592,418, Rick Baker of the Cotton Bowl taking home $490,433, Derrick Fox of the Alamo Bowl earning $438,044. “These bowls are high in the execs' salaries but low on the nonprofitness scale”.
More on how others are looking at it in the NYT.
Corruption and deceit seem to be watchwords for the Bowl Champion Series (aka BCS) according to the authors of Death to the BCS: The Definitive Case Against the Bowl Championship Series. In just one chapter (#3) charges are leveled on the CEO of the Alamo Bowl Derrick Fox’s testimony in front of the House Energy and Commerce subcommittee in May 2009. Fox stated before Congress, “Almost all postseason bowl games are put on by charitable groups, and since up to one-quarter of the proceeds from the games are dedicated to the community, local charities received tens of millions of dollars a year.”
The book’s authors, Dan Wetzel, Josh Peter and Jeff Passan, who used a two-year investigation of tax records, bowl contracts, university documents, and dozens of interviews with the power players of college football, to go to town destroying this argument with facts and figures:
“*The 23 tax-exempt bowls produced $186 million in revenue, including $141 million in net assets, but combined to give just $3.2 million (1.7 percent of revenue) to charity. More than half of that charity came from just two bowls, the Orange and Chick-fil-A.
*27 bowls enjoy not-for-profit status and do not pay taxes
*Not a single bowl game is run by a group that can be considered a charity. They are businesses first and foremost.
*23 bowl games with public records received $7.5 million in direct government handouts.
*The Sugar Bowl received $3 million in funding from Louisiana in 2007 and has its own lobbying firm to ensure its public financing. The organization brought in $34.1 million in revenue and gave ZERO money to charity, despite pulling $11.6 million in tax-free profit and $37 million in assets.
*Sugar Bowl executive director Paul Hoolahan received $607,500 in compensation for fiscal 2008. Associate executive director Jeff Hundley took in $375, 732.
*The Sugar Bowl cronies live lavishly spending thousands of dollars every year including, $494,177 for “entertainment” in 2005, $201,226 for “gifts and bonuses” in 2007, $330,244 for “decorations” in 2007, plus many, many more.”
The rest of the chapter deals with the ”corruption that is starting to spring up as bowls like the Fiesta are reportedly contributing to political friends and allies to protect the Cartel system.” The Fiesta acknowledges spending $4 million since 2000 “on lobbyists, trips, dinners, and golf retreats to build relationships with athletic officials who control the BCS and to garner support from politicians.” The Arizona attorney general is currently investigating the matter. The authors deride this and claim the $4 million could be sitting in coffers of colleges and universities, but instead it is wasted to protect the current BCS.
Update from EO Tax Journal: In an IRS complaint against the Orange Bowl Committee, an organization affiliated with the BCS, the BCS's Orange Bowl, which is organized as a public charity, used its charitable funds to treat Orange Bowl executives and college athletic directors to a four-day "complimentary getaway" aboard Royal Caribbean's Majesty of the Seas earlier this year. As shown by the detailed agenda, this Caribbean cruise was a junket. No business meetings were held. Attendees were instead occupied with full-day excursions to Atlantis Resort and CocoCay, a private island, according to Playoff PAC. Also there is more information on bowl spending:
Recent Orange Bowl Spending Examples
-- $331,938 on "parties" and "Summer Splash" in FYE 2004;
-- $1,189,005 on unspecified "entertainment" and "catering" in FYE
2009;
-- $1,017,322 on undifferentiated "event food" and "entertainment"
in FYE 2008;
-- $756,546 on Bowl personnel travel in FYE 2009;
-- $535,764 on "gifts" in FYE 2006;
-- $472,627 on "gifts" in FYE 2008;
-- $111,492 on "postage and shipping" in FYE 2008;
-- $75,896 on "recruitment" in FYE 2008;
-- $60,000 on "governmental relations" in FYE 2008; and
-- $42,281 on "golf" in FYE 2004 and FYE 2006.
Fiesta Bowl Spending
The Fiesta Bowl spends $331,438 per year on "Fiesta Frolic," a golf weekend for college athletic directors and Bowl officials.
• The Fiesta Bowl has doled-out $124,500 in interest-free loans to its executives.
