Devolution Into A Sad Charity Fraud

by Gary Snyder

Over an 11-year period, Linda Duffy, a former longtime Saugus (MA) Library employee, allegedly stole more than $800,000. Duffy worked at the library; she was "entrusted with a progressively broader range of administrative tasks" and "actively sought to control certain aspects of the library's affairs, for example, handling incoming mail and processing donations by library patrons.” Instead, Federal documents allege, Duffy began depositing checks into the decoy account in November 2004 bearing memo lines such as, "library fees" or, in the case of donations, "Memory of [person's name]."

That same month, she wrote checks from the decoy account to her personal account at Eastern Bank and used the money to purchase jewelry, and pay off dental bills, car repairs, furniture and pay her home mortgage. Prosecutors allege she put a substantial portion of the money into an Eastern Bank account belonging to Duffy's daughter. Much of the funds Duffy used came from charitable donations, including $143,535 from January 2008 to January 2011 sent by Comerica Bank, as trustee for a charitable trust holding an account there. The statements from Comerica were sent directly to Duffy at the library, the court document states. Duffy also allegedly intercepted numerous donations from the GE Foundation between 2004 and 2011, and, according to the document, deceived the foundation into matching funds for donations that never actually occurred. In addition, the document states that Duffy or an accomplice also asked GE to match multiple donations allegedly made by Duffy's mother-in-law, who is the widow of a former GE employee on about 15 occasions between 2007 and 2010. 

In total, the GE Foundation sent the library more than $450,000 in matching funds, nearly all of which were sent in response to made-up library donations.

 



The scandal at the public library also prompted selectmen to move against the Library Board of Trustees, as many in town wondered how they could not have known what Duffy was allegedly doing. 

The Board of Selectmen voted unanimously last week to draft a letter to the Library Board of Trustees asking for their resignation. 

"We find ourselves in an unfortunate situation and we do appreciate the volunteers," said selectman Chairman Scott Crabtree last week. "With these situations everyone puts their time and energy into this, unfortunately, based on the findings, the board felt this was an appropriate action to restore the public confidence and trust." 








Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Fiesta Bowl Politicians Are Cleared

by Gary Snyder

A Maricopa County (AZ) Attorney Bill Montgomery has cleared more than 30 Arizona politicians and three lobbyists of criminal wrongdoing in the Fiesta Bowl scandal, saying the state’s laws just weren’t tough enough for him to press charges.

“Despite the public’s legitimate expectations that current laws ensure a reasonable degree of open and honest government, Arizona’s statutes governing receipt of gifts and reporting requirements fall short of meeting those expectations,” Montgomery said.

Leading the list of politicians who benefited from the college football game was former state Sen. Russell Pearce, who reportedly took about $40,000 in tickets and trips over several years. Pearce came to national attention in 2010 for being the chief sponsor of Arizona’s harsh immigration law. Last month, he was voted out of office in a recall election, in part because of his role in the Fiesta Bowl scandal.

Montgomery isn’t the only one who’s been investigating the Fiesta Bowl. A federal grand jury last month indicted a bowl employee on suspicion of making illegal campaign contributions to various Arizona politicians. The indictment revealed that other, unnamed people were also under investigation but no one else has been charged so far.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

A Note From Gary Snyder (Nonprofit Imperative)

Each year we give an update on the status of charity fraud.

Fraud in 2011 has unfortunately been consistent with previous reports. It continues to flourish… unabated. The New York Times had a story, in 2008, about a startling academic study that indicated that over $40 billion was stolen from charities. In mid-2011, the Inspector General in Texas said that amount had risen to $51 billion…a 27% increase, in just three years. That same trajectory continues based on the data collected for Nonprofit Imperative. Nonprofit Imperative has documented upwards of 5200 incidences of charity fraud.

In 2009, we saw a significant jump in such occurrences as well as a 50% rise in the amount of money stolen. In 2010, Nonprofit Imperative data showed that path had not subsided with a 25% increase and about $2 billion stolen from those to whom the money was intended to go. In 2011, almost $2.7 billion had been embezzled. This is 30% increase in malfeasance from the previous year. Because the documentation of these frauds are taken solely from public documents, members of the Association of Certified Fraud Examiners has suggested that this represents only 5-10% of the total amount of charity malfeasance.

                                              _______________________________

Postscript:  Practically every statement that I have shared in the past decade has been explicitly or implicitly been directed toward the betterment of philanthropy…and there have been many.

I have written or worked on well over a hundred articles; assisted in documentaries, television and radio shows as well as movies; published a twice-monthly e-newsletter for half-a-decade (the equivalent of 2-3 books or 1050 pages); authored two books; lectured; consulted; assisted in numerous thesis on fraud; and served on over 25 boards (many in a leadership capacity).

