Kentuck Sheriffs, Deputies, to Receive Needed Equipment in Settlement Over Allegations of Deceptive Fundraising Practices by Charity, October 20, 2009
U.S. Federal News
FRANKFORT, Ky., Oct. 19 -- The Kentucky Attorney General issued the
following news release:
Attorney General Jack Conway is pleased to announce that Kentucky sheriffs
and their deputies will benefit from a settlement reached between his office and a
Texas-based charity and its solicitor over allegedly deceptive fundraising
practices.
The Office of the Attorney General began investigating the United States Deputy
Sheriff's Association (USDSA) and Courtesy Call, Inc. (CCI) in May 2009 as part of
the Federal Trade Commission's nationwide crackdown on fraudulent charitable
solicitors claiming to help police, firefighters and veterans. USDSA and CCI
allegedly deceived donors by leading them to believe that their donations would be
used to buy bulletproof vests and other equipment for their local sheriffs'
offices. In some cases, the solicitor is alleged to have told donors that the
caller was actually employed by the local sheriff's office.
"In truth, these calls were coming from a telemarketing company and there was no
expectation on the part of USDSA that these donations would be used to assist
sheriffs and deputies in Kentucky," said General Conway. "Deceptive charitable
solicitations not only exploit the generosity of our citizens, they do a
disservice to the first responders who risk their lives to protect us."
While USDSA has donated some equipment to Kentucky law enforcement agencies, its
average annual donation for the entire state was only approximately $10,000, much
less than what was actually raised. The $71,500 in equipment that will be donated
to Kentucky sheriffs and deputies is in addition to USDSA's average annual
donation, and shall be given to sheriffs and deputies who submit an equipment
request application. The Office of the Attorney General is sending applications to
all Kentucky sheriffs' departments. The equipment to be purchased by USDSA could
include bulletproof vests, tasers, digital cameras and radar guns, among other
items.
"I appreciate the Attorney General's office for its work in combating deceptive
charitable solicitations that have taken thousands of dollars from our state. This
settlement will ensure that local sheriffs' departments across Kentucky will
receive much needed equipment," said Warren County Sheriff and President of the
Kentucky Sheriff's Association Jerry "Peanuts" Gaines.
In May, USDSA and CCI voluntarily agreed to temporarily halt fundraising in
Kentucky while the Attorney General's Office concluded its investigation. As part
of an Assurance of Voluntary Compliance (AVC) filed October 15 in Franklin Circuit
Court, CCI can continue its charitable solicitations in Kentucky, but must
identify itself to call recipients as a paid professional solicitor in accordance
with Kentucky law, and obtain written confirmation from its non-profit clients
verifying that the scripts it uses and the representations it makes are true and
accurate.
USDSA must also correct false statements appearing on its website about donations
to various Kentucky counties, and it must approve, in writing, all the scripts
used by any solicitors that fundraise in Kentucky. Additionally, USDSA and CCI
will pay $30,000 to the Commonwealth of Kentucky for its attorneys' fees and costs
of the investigation.
"Kentuckians are generous people who want to give back to those who keep us safe.
I hope you will join me in continuing to support our local charities, but to make
sure that when you give, you're giving wisely. If a charitable solicitor claims to
be raising funds on behalf of a local organization, contact the organization to
verify that it is conducting a fundraising event," said General Conway.
Consumers can also contact the Office of the Attorney General, Consumer Protection
Division at 888-432-9257 or visit
http://ag.ky.gov/civil/consumerprotection/charity/ to find out more information
about the solicitor and the charitable organization.
As part of the settlement, USDSA and CCI have not admitted any wrongdoing and the
AVC is not a finding of any wrongdoing.For more information please contact:
Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com.
Catholic Church: Vote No on Casinos, October 17, 2009
The Cincinnati Enquirer
Thousands of Greater Cincinnati Catholics will get notices in
their church bulletins this weekend urging them to vote against casino gambling in
Ohio for "moral, social and economic" reasons.
But those notices won't mention the reason that could hit churches hardest: If the
casino measure passes, some fear it could outlaw gambling at church festivals, Las
Vegas nights and other fund raisers.
Church officials say they have decided not to make those concerns the focus of
their campaign against the casino measure, also known as Issue 3, because they are
uncertain whether the law really would ban charitable gambling.
They also are hedging their bets in case Issue 3 passes and one day ends up in
court, where the church would argue the law does not, in fact, bar charitable
casino games.
In other words, church officials know they can't complain now that the law would
ban their games and then argue later that it doesn't.
"We think there is some confusion," said Jim Tobin, associate director of the
Catholic Conference of Ohio. "But we're not saying one way or another whether it
will shut our games down."
The confusion arose a few months ago when opponents raised concerns about the
proposed constitutional amendment because it would limit "casino gaming" to the
four casinos Issue 3 would allow to be built. The law includes an exception for
bingo and horse racing, but not for charitable casino games.
Opponents say that means casino games outside the four casino sites - such as
church festivals, Monte Carlo nights and other charitable fundraisers - would be
against the law if voters approve Issue 3.
Casino backers say such talk is nothing more than a scare tactic and that Issue 3
would not prevent charities and churches from hosting casino games.
"This is just another misrepresentation put out there by our opponents. It's just
a fantasy," said former Cincinnati Mayor Charlie Luken, a leader of the pro-casino
campaign. "They have the churches scared, but there is no validity to it at all."
But several others, including Ohio's governor and attorney general, have said a
strict reading of the proposed amendment suggests charitable gambling could be at
risk. Many say approval of Issue 3 will, at the very least, open the door to a
court challenge over whether churches still can legally allow gambling.
"I don't know what a court would find, but I think it's a problem," said Rep. Lou
Blessing Jr., a Colerain Township Republican who opposes Issue 3. "If a court
would rule that the only place you can have casino gambling is those four
locations, the revenue to those church festivals would be dramatically affected."
That's because gambling revenue can account for as much as 20 percent of revenue
at church festivals, which parishes throughout the region rely on to help support
their programs and schools.
An Enquirer analysis in July found that Catholic parish festivals generate $12
million in revenue every summer in Greater Cincinnati and Northern Kentucky. That
total does not include Las Vegas and Monte Carlo nights that many parishes also
count on to raise money.
Even the threat of losing those games and the revenue they generate is stoking
fear in some parishes.
"We take in $20,000 at our church alone in gambling," said Mike Bavaro, who has
helped run the festival at Anderson Township's Immaculate Heart of Mary for the
past 20 years. "There's a lot at stake here."
He said he has closely followed the debate over the impact of Issue 3 and has
talked to Luken and other casino supporters about his concerns.
"I'd like to believe him when he says there will be no impact," Bavaro said. "But
there is no way to know that."
That's the problem for those on both sides of the Issue 3 debate. No one can say
for certain whether the amendment will impact charitable gambling until it's
approved and someone tests the law in court.
The uncertainty is the main reason church officials have shied away from raising
concerns about a ban on charitable gambling before the election. They want to
preserve their argument that Issue 3 would not change anything in case someone
decides to argue in court that it does.
The Catholic Conference's formal position on Issue 3 makes no mention of
charitable gambling and sticks instead to past arguments about the harm casinos
could do to society.
"More persons and families will be seduced into financial hardship, rather than
helped," the conference said in its statement.
But the statement, which will go out to parishes this week for inclusion in church
bulletins, does hint at other problems and suggests passage could give rise to
unintended consequences.
"Issue 3 appears to us to be poorly written," it says, "and overindulgent toward
the gambling interests of private business."
This month, like every October, a sea of pink ribbons washes over products from
sneakers to snacks. While the effort raises research dollars, it...
This month, like every October, a sea of pink ribbons washes over products from
sneakers to snacks. While the effort raises research dollars, it leaves some
breast cancer survivors feeling that companies are profiting from their pain.
When Kim Zielinski was diagnosed with breast cancer in 2007 at the age of 33,
well-meaning friends inundated her with products bearing a little pink ribbon.
Each product's maker promised a cut of the sales price to a breast cancer charity,
and these friends felt they were supporting the cause and, by association,
Zielinski. A petite brunette who's now 35, she was enormously grateful for the
millions of dollars that these pink-ribbon products direct each year to charities
that fund breast cancer research and education.
But it wasn't long before she got a little sick of the pink. "I felt kind of
hateful," says the insurance company sales manager who lives in Charlestown. "I
was like, 'What makes you think I like pink now?'
"I think that the pink ribbon, as a symbol, tends to pretty up what is a pretty
crappy disease. But a pink ribbon is easier to look at than the disease itself."
Many breast cancer survivors like Zielinski find themselves conflicted over this
little powerful ribbon. Some survivors feel companies are exploiting breast
cancer, marketing themselves as philanthropic outfits that care about women when
what they mostly care about is the pink ribbon's enormous ability to boost
profits. Some just feel overwhelmed by the constant pink reminder, especially in
October, Breast Cancer Awareness Month, of a disease that has forever altered
their lives.
Since she was diagnosed 2 years ago, Anna Schleelein, a 26-year-old attorney in
Newton, spends Octobers in a self-imposed pop-culture blackout. She tries to avoid
TV, magazines, and, especially, shopping, to steer clear of all those pink-ribbon
products. "October is just a reminder of my cancer," Schleelein says. She is
screened for recurrences with MRIs and mammograms every six months, and October is
particularly difficult if she is awaiting the results of a test. "I want to buy my
English muffins and not be reminded of it while I'm waiting for results to come
in."
"It's such a double-edged sword," says LaShaune Johnson, 33, another breast
cancer survivor and a postdoctoral fellow, who recently relocated to Hartford from
Hyde Park. She did her dissertation on breast cancer organizations and black
women. "On the one hand, buying that pink stuff makes you feel connected to the
people who survived and made it to the other side
"But personally," says Johnson, "I cringe when I see that stuff. I feel like
they're taking advantage of people who are suffering and want a sense of
belonging."
Samantha King's 2006 book Pink Ribbons Inc. was one of the first that examined
why breast cancer, more so than any other illness, became a ubiquitous marketing
movement. Answer: The most significant risk factors for breast cancer (such as
genetics and age) can't be altered by women, which is why it's often regarded as a
"blameless" disease. It attacks mostly women, who account for the bulk of
America's purchasing power. It attacks the very symbol of femininity, the breast.
And a pink ribbon is cute and soothing. "I've talked to survivors who've contacted
me and were so enraged that their struggle with the disease was being commodified
in this way," says King, who is based in Kingston, Ontario. "The response I've
heard from corporations when I challenge them about this is 'Who cares, as long as
the money is going to a good cause?' "
Many breast cancer survivors and women battling the disease care, that's who. And
they're increasingly willing to speak out about it. "I would hope that companies
aren't looking to profit off the use of the pink ribbon," says Zielinski. "There
are other ways that they can market things." But few causes have proven to be as
incredibly profitable - or as exploited - as breast cancer
* * *
When a company sells a product and promises a portion of the proceeds to a cause
or charity, it's called cause-related marketing. (This is unlike the charitable
foundations that some companies set up to give away money unconnected to product
sales.) Avon and Estee Lauder were two of the first to use the pink ribbon as a
marketing tool by slapping it on cosmetics in 1993. Other companies rapidly
followed suit. Susan G. Komen for the Cure, the Texas-based 900-pound gorilla of
breast cancer fund-raising, has turned cause marketing into a money-printing
machine. Last year, the charity raised almost $50 million from more than 250
corporations, which gave Komen some of their proceeds from product sales. Komen is
just one of dozens of charities that partner with companies to raise funds. The
technique has been a tremendously powerful way of generating money for breast
cancer research and education by redirecting consumer dollars
It is also a powerful technique for raising profits. Research from Cone
Communications, a Boston consultancy that helped pioneer the widespread use of
cause marketing, has shown that 79 percent of consumers would likely switch to a
brand that supports a cause, all other things being equal. People want to buy from
companies that appear to do good deeds. In one test conducted by Cone and Duke
University's Fuqua School of Business, shampoo aligned with a cause saw a 74
percent sales increase over the same brand without a cause
A recent study of the effects of cause marketing by two professors at the Ross
School of Business at the University of Michigan at Ann Arbor found that not only
can companies raise prices and make higher profits on the sale of products that
benefit a cause, these companies' entire brand portfolios can experience a
"spillover" increase in sales and profits, which more than compensates for the
money given to charity. The report concluded, "Our results suggest that actions of
[cause marketing] firms should be looked on with some skepticism by consumers and
government officials - while the firms may be helping with charitable causes,
they are also using [cause marketing] to increase their own prices and profits."
But most consumers don't read reports from Midwestern business schools. Many
people believe that a firm that puts a pink ribbon on a product is donating money
out of its own pocket, at a loss, because it is committed to the fight against
breast cancer. That's not to say the employees and executives aren't committed to
the cause, but that is not why they do it.
"Often, I hear the argument that we would be better off if companies would just
donate the dollars that they spend on marketing these products or creating these
products," says Chris Mann, associate manager of brand marketing for
Brighton-based New Balance, which for the past eight years has given a percentage
of the sales of its "Lace Up for the Cure" shoe, apparel, and accessory collection
to Komen. "And I don't disagree that a donation of that amount would be very
impactful. At the same time, that point of view doesn't understand the realities
of how for-profit corporations have to work. In most of the cases, that money was
never earmarked as purely a donation or a philanthropic initiative. In most cases,
it's funds that are coming out of a marketing budget. And by definition, a
marketing budget is meant to drive return for the business." (The New Balance
Foundation, a separate entity set up to make charitable donations, has given more
than $100,000 over the past four years to local breast cancer initiatives and gave
$100,000 in 2007 to Komen.)
The profit power of cause marketing is why, come October, everything turns pink.
The pink ribbon's use is unregulated, and it has no consistent meaning. Some
companies simply attach a ribbon and say they're "raising awareness." Many
pink-ribbon campaigns require the purchaser to register the sale online or through
the mail
Such misuse and hoop-jumping infuriates Jeanne Sather, a Seattle woman battling
metastatic breast cancer and known throughout the cancer community for her fight
against the pink ribbon and Breast Cancer Awareness Month. She will send a
"Boycott October" button to anyone who asks. Her blog, assertivepatient.com, features what she considers the most egregious, tasteless
examples of pink-ribbon products - including Jingle Jugs, plastic breasts mounted
taxidermy-style on wood that move and play music; sales of a "breast cancer
awareness" edition of the
Jugs resulted in a $50,000 donation to Komen.
"For those of us with breast cancer, it's like getting hit in the face," says
Sather. "The companies are making money off my disease - even if they're giving
an amount to charity, they're making so much more in profit."
* * *
With one in eight women being diagnosed with breast cancer, more research is
needed into cause, treatment, and prevention. Every donated dollar helps, so most
charities refuse to bad-mouth pink-ribbon cause marketing, no matter how much it
upsets some breast cancer patients and survivors.
Of the complaints, Karen White, director of corporate relations for Komen, says:
"It's not something that we hear on a regular basis. Responsible cause marketing
is good cause marketing and serves a wonderful cause. We're excellent stewards of
the funds that come in through this." Still, nonprofit executives realize that
some companies are misusing the pink ribbon, and they recognize that if corporate
partners appear greedy instead of philanthropic, it tarnishes the charities' own
reputations - and fundraising efforts. White says Komen approves the products on
which its partners are slapping Komen's trademarked version of the pink ribbon,
and the charity says it monitors partners to ensure they are following accepted
charitable giving guidelines and state laws that govern corporations involved in
cause marketing.
Nonetheless, Breast Cancer Action (BCA), a San Francisco-based advocacy and
fund-raising nonprofit, has for years called Komen out for joining with companies
that it accuses of raising money for breast cancer while manufacturing products
that contain ingredients that have been proven to or are likely to cause cancer.
BCA recently declared victory when Yoplait, one of Komen's biggest partners
through its "Save Lids to Save Lives" campaign, agreed to stop using milk from
cows treated with recombinant bovine growth hormone, or rBGH. The byproduct of the
hormone that remains in milk has been linked by many studies to the development of
breast cancer. Shortly after Yoplait's statement that it would stop using milk
from treated cows, Dannon made a similar announcement about its yogurt.
In 2002, BCA created the "Think Before You Pink" campaign, encouraging consumers
to ask questions before buying pink, among them: Is the product bad for my health,
where is the money going, and how much is going there?
It's difficult or impossible to answer these questions while confronting a sea of
pink products in aisle five at Walgreens. Which is why Komen, for one, insists
that its corporate partners clearly say on products how the sale will benefit
Komen and if there is a donation minimum or maximum. One of Komen's partners with
a maximum is New Balance, which caps its contribution at $1 million per year. The
shoe maker has hit that target during each of the past two years and expects to do
so again this year, according to Mann. "We would love to [raise the cap]," he
says, "but the unfortunate realities of the business world at this point are that
[we], like many other companies, are not having the flexibility given the current
economic times to increase marketing spends." So what happens each year to the
money that the company earns after the cap is reached that would normally go to
Komen? "We would hold on to that."
White says that Komen monitors its partners' sales and requires that when they
hit their maximum they tell consumers that purchases are no longer benefiting
Komen. New Balance, however, said in a statement that it does not inform consumers
once the company reaches its cap; its product labels state that a maximum donation
exists, so the firm believes it's in compliance with Komen's rules.
Any business that sells for profit an item that benefits a charity is considered a
commercial co-venture and must comply with state laws. Massachusetts has some of
the strictest commercial co-venture requirements in the country, mandating that
before a product can be sold here, a company must register with the state attorney
general's charities' division, file financial documents outlining the program, and
post a $10,000 bond. At the end of program, the company must also tell the
attorney general how much gross revenue the program generated and how much went to
the charity. The filings are the only publicly accessible, legally binding record
of this information - all key to learning just how committed a firm is to a cause
and how profitable these programs are
But calls to the attorney general's office in August and September revealed that
firms partnering with two of the largest breast cancer charities in the country,
Komen and the Breast Cancer Research Foundation (BCRF), are not registered. Of the
dozens of companies that sell products that benefit the BCRF, for instance, only
four are on file. The Estee Lauder Companies is not one of them, surprising
considering that Evelyn Lauder, a senior corporate vice president, launched the
foundation, and the cosmetics maker is its primary corporate benefactor. An Estee
Lauder spokeswoman said in a statement, "We are grateful to the Boston Globe for
bringing this oversight to our attention. The Estee Lauder Companies is proud of
its support for the Breast Cancer Research Foundation and will promptly take the
necessary steps to register as required."
Only 13 Komen partners have current commercial co-venture registrations with
Massachusetts. New Balance is not one of them. Mann explains: "I thought legal was
doing it, and legal thought I was doing it." Since the Globe's query, New Balance
is in the process of coming into compliance.
Emily Callahan, vice president of marketing for Komen, acknowledges that the
nonprofit needs to increase its oversight of partner compliance with state laws.
"We let [partners] take the lead in that," says Callahan. "That's something we
need to be more aggressive with." She says that Komen will ensure that all
partners have filed their forms by this month.
* * *
"It's really hard to combat a symbol like that," says Deborah Shields, executive
director of the Massachusetts Breast Cancer Coalition, an advocacy nonprofit.
"It's hard to challenge it without looking like a big meanie or leftish wacko
fringe." Shields and her group encourage people to make donations directly to
causes they support rather than shopping for the causes. "It does matter where the
funds come from and where they go.
"None of this is happening in Europe," says Shields. "They're stupefied by the
concept of cause marketing."
In fact, there is much concern that so-called consumption philanthropy may
actually be dampening people's willingness to make direct cash donations to
charities. Samantha King explored this trend in her book; she and other social
researchers fear that consumers won't donate directly because they feel they did
their part by buying those pink candies and golf clubs.
As such, the "so what" argument still dominates most of the conversations about
the ethics of pink-ribbon cause marketing. So what if companies make a profit?