• The Fiesta Bowl has paid $1,217,081 to Arizona lobbying firms.
• The Fiesta Bowl spent $91,020 for "travel and entertainment expenses for public officials" in FY 2009.
Another update from Rick Cohen @ NonprofitQuarterly.org where he summarizes Time Magazine and Business Week articles in which he says bowl organizations are nonprofits – and they pay their CEOs exceptionally well for their nonprofit service. Some examples include Paul Hoolahan of the Sugar Bowl at $645,386, John Junker of the Fiesta Bowl at $592,418, Rick Baker of the Cotton Bowl taking home $490,433, Derrick Fox of the Alamo Bowl earning $438,044. “These bowls are high in the execs' salaries but low on the nonprofitness scale”.
More on how others are looking at it in the NYT.
Friday, December 24, 2010
Surprise, not really: Smithsonian Did It Again!
by Gary Snyder
The Smithsonian Institution is, once again, in the forefront of indecision and inadequate leadership. For years the Smithsonian was run by, arguably, one of the charitable sector’s poorest functioning boards. In its recent history the board was a serial nonprofit governance offender and ignored many “red flags”. During the previous administration of Secretary Lawrence Small the board governed an institution that disregarded the inspector general’s report that stated that there was massive malfeasance, an agency that was devoid of implemented policies and procedures, an institution that was overtly secretly and lacked transparency, an organization that was rampant with conflicts of interest, an agency that destroyed documents to cover up its weaknesses and failed any positive standard in its management and governance.
It is now faced with another outcry by the museum world over the censoring one of its own exhibitions - removing a video that appeared in the National Portrait Gallery's groundbreaking exhibition of gay portraiture, "Hide/Seek". Much like his predecessor, the current Smithsonian Secretary G. Wayne Clough has gone missing after making the controversial decision, over the objections of his curators. By his withdrawing from the public debate, it has become a disaster for the institution.
Such concealment is precisely the same tact the Smithsonian took under the Small régime until the Congress intervened and forced his resignation. Most would have believed that the adverse publicity would have changed the way the Smithsonian operated. No one should have expected anything different because this is the same leadership that got itself in a similar mess just a few years ago. They just re-anointed themselves!
The Smithsonian Institution is, once again, in the forefront of indecision and inadequate leadership. For years the Smithsonian was run by, arguably, one of the charitable sector’s poorest functioning boards. In its recent history the board was a serial nonprofit governance offender and ignored many “red flags”. During the previous administration of Secretary Lawrence Small the board governed an institution that disregarded the inspector general’s report that stated that there was massive malfeasance, an agency that was devoid of implemented policies and procedures, an institution that was overtly secretly and lacked transparency, an organization that was rampant with conflicts of interest, an agency that destroyed documents to cover up its weaknesses and failed any positive standard in its management and governance.
It is now faced with another outcry by the museum world over the censoring one of its own exhibitions - removing a video that appeared in the National Portrait Gallery's groundbreaking exhibition of gay portraiture, "Hide/Seek". Much like his predecessor, the current Smithsonian Secretary G. Wayne Clough has gone missing after making the controversial decision, over the objections of his curators. By his withdrawing from the public debate, it has become a disaster for the institution.
Such concealment is precisely the same tact the Smithsonian took under the Small régime until the Congress intervened and forced his resignation. Most would have believed that the adverse publicity would have changed the way the Smithsonian operated. No one should have expected anything different because this is the same leadership that got itself in a similar mess just a few years ago. They just re-anointed themselves!
Wednesday, December 22, 2010
2010-Another Record Year For Charity Fraud
by Gary Snyder
We want to thank you for a tremendous year. As is usually the case, there is good news and there is bad news.
In the past, we have closed out the year with a sampling of the constellation of malfeasance perpetrated by board members, nonprofit executives, volunteers and politicos--all of whom have used charities to line their pockets. The upward trajectory of malfeasance continues unabated.
In 2009, we saw a significant jump in such incidents as well as a 50% rise in the amount of money stolen. In 2010, Nonprofit Imperative data shows that path has not subsided with a 25% increase and about $2 billion stolen from those to whom the money was intended to go. Because the documentation of these frauds are taken solely from public documents, members of the Association of Certified Fraud Examiners believe that this represents only 5-10% of the total amount of charity malfeasance.