I have proffered practices to force the acknowledgement and discussion of some the charitable sector’s most pressing problems, while seeking at least minimal change. I readily acknowledge the results could have been better.

Needless to say, I have received considerable pushback. In truth, some was appropriate. But more often than not, I have found incredible support from people, mostly unknown to me, who coaxed me to carry on or just do better.

We thank you for your support.                                                   

I wish you a Happy Holiday

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Charity Fraud: Money for the Children’s Hospital Burn Unit Taken

by Gary Snyder


She used the nonprofit, Fired Up For Kids,  to solicit donations through the sale of calendars to raise money for the Children’s Hospital Burn Unit. Shortly after the nonprofit was formed Kristin Hamling, president and sole board member, began using its accounts and assets for personal uses, including gym memberships, airline tickets, and at nail and hair salons, according to the attorney general's complaint. Hamling resigned from the organization but refused to turn over to a successor organization the intellectual and physical property of the organization, including its bank accounts and inventory. The Denver (CO) District Attorney’s office won’t say how much money was allegedly stolen. A former volunteer with the group estimates the theft in excess of $50,000.












Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Who Was Watching Out for the Charity Sector’s Best Interests?

by Gary Snyder

Rick Cohen of Nonprofit Quarterly reminds us that when there was considerable infighting regarding the charitable sector‘s tax deduction, the nonprofit sector was not attentive  to what was happening on other fronts. There were important changes in the Omnibus Spending bill. It seems that there were considerable cuts that were missed by those that are charged to represent the charities best interests.

Some that were picked up by Cohen:

§  cut in the Weatherization Assistance Program (WAP) by 60 percent, the lowest funding level since 1977;

§  reduction the Low-Income Home Energy Assistance Program (LIHEAP) from $4.7 billion in FY2011 to $3.5 billion in FY2012;

§  spending was raised the Pentagon’s budget by 1 percent, but cut the budget of the Environmental Protection Agency by 6 percent which will affect nonprofits;

§  spend will knock 100,000 students out of one or another aspect of the Pell Grant program; spending was  reduce the number of years a student can use Pell Grants from nine to six years.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Charity Fraud Bad Guy Wants Out of Prison

by Gary Snyder

He pleaded guilty to embezzling more than $1.8 million from Hartville Homes Inc., a nonprofit organization that operates residential care facilities and other services for the mentally disabled. Court records show Rohr stole the cash between 2001 and 2007 while serving as Hartville Homes’ chief financial officer. Rohr also embezzled $100,000 from St. Barbara Catholic Church in Massillon and $21,769 related to rental property owned by the church while serving as the church’s financial advisor. In a separate case, Rohr was convicted in Summit County for felony theft in connection with his former Cuyahoga Falls-based business, Falls Consumer Credit Management. He now wants an early release after having served three years and three months of a nine-year prison term he received in October 2008. What do you think?  (link)    

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Fundraising Nets 37% For Charities, NY AG Says

by Gary Snyder

According to the New York attorney general’s Pennies for Charity, Where Your Money Goes: Telemarketing by Professional Fundraisers, in 2010, an average of just 34.6 cents of every charitable dollar raised by these professional telemarketing companies in Western New York actually went to charity. By comparison, just 36.9 cents per dollar go to charities statewide. Many charities across the state received even less – and in 61 of the 564 telemarketing campaigns, the charities actually lost money. In total, 63 percent, or $157 million, of the funds raised by 81 telemarketers in 2010 was paid to fundraisers for fees and/or used to cover the costs of conducting the campaigns. By comparison, charities retained 37 percent, or $92 million, of the total funds raised in the campaigns. (link)

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Nonprofit Abuse…Another Appalling Example

by Gary Snyder

The astonishing story of a Santa Ana (CA) charity – which claims to help burn victims after catastrophic fires--is all too typical. The Association for Firefighters & Paramedics was sued by the California attorney general in 2008, but was not shut down. Instead, it settled with the AG last year, paying the AG’s office $100,000 ($67,000 for the AG’s costs, and $33,000 for burn victims), and agreeing that the AG would monitor its fundraising and spending for four years. After settling with the AG the charity filed its tax returns for the previous year, showing that:

§  86 percent of its spending was on fundraising – $1.9 million out of total spending of $2.2 million (the experts like to see no more than 10 percent spent on fundraising);

§  while 11 percent was spent on management  – $228,837;

§  and the very smallest slice of the pie, 3 percent, went to programs that actually helped burn victims. That was a measly $65,280. (The experts like to see 75 percent spent on programs).

The Orange County Register asked the charity for a copy of its latest tax returns, by email, since its phone number has been disconnected. It also left a message with the CPA who prepared its last tax returns, saying it wanted to know how the oversight thing was working out. They have not heard back.