Isn't it better that they send a little to a charity while they're at it? No harm,
no foul, right?
It may be one argument in favor of leaving these companies alone to continue to
pink-ify America, but it doesn't make many women who have or have had breast
cancer feel any better about October. The pinker it gets, the more conflicted and
exploited they feel. "I get e-mails all the time from women with breast cancer
saying, 'Help me survive October. Help me get through October,' " says Sather. "It
feels like a party and we are not celebrating."
Kris Frieswick is a frequent contributor to the Globe Magazine. Send comments to
magazine@globe.com.
Lawsuit: Head of Children's Charity Mismanaged Funds, October 2, 2009
BYLINE: Jenna Cho, The Day, New London, Connecticut
Since 2004, Old Saybrook resident Raymond Bechard has
said he has been helping victims of human trafficking, sexual exploitation and
AIDS, both locally and abroad.
Bechard's nonprofit group, Ahava Kids, raised money to provide immediate help to
victims, including the establishment of an intervention hotline and getting
prostitutes and sex-trafficking victims to safehouses in Connecticut and Georgia.
Bechard even wrote a book on sex trafficking in 2006 titled "Unspeakable: The
Hidden Truth Behind the World's Fastest Growing Crime."
But a new lawsuit alleges that Bechard, the nonprofit's founder and president,
actually pocketed about $100,000 of the $250,000 the charity raised in recent
years, according to State Attorney General Richard Blumenthal.
"He used Ahava Kids as a personal piggy bank," Blumenthal said Thursday,
"withdrawing money as he wished, to shop at department stores or restaurants or
other places that served his personal purposes."
Blumenthal and state Department of Consumer Protection Commissioner Jerry Farrell
Jr. filed a lawsuit on Sept. 1 alleging that Bechard, 48, spent up to $100,000 in
charitable donations on himself at restaurants as well as department, grocery and
sporting good stores. There were also "questionable expenses on gasoline" and
"unexplained ATM cash withdrawals," according to Blumenthal's office.
Bechard has not been charged with any criminal wrongdoing.
"Any alleged financial disclosures which are alleged to be inaccurate have been
rectified," Bechard said in a written statement Thursday. "We will continue to
review any claimed errors in reporting and any mistakes which are found will be
corrected. For this reason, we believe that the investigation and civil suit
against Ahava Kids is misguided."
The state began investigating Ahava Kids about six months to a year ago,
Blumenthal said, when someone who worked for the nonprofit contacted the attorney
general's office with concerns about the charity's finances. The nonprofit's 2007
tax return lists a vice president in Florida, a medical adviser in Cromwell and an
administrator in Old Lyme.
Richard Stout, the administrator listed in the tax return, said Thursday he
volunteered for and donated funds to Ahava Kids but was never an administrator for
the organization.
Stout said questions about the group's finances were likely "driven by the
shoestring budget that (Bechard) was on" and not on the legitimacy of Ahava Kids.
"Ray has basically lived on nothing for three, four, five years and just put his
heart and soul into this cause," Stout said.
Stout estimated he has donated "thousands" of dollars to the group over the years
and said he wouldn't hesitate to donate again.
But contrary to what Bechard claimed in Ahava Kids' 2005, 2006 and 2007 tax
returns, the nonprofit did not funnel donations to other charities -- such as
foreign organizations that provide medication to orphaned children with AIDS -- in
those years, according to the lawsuit.
Instead, Bechard diverted more than $67,000 from Ahava Kids to four companies in
his name in Old Saybrook, the lawsuit alleges. Disciple Makers Workshop, Son
Celebration, Gift Catalog Online and Compel Communications were all registered
with the state as domestic limited liability companies on Aug. 31, 2004, about a
month after Ahava Kids was registered.
Ahava means "love" in Hebrew.
The four companies and Ahava Kids, all co-defendants in the lawsuit, had "no
separate mind, will, or existence of their own and had functioned as the mere
instrumentalities of Bechard for his financial gain," the lawsuit states.
"We believe that about $150,000 was used on purposes that seemed to be legal,
insofar as they served the purposes of the charity," Blumenthal said. "Some of
those records leave questions, but we believe that ... the monies were used on Web
sites, on the safehouse, on personnel services and certain type of equipment that
served either women prostitutes seeking to escape the streets or orphans suffering
from AIDS."
One of Ahava Kids' two safehouses is in Simsbury, Blumenthal said, and has been
used from time to time for its intended purpose. Blumenthal said he was unsure
whether or not there is a second safehouse in Georgia, as Ahava Kids claims on its
Web site.
"A very substantial amount of even the legitimate expenses were for compensation
and other administration costs," Blumenthal said. "A fraction went to actually
help people."
An unattributed YouTube video posted in April on Ahava Kids's mission states that
Bechard has "saved more than 3,000" people to date.
In August, Bechard used his Ahava Kids Twitter page for a fundraising campaign. In
it, he wrote: "SOS its getting bad at ahava ... I feel so ashamed of myself for
begging ... but there is a higher purpose than my own ego."
Misappropriation of charity funds is "relatively uncommon," Blumenthal said, but
the allegations against Ahava Kids could mean the second such misuse in Old
Saybrook in recent years.
Blumenthal concluded in May that the town's longtime police chief, Edmund H.
Mosca, mismanaged a private police fund intended for charitable use known as the
Mac Fund. Mosca reimbursed the fund $22,500 as a result of Blumenthal's
investigation.
"What's heartbreaking about this alleged illegality is that charitable funds were
supposed to help victims of human trafficking and orphans who were betrayed by
this self-dealing," Blumenthal said.
Texas Senator Wants to Guarantee Hospitals Do Their Share of Charity Care, September 28, 2009
BYLINE: Darren Barbee, Fort Worth Star-Telegram
A state senator, concerned that there are flaws in the law governing Texas
nonprofit hospitals' charity -care quotas, has asked the
attorney general whether the office has enough power to make sure the
hospitals do their share.
"Currently there is no enforcement language in the statute, aside from a penalty
for late reporting," Sen. Rodney Ellis , D-Houston, recently wrote to the
attorney general . "There is a lack of uniformity, transparency, and
enforcement in the way in which non-profit hospitals account for their
charity care."
The law, which Ellis wrote, offers nonprofit hospitals three options for providing
charity care:
Nonprofit hospitals can provide charity care equal to their tax-exempt benefits,
which can total millions of dollars a year.
They can devote at least 4 percent of their net patient revenue, including
shortfalls for other government programs such as Medicaid. Another 1 percent must
be spent in ways that benefit the community, such as blood pressure screenings or
health clinics.
Hospitals can also meet the law by providing for the reasonable needs of the
community they serve based on a community assessment.
The law hasn't been updated since it was passed in 1993, according to the Texas
Hospital Association .
"We ought to tighten that bill up so we have an enforcement mechanism," Ellis told
the Star-Telegram . "Right now, the bill lacks that. ... The attorney general's
lack of authority to do anything if their charitable trust division finds a
hospital in noncompliance is a big problem in my judgment."
State law requires that the attorney general receive reports on the hospitals'
charity care, including those that do not meet the charity requirements during the
preceding fiscal year.
The hospital association, a policy and advocacy group for hospitals, is generally
in favor of more transparency but isn't sure how much more authority the attorney
general needs to enforce the law.
Charles Bailey , the association's general counsel, points out that the attorney
general's office routinely audits nonprofit hospitals.
"That may not be the best enforcement mechanism, but it certainly has not
suggested there's been a lack of enforcement," Bailey said. "While I think there's
probably some changes in the law that could be made, our position and our response
will be that we don't believe there is a lack of uniformity or transparency or
enforcement of the charity care law."
The association is considering making recommendations to the attorney general for
changes that would be similar to the Internal Revenue Service's ability to impose
intermediate sanctions against nonprofits.
For instance, the Internal Revenue Code says excise taxes shall be imposed on
transactions between a tax-exempt organization and a person who financially
benefits from his influence over its affairs if the benefit exceeds the value of
what the organization received.
"It's kind of an alternative way to penalize a hospital if they have not met the
requirements," Bailey said.
While explicit language regarding the attorney general's enforcement powers isn't
included in the law, the office's Charitable Trusts Section can investigate and
initiate legal action against all charitable organizations.
It has taken action against charity hospitals in the past.
In 2005, the office settled with Zale Lipshy University Hospital in Dallas after
the trusts section examined the level of charity care provided by nonprofit
hospitals to needy residents in their surrounding communities.
Zale Lipshy agreed to create a $3.5 million endowment specifically for indigent
healthcare.
"Charitable hospitals are held to a higher standard because they are expected to
follow not just the letter of the law, but also the spirit of the law," Attorney
General Greg Abbott said during a speech this year. "It's that spirit that
motivated their founders in the first place. I think we could agree that some in
the charitable nonprofit hospital industry have drifted somewhat from their
moorings."
Charity care
Nonprofit hospitals may meet their charity-care requirement by spending at least 4
percent of their net patient revenue on unreimbursed care, including shortfalls
for government programs such as Medicaid that serve indigents. A look at selected
hospitals' 2007 charity care:
Hospital Charity care cost Percent of net patient revenue Huguley Memorial Medical
Center $18,675,510 16.1 Cook Children's Medical Center $42,042,721 10.6 Baylor
Health Care System $62,164,215 5.3 Texas Health Resources $72,775,695 4.7
Methodist Mansfield Medical Center $3,276,616 8.4 Source: Texas Department of
State Health Services
Stevens Institute, Officers Sued by New Jersey for Mismanaging, September 18, 2009
BYLINE: David Voreacos, Bloomberg.com
Stevens Institute of Technology, a New Jersey university, was sued by state Attorney General Anne Milgram for allegedly mismanaging school finances, improperly handling investments and overpaying its president.
President Harold Raveche and Chairman Lawrence Babbio “regularly misrepresented” spending and borrowing at the Hoboken school, where the endowment fell to $115 million from $157 million in 2000, according to a 16-count civil complaint filed in state court in Jersey City, New Jersey.
Raveche received salary and bonuses of $1.09 million in 2008, as well as below-market loans of $1.8 million, according to Milgram. In 2007, Raveche got salary and bonuses of $770,645 and oversaw operating expenses of $158 million, while the president at the Massachusetts Institute of Technology was paid $635,294 at a school with expenses of $2.3 billion, according to the attorney general.
“Raveche and the Stevens Administration spent more than the board-approved spending rates, imprudently appropriated gifts and bequests to pay operating expenses, unlawfully invaded permanently restricted assets, unlawfully collateralized the endowment, and excessively borrowed through lines of credit,” according to the complaint.
The complaint asks a state court judge to remove Raveche, the president since 1988, and Babbio, who retired in 2007 as president of Verizon Communications Inc. It accuses Raveche of gross negligence in spending and borrowing and financial management.
Babbio, Raveche and a school spokesperson didn’t immediately return calls seeking comment.
Misuse of Endowment
Babbio is accused of misuse of endowment assets, failure to monitor and breach of duty for awarding excessive compensation. Both Babbio and Raveche are accused of breach of trust.
The complaint also seeks repayment by Raveche of “unreasonable” compensation, a reform of the school’s internal controls and accounting practices, and repayment for damages caused to the endowment. Under a 2007 employment agreement, Stevens forgave $928,319 of the $1.8 million in below-market loans to Raveche, according to the complaint.
Babbio, 64, retired from his position as vice chairman and president of Verizon after 41 years at the company and its predecessors. He began his career in 1966 with New Jersey Bell Telephone and worked in engineering, network construction and technology development.
He was president and chief operating officer for Bell Atlantic Corp. before the Bell Atlantic-GTE Corp. merger in 2000 that formed Verizon.
Investigation
On Aug. 12, Milgram sent a letter to the school’s board of trustees explaining the results of her investigation, according to the complaint. At a Sept. 2 meeting, Milgram provided a detailed summary of the probe, prompting the school to form a special committee that “was not properly constituted or given adequate authority,” according to the complaint.
On Sept. 16, Stevens “filed a baseless complaint against this office, which attempted to, among other things, immediately seal this case from the public,” according to the complaint. Stevens, in a statement announcing its suit, said Milgram was “overstepping her authority by questioning the manner in which an experienced board of trustees of a private university administered a portion of its endowment funds.”
“At no time did the special committee or the board propose a settlement counter-offer or attempt to engage in substantive settlement discussions with this office,” according to the state’s complaint.
The case is Anne Milgram v. The Trustees of the Stevens Institute of Technology, Superior Court of New Jersey Chancery Division, Hudson County (Jersey City).
Case Could Signal a Shift in Non-Profit Regulation: Ex-AG Approached in '06; Brief Lingered Until Last Year, September 18, 2009
BYLINE: Harvy Lipman, New Jersey Record
The move to oust the leadership at Stevens Institute of Technology is an
aggressive step by a state Attorney General's Office that is not considered one of
the nation's more assertive regulators of non-profits.
The attorneys general in New York, Pennsylvania, California and numerous other
states have separate charities bureaus, often staffed by dozens of lawyers and
investigators. General oversight of non-profits in New Jersey falls under the
domain of the attorney general's Division of Consumer Affairs, without any lawyers
dedicated solely to be charity watchdogs.
Even the Stevens case which alleges offenses including hiding the true
compensation paid school President Harold J. Ravech from the board of directors,
misrepresenting the institute's finances in government filings and mismanaging the
college's endowment at the cost of tens of millions of dollars apparently took
several years to get off the ground.
Seth Lapidow, a lawyer in Princeton who worked with several Stevens faculty
members in uncovering the alleged mismanagement, said he delivered a legal brief
laying out the case for the state to former Attorney General Stuart Rabner in
2006.
"Rabner was very effusive in his comments about the brief and told us he was very
interested in pursuing it," Lapidow said. But beyond an initial contact by an
investigator shortly afterward, the lawyer said, neither he nor the faculty
members who had gathered evidence supporting the allegations heard back from the
Attorney General's Office for a couple of years.
"Then late last year, I got a call out of the blue," Lapidow said. It came from
Samuel Cornish, a deputy attorney general who had recently joined the office.
Lapidow knew Cornish from private practice on another case involving a non-profit
organization.
"He said, 'I found this thing you did on Stevens and we're interested in pursuing
it.' Maybe they were looking into it for those two years. Maybe an investigator
brought it to his attention. I have absolutely no idea what happened, but I'm
quite grateful it did."
David Wald, spokesman for Attorney General Anne Milgram, wouldn't comment on how
the case came to the office's attention, except to say, "As the attorney general
noted in her press conference, among those who brought it to our attention were
concerned faculty."
Wald also declined to say whether the Stevens lawsuit represented an increased
interest on Milgram's part in the oversight of non-profits. In an interview in
2007, Rabner told The Record he was reviewing the Attorney General's Office's
approach in that area.
"This is an area of concern," said Rabner, who has since become the state's chief
justice. "We are in the process of reviewing ourselves to make sure the staffing
is adequate. If it isn't, we will want to put more resources into it."
Wald said Milgram "has an interest" in the oversight of non-profits, but added
that it was up to her deputy David Szuchman, director of consumer affairs to
allocate resources in that field.
Regulators in other jurisdictions have taken steps to depose leaders of colleges
and other non-profit institutions in the past. In 1996, for instance, the state of
New York moved to force the removal of the president and board at Adelphi
University on Long Island.
Daniel Kurtz, a Manhattan lawyer and former director of the New York Attorney
General's Charities Bureau, was a consultant to the faculty who brought the
original complaint at Adelphi.
"Attorneys general bring these kinds of cases all the time," Kurtz said. "The
overwhelming majority of states confer on the attorney general the authority to
remove the board of a non-profit as a remedy to malfeasance."
The Internal Revenue Service also can penalize non-profits that pay excessive
compensation to their executives defined under federal law as being demonstrably
higher than the salaries paid to officials at similar organizations. To inoculate
themselves against such claims, non-profits hire consulting firms to conduct
"comparability analyses," in which they check the compensation a board is
proposing against what others pay.
In her complaint, Milgram alleges that Ravech was given exorbitant salary
increases over a number of years during which the school didn't hire anyone to do
a comparability analysis. Ravech's total cash compensation reached nearly $1.1
million in 2008 more than the salaries paid the presidents of Harvard and the
Massachusetts Institute of Technology.
The suit claims that in 1999 board chairman Lawrence T. Babbio "falsely
represented" to the rest of the trustees that a comparability study had been
completed.
When a consultant was finally hired, the attorney general alleges, it "never
performed adequate executive compensation comparability analyses."
The IRS has been focusing more closely on excessive compensation for the past five
years. In 2004 it announced a new enforcement effort, through which it reviewed
compensation packages at more than 2,000 non-profits. As a result, 25
organizations were hit with tax assessments for violating the compensation
regulations guiding tax-exempt organizations.
Since then it has launched two more studies focusing on compensation and other
practices, first at hospitals and then institutions of higher education.
In a speech before the Texas Attorney General's Office staff in January, the IRS'
commissioner of tax-exempt and government entities at the time, Steven T. Miller,
summarized the findings of the hospital study. Even institutions that aren't
violating the rules are paying so much, he concluded, that they run the risk of
creating public outrage.
"Nearly all of the compensation arrangements we reviewed were reasonable under the
current [comparability] standard," Miller said. "But compensation was pretty high,
and I wonder how it will be received in the court of public opinion."
Attorney General of Massachusetts Announces Initiative on Executive and Director Compensation, September 14, 2009
BYLINE: Shirin Philipp, Mondaq
The compensation practices of nonprofit organizations in Massachusetts just became
subject to increased scrutiny. The Non-Profit Organizations/Public
Charities Division of the Office of the Attorney General of Massachusetts
announced yesterday that it is turning its attention to compensation paid by
health care systems and health care insurers to their executives and directors.
Depending on the outcome of its investigation and new reporting requirements, the
Division may expand its review to other sectors.
The Division expressed its concern that executive compensation levels have risen
artificially in recent years, despite the enactment of "intermediate sanctions"
rules and regulations under Internal Revenue Code Section 4958 several years ago.
Under its authority to enforce the due application of charitable funds, the
Division will increase its review of organization practices for setting executive
compensation levels. The Division plans to require "significantly more expansive
and robust reporting requirements for large health care organizations." The
Division will require calendar year reporting for all affected organizations by
March 1 of the subsequent year, starting in 2010. Large health care organizations
will need to report a variety of information, including, for example, the
decision-making process and rationale for executive compensation and how
performance bonuses "promote fiscal health and charitable mission."
In addition to executive compensation, the Division is reviewing the practice at
four health care insurers of compensating independent board members. The Division
stated that because the practice is rare and may compromise a director's
independence, it requires "a clear and convincing case."
The Division stated that its initial focus is on the health care sector, due in
part to concerns about the rising costs of health care. The Division anticipates
that it may expand its review and its reporting requirements to other nonprofit
sectors. The broader implications are clear, however, even without the Division's
formal investigation of other sectors. It is evident from the initiative described
yesterday [.pdf] that the Division is not sympathetic to high compensation
established substantially in reliance on comparable compensation studies supplied
by consultants. However, the Division explicitly acknowledged that nonprofit
organizations draw executives from the commercial market and that the Division
does not mean to substitute its judgment for that of active boards of directors.
The Division expects an organization's board of directors to be engaged and
thoughtful in the process and in reaching its conclusion.
In light of this new initiative and prior guidance issued [.pdf] by the Division,
as well as a broader concern nationally about executive compensation, all
nonprofit organizations are well-advised to evaluate their processes and
conclusions for executive and director compensation to determine whether such
compensation is indeed fair and reasonable.
The content of this article is intended to provide a general guide to the subject
matter. Specialist advice should be sought about your specific circumstances.
Nonprofit Groups Upset at Exclusion from Health Bills, September 13, 2009
BYLINE: Stephanie Strom, New York Times
Nonprofit organizations say they are upset that Congress and the Obama administration have not addressed their rising health care costs in the various health care proposals being floated on Capitol Hill.