This embarrassment continues to be a pox on the charitable sector. Unfortunately, interest and concern by regulators, charity leaders, business leaders, IRS, judges and prosecutors is virtually nonexistent. Watch for my upcoming book, Silence: The Impending Threat to the Charitable Sector, which will spotlight many reasons for the lack of concern as well as how to address this foreboding danger to the nonprofit sector.
Your tips and insights certainly enhanced the e-newsletter, Nonprofit Imperative, the twice-monthly journal that has tracked and collected data on hundreds of billions of dollars of charitable and nonprofit-political fraud at thousands of charities. Thanks to those of you wanting us to highlight a charity in Skunk-of-the-Month. You exhibited great patience in having to have to wait a month or more because there were so many submissions.
Whether we were briefing electronic media such as an HBO or National Public Radio or a U.S. House oversight committee or a U.S. Senate committee or helping teems of investigative reporters on the multitude of challenging problems plaguing the nonprofit sector or writing articles (blogs, newsletters) or responding to frequent inquiries, our investigations and recommendations have shed some light on an impending crisis and hopefully assisted in a better understanding of the need for openness, accountability, and effectiveness of our charities.
We are very appreciative of your support. It is remarkable.
Happy Holidays!!
Gary Snyder
Nonprofit Imperative
gary.r.snyder@gmail.com
248.324.3700
We want to thank you for a tremendous year. As is usually the case, there is good news and there is bad news.
In the past, we have closed out the year with a sampling of the constellation of malfeasance perpetrated by board members, nonprofit executives, volunteers and politicos--all of whom have used charities to line their pockets. The upward trajectory of malfeasance continues unabated.
In 2009, we saw a significant jump in such incidents as well as a 50% rise in the amount of money stolen. In 2010, Nonprofit Imperative data shows that path has not subsided with a 25% increase and about $2 billion stolen from those to whom the money was intended to go. Because the documentation of these frauds are taken solely from public documents, members of the Association of Certified Fraud Examiners believe that this represents only 5-10% of the total amount of charity malfeasance.
This embarrassment continues to be a pox on the charitable sector. Unfortunately, interest and concern by regulators, charity leaders, business leaders, IRS, judges and prosecutors is virtually nonexistent. Watch for my upcoming book, Silence: The Impending Threat to the Charitable Sector, which will spotlight many reasons for the lack of concern as well as how to address this foreboding danger to the nonprofit sector.
Your tips and insights certainly enhanced the e-newsletter, Nonprofit Imperative, the twice-monthly journal that has tracked and collected data on hundreds of billions of dollars of charitable and nonprofit-political fraud at thousands of charities. Thanks to those of you wanting us to highlight a charity in Skunk-of-the-Month. You exhibited great patience in having to have to wait a month or more because there were so many submissions.
Whether we were briefing electronic media such as an HBO or National Public Radio or a U.S. House oversight committee or a U.S. Senate committee or helping teems of investigative reporters on the multitude of challenging problems plaguing the nonprofit sector or writing articles (blogs, newsletters) or responding to frequent inquiries, our investigations and recommendations have shed some light on an impending crisis and hopefully assisted in a better understanding of the need for openness, accountability, and effectiveness of our charities.
We are very appreciative of your support. It is remarkable.
Happy Holidays!!
Gary Snyder
Nonprofit Imperative
gary.r.snyder@gmail.com
248.324.3700
Saturday, December 18, 2010
Somewhat Good News for Madoff Victims
by Gary Snyder
With recent developments, there is good reason to believe that the victims of Bernard Madoff's schemes will see more money than they possibly could have expected.
Jeffry Picower’s widow, Barbara, agreed to return a staggering $7.2 billion that her husband reaped from the giant Madoff Ponzi scheme. U.S. Attorney Preet Bharara called the forfeiture the largest in Justice Department history and a "game changer" for those swindled by Madoff. "We will return every penny received from almost 35 years of investing with Bernard Madoff," Barbara Picower said in a statement. "I believe the Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering." A huge charitable foundation that Picower had created closed in 2009 after its assets were wiped out in the Madoff fraud. It had donated hundreds of millions to colleges, libraries and other groups.