Its website and the “donate now” button – still appear to be in fine working order.

Since 2005, the Association for Firefighters & Paramedics has raised $15.2 million for charity, while spending just a fraction of that on the burn victims for whom it purportedly raised the money. 

The Orange County Register chronicled how Mitch Gold (the king of telemarketing fraud in Orange County) built a network of dubious charities that preyed on unsuspecting donors.  Gold did time behind bars, but his protégés (including the current President of The Association for Firefighters & Paramedics), subcontractors and former clients carried on, raising more money with less scrutiny than Gold ever did.

When Gold went to prison, his money machine chugged along without him.

• Ex-convict Joe Shambaugh, one of Gold's legal advisers, set up shop as a charity administrator. Until last summer, he managed four closely linked charities from a rundown office in Santa Ana. The Shambaugh charities raised $16 million from 2001 through 2004. They spent about 1 cent on the dollar for charitable projects.

• Robert M. Friend Jr., who had formed one of Gold's last big charity clients in May 1999, spun off four charities that raised $8 million. Amount spent on charitable works: 8 cents on the dollar.

• Former Gold clients David Dierks and Phil LeConte raised more than $27 million for three police charities. They spent 13 cents on the dollar for programs. Dierks and LeConte paid themselves $1.1 million.

Most of the money donated to these charities actually went to the fundraisers, many of whom once worked for Gold.

Gold was partial to charities with veterans, firefighters, cops or children in their names. Of 24 charities that he represented in the late 1990s, 22 traded on one of these causes. Among them: American Veterans Network, American Veterans Relief Fund and Help Hospitalized Veterans. His followers have stuck to that strategy.

Former aide Shambaugh managed the Association for Disabled Firefighters and the Disabled Firefighters Fund. Former Gold client Friend runs the Disabled Firefighters Foundation.

After 911 a sweeping nationwide transformation of law enforcement that has left donors with few places to turn for help. The FBI quickly shifted agents and money to terrorism. About 300 FBI agents were reassigned from white-collar crime to terrorism. 

Two other former Gold associates were charged after lengthy investigations. Former Gold apprentice Joe Shambaugh was indicted on federal fraud charges. He is now a fugitive. Onetime Gold subcontractor Duane Kolve was accused of criminal racketeering by Wisconsin prosecutors.

"There needs to be a more concerted effort to rein in and regulate charitable solicitation fraud," said Eau Claire County, Wis., District Attorney Richard White, who prosecuted Kolve. "If it's happening here, how many other places is it happening, and at what level?"

A prosecutor had wanted to do more. "I tried to get any investigators I could find to work charitable fraud, and I can't find an investigator," she said. "You have a willing prosecutor and nobody to investigate the crime. It's depressing."

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Wycelf Jean’s charity under scrutiny....again

by Gary Snyder


You may remember that Wycelf Jean’s charity was in the headlines for not filing the legal docs. Then the next year it also lost nearly $250,000 in 2009 for reasons that are unclear. Now Yele Haiti is showing less than one third of the $16 million in donations from 2010 was used for earthquake relief efforts. While overspending is not that uncommon, the spending raised some interest. 


Based on the charity's tax filings from 2010, $1 million was paid to a non-existent  firm, Amisphere Farm Labor Inc. to distribute food, but records do not show its existence. Another $353,983 was doled out to P&A Construction, a company headed by Jean's brother-in-law Warnel Pierre. The charity also gave $250,000 to a Haitian television station run by Jean. Yele Haiti also paid $577,185 to a company called Samosa SA, based in the Haitian capital of Port-au-Prince, as a “bulk water supplier.” But some of that money went to rent a house for Yele Haiti volunteers on Samosa’s property at the inflated price of $35,000 a month.






Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)

Audit the Auditors

by Gary Snyder

In Silence: The Impending Threat to the Charitable Sector, we strongly suggest that all charities should ‘audit the auditors.” We believe that nonprofit auditors are a weak link in the watchdog process. We have further evidence that is the case. The Public Company Accounting Oversight Board, the watchdog for U.S. accounting firms, has taken issue with audits performed by two of the "Big Four" auditors. In reports posted on the PCAOB website, PwC was found to have shortcomings at 28 of 76 audits inspected by the PCAOB. That's up from nine in the prior inspection. Problems were found at 12 of 54 KPMG audits reviewed, up from eight. While the review was a look at for-profit companies, there is no reason to believe that such problems could not occur with charity audits.

PwC chairman and head partner Robert Moritz noted the rise and said the firm was "working to strengthen and sharpen the firm's audit quality…” A spokesman for KPMG, said the PCAOB's inspection process "has played an important role in improving audit quality, and their insights have measurably helped KPMG as we work to continuously improve our audit performance and strengthen our system of audit quality control."

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)