The main bill in the House would award a tax credit to small businesses that provide their employees with health insurance — but nonprofits do not pay income taxes and thus would not benefit.
“Why should employees of nonprofits be treated worse than employees of for-profit businesses?” said Jonathan A. Small, government affairs consultant at the Nonprofit Coordinating Committee of New York.
Nonprofit groups were hoping that the president would include them in his speech to Congress on Wednesday, but instead he mentioned only “families, businesses and government.”
“There was nothing in that much-repeated trilogy of those needing help that spoke to nonprofits,” said Lester M. Salamon, director of the Center
Some nonprofit groups have called for a subsidy along the lines of the Earned Income Tax Credit, in which money would be returned to organizations that demonstrate they have paid for an employee’s health care.
As a group, nonprofit organizations are the nation’s fourth-largest employer. But their advocates say policy makers know little about the workings of nonprofits, which pay payroll taxes and, in rare instances, taxes on unrelated business activities, but are exempt from taxes on their income.
“In this administration, there are so many people who came from the nonprofit community, but they don’t really seem to think about the unique laws and rules that govern it,” said Diana Aviv, president and chief executive of the Independent Sector, a nonprofit trade association.
When the concerns of nonprofit groups were raised on a conference call after the president’s speech on Wednesday, representatives from the White House Office of Public Engagement and Intergovernmental Affairs were taken aback, and nonprofits have reported similar reactions from staff members in House and Senate offices.
“We had our nonprofit lobbying day on Capitol Hill in July, and our members spoke to their elected officials about this issue,” said Tim Delaney, chief executive of the National Council of Nonprofit Associations. “We heard a constant refrain: ‘Gee, we never thought about nonprofits as employers before.’ ”
Linda Douglass, a White House spokeswoman, said she had no comment because the policy was still being analyzed.
Only 2 percent of the organizations responding to the survey said they were “not too concerned” about health care costs, and 72 percent of the respondents said those costs had risen — with roughly one-third of those reporting increases of 10 percent or more.
UCLA Doctor Sued for Charity Funds, September 10, 2009
BYLINE: Raja Abdulrahim, Los Angeles Times
A UCLA School of Medicine professor of cardiothoracic surgery is being sued by
the state attorney general for allegedly using money from a research
charity he founded to fund his personal business ventures and medical research
activities.
California Atty. Gen. Jerry Brown filed the lawsuit Wednesday against Dr. Gerald
D. Buckberg and five officers of the nonprofit L.B. Research & Education
Foundation, citing California law that bars a charity's director, officer or board
member from benefiting from the organization's income or assets.
The officers improperly used charity funds to finance their own medical research
or research by companies in which they had a financial interest, and to
manufacture medical devices they sold, according to the attorney general's office.
Brown is seeking to recover more than $500,000 in misappropriated funds. He also
wants to dissolve the charity and prevent the defendants from running the
organization until they provide detailed accounting statements.
"The investigation by the attorney general's office is a result of evidence
presented to them by UCLA," said university spokesman Phil Hampton.
The investigation was launched in 2007 and turned up a number of inappropriate
uses of the foundation's funds.
For example, Buckberg used $120,000 in donations to produce an educational DVD.
The rights to the DVD belong to a company owned by Buckberg.
In 2003, Buckberg used $15,000 to pay a company he owns to build plastic heart
models, which he then sold.
In 2000, the charity donated $1 million to UCLA to establish an endowed faculty
chair that Buckberg applied for. When his application was rejected, L.B. Research
sued UCLA. Roughly $300,000 of the foundation's assets have since been used to pay
for the lawsuit.
As a result of the lawsuit, UCLA discovered that Buck- berg was the source of the
$1 million donation and that he conspired to ensure he would be named to the
faculty chair, according to a statement released by UCLA. This prompted the
regents of the University of California to ask the attorney general to sue the
foundation because of "self-dealing and other wrongdoing at L.B."
Buckberg, who serves as a director of the foundation, started the research charity
in 1997 and primarily funded it himself with about $3 million. But the charity did
receive about $130,000 in donations, officials said.
"You can't then turn around and use the charity's money for your benefit," said
Scott Gerber, a spokesman with the attorney general's office. "The source of the
funds is irrelevant, you still can't use the charity's funds for the personal
benefit of the directors."
Gerber declined to say whether Buckberg had taken tax deductions for his donations
to the foundation. Buck- berg did not respond to calls Wednesday.
Massachusetts AG Announces Examination and Increased Oversight of Executive and Director Compensation, September 2, 2009
The office of the Massachusetts Attorney General has released a memorandum stating its intention to increase oversight of both executive and director compensation. The initial focus of the examination will be on large health care systems and health care insurers. The examination may be extended to other sectors. For more information, see Massachusetts AG Announces Examination and Increased Oversight of Executive and Director Compensation.
Espada Has an Armada; Pol's Charity on Car Spendingspree, August 30, 2009
BYLINE: Isabel Vincent, Susan Edelman, and Melissa Klein, The New York Post
State Senate Majority Leader Pedro Espada Jr. turned his Bronx nonprofit health
center into his own "cash for clunkers" program when it bought an old,
gas-guzzling junker from his eldest son.
The Comprehensive Community Development Corp. picked up a 2001 Ford Expedition -
with more than 175,000 miles - from Pedro Gautier Espada, who unloaded it in March
2008.
The Bronx charity, which is now under investigation by the state Attorney
General's Office, would not say how much it paid for the old SUV. A spokesman,
Alexander Fear, insisted it was bought "at a cost far below the Kelly Blue Book
value." The listed value for such a vehicle, if in excellent condition, is $7,300.
But Fear did not explain why the charity needed the tired jalopy.
The CCDC, which runs five Soundview Health Center clinics for the needy, has
bought a series of upscale gas-guzzlers, including a Cadillac Deville, a GMC Envoy
SUV and luxury Chrysler 300C - periodically replacing them with newer vehicles,
records show.
Pedro G., 35, who makes an estimated $90,000 a year as the charity's "director of
environmental care," had three of his own vehicles parked at the clinics last
week: a black 2006 BMW, a white Ford van and a white 2007 Yukon Denali XL, which
had a $50,000 base price.
But he isn't the only Soundview staffer getting a sweet ride.
Sen. Espada (D-Bronx) himself uses a luxury car paid for with his charity's money
and allows the use of other cars by top employees, including his daughter-in-law
and a woman convicted of committing fraud for one of his campaigns.
At Soundview headquarters on White Plains Road, Sen. Espada, who collects nearly
$460,000 a year in salary and benefits as the charity's CEO, got into a 2008
Chrysler 300C sedan driven by someone who picked him up. The car is registered to
the charity.
Spokesman Fear said, "No Soundview employee is paid to act as a chauffeur." He
did not say whether the CCDC paid for outside drivers. The younger Espada's
wife, Lourdes Mocete, drives a 1986 Volkswagen Golf registered to the charity's
address on White Plains Road.
Another Soundview employee who uses a charity-paid car is Maria Cruz, 53. In
2005, she and three fellow employees pleaded guilty to siphoning about $30,000
from programs for poor families and AIDS patients - and steering it to the elder
Espada's failed campaign for Bronx borough president in 2001.
Cruz, who still works at Soundview as director of human resources, drives a
silver 2007 Jeep Grand Cherokee registered to CCDC.
The cars raised the eyebrows of charity watchdogs.
"An employee and their relatives should not use a charity's resources for
personal gain or to offset personal expenses," said Laurie Styron, an analyst at
the Chicago-based American Institute of Philanthropy.
Fear denied any abuses.
"There are senior employees who receive a car out of necessity of coordinating
their responsibilities for a health-care network with multiple facilities, spread
from the northeast to the southwest Bronx that have over 100,000 patient visits
annually."
He would not disclose the number or cost of CCDC cars, but called the expense a
"minuscule" part of Soundview's $15 million annual budget. Additional reporting by
Kelly Magee
All Relative: Pedro Turns Charity into $15Million 'Family Biz,' August 16, 2009
BYLINE: Isabel Vincent, New York Post
For state Senate boss Pedro Espada Jr., charity begins at home - with cushy jobs
at his nonprofit health-care centers in The Bronx for his sons and extended family
members.
The powerful majority leader - who last week was thwarted in his effort to create
a $120,000-per-year state job for a son - is being investigated by the
state Attorney General's Office for turning his health-care charity into
a family and political money tree.
The one-time Democratic turncoat controls the money flow as CEO of Comprehensive
Community Development Corp., which he founded in 1978 and which is the umbrella
organization for Soundview HealthCare Network.
The corporation's five clinics serve more than 40,000 people each year, but
critics say Espada has put to personal and political use some of the $15 million
the organization pulls in annually.
"For Pedro Espada, politics is a route to wealth and power," said a Bronx
political insider.
Even as the geyser of cash rains on his family and on his political campaigns,
Comprehensive Community Development owes some $347,000 in federal and state income
tax withheld from employees, as well as unpaid unemployment taxes.
Espada associates have been raiding his health-care network till since the late
1990s.
The senator was acquitted of charges that he stole more than $200,000 in Medicaid
cash in order to finance his and his son's political campaigns.
But four senior employees of the Soundview HealthCare Network were convicted in a
scheme to divert state money to Espada's 2001 run for Bronx borough president. The
money had been intended for programs aiding poor women and children and HIV
patients.
Among the charity's other lapses:
* Espada paid himself nothing in 2007, IRS documents indicate - but the
corporation's chief financial officer says they will be amended to show the
lawmaker paid himself more than $450,000 a year, some $80,000 more than the
standard for a charity its size.
* Espada stacks his nonprofit board with relatives and friends. His grandfather
Victor Feliciano - who is between 90 and 100 years old and lives in Puerto Rico -
is on the board and votes via conference calls from the family compound there.
Lourdes Mocete, who is married to Espada's eldest son, Pedro G. Espada, is
chairwoman of the board, according to 2007 tax records, the latest available.
Pedro G. Espada, 35, draws a $90,000 salary, sources say, as Soundview's director
of "environmental care."
He abruptly resigned this week from a Senate job created by his dad after
Attorney General Andrew Cuomo threatened a probe.
State law bans elected officials from participating in "any decision to hire,
promote, discipline or discharge a relative" for any paid state post.
* Only one board member, T.L. Solimon, was identified as a doctor - but his
license is no longer active.
"By our standards for charities, neither the chair nor the treasurer should be
compensated, directly or indirectly," said Bennett Weiner, who heads up the Wise
Giving Alliance of the Better Business Bureau.
According to Weiner's analysis of the corporation's tax filings from 2005 to
2007, Mocete profits indirectly from her husband's employment, even though she
draws no salary as a board member.
* Espada's uncle, Juan Feliciano Jr., was the chief executive officer at the
Soundview medical clinic. He left that position in January after he took an Albany
job paying about $76,000 a year.
Meanwhile, Espada's other sons, Romero and Alejandro, each rake in about $90,000
at the Soundview Health Center on White Plains Road, a political insider said.
When The Post went looking for them there, they were not at work.
Romero Espada, 27, is director of Soundview's "help desk," a post he has held
since 2006. His job is to train employees on the clinic's computer systems.
Alejandro Espada, 30, oversees his father's five clinics, according to
Soundview's longtime chief financial officer, Kenneth Brennan.
Brennan worked as campaign treasurer for Espada in 2001 and 2003. He sits on the
corporate board and earns just under $136,000, according to the nonprofit's 2006
tax filings, the most recent to list his salary.
Although charities are required to disclose personal relationships to explain
possible conflicts of interest, a spokesman for Espada's charity refused to
clarify board members' relationships with the lawmaker.
Alexander Fear, Soundview's legal counsel, stated in an e-mail that the board
members "volunteer their time and services as private citizens. We do not have
permission from board members to release personal information."
At least two of the Soundview employees who were convicted of fraud for rerouting
funds to Espada's campaign - Sandra Love and Maria Cruz - are still employed
there, The Post has learned.
Love is the site director for the Delany Sisters Health Clinic, one of the five
medical centers under the Soundview umbrella. Cruz is director of human resources
for Soundview HealthCare Network.
In June, Espada and another Democratic senator, Hiram Monserrate, of Queens,
threw the Senate into chaos when they defected to the Republicans.
The ensuing monthlong stalemate had the parties bidding against each other until
last month, when a deal was reached for Espada to return to the Democratic fold
and become the majority leader.
BYLINE: Ryan Gabrielson and Michelle Reese, The Tribune, Mesa, Arizona
When it comes to policing Arizona charities, the long arm of the law
is a paralyzed limb.
The state's Private School Tuition Tax Credit program has made the regulatory
paralysis especially obvious. Nonprofit charities control every part of the
$55-million-a-year tax subsidy program, which converts donations of income tax
dollars into tuition scholarships for private school students.
A Tribune investigation of private school tax credits found the subsidies have
largely failed to expand access to private education for low- and middle-income
families, as lawmakers promised.
Instead, the state law created an industry of unaccountable middlemen -- school
tuition organizations, or "STOs" for short.
A handful of these scholarship charities work exhaustively to provide financial
aid for underprivileged students, and spend miniscule amounts on administration.
A majority of STOs, however, blatantly violate the few regulations that lawmakers
included in the statute, state and federal tax records show.
Officially, these nonprofits report to the Arizona Department of Revenue and the
Internal Revenue Service.
But the state agency lacks the tools to detect even rampant misconduct. And the
IRS has shrunk its auditing force dramatically in recent years.
"In Arizona, unless the IRS is going to come out and audit them, which doesn't
happen as often as people think, there's really no enforcement mechanism," said
Ellis Carter, a Phoenix attorney who focuses her practice on nonprofits and
represents Arizona Scholarship Fund, the third-largest STO.
The state law that governs private school tax credits has just two clear
regulations -- both of them unenforceable.
The first restriction forbids parents from taking a tax credit for a donation that
paid tuition for their own child.
But parents can commit that brand of tax fraud with impunity because the state
never learns which students receive tax credit scholarships.
Only STOs know which taxpayers make donations and which private school students
benefit.
Scholarship charities provide the state with aggregate totals of donations
received and tuition paid each year, but nothing else.
The Arizona Christian School Tuition Organization goes so far as to routinely
shred its application materials after it cuts scholarship checks each spring, said
Steve Yarbrough, the STO's executive director. Destroying the records protects
families' private financial information, he said.
Without scholarship details, there is no evidence to prove the crime, said
Georganna Meyer, the state revenue department's chief economist.
Meyer alone oversees Arizona's tax credits, a species of government subsidy of
which private school tuition donations are by far the largest.
Over the private school credits' 12-year history, Meyer has tirelessly worked to
track how the system operates, who benefits and whether scholarship charities
follow the law, state tax records show.
She peppers STO executives with e-mails and phone calls when their financial
statements are incomplete. Or when the charities write tuition checks to parents,
not schools, raising concerns that the income tax dollars do not always fund
private education.
"I fuss with them about that," Meyer said. "I've told them before, that the
statute says the money goes ... for a child to go to a school."
She jokes that her title should read, "Queen of tax credits."
But the economist ultimately has no control over the private school tax credits
and the STOs they fund.
And Meyer is unable to enforce even the state law's simplest provision.
Scholarship charities must use 90 percent of their income tax donations to pay for
private school tuition. That limits how much the STOs can spend on themselves, at
least theoretically.
During the past six years, nearly two-thirds of STOs spent less than 90 percent on
scholarships, according to state tax records.
Most have improved in this area, but some fell short by a wide margin.
State records show the Children's Scholarship Network of Arizona hasn't spent any
of the $47,000 it received in contributions for tuition. The White Mountain
Tuition Support Foundation used only 61 percent of its $400,000 on scholarships.
Meyer said she has no way to penalize STOs for violating the 90 percent rule
because state law doesn't specify how much time scholarship charities have to
spend income tax donations.
"It goes back to the point that I've got, really, no authority over them," she
said.
The state attorney general and auditor general consider nonprofit charities
outside of their jurisdiction.
Widespread violation on the 90 percent rule is a symptom of problems with the
state tax credit law itself.
"The STO statute is incredibly ambiguous," said Carter, the nonprofit attorney.
"It really is horribly written."
Scholarship charity executives argue that the system works well as is.
STOs police themselves, said Harry Miller, executive director of the Tuition
Organization for Private Schools. Until last month, Miller was president of the
STO industry group, the Arizona School Tuition Organization Association.
When particular "bad players" are operating inappropriately, other STO executives
will advise the wayward nonprofits on how to reform.
"The last thing we want is an STO that's out of compliance in any way," Miller
said.
STOs also receive contributions for private school scholarships through a much
smaller corporate tax credit program. Unlike the tax credits for individuals, the
corporate program is tightly regulated, limiting donations and requiring that
scholarships go to underprivileged students who are transferring from public
schools. Corporate donations account for less than a quarter of all income tax
credit money.
EYES OF THE STATE: Georganna Meyer, chief economist at the Arizona Department of
Revenue, is the only state official who oversees private school tax credits.
DARRYL WEBB, TRIBUNE
Nonprofits Continue Boom in Face of New Pressures, July 27, 2009
BYLINE: Adam Jadhave, St. Louis Post-Dispatch
An executive and regular donor was planning a charity golf
tournament. An active church had plans for a new project in north St. Louis.
Both needed an official vehicle for their plans, an organization to carry the
banner. But rather than look to existing groups, they all founded nonprofit
organizations. And in taking matters into their own hands, they joined a gathering
legion who have incorporated nonprofits to match their passions and ideas.
In Missouri, the number of new nonprofit corporations founded annually has risen
steadily this decade, from 1,233 in 2000 to 2,257 in 2007. In 2008, the number
exploded to 3,082, almost a 37 percent increase in a single year. In all, the
state has more than 52,400 registered nonprofits.
In Illinois, nonprofit incorporations have increased almost every year since at
least 1970, though they fell this year. There are almost 85,400 nonprofits in the
state.
"They're simply moral or social entrepreneurs that are concerned about the
issues," said Kirsten Grnbjerg, a professor at Indiana University and a chair at
the Center on Philanthropy. "I get a request at least once a month from someone
else who says, 'I'm starting a new nonprofit. Tell me what to do.'"
Nationally the trend looks much the same; for decades, entrepreneurs have taken
their resolve to the not-for-profit sector each year in greater numbers.
Experts can't come up with any single reason why the nonprofit sector has grown
like it has. But they all see one common thread: the almost mythic American,
can-do spirit, as people with passions figure they can do it best themselves.
"That 'Let's take charge' attitude leads them to start a nonprofit," said Bob Ottenhoff, president and CEO
of Guidestar, a national clearinghouse of nonprofit data that is itself an
independent tax-exempt organization. "They're saying, 'I'm not going to wait for
someone else to do it. I'm not going to wait for the government to do it. I'm
going to do it myself.'"
QUICK SUCCESS
C. John Keane, who owns one company that sells medical malpractice insurance and
another that provides software to physicians, started the Keane Group Foundation
in March as a way to streamline his and his companies' charitable efforts.
"We do a fair amount of giving to various organizations, and we decided to try to
bring a little more organization and direction to it," Keane said.
By the end of May, Keane's charity had put on a golf tournament -- "something
small and experimental to see how it went" -- as a first attempt to benefit
research into leukemia and lymphoma. The event drew about 100 golfers and grossed
more than $50,000.
"I never dreamed when we decided to move forward that we would be as far along as
we are right now," Keane said. Keane's new nonprofit was one of 1,614 incorporated
in the state of Missouri in the first six months of the year. That pace, if
maintained, would beat last year's high.
The Post-Dispatch reviewed a random sample from the 298 nonprofit creation filings
in March and found wide variance in the purpose of the fledgling organizations.