The Picower settlement means roughly half of the $20 billion that investors entrusted to Madoff has now been recovered, authorities said.
The trustee representing victims of Bernard Madoff’s fraud has filed more than two dozen lawsuits in recent weeks against foundations and charities that invested directly with Madoff and allegedly profited from the scheme. Some charities and individuals that profited—by getting back more than they put in, before the fraud was uncovered—have entered into settlements to avoid lawsuits. The lawsuit, which is typical of the latest claims filed against foundations and nonprofit groups, states that $5.32-million of the $6.68-million withdrawn by the cultural organization from 2002 to 2008 was “fictitious profit” from the Ponzi scheme. Recently, the Jewish women’s charity Hadassah announced that it had struck an agreement to give back $45-million, slightly less than half of its profit from investing with Madoff. Also, Carl Shapiro, a Boston investor and philanthropist and close friend of Bernard Madoff’s, agreed to return $625-million to the trustee. The trustee, Irving Picard, had maintained that Mr. Shapiro, an early investor with Madoff, withdrew more than $1-billion in the six years preceding the exposure of the fraud. Tax forms for the Carl and Ruth Shapiro Foundation listed assets of $345-million in 2007 but just $112-million at year-end 2008. JTA gives some insight as to a few of the organizations that are being asked to give back some money:
• America-Israel Cultural Foundation, $5 million
• The American Committee for Shaare Zedek Medical Center in Jerusalem, $7 million
• United Congregations Mesorah, $16 million
Foundations established by Bernard Madoff’s sons were also among those that were targets in the latest round of clawback suits. On December 8, the trustee sued the Mark and Stephanie Madoff Foundation and the Deborah and Andrew Madoff Foundation for $2-million each to recover transfers that were made to the foundation from Bernard Madoff accounts. “This action is brought to recover the fictitious profit amount so that this customer property can be equitably distributed among all of the victims.” (Chronicle of Philanthropy) Mark Madoff was found dead as a result of an apparent suicide on December 11, the second anniversary of his father’s arrest.
The trustee recovering money for investors who lost billions of dollars in jailed financier Bernard Madoff's fraud filed civil racketeering charges against an Austrian banker and 55 other defendants, demanding they give up nearly $20 billion and accusing the banker of being Madoff's "criminal soul mate." Court-appointed trustee Irving Picard used tough language to portray a 23-year relationship between banker Sonja Kohn and Madoff, saying she "masterminded a vast illegal scheme" as she and others engaged in money laundering, mail and wire fraud, and financial institution fraud in support of the Madoff's scheme. He also accused her of accepting at least $62 million in secret kickbacks from Madoff for soliciting investors for the fraud. (AP)
With recent developments, there is good reason to believe that the victims of Bernard Madoff's schemes will see more money than they possibly could have expected.
Jeffry Picower’s widow, Barbara, agreed to return a staggering $7.2 billion that her husband reaped from the giant Madoff Ponzi scheme. U.S. Attorney Preet Bharara called the forfeiture the largest in Justice Department history and a "game changer" for those swindled by Madoff. "We will return every penny received from almost 35 years of investing with Bernard Madoff," Barbara Picower said in a statement. "I believe the Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering." A huge charitable foundation that Picower had created closed in 2009 after its assets were wiped out in the Madoff fraud. It had donated hundreds of millions to colleges, libraries and other groups.
The Picower settlement means roughly half of the $20 billion that investors entrusted to Madoff has now been recovered, authorities said.
The trustee representing victims of Bernard Madoff’s fraud has filed more than two dozen lawsuits in recent weeks against foundations and charities that invested directly with Madoff and allegedly profited from the scheme. Some charities and individuals that profited—by getting back more than they put in, before the fraud was uncovered—have entered into settlements to avoid lawsuits. The lawsuit, which is typical of the latest claims filed against foundations and nonprofit groups, states that $5.32-million of the $6.68-million withdrawn by the cultural organization from 2002 to 2008 was “fictitious profit” from the Ponzi scheme. Recently, the Jewish women’s charity Hadassah announced that it had struck an agreement to give back $45-million, slightly less than half of its profit from investing with Madoff. Also, Carl Shapiro, a Boston investor and philanthropist and close friend of Bernard Madoff’s, agreed to return $625-million to the trustee. The trustee, Irving Picard, had maintained that Mr. Shapiro, an early investor with Madoff, withdrew more than $1-billion in the six years preceding the exposure of the fraud. Tax forms for the Carl and Ruth Shapiro Foundation listed assets of $345-million in 2007 but just $112-million at year-end 2008. JTA gives some insight as to a few of the organizations that are being asked to give back some money:
• America-Israel Cultural Foundation, $5 million
• The American Committee for Shaare Zedek Medical Center in Jerusalem, $7 million
• United Congregations Mesorah, $16 million
Foundations established by Bernard Madoff’s sons were also among those that were targets in the latest round of clawback suits. On December 8, the trustee sued the Mark and Stephanie Madoff Foundation and the Deborah and Andrew Madoff Foundation for $2-million each to recover transfers that were made to the foundation from Bernard Madoff accounts. “This action is brought to recover the fictitious profit amount so that this customer property can be equitably distributed among all of the victims.” (Chronicle of Philanthropy) Mark Madoff was found dead as a result of an apparent suicide on December 11, the second anniversary of his father’s arrest.
The trustee recovering money for investors who lost billions of dollars in jailed financier Bernard Madoff's fraud filed civil racketeering charges against an Austrian banker and 55 other defendants, demanding they give up nearly $20 billion and accusing the banker of being Madoff's "criminal soul mate." Court-appointed trustee Irving Picard used tough language to portray a 23-year relationship between banker Sonja Kohn and Madoff, saying she "masterminded a vast illegal scheme" as she and others engaged in money laundering, mail and wire fraud, and financial institution fraud in support of the Madoff's scheme. He also accused her of accepting at least $62 million in secret kickbacks from Madoff for soliciting investors for the fraud. (AP)
Monday, December 13, 2010
The Prearranged Funeral Fraud
by Gary Snyder
About a year and half ago, Nonprofit Imperative indicated that the pre-paid prearranged funeral business could be one of the largest frauds perpetrated in the nonprofit, as well as the for-profit sectors. Several states are investigating , but it seems to be generating a lot of news in which a funeral mogul, James Douglas Cassity, and other leaders of his funeral empire — National Prearranged Services Inc. —that apparently embezzled as much as $600 million that was supposed to be used to pay funeral expenses for about 150,000 consumers. National Prearranged Services, Inc., headquartered in Clayton, MO, is an entity that sold prearranged funeral services in 19 states. According to a FBI Press Release they, among other things, altered insurance applications bought at the time of signing and made himself and his company as sole beneficiary, while extracting $100 million from the customers’ policies.
A federal investigation of James Douglas Cassity uncovered a scheme full of intertwined corporations and missing funds. Cassity pleaded guilty of conspiracy and tax fraud violations in 1982, lost his law license and served six months in federal prison. Most consumers who paid for funeral plans are protected by state insurance-guarantee associations (see below the status of the associations). In some cases, however, the insurance pays only a small portion of the actual cost of the arrangements, and participating funeral homes must make up the difference, funeral directors said.
Here is some backdrop that appeared in Nonprofit Imperative in June 2009: A Merrill Lynch employee sold life insurance policies to finance a pre-need funeral trust. He received a commission and provided investment advice on the proceeds that went to the Illinois Funeral Directors Association. An IFDA subsidiary took a piece of the premium for overseeing the trust and its cut exceeded the legally allowed amount. The trust had deficits of $10.4 million in 2001, $39 million in 2006 and as much as $100 million at the present time. The state comptroller wants $10 million to pay for current funerals. Merrill Lynch has offered $18 million to release them from liability and that is not acceptable to many funeral directors. The funeral homes say they are losing an estimated $500,000 each. The undertakers are crying foul and pointing to the failure of the regulators to do their job. There is much at stake including dignified burials for the 40,000 Illinois residents that bought the plans. (The State Journal-Register)
It seems that at least two other states have similar problems and solvency is a risk there as well.