A number were membership-based organizations -- a sorority, homeowner
associations, a maintenance co-op for dental offices. Some were churches: a Korean
Baptist church in St. Charles and Jesus Loves You House of Prayer registered in
Wentzville.
There were sports-based clubs -- a football organization in Kansas City and a disc
golf association near Branson, Mo. Others were medical-related: a fund dedicated
to advocacy focused on obstetric fistulas and a fundraising group for medical
research.
Several couldn't be contacted. Most don't yet have websites, telephone listings or
advanced operations.
One new nonprofit -- formed to provide therapy to the disabled by pairing them
with horses -- was already contemplating whether to continue as an organization.
POLICING NONPROFITS
Experts warn that while there has been a long trend of more individuals trying
their hands at nonprofit work, it's not always clear how long they last or whether
they succeed.
Though a nonprofit must make a detailed application to the Internal Revenue
Service for tax-exempt status, many don't face regular reporting requirements.
Organizations with less than $25,000 in annual income, as well as churches, are
exempt from federal financial disclosure rules. The IRS only this year began
asking smaller organizations to file an abbreviated form.
And the sheer volume of organizations makes policing difficult. The IRS believes
there were 1.9 million tax-exempt organizations in 2008, but it has no way of
knowing how many are defunct.
State attorneys general provide some financial oversight, but rules vary from
state to state. In Illinois, the bulk of nonprofits -- those designated charitable
and tax-exempt by IRS -- must register with the attorney general's office and
provide annual financial statements, as do any other nonprofits that solicit
public donations. In Missouri, however, registration and reporting to the attorney
general's office is mandatory only for a minority of nonprofits: noncharitable
organizations that solicit contributions, said Bob Carlson, a Missouri assistant
attorney general who works with nonprofits.
Meanwhile, the Missouri attorney general's voluntary, public "Check a Charity"
online database lists only about 1,000 of the nonprofits incorporated in the
state.
Carlson said he can scrutinize only a tiny sliver of the state's nonprofits; in
2008, he opened 72 investigative files. The system requires donors to decide which
are worthy causes, he said.
"The donors, they have a lot of power because they can say, 'Look I'm not going to
donate to you, I'm not going to support you because you're not efficient, because
you're not transparent,'" Carlson said.
And with the severe recession putting pressure on charitable contributions,
experts said they expect the nonprofit growth to slow or even decline in the next
few years. The number of organizations given tax-exempt status approval by the IRS
in 2008 fell significantly for the first time in many years.
To survive, many nonprofits will have to operate more like a business, with
models, standards and practices for better efficiency and effectiveness, several
analysts said. In some cases, that may mean more mergers or partnerships among
nonprofits.
"It's a market function -- the market will determine some who are best positioned
to move forward," said Mary McMurtrey, president of the Gateway Center for Giving,
an association of grant makers in the St. Louis area.
John R. Schmidtke, pastor at Bethlehem Lutheran Church, is banking on a record of
nonprofit success for a venture incorporated in March. A nonprofit Schmidtke and
his church founded nine years ago -- Better Living Communities -- has worked with
private corporations and local and state officials to leverage tax credits to
build dozens of new homes in the depressed Hyde Park neighborhood. The
organization's work has persuaded other developers to follow suit.
Buoyed by that venture, Schmidtke and the church now have a second nonprofit,
focused on an educational project that they're not quite ready to reveal.
"Given our success in the past, we hope our partners and supporters in the past
will be on board with us this time," Schmidtke said.
Law Shields Religious Charities From Scrutiny, July 26, 2009
BYLINE: Harvy Lipman, New Jersey Record
One of the key elements of the money-laundering case brought Thursday against
several leaders of the Syrian Jewish communities in Brooklyn and Deal was the use
of charities linked to religious groups as conduits.
According to the federal complaints, checks made out to the charities were sent to
Israel, where the funds were run through other entities and returned to
money-laundering clients for a fee.
This is not the first time federal authorities have uncovered a scam utilizing
religious charities to launder money. In fact, less than two weeks ago, Naftali
Tzi Weisz, the grand rabbi of a Brooklyn-based Hasidic sect, agreed to plead
guilty to one charge in a case involving charities connected to his group. That
scheme involved steering donations to the charities, which would transfer the
money through various Israeli banks and organizations and return 80 percent to 95
percent of the funds to the donors.
Thus, a donor who gave $100,000 would get a tax deduction for the full amount,
even though only $5,000 to $20,000 of the money went to charity.
Several experts in non-profit law said that federal tax law significantly hampers
regulators' ability to ferret out abuse by charities linked to religious groups.
Under the Internal Revenue Code, such organizations are not required to file tax
returns as most non-profits are. Of the half-dozen charities named in Thursday's
federal complaints, only one has filed federal tax returns.
"There's no regular flow of information the way there is with every other form of
taxpayer, whether an individual or a tax-exempt entity," said Marc Owens, a
Washington lawyer and former head of the Exempt Organizations Division of the
Internal Revenue Service. "Because of that lack of information, the IRS has a
difficult time determining if something irregular is going on. There are no
documents to look at."
Oversight 'difficult'
Daniel Kurtz, a Manhattan lawyer and former director of the New York Attorney
General's Charities Bureau, said religious groups' exemption from filing tax
returns also hamstrings state regulatory agencies, which rely on the information
in the returns.
"Obviously, it makes it tremendously difficult to exercise any level of
oversight," Kurtz said.
He noted that some restraints on government review of religious groups' activities
are warranted under the First Amendment's guarantee of religious freedom.
"There may be some things that would look unusual at another organization, like
spending a lot of money for vestments to clothe a priest, that are none of the
state's business," Kurtz said. "But the total lack of oversight is troubling."
Owens said Congress has recently added a section restricting audits to the tax
code, even further limiting oversight of religious groups.
"There's a requirement that a high official of the IRS determine that there is a
reasonable probability an audit will find information that endangers the church's
tax-exempt status before an audit can be conducted," he said.
That's quite different from other non-profits, which can be audited if an IRS
examiner sees any reason to suspect a problem.
"You can't start an audit of a church because an agent drove by a church and saw
something suspicious, like a big car parked in the driveway," Owens said.
Complicating matters, the tax code doesn't define what constitutes a church.
"There are no regulations, but the issue has been addressed by a series of court
decisions over the years," Owens said. The IRS has developed a set of 14 criteria
to decide whether an organization constitutes a religious group that have been
endorsed to varying degrees in subsequent court rulings.
Chief among them are whether the organization has a congregation, holds regular
services, ordains ministers based on a set of prescribed studies and has its own
place or places of worship.
"An organization does not need to meet all of them, but it needs to meet a goodly
number," Owens said.
New Law to Empower Attorney General's Office to Fight Securities Fraud, June 30, 2009
U.S. Federal News
The office of the Florida Attorney General issued
the following news release:
Attorney General Bill McCollum today joined Senator Garrett Richter and
Representative Tom Grady to witness Governor Charlie Crist sign into a law a bill
that further protects securities investors. The legislation broadens state
authorities' ability to investigate and pursue securities fraud and will empower
the Attorney General to participate in civil investigations, with the approval of
the state's regulating authority.
"We need every resource and every option available to protect our citizens from
another Bernie Madoff-type scheme," said Attorney General McCollum. "I appreciate
the Governor's action on this bill and look forward to putting these new tools to
work on behalf of our citizens."
Recent securities scams, including the infamous Bernie Madoff crisis, wiped out
the assets of many families and charities throughout Florida. The resulting
financial devastation highlighted the need for the state to better equip itself to
fight securities fraud and galvanized the Attorney General and others into action.
The law, which will go into effect on July 1, gives the Attorney General the
authority to conduct securities fraud investigations and to file securities fraud
lawsuits against bad actors, when approved by the Office of Financial Regulation.
The Attorney General's Office will also be able to seek restitution for victims,
secure civil penalties and contribute to an overall comprehensive strategy of
prevention and deterrence. The legislation also provides additional crime-fighting
tools available to McCollum's Office of Statewide Prosecution, specifically a
provision to criminally prosecute securities fraud and money laundering related to
these investment scams.
"Our economy will grow stronger if investors have confidence in our financial
markets," said Rep. Tom Grady (R- Naples), a securities attorney and expert in
securities regulation who drafted the bill and sponsored it in the House. "By
increasing the tools available to the state to prosecute violators of our
securities laws, we protect investors and foster needed trust in the system."
"Florida needs every resource available to address this growing concern," said
Sen. Garrett Richter (R- Naples), a banker and chair of the Senate Banking &
Insurance Committee, the bill's Senate sponsor. "This legislation will reinforce
our regulatory system and bolster investor trust."
The Investor Protection Act also enhances the Office of Financial Regulation's
(OFR) enforcement powers by authorizing the emergency suspension of persons and
firms for failure to provide financial books and records to OFR and by allowing
the adoption of sanction guidelines for registrants who violate the Florida
Securities and Investor Protection Act. These enhanced capabilities - plus the
Attorney General's ability to engage in civil investigations - will help prevent
and discourage future illegal conduct by a financial advisor or firm.
""On behalf of its three million members, AARP thanks Attorney General McCollum
and Florida's leaders for taking action to significantly augment the state's tools
available to protect seniors from unscrupulous investment advisers," said Jack
McRay, Advocacy Manager for AARP Florida state office.For more information please
contact: Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com.
Texas Adopts Law on Stewardship of Trusts After Founders Die, June 28, 2009
BYLINE: Stephanie Strom, New York Times
Texas has adopted a law intended to ensure that so-called orphan trusts, which
are left under the stewardship of lawyers or banks after their founders have died,
continue to comply with the founders' wishes.
The law, which was signed this month by Gov. Rick Perry, a Republican, bars
trustees from moving a trust or foundation out of Texas without court approval. In
many orphan trust cases, the local banks originally selected as trustees have been
acquired by multinational financial institutions based out of state.
The law further directs the courts to determine whether moving a trust out of
Texas would interfere with the trustee's ability to comply with the donor's
intentions.
The trustee must also notify the state attorney general's office, which oversees
charities, of any plans to move a trust out of Texas.
State charity regulators, nonprofit leaders and others complain that with no
family members to encourage compliance with the original donors' wishes, banks and
lawyers have wide latitude to change the way trusts operate and decide which
charities will receive grants.
''Banks take these trusts to distant places where no voice is there to step in
and express concerns,'' said State Senator Eliot Shapleigh, an El Paso Democrat
who wrote the law and has worked for several years to get it passed. ''Assets get
invested in bank stocks and other risky ventures, and the proceeds are not
allocated as the testator intended.''
Jack Siegel, a charity governance expert, said the law ''seems to take a good
step in the right direction.''
Still, Mr. Siegel said, the best way for donors to ensure that their wishes are
fulfilled after their deaths is to construct their trust documents carefully.
''It's a problem with people who tie their money up in trusts for long periods
of time,'' he said. ''They have good, legitimate notions of where their money
should go, but don't think much about the administration of their funds.''
Even when donors are specific, their wishes are not always followed. For
instance, J. P. Morgan moved the Robert U. and Mabel O. Lipscomb Foundation to
Delaware from El Paso, where it was originally under the custody of a local bank.
Although the Lipscomb will directed that a third of the foundation's assets go to
the Roman Catholic Diocese of El Paso, a third to the El Paso Museum of Art and a
third to organizations in El Paso that serve people with hearing and vision
problems, J. P. Morgan did not always comply.
Additionally, the bank cut the amount of money given away each year so that the
foundation ran afoul of tax law requiring foundations to distribute a minimum of 5
percent of their assets annually, until an article in The New York Times noted the
problem in 2007. The foundation's giving doubled after that, according to its tax
forms.
Previously, J. P. Morgan defended its management of the foundation, saying it
was prudent and exceeded legal requirements for distribution.
The Texas Bankers' Association and Bank of America testified against passage of
the law as it was originally written. But John Brigance, executive director of the
wealth management and trust division of the association, said banks could live
with the legislation.
Mr. Brigance said the law would require banks that serve as fiduciaries of
trusts established in Texas to maintain trust functions in the state. Many large
banks instead have consolidated trust operations in one location.
''The law is in a form we can live with, but I respectfully disagree with the
premise that restricting the location of certain trust functions serves the
purpose of ensuring a donor's intentions,'' he said.
Mr. Shapleigh said that he himself was somewhat disappointed with the law in its
final iteration and that he believed it would take national attention to truly
correct the problems.
''I think it's a first step,'' Mr. Shapleigh said, ''but really this is a
national issue that needs investigation and action at the Congressional level.''
O.C. Predators Revive Telemarketing Tricks; Suits Filed Against Charities for Deceptively Soliciting Funds for Firefighters, Police, Veterans, June 22, 2009
BYLINE: Commentary, Orange County Register
After years of citizens being hassled by deceptive solicitation calls for
phony charities , California Attorney General Jerry Brown last month filed
suit in Orange County Superior Court against five charities and their
fundraisers. The state has been investigating these groups for more than a year
and joined with the Federal Trade Commission in a nationwide initiative against
these false charities . While some of the groups, such as the Coalition of Police
and Sheriffs, Disabled Firefighters Fund and American Veterans Relief Foundation,
already have been forced to close by the FTC, Brown is seeking involuntary
dissolution of the other organizations named in the suit.
These latest alleged telemarketing scams actually are an evolved form of a
legendary Orange County-based con of a decade ago. Mitch Gold ran hundreds of
fraudulent companies all titled with words like "police," "firefighters," or
"veterans" to invoke sympathy and trust in the people his telephone agents called,
according to a Register investigation. Mr. Gold would set up a contract with a
charity giving them a fixed percentage return of money he raised, usually below 15
percent. Once this agreement was established, telemarketers would pressure people
into donating money. The Register investigation found that in the four years after
Gold fled the business in late 2000, $83 million was raised in the name of his
charities and only $5.7 million of those dollars went to good works. The rest of
the money went to fundraisers and charity executives. Mr. Gold was charged with
fraud, convicted in 2002 and now is serving an eight-year federal prison term.
The organizations that Attorney General Brown sued in May allegedly are even
shoddier than Gold's. These new telemarketers, a number of whom once worked for
Gold, sometimes pay as little as 3 percent of every dollar earned to the charity
they claim to support, according to the lawsuit.
Of the five Orange County charities Brown sued, the Coalition of Police and
Sheriffs, Disabled Firefighters Fund, and American Veterans Relief Foundation were
all operated by the same staff. The five charities are being charged with engaging
in deceptive and misleading solicitations, engaging in unfair business practices,
using false or misleading statements when soliciting for contributions, and
failure to use contributions for the purpose solicited. The Attorney General's
Office said in a statement that it is also attempting to prevent the directors
from operating again in California until they abide by state law.
Attorney General Brown is not only asking for the involuntary dissolution of the
charities, a spokesperson told us, but also requiring the repayment of all funds
falsely raised. Each organization, their directors and for-profit fundraisers are
facing civil penalties of at least $100,000 each. The Attorney General's Office
has not specified how any funds recovered will be allocated.
At a time when everyone's donated dollar counts for so much, it is despicable that
these fraudulent organizations would prey on citizens' goodwill. Attorney General
Brown's crackdown will hopefully end the exploitation of people who have donated
in good faith to help police, fire fighters and veterans.
Wal-Mart shoppers on Friday donated nearly $1,500
in just a few hours to two men, dressed in military garb, who were supposedly
raising money to help local veterans. Those men, members of the Veterans Support
Organization, may have been dressed like veterans -- but they have never served in
any of the armed forces, police said.
And with administrative offices in Rhode Island and Florida, the company's chief
operating officer Richard VanHouten has admitted none of the donations go directly
toward helping veterans on Cape Cod.
While the VSO is a registered nonprofit in this state, according to the state
Attorney General's Office, Falmouth Veterans Agent Jay Hill said that legal or
not, "something stinks."
Hill, who said he had never heard of the VSO before last week, said the group did
not inform him they would be fundraising in town.
But yesterday, just one day after the Times published an article about the group,
a $500 check is being sent to Hill, said John Nakowicz, chief financial officer
for the VSO.
"We don't normally call specific people in communities before we solicit,"
Nakowicz said. "But we sent a check to Mr. Hill for $500 because he wanted some
money for his organization."
That check, which will not be accepted by the town, is nothing more than "hush
money," said Selectman Ahmed Mustafa, a retired Air Force senior master sergeant.
"Now they want to give $500 to the veterans? That's like taking money from a
corrupt organization," Mustafa said. "It won't be cashed, I guarantee you that,
because it makes me a party to their wrongdoing."
In 2007, the VSO raised $121,000 with a total revenue of $317,000, according to
records from the Attorney General's Public Charities Division.
VanHouten said Saturday that 52 percent of all monies raised go toward the
charity, while roughly 30 percent pays for the volunteers and the remainder
offsets other overhead costs.
That is in direct contrast to what Hill was told outside of Wal-Mart. The
solicitors outside the store Friday said that 78 percent of all the funds raised
helped veterans, Hill said.
Hill also said he spoke to three people who donated to the group Friday and all of
them said they were under the impression that "local" meant the money would be
spent on helping veterans in town or on the Cape.
Two of the three also assumed the collectors were veterans themselves.
But on Saturday, VanHouten said the money is donated to Veterans Assistance
hospitals all over New England, and that's what his employees mean by "local."
He also said his volunteers never claim to be veterans. Their camouflage clothes
can be bought at most stores, VanHouten said, and he said all non-combat workers
wear a patch that reads "non veteran" on their backs.
Hill and Mustafa said they could not confirm if the two men outside Wal-Mart were
wearing such patches, because their backs were constantly against a wall.
VanHouten did not return a phone message seeking comment yesterday.
This isn't the first time the group's practices have been questioned.
Internet searches on the VSO turn up several stories in Florida newspapers
involving questionable solicitation tactics and complaints from area veterans
groups as far back as 2006, and as recent as a few months ago.
In a similar but unrelated matter, the state attorney general filed lawsuits on
May 20 against two charities and four professional solicitors for allegedly
misleading donors into believing their money was benefiting local veterans and law
enforcement personnel.
The state alleges that Our American Veterans, based in Georgia, violated consumer
protection laws by misleading donors into thinking their contributions were
helping veterans in Hingham and Hull.
Unfortunately, using veterans as a way to make money has become all too common,
said Merrill Blum, executive director of the Nam Vets Association of the Cape and
Islands and Veterans Outreach Center in Hyannis.
"There's no way of knowing how prevalent it is but it's not uncommon," Blum said.
"There's always a scam these days by people trying to take advantage of what is
genuinely a feeling of support for our veterans."
No representatives from the VSO have been seen since Friday, according to Hill and
police.
Fraud in the NONprofit Sector? You Bet, June 1, 2009
BYLINE: Thomas Buckhoff and Abbie Gail Parham, Strategic Finance
Because their mandate is so noble, many nonprofit organizations (NPOs) mistakenly
assume that their employees and volunteers wouldn't steal from them. What
coldhearted person would steal money donated to grant wishes for terminally ill
children or make off with funds pegged to important research? Misguided beliefs
like these often influence accountants and auditors of NPOs and small charities to
be less diligent than their counterparts in large forprofit entities in setting up
controls for safeguarding cash. As a result of these lax controls, many NPOs
become breeding grounds for fraudulent activity.
Consider the following case examples:
* A former program administrator of the Carnegie Institution of Washington, which
conducts scientific research across several disciplines, pleaded guilty to
embezzling $202,000 earmarked to help public-school teachers become better versed
in science.
* The founder of the Thornton Kidney Research Foundation pleaded guilty to mail
and wire fraud and was ordered to pay $644,000 in restitution. His transgressions
also got him eight years in federal prison.
* The former CEO of the Indianhead Community Action Agency, which helps the poor
find housing and offers them literacy training, was charged with forging checks in
excess of $1 million.
* A former president of Goodwill Industries was indicted on federal charges that
he stole more than $800,000 from the charity by wiring money to overseas bank
accounts. Since then, a financial controller of Goodwill Industries was charged
with embezzling nearly $400,000.
* A former accounts payable clerk for NorthBay Healthcare Group, a not-for-profit
organization that operates hospitals and clinics in Vacaville and Fairfield,
Calif., pleaded guilty to computer fraud. She used her computer to gain
unauthorized access to the company's accounting software and issue checks payable
to herself and others, resulting in the theft of at least $875,000.
* An internal investigation by Oxfam International, a relief organization,
uncovered fraudulent expenditures of $22,000. Oxfam paid for relief supplies that
were never delivered to a province in Indonesia following the 2004 tsunamis in
South Asia.Most of the funds were recovered, and 22 employees are facing
disciplinary action, including possible dismissal.
A Growing Problem
According to the 2008 Report to the Nation on Occupational Fraud and Abuse by the
Association of Certified Fraud Examiners (ACFE), occupational fraud and abuse
costs U.S. organizations roughly $994 billion annually, or about 7% of total
revenues. Results of other surveys underscore an emergent problem. In 2006, KPMG
conducted a fraud survey of 459 public companies, nonprofit organizations, and
state and federal government agencies. Some 75% of the respondents reported that
their organizations had suffered losses because of employee fraud during the past
year, with the average loss coming in at $464,000. And (surprise!) workers at
foreign charities and nonprofits aren't immune from corruption, either. In its
2008 fraud survey, BDO Kendalls, a worldwide network of public accounting firms,
received 384 responses from not-for-profit organizations based in Australia and
New Zealand.Major findings included:
* The typical fraudster was in his or her 40s and was a paid nonaccounting
employee.
* The average fraud loss was $45,527.
* About 92% of fraud was committed by paid employees and only 8% by unpaid
volunteers.
* Cash theft and kickbacks/bribery were the most common types of fraud reported.
* The largest number of fraud incidents was reported in organizations with no
volunteers.
As these statistics and case examples illustrate, small charities and NPOs aren't
immune from this disturbing trend toward greater employee dishonesty. It's
important to note, however, that the results of all fraud surveys reflect
incidents that were actually discovered, which some fraud experts estimate
comprise less than half of all fraud being perpetrated. Thus, most employee fraud
goes undetected. By whatever measure, this type of deception has become
increasingly widespread and is an enormous and intolerable financial drain on our
society.
Fraud Prevention and Detection
Preventing fraud in NPOs-or in any business, for that matter-is a two-step
process: (1) conduct employee background checks, and (2) minimize opportunities
for internal theft. Fraud experts estimate that NPOs can prevent about 80% of
fraud by effectively screening prospective employees and volunteers. Those with
criminal backgrounds and/or who misrepresent themselves on their employment
applications are most likely to commit fraud. Case in point: According to an Aug.
7, 2003, article, "Fighting Charity Fraud," in The Chronicle of Philanthropy,
Steven Mason, the father of three young children and an overtly religious man, was
criminally convicted for unemployment compensation fraud and receiving stolen
property. Subsequently,Workforce Central Florida, a nonprofit job-placement
program, hired Mason as finance director. Mason stole $172,000. Impressed by his
experience as finance director for Workforce Central Florida, and with no
knowledge of his past, United Arts of Central Florida hired Mason as finance
director. He then allegedly stole $148,000 from United Arts. Neither of these two
NPOs conducted background checks on Mason before hiring him; they presumably
considered the nominal cost of performing such checks to be an unnecessary
expense. Both organizations learned from their mistakes and, not surprisingly, now
conduct background checks on every prospective employee. (For more information,
see http://philanthropy.com/free/articles/ v15/i20/20002901.htm.)
How can your organization minimize opportunities for internal theft? The most
effective way is to implement and adhere to a good system of internal controls.
The three primary objectives of such a system include: (1) safeguarding the
organization's assets, (2) ensuring the accuracy and timeliness of financial
information, and (3) encouraging compliance with organizational policies,
procedures, laws, and regulations. An effective internal control system should
include the following five procedures:
1. Proper Authorization and Segregation of Duties. The same employee shouldn't
perform more than one of the following three job functions: authorization, custody
of assets, and recordkeeping. For example, Steven Mason exploited his position as
finance director by writing checks to himself (an authorization function), signing
the checks (a custody-of-assets function), and recording the disbursement of funds
as "operating support" for a local arts group (a recordkeeping function). Of
course, employees performing different functions can collude to commit fraud, but
such situations are rare. The 2008 BDO Kendalls fraud survey indicated that
collusion occurred in only 19% of reported cases. Thus, the risk of fraud can be
greatly reduced by adequately segregating job functions to make it difficult for
one person to act alone.
2. Adequate Documents and Records. Documentation and records provide a paper trail
that helps organizations keep track of their limited resources. Charities and
companies with poor tracking systems tend to be ripe for fraud. Understandably,
employees are less inclined to steal if they're made aware that the organization
carefully and precisely documents all of its income and expenses. Ideally, all
NPOs should maintain source documentation for all cash receipts and cash
disbursements. A source document should be an original document that includes the
date, amount, and business-related purpose of the transaction. Common examples of
source documents include, but aren't limited to, vendor invoices, sales receipts
for purchases made, cash register tapes, and bank deposit tickets, including
copies of all checks received from donors. The absence of adequate source
documentation can be a red flag that an insider is defrauding the organization.
3. Physical Safeguards. Organizations (for-profit and nonprofit alike) can
minimize opportunities for misuse or theft by limiting access to physical assets
and accounting records by unauthorized personnel. Such safeguards include locked
cash registers and storerooms, electronic passwords, fireproof safes, fences
around buildings, and secure storage lots for equipment and materials. Special
fund-raising events are prime targets for employees and volunteers to commit
fraud. These events usually involve large volumes of cash that many individuals
may handle with little or no control procedures in place. If it hasn't already,
your organization should implement the following physical safeguards:
* Use cash registers and/or locked boxes, and limit access to both.
* Deposit cash in the bank the same day cash was received, if possible.
* Require passwords to access the computerized accounting system, and limit access
to them.
4. Electronic Controls. Protecting confidential information isn't only a business
requirement-it's often a legal requirement. Employees can breach confidentiality
by simply allowing someone to use their password to access company data. From
there, unauthorized users can alter, delete, or steal information. Moreover,
hackers pose threats from outside the organization and can gain access to company
data through electronic trickery like "masquerading" and "piggybacking."
What can you do to mitigate the risk of security violations and loss of data? The
first step is to implement proper access-control mechanisms, beyond just usernames
and passwords, so that only authorized persons are able to view data, perform
tasks, or both. This probably will mean creating several levels of security and,
therefore, several levels of users. "Data masking" is a method of hiding sensitive
information within a database so that it can't be leaked to others. Encryption
technology, which allows only authorized users to access ("decrypt") certain
information, is becoming increasingly important for companies that allow employees
to use laptops, CDs, and USB keys that contain confidential data. Other strategies
include maintaining antivirus protection to detect threats and crafting policies
to limit and/or control Internet use to help prevent access to infected websites.
All of these strategies will help protect your company from accidental loss or
deliberate theft, as well as secure the data so it can't be read if it's lost or
stolen.
5. Independent Checks. The notion underlying independent checks is that if
employees know that their activities are being monitored, the perceived
opportunity to commit fraud is reduced. For example, when an independent manager
(one with no access to donated cash) compares the cash receipts log to what was
deposited in the bank, the manager is making sure that all cash received actually
was deposited into the bank. Such independent checks not only guard against
employee fraud but also uncover honest mistakes. But the biggest concern with
not-for-profit organizations is that incoming cash donations won't be logged in
but will instead be diverted into the pockets of dishonest employees or
volunteers. The following controls over cash receipts should be implemented to
minimize losses:
* Create some kind of estimate regarding the amount of cash that, according to the
budget, should have been received, and reconcile it to the amount of cash actually
received.
* Create a record of cash actually received, and reconcile it to deposits on the
monthly bank statements.
* Require at least two people to be present whenever cash is received.
* In lieu of cash donations, request that donors pay by check or by credit or
debit card.
Few people who steal expect to be caught and punished. Thus, an effective way to
prevent fraud is to make employees think they'll be caught and punished if they
steal. Instilling this "perception of detection" in employees' minds is the single
most effective way to prevent fraudulent activity. One way to send a clear message
to employees and volunteers is by having a written policy stating the
organization's stand and how it will deal with fraud perpetrators. Another strong
deterrent: Install security cameras in areas where cash is handled. A
less-expensive but perhaps equally effective option would be to conduct "surprise"
audits of cash accounts since staffers and volunteers won't have time to cover
their tracks. Smaller companies especially should have a policy of job rotation
and enforced annual leave since many frauds require the person to maintain
continuous, manual intervention.
Governance Issues
Recent accounting scandals have focused attention on corporate governance and
directors' duties and responsibilities. Directors of not-for-profit organizations
are legally bound by the fiduciary duties of care, loyalty, and obedience. The
duty of care-to act as an ordinarily prudent person would under similar
circumstances-requires that directors be informed and make decisions based on
facts and reliable information. The duty of loyalty requires directors to use
fairness, good faith, and honesty in their actions. It requires a director to act
in a manner believed to be in the best interests of the corporation without
considering any personal gain. Finally, the duty of obedience requires directors
to carry out the mission of the organization while, at the same time, assuring
that board policies and decisions comply with the law. In short, directors must be
committed to the organizations they serve.
Adhering to these duties establishes high standards of accountability. NPOs are
accountable to a number of groups, including state attorneys general and the
Internal Revenue Service (IRS). As protectors of the public interest, state
attorneys general oversee charitable organizations by investigating fraud
allegations involving nonprofits and monitoring compliance with a state's
fund-raising laws. The IRS is responsible for monitoring tax-exempt status and
enforcing tax compliance for qualified charitable organizations.
Directors and officers-as well as corporate accountants and auditors-have a
fiduciary duty to ensure that all of the donations received are used to carry out
the NPO's charitable mandate. This can be accomplished by implementing and
adhering to an internal control system that both minimizes opportunities to commit
fraud and maximizes the probability that fraudulent acts will be detected early.
Such a system requires the organization to conduct background checks on all
employees and volunteers, establish controls for safeguarding cash receipts and
disbursements, and demonstrate its commitment to a fraud-free environment by
terminating and/or prosecuting those who exploit the organization for personal
gain.
Massachusetts: Wellness Community gone, but questions persist, Apr. 25, 2009
NEWTON - For nearly two decades, thousands of cancer patients turned to the Wellness Community of Greater Boston when news of their diagnosis upended their lives. But at the start of this year, the popular nonprofit abruptly shut down, its chief executive resigned, and staff and patients were offered vague explanations about fiscal problems related to the "economic climate." Now the board of the organization is considering a forensic audit to follow the money trail, and some clinicians are calling for the attorney general to investigate. While there is no concrete evidence of financial misuse, and the former chief executive said the operation was run properly, some troubling questions linger in the minds of patients and staff.
Pennsylvania: Bank, charities battle on trust, Apr. 19, 2009
Thirty-six years after her death, Elizabeth R. England lives on in the good works of her estate: Summer fun for poor children at College Settlement Camp in Horsham.
But recently, Miss England was reborn as a player in a drama she tried her best to avert: a dispute over who administers her trust, now worth about $14 million, and how much money that institution deserves for serving as trustee.
Mary C. Kenney, deputy attorney general, said she could not comment because of the pending litigation. But she told the court that the state also objected to Mellon's charging the trust for legal fees for services "rendered in support of the Trustee's claims for retroactive and future fee increases."
Ohio: Deputy Sheriffs Association: Organization folds after history of rogue fundraising, Apr. 26, 2009
The saga of the American Deputy Sheriffs Association, an organization whose phone solicitations were found to violate Ohio law in 2004, appears to be over. The nonprofit group was dissolved last month in its home state of Texas by the Columbus lawyer who was appointed as its receiver by a Franklin County judge. The association "seems to have been operated by its agents largely as a personal income generator," Jeffrey M. Lewis wrote in his final receiver's report, filed in July with Franklin County Common Pleas Court.
Pennsylvania: Military academy alumni call for inquiry, Apr. 23, 2009
A long-simmering feud between a small group of alumni and the administration of Valley Forge Military Academy and College has erupted into a major battle as both sides hurl allegations and threaten legal action. After three years of attempting to take their complaints to the school's trustees, the alumni group, known as the Valley Forge Old Guard, plans to call on the state attorney general to investigate the nonprofit that runs the school.
Hawaii: Charity Registry System Now Available Online at http://www.ehawaii.gov
Associated Press
Apr. 22, 2009-- The Hawaii Attorney General launched its new online Charity Registry System through the state's official Web site (http://www.ehawaii.gov).
The Registry allows the public to search for and view the registration statements of registered charities and their IRS Form 990 or 990EZ (Return of Organization Exempt from Taxation) when they are filed with the Attorney General annually as required by Hawaii's charitable solicitation law. Effective January 1, 2009, all charitable organizations (with certain charities being exempt) that solicit contributions and any person who employs a charitable appeal in soliciting contributions from the public must register with the State Attorney General's office before soliciting any funds. In addition to the search, charities can securely complete their annual fee payment online with either credit card or check.
For more information about the Hawaii Charity Registry, please contact Hugh R. Jones, Deputy Attorney General, at (808) 586-1473 or Hugh.R.Jones@hawaii.gov
Ohio: Hospitals? aid info can be hard to find; Apr. 19, 2009
In the outpatient waiting area of Kettering Memorial Hospital, you’ll find plenty of marketing and promotional signage and a nearly life-size oil painting of a little girl handing her sub sandwich to a homeless man lying on the sidewalk. What you won’t find there is a sign informing patients and their families that the hospital is required to provide free care to families earning up to the federal poverty level. Nor will you find that sign posted in the hospital’s registration office or its emergency room area, as required by state law.
The Haas charitable trusts, the creations of Otto and Phoebe Haas in the 1950s and early 1960s, have swelled to financial giants, topping $2.7 billion in assets when Dow Chemical Co. bought the Haas family business, Rohm & Haas Co.
Wisconsin: ATTORNEY GENERAL J.B. VAN HOLLEN SEEKS INTERVENTION IN CONSERVE SCHOOL LITIGATION, Apr. 14, 2009
LAND O'LAKES - Attorney General J.B. Van Hollen announced that he has asked the Vilas County Circuit Court for permission to intervene in a pending lawsuit involving the Conserve School located in Land O' Lakes, Wisconsin. Click on the link below to read the article.
Pennsylvania: ATTORNEY GENERAL CORBETT ANNOUNCES LAWSUIT AGAINST CITIZENS ALLIANCE, April 10, 2009
US State News
PHILADELPHIA, Pa., April 7 -- The Pennsylvania Attorney General's Office issued the following news release:
Attorney General Tom Corbett today filed a lawsuit to begin the legal process of shutting down Citizens Alliance for Better Neighborhoods, the nonprofit organization former state Senator Vincent Fumo started in 1991. Citizens Alliance In the lawsuit, Corbett asks the Commonwealth Court to revoke the corporate franchise of Citizens Alliance and distribute its assets to an appropriate successor or successors. As an alternative, Corbett seeks to permanently remove Citizens Alliance officers and directors and appoint new individuals to serve going forward. (Click here to read the lawsuit)
Corbett said in addition to Fumo, the lawsuit names Ruth Arnao, who worked at various times as the organization's executive director, vice-president, assistant secretary and director. Several of Citizens Alliance's former officers and directors have also been named in the lawsuit.
Fumo and Arnao were found guilty by a Federal jury on March 16, 2009 of conspiracy, fraud, obstruction of justice and tax violations. They are each awaiting sentencing. Corbett said that the Attorney General's Charitable Trusts and Organizations Section began a civil investigation of Citizens Alliance in March of 2007 after Fumo and Arnao's federal indictment listed excessive expenditures for non charitable purposes. Corbett explained that the Attorney General's Charitable Trusts and Organization Section has oversight of nonprofit organizations in Pennsylvania. The section only has civil jurisdiction and today's court action was delayed until after Fumo and Arnao's trial and conviction was complete.
The filing of the complaint initiates the discovery phase of the investigation, which enables investigators to take a closer look at the matters alleged. Corbett said the lawsuit alleges that Fumo and Arnao unlawfully diverted approximately $1.9 million of Citizens stated charitable funds for personal use and political advantage. The nonprofit allegedly solicited both public grants and private donations to fund its activities.
According to the lawsuit, charitable funds were used to not only purchase high-end equipment, tools and motor vehicles, but were also used to purchase and renovate the building in which Fumo's senatorial district and campaign offices were located, to fund political polls, and to oppose a sand dune project along beaches in New Jersey ocean-front communities to protect the property value of Fumo's beach house. "The purpose of Citizens Alliance for Better Neighborhoods was to promote the public health, housing, safety and education in Philadelphia," Corbett said. "Using nonprofit money to fund a lavish lifestyle and finance political campaigns is unacceptable."
The lawsuit claims that none of the officers or directors of the nonprofit ever objected or took action to prevent the massive waste of the organization's assets. These individuals also allegedly failed to oversee the investments Fumo and Arnao made on behalf of the organization. "The misuse of nonprofit organization funds is an area of concern to my office," Corbett said. "We will continue to aggressively pursue the abuse of nonprofit and taxpayer money, whether it is a large organization in Philadelphia or a small local nonprofit."
As part of its lawsuit the Attorney General's Office seeks to: "Order the defendants to provide a complete and accurate accounting of their administration of Citizens Alliance assets from 1998 through 2009; "Surcharge the individual parties responsible for the full amount of any assets determined to have been wasted, mismanaged, misappropriated or diverted as a result of their defendants' collective or individual acts or omissions; "Revoke the Articles of Incorporation granted to Citizens Alliance and direct the disposition of its assets to an appropriate successor or successors to fulfill as nearly as possible its stated charitable purpose; "As an alternative to revoking Citizens Alliance corporate franchise, the Commonwealth seeks to permanently remove Citizens Alliance officers and directors from its board of directors and appoint new individuals to serve going forward. A complete list of individuals named as co-defendants in the lawsuit are listed below.
* Vincent J. Fumo, former state senator, and the founder of Citizens Alliance. * Ruth Arnao, employee of Fumo's senatorial staff, Executive Director, Vice-President, Assistant Secretary and Director of Citizens Alliance. * Joseph Russo, served as the Chairman, President, Secretary, Treasurer and Director of Citizens Alliance. * John Sfrisi, served as the Secretary and Director of Citizens Alliance. * Albert Mezzaroba, served as Director of Citizens Alliance. * Jeffrey Travelina, served as Treasurer and Director of Citizens Alliance. * John Travelina, served as Director of Citizens Alliance. * Amel Hammad, served as Director of Citizens Alliance. * Christian DiCicco, employed as member of Fumo's senatorial staff as well as Executive Director and Director of Citizens Alliance. * Todd Baritz, served as Director of Citizens Alliance. * Patricia Evers, served as Director of Citizens Alliance. * Kenneth Baritz, served as Director of Citizens Alliance. * Reverend Gary Pacitti, served as Director of Citizens Alliance. The lawsuit was filed today in Commonwealth Court in Harrisburg by Chief Deputy Attorney General Mark Pacella of the Attorney General's Charitable Trusts and Organizations Section.For more information please contact: Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com
New York: City Opera Taps Into Endowment, Apr. 18, 2009
The New York Times
By DANIEL J. WAKIN; Compiled by DAVE ITZKOFF
The New York City Opera said on Friday that it had raided its endowment of a total of $23.5 million to pay off debts and right the troubled company's finances, leaving little left in its coffers.
The company took $17.5 million from the endowment in the fall, said George R. Steel, the artistic director and general manager, with the approval of the New York State attorney general's office, which regulates nonprofit organizations.