About a year and half ago, Nonprofit Imperative indicated that the pre-paid prearranged funeral business could be one of the largest frauds perpetrated in the nonprofit, as well as the for-profit sectors. Several states are investigating , but it seems to be generating a lot of news in which a funeral mogul, James Douglas Cassity, and other leaders of his funeral empire — National Prearranged Services Inc. —that apparently embezzled as much as $600 million that was supposed to be used to pay funeral expenses for about 150,000 consumers. National Prearranged Services, Inc., headquartered in Clayton, MO, is an entity that sold prearranged funeral services in 19 states. According to a FBI Press Release they, among other things, altered insurance applications bought at the time of signing and made himself and his company as sole beneficiary, while extracting $100 million from the customers’ policies.
A federal investigation of James Douglas Cassity uncovered a scheme full of intertwined corporations and missing funds. Cassity pleaded guilty of conspiracy and tax fraud violations in 1982, lost his law license and served six months in federal prison. Most consumers who paid for funeral plans are protected by state insurance-guarantee associations (see below the status of the associations). In some cases, however, the insurance pays only a small portion of the actual cost of the arrangements, and participating funeral homes must make up the difference, funeral directors said.
Here is some backdrop that appeared in Nonprofit Imperative in June 2009: A Merrill Lynch employee sold life insurance policies to finance a pre-need funeral trust. He received a commission and provided investment advice on the proceeds that went to the Illinois Funeral Directors Association. An IFDA subsidiary took a piece of the premium for overseeing the trust and its cut exceeded the legally allowed amount. The trust had deficits of $10.4 million in 2001, $39 million in 2006 and as much as $100 million at the present time. The state comptroller wants $10 million to pay for current funerals. Merrill Lynch has offered $18 million to release them from liability and that is not acceptable to many funeral directors. The funeral homes say they are losing an estimated $500,000 each. The undertakers are crying foul and pointing to the failure of the regulators to do their job. There is much at stake including dignified burials for the 40,000 Illinois residents that bought the plans. (The State Journal-Register)
It seems that at least two other states have similar problems and solvency is a risk there as well.
Madoff Didn't Just Hurt the Rich
MADOFF UPDATES:
The trustee representing victims of Bernard Madoff’s fraud has filed more than two dozen lawsuits in recent weeks against foundations and charities that invested directly with Madoff and allegedly profited from the scheme. Some charities and individuals that profited—by getting back more than they put in, before the fraud was uncovered—have entered into settlements to avoid lawsuits. The lawsuit, which is typical of the latest claims filed against foundations and nonprofit groups, states that $5.32-million of the $6.68-million withdrawn by the cultural organization from 2002 to 2008 was “fictitious profit” from the Ponzi scheme. Recently, the Jewish women’s charity Hadassah announced that it had struck an agreement to give back $45-million, slightly less than half of its profit from investing with Madoff. Also, Carl Shapiro, a Boston investor and philanthropist and close friend of Bernard Madoff’s, agreed to return $625-million to the trustee. The trustee, Irving Picard, had maintained that Mr. Shapiro, an early investor with Madoff, withdrew more than $1-billion in the six years preceding the exposure of the fraud. Tax forms for the Carl and Ruth Shapiro Foundation listed assets of $345-million in 2007 but just $112-million at year-end 2008.
Foundations established by Bernard Madoff’s sons were also among those that were targets in the latest round of clawback suits. On December 8, the trustee sued the Mark and Stephanie Madoff Foundation and the Deborah and Andrew Madoff Foundation for $2-million each to recover transfers that were made to the foundation from Bernard Madoff accounts. “This action is brought to recover the fictitious profit amount so that this customer property can be equitably distributed among all of the victims.” (Chronicle of Philanthropy) Mark Madoff was found dead as a result of an apparent suicide on December 11, the second anniversary of his father’s arrest. (NY Post)
The trustee recovering money for investors who lost billions of dollars in jailed financier Bernard Madoff's fraud on Friday filed civil racketeering charges against an Austrian banker and 55 other defendants, demanding they give up nearly $20 billion and accusing the banker of being Madoff's "criminal soul mate." Court-appointed trustee Irving Picard used tough language to portray a 23-year relationship between banker Sonja Kohn and Madoff, saying she "masterminded a vast illegal scheme" as she and others engaged in money laundering, mail and wire fraud, and financial institution fraud in support of the Madoff's scheme. He also accused her of accepting at least $62 million in secret kickbacks from Madoff for soliciting investors for the fraud. (AP)
The trustee representing victims of Bernard Madoff’s fraud has filed more than two dozen lawsuits in recent weeks against foundations and charities that invested directly with Madoff and allegedly profited from the scheme. Some charities and individuals that profited—by getting back more than they put in, before the fraud was uncovered—have entered into settlements to avoid lawsuits. The lawsuit, which is typical of the latest claims filed against foundations and nonprofit groups, states that $5.32-million of the $6.68-million withdrawn by the cultural organization from 2002 to 2008 was “fictitious profit” from the Ponzi scheme. Recently, the Jewish women’s charity Hadassah announced that it had struck an agreement to give back $45-million, slightly less than half of its profit from investing with Madoff. Also, Carl Shapiro, a Boston investor and philanthropist and close friend of Bernard Madoff’s, agreed to return $625-million to the trustee. The trustee, Irving Picard, had maintained that Mr. Shapiro, an early investor with Madoff, withdrew more than $1-billion in the six years preceding the exposure of the fraud. Tax forms for the Carl and Ruth Shapiro Foundation listed assets of $345-million in 2007 but just $112-million at year-end 2008.
Foundations established by Bernard Madoff’s sons were also among those that were targets in the latest round of clawback suits. On December 8, the trustee sued the Mark and Stephanie Madoff Foundation and the Deborah and Andrew Madoff Foundation for $2-million each to recover transfers that were made to the foundation from Bernard Madoff accounts. “This action is brought to recover the fictitious profit amount so that this customer property can be equitably distributed among all of the victims.” (Chronicle of Philanthropy) Mark Madoff was found dead as a result of an apparent suicide on December 11, the second anniversary of his father’s arrest. (NY Post)
The trustee recovering money for investors who lost billions of dollars in jailed financier Bernard Madoff's fraud on Friday filed civil racketeering charges against an Austrian banker and 55 other defendants, demanding they give up nearly $20 billion and accusing the banker of being Madoff's "criminal soul mate." Court-appointed trustee Irving Picard used tough language to portray a 23-year relationship between banker Sonja Kohn and Madoff, saying she "masterminded a vast illegal scheme" as she and others engaged in money laundering, mail and wire fraud, and financial institution fraud in support of the Madoff's scheme. He also accused her of accepting at least $62 million in secret kickbacks from Madoff for soliciting investors for the fraud. (AP)
Thursday, December 2, 2010
A Big Denial Cost Charity $42 Million
by Gary Snyder
As noted a month ago in NI, The Conference on Jewish Material Claims Against Germany (aka the Claims Conference) acknowledged revelations of the $42.5 million theft from funds granted by the German government to Holocaust survivors. Apparently denial has set in at the Conference. Reports indicate that at its first executive meeting since the disclosure of the fraud, all was business as usual. This major swindle was only mentioned as a side issue in the final paragraph, without a hint of remorse. Claims Conference chairman Julius Berman was asked about resigning or apologizing for taking 16 years to uncover the fraud, he was dismissive. He not only refuses to apologize, he believes the leadership bears no responsibility. The fraud was orchestrated for years by key employees in the New York claims processing office under the very noses of senior executives. Executive vice president Greg Schneider also rebuffed charges that he failed to impose adequate oversight and assume responsibility for not detecting criminals conspiring from his office and under his authority for almost two decades. Both board and staff dismissed independent forensic audits. All of this despite repeated warnings from board members.
In contrast to the accountability of the board and executive, the German Finance Ministry informed Time magazine that it may demand compensation. The German government is surely obliged to demand responsible oversight of its taxpayers’ funds entrusted to the Claims Conference on behalf of survivors.
This was not the first major fraud affecting the Hardship Fund. From 1980 to 1987, Werner Nachman, the head of the German Jewish community, embezzled $12 million. But in sharp contrast to today’s Claim Conference leaders, nine directors of the Central Council of Jews in Germany resigned after the theft was revealed.
These board decisions point out that the current leaders regard themselves as immune from accountability. To make matters worse, the chairman, treasurer and executive vice president not only denied culpability, they portray themselves as heroes.
This reminds us of the fiasco at the Smithsonian Institution where internal policies were not followed by the administration and Congress pressed for change. Even though board members endorsed leadership’s abhorrent behavior, they were promoted to higher positions. They did not do their due diligence and even engaged in a cover up exposed by the press.