Court documents stated that $9.5 million of that sum had been used to repay a loan taken out to cover a ''cash shortfall'' from last season and that the rest had been used for operating costs this season, when the company suspended most operations while its home, the David H. Koch Theater at Lincoln Center, was being renovated.
Earlier this week, City Opera said, it received approval for another $6.6 million withdrawal from the endowment to meet payroll and other needs.
The withdrawals are considered loans, and the opera has promised to restore the money. A spokesman for City Opera, Pascal Nadon, said the company's endowment now stands at $10.4 million. City Opera's budget next year is estimated at between $25 million and $30 million. The company recently announced a stripped-down season of five productions for 2009-10.
Dallas government must significantly amend its management of the W.W. Samuell Estate -- the largest donation in the history of the Dallas Park and Recreation Department and one of the foundations of the city's park system -- according to an agreement reached today between Dallas City Hall and the Texas Office of the Attorney General.
"Today's agreement specifically provides that Dr. Samuell's will created a charitable trust -- and did not simply give Samuell property to the city of Dallas for use as city officials see fit," a statement from the Office of the Attorney General reads.
A Dallas City Hall representative could not immediately be reached for comment.
The agreement, which has been in the works for days, states the Dallas Park and Recreation Board must by May 1 prepare a report detailing its recent actions involving the Samuell Farm property.
This report, according to the attorney general's office, must include the status of improvements to the Samuell Farm that the city auditor recommended in a 1999 audit.
The Park Board must also "establish a standard quarterly accounting statement that is used to account for Samuell properties, as well as assets used and administered by the Samuell Trust," the attorney general's office said.
Under the agreement, the Park Board must also review written reports detailing current operations at Samuell Park properties and future plans for the Samuell Farm. The Park Board must make those reports available to the attorney general's office, according to the agreement.
Today's agreement stems from a disagreement over the will of William Worthington Samuell, a Dallas philanthropist and surgeon who died in 1937.
"Real estate to the City of Dallas Park Board for park purposes - not to be sold," Samuell wrote in handwritten note that served as his will. "Balance to Park Board as permanent foundation. First National Bank, administrator."
As The Dallas Morning News' David Flick reported last week, Samuell's estate consisted of 900 acres in real estate and financial holdings that were then valued at about $1.2 million.
Since then, the park board has, with court consent, sold or leased some of the property, but Samuell's name is enshrined in Dallas parks such as Samuell-Grand, Samuell-Beaumont and Samuell-Garland.
In the last few years, a 340-acre tract about 15 miles east of downtown Dallas became the center of a dispute between the park department and a nonprofit group that ran it earlier this decade, Friends of the Farm.
The last contract between the group and the city expired in 2007. After a year of wrangling, the group last autumn returned the keys to the farm to the park department, Flick reported.
In the course of the dispute, Hugh Brooks, then the executive director of the group, sent a letter to the attorney general, questioning the department's stewardship of the Samuell properties and alleging that, if not for city mismanagement, the bequest would now be worth a quarter of a billion dollars.
New York: Historical society under fire over furniture loan Rochester Democrat and Chronicle, April 13, 2009
Rochester Democrat and Chronicle (New York)
April 13, 2009 Monday
David Andreatta Staff writer
Movers have been hauling artifacts from the Rochester Historical Society's headquarters for weeks in preparation for the organization's relocation to the Rundel Library - but they're not taking everything.
Furniture from the society's collection, including nearly two dozen handcrafted chairs, an armoire and mirrors, will remain in the East Avenue mansion the organization is vacating and will be on "extended loan" to the couple that bought the property.
Society executives say the items are befitting of the historic home, known as Woodside, and inappropriate to display and difficult to store in the downtown Rochester library.
But the arrangement is now under scrutiny by the state Department of Education, which chartered the organization and last year in open court expressed dissatisfaction with its leadership. The department on Friday reported it was continuing to investigate allegations brought to its attention by the public.
Opponents of the loan, which include disaffected members and former trustees whose complaints sparked the probe in 2007, argue the loan violates federal and state laws that ban charitable organizations such as museums from providing a substantial benefit to a private interest.
"It should be obvious that use of valuable collection items by private individuals in their personal residence, where the items are owned by an institution created to preserve and display the items, is likely more than insubstantial benefit," said Michael de Freitas, a nonprofit lawyer representing the opponents.
Among the more than 30 pieces of furniture to be loaned are 22 chairs crafted by the renowned Herter Brothers.
Trustees approved the loan in October, according to meeting minutes obtained by the Democrat and Chronicle. Details of the arrangement were not disclosed when the society petitioned the state Supreme Court to sell the mansion, but an addendum to the purchase agreement filed in court raised the possibility of loaning items.
Under the agreement, the items would be insured by the homeowners, Robert and Amy Tait, but are the property of the society and subject to annual inspection by trustees. The society may also recall the items at any time.
Patrick Malgieri, president of the board of trustees, said any private benefit to the Taits is "quantitatively and qualitatively incidental" and that the loan furthers the society's mission.
"The society fulfills its mission and purposes in a variety of ways, some, but not all, of which include the active display of its collection to the public," Malgieri said in an e-mail message. "Preservation of items is but one of the means by which we fulfill those goals."
The state Education Department said the arrangement is unusual. "Most museums have collection policies that forbid loans to individuals," Tom Dunn, a spokesman for the department, said in an e-mail message.
Dunn said the state would look at two "guiding principles." The first, as noted in IRS rules, is whether anyone is "benefiting from the loan of collection objects belonging to an institution."
He added that the state "would also want to know if valuable objects are receiving adequate protection in a loan. Are they adequately insured, secure and kept in the right environmental conditions?"
Nonprofit lawyers who reviewed the agreement said there was little question that the new owners are benefitting from the deal.
"There certainly is a private benefit here," said Jill Manny, executive director of the National Center on Philanthropy and the Law at New York University.
"The question is whether the private benefit rises to the level where it calls into question whether the historical society is operating primarily for charitable purposes or primarily for the private benefit of this couple."
Manny, a law professor, added: "It doesn't sound like something that ought to happen."
The meeting minutes refer to the furniture as the "Taits' Wish List," and describe the items as those "from the house that they would like to have stay at Woodside on an extended loan."
Jeffrey Hurwit, a nonprofit lawyer and former Massachusetts assistant attorney general in the division of public charities, said the law offers some flexibility in how charitable organizations can define their interest in loaning items to private individuals.
"The bottom line has got to be the best interests of the organization," Hurwit said. "Not that there is any wrongdoing here, but the minutes don't show how this arrangement benefits the organization in any way, which is the fiduciary responsibility of the board."
Amy Tait said the furniture would not be in day-to-day use, noting that some of it is in disrepair, and that the deal mutually benefits the society and the historic nature of Woodside.
"The entire concept was a result of thinking about win-win opportunities for the organization and us," Tait said. "It just seems like their (the items') most significant benefit is to complement the house they've been in for many decades."
The Rochester Historical Society is expected to be out of Woodside by June.
Wisconsin: Legal custodian sought for Conserve School Milwaukee Journal Sentinel, April 15, 2009
Milwaukee Journal Sentinel (Wisconsin)
AMY HETZNER, Staff, Milwaukee Journal Sentinel
Wisconsin Attorney General J.B. Van Hollen has asked that a retired state Supreme Court justice be appointed custodian for the entity that runs an environmentally focused North Woods boarding school embroiled in a lawsuit over plans to change how the school operates.
The request comes as part of a motion by the state to intervene in the lawsuit pending in Vilas County Circuit Court in which parents of students at Conserve School in Land O'Lakes are trying to keep it a four-year high school. Plans call for converting the school in 2010 to one in which juniors from other schools would spend one semester.
Van Hollen is asking that former Justice Jon P. Wilcox be appointed custodian to represent the Conserve School Corp. during the litigation.
"The Conserve School is a tremendous asset to the people of Wisconsin," Van Hollen said in a statement. "My goal is to make sure conflicts of interest do not harm the school's interests or prevent the school from protecting its legal rights."
The attorney general can request the appointment of a custodian as part of his authority to request a judicial dissolution of a non-profit corporation, Assistant Attorney General Steve Means said.
Means said the state is concerned that if Conserve School proceeds with its plan, the school's assets and ability to remain in the state could be jeopardized. Already, the Culver Educational Foundation has filed a lawsuit in federal court in Chicago asserting that the school is in violation of the trust that established it and requesting that the school's $180 million in assets be redistributed.
"Given some of the issues raised in the litigation, there's a risk that what has been set aside as a gift for the state of Wisconsin is at risk of essentially going out of state to another entity," Means said.
School officials have said that recent economic downturns have affected trust assets, and that the conversion to a semester-only school will relieve financial pressures to allow the school to continue operating.
Copyright 2009, Journal Sentinel Inc. All rights reserved.
Minnesota: Attorney general's office settles suit with Minneapolis-based Allina Finance & Commerce, April 15, 2009
Finance & Commerce (Minneapolis, MN)
Scott Carlson
Allina Hospitals & Clinics has settled a lawsuit, brought by Minnesota Attorney General Lori Swanson, which accused the Minneapolis-based health care provider of breaking state law by charging patients usurious interest on their medical account debts, the parties said Tuesday.
The settlement is valued at a minimum of $1.1 million and covers "thousands of patients," Swanson and Allina President Ken Paulus said at a joint news conference.
Under the accord, Allina will reimburse people who were charged more than 8 percent on their MedCredit accounts; those people will get back the amount of money they overpaid from Jan. 22, 2007 through Jan. 31 of this year. Starting Feb. 1 and going forward, the interest on all current and future MedCredit accounts has been capped at 8 percent, the state's usury law limit covering interest charged on such debts.
In January, the attorney general's office sued Allina in Hennepin County District Court, alleging the nonprofit health provider had been charging up to 18 percent interest on medical debts in violation of the law. Swanson's lawsuit alleged that under Allina's MedCredit program, patients owing up to $4,999 were being charged 18 percent interest and 12 percent on debts from $5,000 to $9,999.
Swanson and Paulus said all patients eligible for a refund will receive a letter from Allina within 60 days with more detailed information. Refunds will be in the form of credits to outstanding balances on patients' accounts. If a refund is greater than an existing balance, the difference will be held in the account and applied to future charges at Allina, the parties said.
Swanson applauded Paulus for sitting down at multiple meetings to "constructively solve a problem. " The joint resolution enables Allina to avoid facing civil fines at a time "when hospitals are facing their own financial pressures" as a result of the bad economy and lack of adequate insurance coverage for many patients, Swanson said.
Meanwhile, Paulus said the lawsuit settlement was the result of open dialogue and collaboration with the attorney general's office. As the two sides negotiated the settlement, it became clear that was the right thing to do and "do the right thing for our patients," he said.
Under the settlement, Allina and MedCredit admitted no wrongdoing. In January, Allina denied the lawsuit allegations, contending its vehicle of "open-ended credit" - meaning that patients can use the program on an ongoing basis for subsequent care - was consistent "with Minnesota law for this type of credit. "
In a January statement, Allina said it "believes that MedCredit remains a valuable tool to help some patients pay their medical bills and that it may be a better alternative to financing such debt through a credit card, which may carry a much higher interest rate. "
Paulus noted the settlement still allows Allina to continue offering "open-ended credit" to patients, with the only restriction being the 8 percent ceiling on interest. Asked what impact the settlement might have on Allina's revenue, Paulus responded, "It's an investment in our patients and that's a good thing. I think we are striking the right balance. "
Swanson said her office learned after suing Allina that two other hospital clinics were charging patients more 8 percent interest on their account balances but have since pulled back to the 8 percent limit. She declined to name the clinics, citing the state's data privacy law.
Allina serves communities throughout Minnesota and western Wisconsin. It employs more than 22,000 people.
New York: FINANCES IMPERIL ARTS CENTER, April 16, 2009
The Times-Union (Albany, NY)
April 16, 2009 Thursday
PAUL NELSON STAFF WRITER
SCHENECTADY -- The cash-strapped Hamilton Hill Arts Center is operating $237,000 in the red and the executive board is looking into possible financial mismanagement, according to documents obtained by the Times Union.
The minutes from three recent meetings and audits from prior years paint a bleak picture of a nonprofit organization that over at least since 2005 has slipped toward insolvency. Some of the 18 board members are demanding answers.
In the past month, the board has held two emergency meetings and a regular one poring over the books while scrutinizing the role of Executive Director Margaret "Miki" Conn and other employees who, according to the documents, made decisions without the board's consent.
"There is concern about ED (executive director) making side dealing without the Boards's knowledge or approval," according to minutes from an emergency meeting the board on March 15, convened after Conn discussed the center's fiscal problems with reporters.
At the second emergency meeting two days later, board members expressed concerns about Conn's remarks to the Times Union and Daily Gazette and suggested ways Conn could present the organization in a better light. Conn did not return calls seeking comment.
On Wednesday board Treasurer and Secretary Jamaica Miles said the process of applying for local, state, and federal grants "caused periodic gaps in funding." Though Miles could not provide specific figures, she acknowledged that the center was currently operating in a deficit. Miles, who has been on the board since November, said she and two other board members met with a representative from the Charities Bureau of the state attorney general's office to discuss how the board can do be more effective in carrying out its responsibilities. The AG's office did not return calls seeking comment.
Conn and other staff members were forced to make some key financial decisions for about two years when the board didn't meet because it failed to have a quorum, according to someone with knowledge of the situation who requested anonymity because the person was not authorized to speak publicly on the issue.
Board President Michele Bergeron is on medical leave, Miles said.
The minutes from the first emergency meeting last month indicate an unidentified staff member opened a bank account without board approval. Additionally, the minutes state a grant received for a TV production program was used for other purposes. As a result, the board this week passed resolutions barring Conn and any other staffers from signing checks without board approval, removed the employees' authorization for the center's accounts and lines of credit and called for an immediate audit,
The Hamilton Hill Arts Center was founded in 1968 facility offering after-school and summer programs in the arts for low-income children, free concerts and community celebrations, a gallery of changing exhibits focused on African and African-American artists, and classes and workshops for adults.
Pennsylvania: Latest grand jury to probe corruption, organized crime, April 17, 2009
Pittsburgh Tribune Review
April 17, 2009 Friday
Brad Bumsted
Attorney General Tom Corbett is empaneling an investigative grand jury in Pittsburgh that will focus on public corruption and organized crime, among other things, a spokesman said today.
Corbett petitioned the state Supreme Court to start a grand jury that would replace one that expired, said Kevin Harley, the attorney general's spokesman.
Corbett might shift the focus of the Pittsburgh grand jury toward possible wrongdoing in the gambling industry, but Harley refused to comment on that.
The grand jury also might investigate environmental crimes and insurance fraud, Harley said.
The gand jury's deliberations are secret.
A Pittsburgh grand jury last month recommended criminal charges against former House Democratic Whip Mike Veon, formerly of Beaver Falls, and his district aide, Annamarie Peretta-Rosepink, for allegedly misusing a nonprofit that received more than $10 million in state grants. Veon and Peretta-Rosepink say they are innocent.
Corbett has said he is investigating House and Senate Republicans and Democrats for any violations of using state resources for political purposes. Veon and Peretta-Rosepink are among 12 Democratic defendants accused with theft and conflict of interest in July.
The Pittsburgh grand jury is one of four Corbett is running in Pennsylvania. Two are in Harrisburg, one of them focused on public corruption, and another is empaneled in Montgomery County.
The grand juries run for at least 18 months. They meet one week per month. They can extend to a 24-month session by majority vote, according to Harley.
Thirty-five grand jurors from Western Pennsylvania will be selected, though 23 will be considered "permanent" grand jurors to make recommendations, Harley said. Extra grand jurors are selected as substitutes because of the length of a panel's proceedings.
When a grand jury convenes, prosecutors summarize for the jurors unfinished business from the previous grand jury.
Washington DC: Siren Song (Cont'd); What is Mayor Fenty hiding about the donation of fire equipment? Apr. 19, 2009
The Washington Post
THE EFFORT to donate surplus fire equipment to a small community in the Dominican Republic was, in the words of the D.C. attorney general, a "humanitarian gesture." Assuming he's right, why does no one want to claim credit for this good deed? Why are Mayor Adrian M. Fenty (D) and members of his administration obscuring basic facts of this transaction?
It's been more than three weeks since disclosure of the unusual deal in which the city government used a local nonprofit to send a firetruck and an ambulance to the city of Sosúa. Attorney General Peter Nickles said that he conducted a thorough review and found nothing improper; in fact, he said that the disposition served "important and legitimate public purposes."
Yet there has been unwillingness to answer basic questions about the equipment's worth, how it was declared excess and, foremost, who suggested it be donated. A procession of Fenty administration officials appeared at two hearings of the D.C. Council to profess ignorance on matters under their purview. Mr. Fenty told Channel 4's Tom Sherwood he didn't know anything about the transaction until the day before the Washington Examiner broke the story, even as it was revealed that two members of his inner circle asked the contracting officer how to undertake the donation.
The final indignity was the administration's refusal to allow the one official said to know about the transaction to testify before the council. Mr. Nickles barred the testimony, citing an investigation to be conducted by the city's inspector general. It's quite likely that this gift was perfectly appropriate; after all, in 2007 the council formally thanked the mayor of Sosúa for his kindness in working with District youth visiting there as part of an exchange program. But the circumstances of the transaction have taken on a life of their own, and the mayor shouldn't have to wait for a formal inquiry -- or subpoenas from the council -- to level with the public about the actions of his government.
Wyoming: Judge approves Wyoming Valley Health Care System sale, Apr. 7, 2009
By Nicholas Sohr
Staff Writer, citizensvoice.com
Published: Tuesday, April 7, 2009 4:11 PM EDT
Luzerne County Judge Joseph M. Augello approved this afternoon the sale of Wyoming Valley Health Care System to a nation hospital chain.
WVHCS presented its case before the judge in Orphans’ Court this morning. County court approval is required because WVHCS is a non-profit organization and the buyer, Community Health Systems, of Franklin, Tenn., is a for-profit, publicly traded company.
WVHCS Chief Operating Officer Maggie Koehler said the sale would close April 30.
WVHCS, the county’s largest private employer with about 3,200 workers, owns Wilkes-Barre General Hospital, First Hospital in Kingston, Heritage House nursing home, and other diagnostic and care facilities in the area.
CHS is a publicly traded company based in Franklin, Tenn. It owns, operates or leases 121 hospitals in 29 states with a combined 18,000 licensed beds. Wilkes-Barre General, with 410 beds, would be the 10th CHS acute care hospital in Pennsylvania, and one of the largest facilities in the chain, should the deal be granted regulatory approval.
CHS, according to court documents filed Feb. 25, will:
- Transfer about $136 million to WVHCS to pay off its debt, which is unspecified in the documents. The remainder would be used to start a foundation to channel money to local health charities.
- Commit at least $135 million to capital improvements for Wilkes-Barre General, including a new 30,000-square-foot emergency room, up to 40 single-occupancy intensive care rooms, a new patient tower, a 500-space parking garage and a cancer center.
- Offer all WVHCS employees equivalent positions and pay.
- Continue for at least a decade to “treat any patient presented to the emergency room who has a medical emergency.”
- Maintain ownership of Wilkes-Barre General and First Hospital for at least five years.
WVHCS will also create a charitable foundation to support health care initiatives in the community. Koehler said the current low-end estimate for the foundation’s endowment is about $16.5 million, though the number could change significantly as the value of market-driven assets rise and fall. From those funds would be taken contingencies, like law suit awards or settlements and executive severance packages, estimated to be up to $11 million.
The state Attorney General’s office, which has also reviewed the deal, presented no major objections to the sale, but will monitor the financial status of the charitable foundation that succeeds WVHCS.
The complaint, filed by the New York attorney general, Andrew M. Cuomo, accused Mr. Merkin of lying to clients about Mr. Madoff’s dominant role in his hedge fund and improperly collecting more than $470 million in fees — fees that dwarfed his own personal losses in the Madoff fraud — for simply handing his clients’ money to Mr. Madoff.
The complaint did not accuse Mr. Merkin of knowing about Mr. Madoff’s vast fraud. But it charged that he had failed to carry out the diligent research and investigation he had promised, and in some cases had deliberately deceived clients about his investments with Mr. Madoff, beginning in 1992.
Moreover, it accused him of having misled his clients for nearly a decade before that by surreptitiously relying on another money manager to run his hedge funds — even after the manager had been jailed for insider trading.
Mr. Merkin’s “deceit, recklessness and breaches of fiduciary duty have resulted in the loss of approximately $2.4 billion,” according to the complaint filed by Mr. Cuomo’s office, which opened an investigation of Mr. Merkin soon after the Mr. Madoff was arrested in mid-December.
A lawyer for Mr. Merkin, Andrew J. Levander, called the complaint “hasty and ill-conceived,” and said Mr. Merkin would vigorously defend himself.
“The evidence shows that this lawsuit is without merit,” Mr. Levander said, adding that investors had agreed that Mr. Merkin could use other money managers. “Mr. Merkin performed extensive due diligence on Madoff and his trading strategy,” he continued. “Unfortunately, Mr. Merkin’s due diligence, just like the detailed investigations performed by countless others, including regulators, was thwarted by the intricate, fraudulent scheme perpetrated by Madoff.”
Mr. Merkin agreed Monday to an asset freeze, subject to the approval of the courts.
Monday’s accusations echo charges that have already been made against Mr. Merkin in private lawsuits filed by some charities and institutions, including New York University and a charitable foundation established by Mortimer B. Zuckerman, the publisher and real estate executive.
Mr. Zuckerman also sued Mr. Merkin on Monday, saying he and his personal foundation had lost a total of $40 million in the fraud scheme. The lawsuit said that Mr. Merkin had hidden Mr. Madoff’s role and failed to exercise reasonable care in selecting money managers and overseeing their work.
“I invested with Ezra Merkin. I never heard of Mr. Madoff, I never heard his name,” Mr. Zuckerman said in an interview on Monday.
Mr. Levander said Mr. Zuckerman’s complaints were “entirely baseless and without merit.”
The lawsuits are the latest aimed at so-called Madoff feeder fund managers. Massachusetts regulators last week sued the Fairfield Greenwich Group, one of the earliest such funds, saying it had repeatedly misled investors about how diligently it checked out Mr. Madoff’s operations.
Mr. Cuomo’s office went a step further, focusing not just on Mr. Merkin’s dealings with Mr. Madoff but also on his broader track record as an investment manager. Specifically, it accused Mr. Merkin of improperly commingling his personal funds with his hedge fund accounts and using some of the money to buy artwork worth more than $91 million for his apartment.
The complaint also detailed his relationship, dating to 1985, with a money manager named Victor Teicher, who specialized in merger-related investments. Mr. Teicher was indicted for insider trading in 1988, convicted in 1990, denied an appeal in 1993 and jailed for a year, starting in 1994.
According to the complaint, it was Mr. Teicher — not Mr. Merkin — who actually managed Mr. Merkin’s two best-known hedge funds, the Ariel fund and Gabriel Capital, from 1988 until at least 1998.
Mr. Merkin, the complaint said, “occupied himself primarily with raising money for the funds using his extensive social and professional network.”
Exhibits filed with the Cuomo complaint on Monday included transcripts of extensive interviews with Mr. Merkin, in which he was questioned about his relationship with Mr. Madoff, whom he said he had met in “the very late ’80s, maybe 1990.”
They also include several e-mail messages Mr. Merkin received from Mr. Teicher immediately after Mr. Madoff was arrested. One of them said, “The Madoff news is hilarious; hope you negotiate out of this mess as well as possible.” It continued, “Unfortunately, you’ve paid a big price for a lesson on the cost of being greedy.”
Mr. Madoff, who has pleaded guilty to defrauding clients of $65 billion they believed they had in their accounts with him, is in jail awaiting sentencing.
Mr. Merkin’s three investment funds — Ascot Partners, Ariel and Gabriel — had been either fully or partly invested with Mr. Madoff since 1990, according to the complaint. It claimed the Ascot fund was formed in 1992 “for the sole, but undisclosed, purpose of serving as a feeder to Madoff.” The Ariel fund is not related to Ariel Investments of Chicago.
Through its civil complaint, Mr. Cuomo’s office is seeking restitution and unspecified damages from Mr. Merkin, whose family has long been prominent in finance and philanthropy in New York.
Leslie Wayne, Zachery Kouwe and Alison Leigh Cowan contributed reporting.
This article has been revised to reflect the following correction:
Correction: April 7, 2009
An earlier version of this article misstated one institution that is suing the financier, J. Ezra Merkin. It is New York University, not the NYU School of Law.
Illinois: Report: Chicago-Area Hospitals With Tax Breaks Skimping on Charity Care, April 14, 2009
The Bond Buyer
April 14, 2009 Tuesday
Yvette Shields
CHICAGO -Chicago-area not-for-profit hospitals enjoy an estimated $498 million in tax-exemption benefits annually while collectively providing just $176 million in charity care, according to a new report from a Chicago-based fiscal research organization.
As part of a follow-up to a similar report released in 2006, the Center for Tax and Budget Accountability looked at 47 nonprofit hospitals in the region, comparing the various federal and state breaks on property taxes and sales taxes they receive to their levels of free or discounted care provided to low-income citizens and the uninsured.
"Tax breaks are essentially an expenditure of public funds. The value of the tax breaks given to nonprofit hospitals are public dollars in the hands of those hospitals that lawmakers intended to be spent on charity care," said the study's author, Heather O'Donnell.
The study found that the hospitals did increase their charity care by $40 million over the last three years, but the value of their tax breaks also grew by $94 million during the same period. The group included in its statement accompanying the report a comment from Illinois Attorney General Lisa Madigan, who several years ago introduced legislation proposing hospitals be required to meet a minimum threshold of charity care.
"As the number of uninsured Illinoisans increases, it has become even more important that nonprofit hospitals provide extensive free and discounted care ... CTBA's analysis underscores the continuing importance of this issue," Madigan said.
The Illinois Hospital Association, which annually releases a report on the level of community benefits provided by the state's nonprofit hospitals, called the CTBA's calculations flawed and countered that hospitals provide nearly five times the value of their tax exemptions in the form of community benefits.
"In essence, the report overstates the hospitals' potential tax liability while understating the benefits they provide," IHA president Ken Robbins said in a statement. "For example, it uses 2007 data instead of readily available data from the 2008 hospital Community Benefit Reports, thereby understating the actual increase in hospital charity care by 35%."
The association further slammed the CTBA report as overestimating the sales tax liability by applying the regular sales tax rate to all supplies, even though a 1% rate applies to prescription drugs, food, and consumable medical supplies, and there is no sales tax for supplies for Medicare and Medicaid patients. Property taxes were counted as representing 2.2% of a hospital's expenses, when the association said it represents a lower level of 1%.
Robbins also noted that the CTBA acknowledges that hospitals provided more than $2 billion in overall community benefits and that charity care levels rise to $600 million when bad debt and the difference between the cost of providing services to Medicaid patients and the level reimbursed by the government are factored into the equation.
Illinois has a been a focal point of the national debate over whether tax-exempt hospitals deserve their local, state and federal tax exemptions including those on interest earnings on their bonds. The state Supreme Court last year announced it would hear Provena Covenant Medical Center's appeal of a lower court opinion that stripped the Urbana hospital of its property tax exemption for failing to provide sufficient charity care.
The Illinois Department of Revenue formally acted to strip the property tax exemption after finding that the hospital failed to meet state requirements that govern charitable and religious organizations because it provided less than 1% of its revenues for charity care.
Three pastors of a nondenominational church in Randolph used members' donations and proceeds from selling the $5 million church building to buy a $1.6 million mansion in Mendham Township, a $450,000 schooner in Jersey City and life-coaching classes, state officials said today.
Eric Simons, the pastor of Church Alive, also paid himself an annual salary of between $70,000 and $90,000, state officials said. Simons, his wife and the church's associate pastor, Marianne Simons, and assistant pastor Philip DuPlessis, also gave themselves a total of $150,000 in honorariums for personal use, officials said.
"It pretty clearly shows you that greed was at play," state Division of Consumer Affairs director David Szuchman said today at a press conference in front of the Mendham home.
In a settlement reached with the state, the Simonses and DuPlessis will pay back $2.5 million to the congregation and nearly $61,000 to the state to reimburse it for the cost of the investigation. They also must immediately resign as church board members, Szuchman said. They still serve as church pastors.
State officials additionally assigned a fiscal monitor to take control of the church's finances and have referred fraud allegations about the three pastors to the Morris County Prosecutor's Office. Robert Bianchi, the county prosecutor, said his office would consider charges.
Half a dozen of the church's 75 members attended today's press conference and were glad the state had reached a settlement with the pastors. They said they had donated the money for church improvements and to aid the poor. All three pastors, they said, should be charged with crimes.
"What breaks my heart is that children were going to bed with no food, and he would live in a house like this," said Maria Palumbo of Wharton, who was a member of the church for 13 years, and in that time, donated $90,000. "If I had known that this was what my money was going toward, I wouldn't have given a dime."
In addition to the reimbursements, the settlement requires the church to appoint a new board within 30 days, Szuchman said. The board will determine any sales prospects for the Mendham mansion, where the Simonses still reside.
DuPlessis must turn over the title and registration of the schooner, where he and his wife, Sharon, live, to the church. Sharon DuPlessis was an assistant pastor at the church, but she is not part of the settlement, state officials said.
The church's board also must hire a financial adviser to examine the books to uncover what happened to the rest of the $5 million from the sale of the church building at 791 Route 10 East, officials said.
Philip DuPlessis said he and the Simonses did nothing wrong.
"We believe it's an injustice," DuPlessis said about the settlement. "We've been good stewards of our finances, and we have every penny accounted for."
DuPlessis said they were "forced" to sell the church building because they were unable to pay the $10,000-per-month mortgage. From the sale of the church, DuPlessis said, "there were some proceeds in which we invested."
One of the investments was the "parsonage" in Mendham, at which he said youth, women's and prayer groups, as well as ministry, are held several times a week.
DuPlessis said he "never" used church funds for personal use, "besides obvious compensation and salary." The schooner, he said, was a "leadership development platform" used by inner-city youth.
"We are passionate about personal life transformation of leaders," DuPlessis said.
In a statement, Simons said, "What these people meant for our destruction, God utilized it for our good in strengthening our church, galvanizing the members and creating the landing strip for a better and brighter future."
The investigation into the church's funds began in May 2008 after church members realized the pastors had bought the Mendham home and the schooner, said Jeff Lamm, a state consumer affairs spokesman.
The three pastors, who had come to the congregation in 1999, had disbanded the church's board, giving themselves full control of church funds, officials said. State officials are uncertain how much money was donated into the building fund, but they said most of the donations were made by seven couples and one individual.
The state investigation revealed Marianne Simons, a Realtor for Weichert, put the church building on the market and took a commission on the $5 million sale in May 2008. The building was owned by the not-for-profit Church Alive Inc., state officials said. The DuPlessises rented out the sailboat to corporations as part of Philip DuPlessis' for-profit business at Liberty Landing Marina in Jersey City, state officials and church members said.
Simons also spent about $40,000 on life-coaching classes and a life-coaching license he uses to operate his for-profit life-coaching business. Church Alive holds the license, officials said.
Bible Church International continues to lease space to Church Alive for its Sunday worship services, said Larry Biondo, a chief investigator at consumer affairs. Those services are still lead by Eric Simons and Philip DuPlessis.
"Our roles as pastors is a God-given calling, and the state attorney general cannot take that away from us," DuPlessis said.
Information on the charitable organizations are available at state.nj.us/lps/ca/charity/chardir.htm, as well as through The Star-Ledger's Helping Hands blog. Consumers also can call the Charitable Registration Hotline at 973-504-6215. Religious organizations must comply with state laws governing charities and nonprofit corporation, but do not have to register.
Former members of the Newburyport Waterfront Trust and the attorney who helped draft the original trust this week urged the City Council not to approve the appointment of Clifford Goudey for a second term as a trustee.
It was the first time Mayor John Moak'’s nomination to re-appoint Goudey came before the council, and the board voted to follow its usual course of a two-week examination period followed by a final vote on April 27.
“"This is the first time in 40 years of living in Newburyport that I have appeared before City Council to oppose an appointment,"” said attorney William Harris, co-drafter of the 1991 Declaration of Public Trust. “"Mr. Goudey, although very talented, should not have fiscal responsibility... … he doesn’'t have the temperament of a fiduciary.”"
Carl Panall, a former member of the Trust, said he felt Goudey was “"a bad fit” "for the position.
One of the charges laid at Goudey'’s feet is that owners of private boat charters do not pay the Trust for a ticket booth that was placed on the public promenade in Riverside Park.
" “While chairing the Waterfront Trust in 2008, Mr. Goudey had avoided the prohibition against Trustees’ leasing the public promenade by assigning the right to operate a ticket booth without charging rents,”" wrote Harris in a four-page statement.
The Trust prohibits any uses of property that interfere with the public ways and the public promenade. The six-foot by 12-foot enclosed booth has been sitting on the public way for at least two years, Harris wrote.
Nicholas Metcalf of Newbury, another of the warriors from the original struggle to preserve the ways to the waterfront, urged the council to listen to Harris.
" “If it wasn'’t for Bill Harris, we wouldn'’t have the waterfront today,”" Metcalf said. “"Please respect his views.”"
Councilor-at-Large Tom Jones was willing to respect Harris’ views to the point of making a motion to deny the re-appointment. But other councilors wanted more time to consider Goudey’'s reappointment.
Council President James Shanley said this was not a matter for a hasty decision, adding that the board had only heard from three people. A fourth person, Joanie Puriton of Newbury, came in late and missed the chance to speak during the public comment portion of the meeting.
Ultimately, the council decided to let the nomination take its natural course.
Goudey’'s term expired in December, but he has remained on the Trust and is still acting as its chairman. According to Harris, Goudey not only ran the group’'s April 6 meeting, he also signed several new leases.
All meetings of the Waterfront Trust are required to be open to the public and minutes of each meeting must be recorded and stored at the city’s expense. Harris said meeting minutes, if they were recorded, are not available for public review.
The Trust is also required to submit an annual report to the Non-Profit Organizations and Public Charities Division of the Office of the Attorney General.
“In late 2008,” Harris wrote, "“the Non-Profit Organizations and Public Charities Division informed me that the Newburyport Waterfront Trust was overdue for filing of annual [forms] for at least five years. When advised of this information, Chairman Goudey made no effort to ascertain whether the Trust had a duty to file [the forms] for the past five years or not.”"
Harris also charged that Goudey has a personal agenda for the waterfront that contradicts the tenets of the Trust, and that Goudey does not respect the interests of other groups that also have a stake in the waterfront.
It was the second challenge this year to a mayoral re-appointment. In February, both a resident and Councilor Larry McCavitt opposed the reappointment of city building inspector Gary Calderwood
Tuesday, following the council meeting, Harris and charter boat owner George Hilton walked the waterfront and came up with alternate locations for the ticket booth.
"“There was a fairly easy solution to this problem,”" Harris said, “"but the chairman was committed to his solution, right or wrong.”"
The Newburyport Waterfront Trust
The Waterfront Trust was created in 1991 as the result of a lawsuit stemming from Newburyport'’s urban renewal.
The Friends of the Newburyport Waterfront, a group founded by attorney William Harris, filed a federal suit against the Newburyport Redevelopment Authority in the mid ‘70s to preserve the public promenade and six traditional straight “wayes” to the waterfront
At the time, a designated waterfront developer had proposed building retail space and condominiums along the central waterfront. The Friends argued that the development did not provide straight ways to the waterfront.
The case was subsequently heard in the commonwealth’s land court, where a judge determined that the "wayes" had been abandoned - but the Friends appealed that decision and their appeal was upheld in 1979.
A settlement was reached in 1980, and the Trust was created 10 years later to protect access from the land to the water, and vice versa.
The Waterfront Trust is an executive body of the city with extraordinary safeguards. It holds lands that neither the city nor the state may sell or otherwise dispose of. These lands include Somerby’s Landing, Riverfront Park and Market Landing Park at the foot of Green Street, and part of Railroad Avenue.
These and other public trust lands were placed under the special protection of Trustees of the Newburyport Waterfront for the benefit of all citizens, but for those in Newbury, Newburyport and West Newbury, in particular.
The trustees is an executive body of the city, a political subdivision of the commonwealth, because its members make executive decisions regarding property that a court has required the city to hold in trust.
Pennsylvania Attorney General Corbett Announces Arrest of Philadelphia Child Care Worker, Apr. 25, 2009
Pediatrics Week
A Philadelphia child care worker accused of defrauding the Pennsylvania Department of Education out of more than $400,000 was arrested yesterday by agents from the Attorney General's Office.
Attorney General Tom Corbett identified the defendant as Tyron Ali, 35, 5136 N. Carlisle St., Philadelphia. Ali is the president of Logan Child Care Resource Center, 4802 N. Broad St., Philadelphia. The Logan Center is a non-profit organization that operates as both a home provider and sponsoring organization.
Evidence and testimony regarding the case was presented to a statewide investigating grand jury, which recommended the criminal charges being filed today.
Corbett said, "The grand jury uncovered a concerted plan by Ali to use his non-profit organization as a vehicle to commit massive theft of taxpayer dollars, which was designated for low-income children and senior citizens."
Corbett said that the Logan Center participated in the Child and Adult Care Food Program, which is a federally funded program administered by the Pennsylvania Department of Education, to provide nutritious meals and snacks to low-income individuals who are enrolled in participating child and adult care centers.
According to the grand jury, Ali was required to forward an accurate list of legitimate expenses to the Department of Education for all daycare centers under the Logan umbrella. The Department of Education would then forward the funding via direct deposit into Ali's bank account for reimbursement to the day care centers for meal costs.
The charges state that Ali submissions included ghost employees on the payroll, forged bank statements, counterfeit payroll records, counterfeit employee payroll checks, cashier's checks, and inflation of expenses and administrative costs well beyond the expenses and costs actually incurred by Logan to the Department of Education.
"The Logan Child Care Center was an effective front used to commit massive theft of taxpayer dollars, which had been earmarked for low-income children and adults," Corbett said. "Through his scheme, Ali diverted hundreds of thousands of dollars in non-profit funding to his own accounts for personal use."
According to the grand jury, Ali submitted highly inflated home provider payments and administrative costs to the Department of Education. From June 2005 through September 2005, Ali submitted more than $205,000 in home-provider reimbursement and more than $32,000 in administrative costs. Bank records indicate however, that Ali actually paid approximately $61,889 in home provider payments and $29,510 in administrative costs.
Agents estimate that between 2004 and 2007 Ali defrauded the Department of Education out of more than $400,000.
Corbett said that Ali also included ghost employee salaries in his administrative cost figures totaling at least $36,000.
The grand jury found that Ali had a monthly pattern of writing unauthorized checks to himself, making unauthorized ATM withdrawals and unauthorized point-of-sale transactions from Logan's accounts.
Corbett said that an extensive amount of these non-profit funds were used by Ali for travel, dining, clothing purchases, jewelry, car payments, insurance payments and other personal items.