As noted a month ago in NI, The Conference on Jewish Material Claims Against Germany (aka the Claims Conference) acknowledged revelations of the $42.5 million theft from funds granted by the German government to Holocaust survivors. Apparently denial has set in at the Conference. Reports indicate that at its first executive meeting since the disclosure of the fraud, all was business as usual. This major swindle was only mentioned as a side issue in the final paragraph, without a hint of remorse. Claims Conference chairman Julius Berman was asked about resigning or apologizing for taking 16 years to uncover the fraud, he was dismissive. He not only refuses to apologize, he believes the leadership bears no responsibility. The fraud was orchestrated for years by key employees in the New York claims processing office under the very noses of senior executives. Executive vice president Greg Schneider also rebuffed charges that he failed to impose adequate oversight and assume responsibility for not detecting criminals conspiring from his office and under his authority for almost two decades. Both board and staff dismissed independent forensic audits. All of this despite repeated warnings from board members.
In contrast to the accountability of the board and executive, the German Finance Ministry informed Time magazine that it may demand compensation. The German government is surely obliged to demand responsible oversight of its taxpayers’ funds entrusted to the Claims Conference on behalf of survivors.
This was not the first major fraud affecting the Hardship Fund. From 1980 to 1987, Werner Nachman, the head of the German Jewish community, embezzled $12 million. But in sharp contrast to today’s Claim Conference leaders, nine directors of the Central Council of Jews in Germany resigned after the theft was revealed.
These board decisions point out that the current leaders regard themselves as immune from accountability. To make matters worse, the chairman, treasurer and executive vice president not only denied culpability, they portray themselves as heroes.
This reminds us of the fiasco at the Smithsonian Institution where internal policies were not followed by the administration and Congress pressed for change. Even though board members endorsed leadership’s abhorrent behavior, they were promoted to higher positions. They did not do their due diligence and even engaged in a cover up exposed by the press.
Tuesday, November 30, 2010
Finally, the Punishment Fits the Crime!
by Gary Snyder
As readers of Nonprofit Imperative have followed, former Virginia Secretary of Finance John W. Forbes II had admitted stealing $4 million in tobacco-region economic development money designated Literary Foundation of Virginia -- an organization Forbes established ostensibly to promote adult literacy. In the following years less than $1 million was used for literacy and the rest for personal uses such as an expensive home and $1 million in salaries for himself and his then-wife, Tina. He transferred the money from the foundation to two shell companies he created before spending it. Facing a federal subpoena for records earlier this year, he manufactured minutes from meetings held by the board of directors of the Literary Foundation to make himself look less culpable, and he asked Tina, by now his ex-wife, to hide documents. In an atypical ruling in which the Judge fit the sentence with the crime, he put Forbes in prison for 10 years. Forbes must make $4 million in restitution to the commission. In all too many instances, judges give convicted criminals a slap on the wrist and merely ask for restitution (which is seldom paid). In only 50% of the restitution cases is one penny paid.
From Nonprofit Imperative, a twice monthly e-newsletter. To subscribe, email gary.r.snyder@gmail.com
As readers of Nonprofit Imperative have followed, former Virginia Secretary of Finance John W. Forbes II had admitted stealing $4 million in tobacco-region economic development money designated Literary Foundation of Virginia -- an organization Forbes established ostensibly to promote adult literacy. In the following years less than $1 million was used for literacy and the rest for personal uses such as an expensive home and $1 million in salaries for himself and his then-wife, Tina. He transferred the money from the foundation to two shell companies he created before spending it. Facing a federal subpoena for records earlier this year, he manufactured minutes from meetings held by the board of directors of the Literary Foundation to make himself look less culpable, and he asked Tina, by now his ex-wife, to hide documents. In an atypical ruling in which the Judge fit the sentence with the crime, he put Forbes in prison for 10 years. Forbes must make $4 million in restitution to the commission. In all too many instances, judges give convicted criminals a slap on the wrist and merely ask for restitution (which is seldom paid). In only 50% of the restitution cases is one penny paid.
From Nonprofit Imperative, a twice monthly e-newsletter. To subscribe, email gary.r.snyder@gmail.com
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