According to the grand jury, Ali used non-profit funds at the area restaurants including Capital Grille, The Latham Hotel, Society Hill Hotel, and Zanzibar Blue. Ali also allegedly used non-profit money to purchase high-end clothing at Boyd's Bottino Shoes, Brooks Brothers and Ralph Lauren and for payment to a local Mercedes-Benz dealer.
The grand jury also found that Ali traveled extensively and paid for AMTRAK tickets and Joe's Caribbean Cruises with non-profit funds and even used a Logan check card to pay approximately $1,500 in City of Philadelphia parking violations.
Corbett said that this is part of an ongoing investigation and more charges are expected.
Ali is charged with 371 counts of forgery, 371 counts of tampering with public records or information, 371 counts of illegal use of a computer, 371 counts of tampering with records or identification, 371 counts of securing the execution of documents by deception, 228 counts of bad checks, one count of dealing in proceeds of illegal activity, one count of criminal conspiracy, one count of theft by unlawful taking, one count of theft by deception and one count of receiving stolen property.
Ali was taken into custody yesterday, April 2, 2009. He was arraigned before Harrisburg Magisterial District Judge Joseph Solomon and lodged in the Dauphin County Prison in lieu of $750,000 cash bail. A preliminary hearing is scheduled for April 15, 2009.
He will be prosecuted in Dauphin County by Senior Deputy Attorney General John Flannery of the Attorney General's Criminal Prosecutions Section.
(A person charged with a crime is presumed innocent until proven guilty.)
U.S. DEPARTMENT OF JUSTICE; Former Michigan School Official Sentenced to Serve 46 Months in Jail for Role in Fraud Scheme, April 11, 2009
Pediatrics Week
April 11, 2009
A former Michigan school official was sentenced to serve 46 months in jail and to pay $1.34 million in restitution for his role in a fraudulent scheme to obtain millions of dollars from the Detroit-area Ecorse Public School District, the federal E-Rate program and TCF National Bank, the Department of Justice announced.
Douglas Benit, a former assistant superintendent at Ecorse Public Schools (EPS), was sentenced in the U.S. District Court in Detroit today after pleading guilty on Nov. 24, 2008, to one count each of mail fraud and bank fraud. Douglas Benit and his wife, Mary Ann Elam Benit, were previously indicted by a federal grand jury in Detroit on May 23, 2006. Mary Ann Elam Benit is scheduled to be sentenced tomorrow.
"The children of the Ecorse Public School District as well as countless others around the nation rely on the federal E-Rate program to provide funding for internet access, telecommunication services, and computer and communication networks," said Scott D. Hammond, Acting Assistant Attorney General in charge of the Department's Antitrust Division. "Douglas Benit exploited his position as a trusted school official and lined his own pockets with money that should have gone to these deserving children."
Among his duties at EPS, Douglas Benit was responsible for the management of the construction of multiple new facilities in the district. While hiding his affiliation with Coral Technology Inc. (Coral), an Ohio corporation under his control, Benit recommended to the school board the awarding of contracts to Coral, effectively steering those contracts to his own company. Funding for these contracts came from EPS general funds, EPS construction bond funds and the federal E-Rate program.
Additionally, Doug and Mary Ann Elam Benit obtained a $200,000 line of credit from Minnesota-based TCF National Bank through the submission of loan application and supporting documentation which vastly overstated and misrepresented their personal and corporate assets and income.
The E-Rate program subsidizes the provision of Internet access and telecommunications services, as well as internal computer and communications networks, to economically disadvantaged schools and libraries. The program was created by Congress in the Telecommunications Act of 1996 and is administered by Universal Service Administrative Company, a non-profit corporation, under the auspices of the Federal Communications Commission.
As a result of the Antitrust Division's investigation into fraud and anticompetitive conduct in the E-Rate program, a total of seven companies and 18 individuals have pleaded guilty or have been convicted and found guilty or entered civil settlements. Those companies and individuals have paid, agreed to pay, or been sentenced to pay criminal fines and restitution totaling more than $40 million. Including today's sentence, 12 individuals have been sentenced to serve jail time.
The investigation was conducted jointly by the Antitrust Division's Cleveland Field Office and the Detroit office of the FBI. Anyone with information concerning fraud or anticompetitive conduct in the E-Rate program should contact the Cleveland Field Office of the Department's Antitrust Division at 216-687-8400.
New York: Nonprofits feeling a new pinch; Charities say the limit on the number of drop-off bins is a big blow to revenue, Apr. 5, 2009
Newsday, Nassau and Suffolk Edition
BY DENISE M. BONILLA
A recent moratorium on clothing drop-off bins in the Town of Babylon, combined with high licensing fees adopted earlier, is depriving local charities of crucial revenue that helps keep them afloat in difficult times, charity organizers say.
Since 2005, Babylon has required a $1,000 annual licensing fee to place a bin and $1 per each additional bin, along with a $350 vehicle fee for each vehicle that removes the clothes. The yearlong moratorium freezes the number of bins and prohibits licensing of any new ones.
The town currently has 51 bins in 38 locations. In 2005, the town had 71 bins in 43 locations.
"I don't know where their priorities are," said Alex Fezza, executive director of the nonprofit Breast Cancer Help Inc. in Bay Shore.
Town Supervisor Steve Bellone defended the moratorium, believed to be the only one on Long Island, and the fees. "I believe we have to have a system in place that controls not only the maintenance of the bins but the amount of bins," he said. "It reaches a certain saturation point where the town has enough bins where we think it's sufficient to support organizations doing good work without having a negative impact on the appearance of the town."
Fezza said he had wanted to add more bins in Babylon but the moratorium has put a halt to those plans. He called clothing donations a "primary source of revenue" for his organization, estimating that the more than 60 bins he has around Long Island raise $2,000 to $4,000 a month.
Fezza has a contract with Earthrite Textile Recycling in Ronkonkoma, which pays the fees and insurance and is responsible for picking up the clothes and maintaining the boxes. In exchange, the company keeps 25 percent of the gross from the sale of the clothes, said owner Sal Zuccarello. Zuccarello said that at first he supported the town's fees, which he saw as a way of weeding out less reputable companies. "But now it's to the point that it's even hurting us," he said.
The bins he oversees for several nonprofits have plummeted from 40 to 15, he said, in part due to fees. Zuccarello, who had planned to place at least two additional bins this year, was surprised to learn of the moratorium from a Newsday reporter. "This is going to hurt people who are legitimate," he said.
Nonprofit organizations have long complained that disreputable groups have set up boxes in the middle of the night with false or misleading information and little of the proceeds, or none, actually going to charity. Babylon was one of the first towns on Long Island to institute licensing fees and regulate the clothing boxes.
More towns are now attempting to regulate the bins. In the past nine months at least three towns have implemented tighter controls, and Suffolk County Executive Steve Levy signed a law in December that requires companies to clearly identify that their bins are for profit and charities to post proof of their nonprofit status.
Many organizations are pressing for state regulation. Alfred Vanderbilt of Goodwill Industries said his organization is supporting a state measure similar to one recently passed in New Jersey that allows municipalities to collect $25 per bin annually and requires bins to be owned by a charitable organization registered with the state attorney general. Contact information and who will profit must be posted on the bin, and municipalities can collect up to $20,000 in fines for violations.
In most Long Island towns that have bin rules, licensing fees range from $25 to $100 and only nonprofits are allowed to have bins.
Bellone said the town has no immediate plans to limit bins to nonprofits, because some for-profit companies donate a large share of their proceeds to charity. He said that because Babylon is densely populated, the bins can raise a lot of money and the $1,000 licensing fee helps lend legitimacy to an organization. And he said there has been no scarcity of interest due to the fees. "If anything it's the opposite. They're still very much interested in putting their bins here," he said.
Bill Tymann, chief executive of Big Brothers Big Sisters of Long Island, said his organization has clothing bins in other towns but has avoided Babylon after it instituted the licensing fees. Women of Substance, a domestic violence and child abuse nonprofit in Lindenhurst, has a handful of boxes in the town, said the founder, the Rev. Mary Elberfeld, but she called the fees "almost a deal breaker." She, too, was surprised to hear of the moratorium.
Her clothing bins can bring in $700 a month, she said, and that's "what pays for our 24-hour hotline."
Elberfeld said that as long as an organization gets the property owner's permission and keeps the bins clean, the town should not interfere, especially in this downtrodden economy.
"We're not getting the donations we were before, we only want to get the stinking clothes," she said. "No other township is doing this."
Fezza said the town should work with nonprofits to create a better policy. "They're just doing it on their own without any input from us," he said. "They're hurting every one of us."
Pennsylvania: Logan man accused of bilking child-care nonprofit of $400,000; Apr. 4, 2009
The Philadelphia Daily News
By DANA DiFILIPPO
Day-care provider Tyron Ali told the state he needed taxpayer money to feed needy kids nutritious meals and snacks.
Instead, the Logan man used it to feed his greed, allegedly using more than $400,000 in state funds to buy himself jewelry, designer clothes and shoes; to dine at upscale eateries; to buy Amtrak tickets, and to take Caribbean cruises, according to state Attorney General Tom Corbett.
Ali, 35, of Carlisle Street near Lindley Avenue, also allegedly used public money to make car and insurance payments and to pay $1,500 in city parking tickets, Corbett added.
He was arrested Thursday on 371 counts of forgery, tampering with public records and related offenses stemming from the fraud scheme which lasted from 2004 to 2007.
Ali was president of Logan Child Care Resource Center, a nonprofit facility on Broad Street near Louden that participated in the Child and Adult Care Food Program. That federally funded program, administered by the Pennsylvania Department of Education, provides food to needy children and senior citizens in day-care centers.
But in paperwork he submitted to the department for reimbursement, Ali inflated his expenses, listed ghost employees on his payroll and forged financial statements, Corbett said. Ali also wrote checks to himself and made ATM withdrawals from the center's accounts, without authorization, according to the grand jury.
"The Logan Child Care Center was an effective front used to commit massive theft of taxpayer dollars, which had been earmarked for low-income children and adults," Corbett said.
More charges are expected. Ali was being held in the Dauphin County Prison on $750,000 bail. He is scheduled for an April 15 preliminary hearing.
Center staff did not return calls for comment yesterday. A recorded message there informed callers that the center was now accepting enrollment.
Pennsylvania: ATTORNEY GENERAL CORBETT CAUTIONS CENTRAL PA STORM VICTIMS ABOUT SCAMS, Apr. 1, 2009
US State News
HARRISBURG, Pa., March 31 -- The Pennsylvania Attorney General's Office issued the following news release:
Attorney General Tom Corbett urged consumers to be watchful for possible scams as they work to repair damage that was done by a fast-moving weekend storm that passed through York, Lancaster and other Central Pennsylvania counties. "Storm-damaged areas are often a magnet for scam artists and con-men, looking to take advantage of victims," Corbett said. "Consumers across the region should be watchful for scams and report any suspicious activity." Corbett said that the most common topics for consumer complaints following disasters are home repair schemes, government loan or grant schemes and fraudulent disaster-related fundraising efforts.
"Home repair schemes can include shoddy contractors, who take money but never do any work; phony inspectors, who are actually salesmen looking to sell expensive products or services; or bogus insurance adjusters, who may try to convince you to inflate claims, direct you toward questionable contractors or convince you that they will take care of 'all the paperwork' while redirecting claims payments to themselves," Corbett said.
Corbett encouraged consumers to consider the following "warning signs" for disaster-related scams and fraud: Contractor issues - * Unsolicited door-to-door sales pitches. * Requests for large up-front payments. * No written estimates or contracts. * Offers to perform work using "left over" or "discount" materials from other jobs. * High-pressure sales pitches. Consumers should check with your Better Business Bureau for a history of complaints against a particular business and check with the Attorney General's office for a history of lawsuits or other legal actions. Loan or government grant schemes - * Requests for up-front payments for loan applications or to search for grants.
Relief agencies and government assistance programs do not ask for pre-payment by disaster victims. Contact relief agencies and local governments directly to get a list of available disaster-relief programs (Check with the local chapter of the Red Cross, U.S. Small Business Administration, and local emergency management officials for more information).
Disaster relief fundraising scams
* Be wary of high-pressure tactics and door-to-door collections.
* Ask for details about any charity before you make a donation (legitimate charities will always explain their programs and services).
* Check to see if a charity is registered in PA before making a contribution (charity registration info is available on the PA Department of State website at www.dos.state.pa.us).
* Ask for info about how funds will be spent (legitimate charities will tell you what percentage of your gift will go toward community services, operating expenses or fundraising).
* Write checks directly to the charity, rather than giving cash.
Other consumer issues
* Disasters can wipe out financial records, including credit card and utility bills, bank statements, and other vital information - keep spare copies in a safe location.
* Call your bank, credit card, utilities and other businesses that send you bills, and notify them of the problem.
* Get a free copy of your credit report, which will list all your major accounts and creditors at www.annualcreditreport.com.
* Ask for duplicate bills or a delayed payment plan (ask for a delay before you are late on any payments).
* Contact your insurance company as soon as possible, to identify what losses are covered.
* Call the PA Insurance Department or the AG's Bureau of Consumer Protection if you have problems getting a response from your insurance company.
* Consider getting advice from a non-profit financial counseling service to plan your best response to added expenses and/or financial losses related to the disaster.
Consumers with questions or problems related to disaster-recovery scams can contact the Attorney General's Consumer Protection Hotline at 1-800-441-2555 or file an online complaint at www.attorneygeneral.gov.For more information please contact: Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com
New Jersey: Con man receives sentence of 6 months 'Masquerader' passed self off as federal agent, Apr. 3, 2009
The Star-Ledger (Newark, NJ)
JIM LOCKWOOD, STAR-LEDGER STAFF
Calling a former auto repossessor who impersonated a U.S. Secret Service agent a "Walter Mitty-like chronic masquerader," a judge sentenced him yesterday to six months in federal prison.
"He's got the umbrage, the hubris, or to use another expression, the chutzpah, to pass himself off as a member of the Secret Service to a local police authority," U.S. District Judge William Walls said of 41-year-old Fred Parisi.
In April 2001, Parisi, of Morris County, who had known a Secret Service agent, obtained a genuine set of Secret Service credentials and had a fake set made for himself, according to his indictment. It did not specify how he obtained the real credentials. Then, while working as an auto repossessor, he often passed himself off as a Secret Service agent, until he was caught in 2004 using the credentials to try to get out of a traffic ticket in Little Falls, the indictment states.
He never received a traffic ticket, but investigations eventually led to the federal charges, as well as a pair of unrelated theft charges in Morris County, and a civil lawsuit by the state Attorney General's Office seeking to revoke a 9/11 charity he founded supposedly to benefit ailing World Trade Center rescue workers.
Walls said he wanted to punish Parisi with more than the maximum prison term he faced, which the judge could have done, but instead stuck with the plea agreement calling for six months behind bars. That was the high end of guidelines that called for penalties ranging from probation to up to six months in prison per charge. Walls sentenced Parisi to a pair of six-month terms, running concurrently. Parisi also agreed in the plea not to appeal his sentence, as long as it was within the guidelines. Three other charges of misusing names and badges were dismissed.
Defense attorney Elizabeth Smith argued Parisi's sentence should only be the six weeks behind bars Parisi served last year as a federal detainee in the Essex County jail. That incarceration, coupled with another 10 months that Parisi served last year in the Morris County jail on the theft charges there, has been enough punishment, Smith argued.
A married father of three children, Parisi has been out of work and lost his home, and his family is now on welfare and living in a relative's basement, Smith said. The crime was nonviolent, Parisi did not profit from it and the court's pre-sentencing report said there were no victims, Smith added.
Parisi also said he has a job lined up with a home-maintenance firm willing to hire him to wash windows, clean rain gutters and power-wash siding. During the past five years, the case "has created victims - my wife and three children," Parisi said.
"I have learned a painful lesson. I have already turned my life around," Parisi told Walls. "I can guarantee to you and this court you will never see me again."
The judge was not moved. He said society is the victim and called Parisi "arrogant and reckless." As for his family being victims, Walls told him, "I suggest you look in the mirror. . . . He doesn't appreciate the seriousness of this masquerade."
Assistant U.S. Attorney Bradley Harsch argued that prison time was necessary because Parisi had misrepresented himself before. He was convicted in 1998 of impersonating a Jersey City police officer while repossessing cars and was fined $600.
"He had a second chance, so he should not get a second, second-chance," Harsch said. "Those are just two instances from a larger pattern of his habitually trying to pass himself off as someone else."
In 1997, Parisi also was dismissed from the Passaic police department for falsifying documents that his discharge in 1989 from the U.S. Air Force was a "general or other than honorable discharge," and for misrepresenting that he was a canine officer, Harsch said.t change it to say that he did -
In 2007, Parisi filed false information when establishing a nonprofit 9/11 Rescue Workers Foundation, Harsch said. In January, the state Attorney General's Office and Division of Consumer Affairs filed a lawsuit to dissolve that charity, claiming it spent $75,000 on mortgages, restaurants, doctors and dentists for Parisi and his mother. No criminal charges have been filed regarding that charity.
Walls likened Parisi to the fictional title character in the James Thurber short story "The Secret Life of Walter Mitty," a daydreamer who lives in a fantasy world.
"I've read your history. That history is one of a chronic masquerader," Walls told Parisi. "I'm not being facetious - this Walter-Mitty-like life could have some serious consequences."
Parisi's former business partner, Roy Jensen, and a Jefferson couple, Sandy and Kevin Fitzgerald, who are the alleged victims of Parisi in the pending Morris County theft cases, attended the sentencing with four others. They were dismayed by the six-month sentence and saw it as too lenient.
"It's horrible. I'm terribly disappointed," Sandy Fitzgerald said. "I think it just let's him out jail sooner to do more devious acts."
Walls also barred Parisi from possessing firearms or working in law enforcement or a position with direct or indirect contact with it, including auto repossessing. Parisi was allowed to remain free on bail, with electronic ankle-bracelet monitoring, until June 3, when he must surrender.
New Jersey: PASTORS OF MORRIS COUNTY CHURCH TO REIMBURSE CONGREGANTS FOR MISAPPROPRIATED DONATIONS, Apr. 3, 2009
US State News
NEWARK, N.J., April 1 -- The New Jersey Attorney General issued the following news release:
The pastors of a Randolph-based church who were accused of diverting congregation donations for their own personal use, including purchase of 78-foot schooner and a $1.6 million property in Mendham, have agreed to reimburse donors and immediately resign from the church's board.
Additionally, a fiscal monitor will take control of the banking and financial accounts maintained by Church Alive, Inc., which also is known as Randolph Christian Church, Inc. The church is a non-profit corporation located at 791 Route 10 in Randolph. Eric Simons and his wife, Marianne, who are pastor and assistant pastor of the church, and Philip DuPlessis, an assistant pastor at the church, also are barred for 10 years from serving on any financial board.
DuPlessis' wife, Sharon, is an assistant pastor at the church but she is not a respondent in this settlement. "These church leaders asked for donations for the betterment of the congregation but in reality they misused these monies for their own personal gain," Attorney General Anne Milgram said. "We remain vigilant in enforcing the state's charities laws and we will continue to hold accountable those who attempt to cheat donors."
Congregants were told their donations would be put into a Building Fund. Instead, the donations were comingled with other church funds that were solely controlled by the Simonses and DuPlessises. In addition to the schooner and property, they paid themselves "honorarium" totaling $150,000 and also spent $39,395 on "life-coaching" classes and a "life-coaching" license for Eric Simons. Simons operates a for-profit "life-coaching" business. The church itself holds the license.
"These pastors violated the trust of donors, claiming the donations would fund a new building. Instead, by controlling the donated funds without any oversight, they spent lavishly on themselves. Donors need to be vigilant and check with our Charities Registration Unit before giving their hard-earned dollars to any charitable or non-profit group," said David Szuchman, Consumer Affairs Director.
The church is required to appoint an official board within 30 days, under terms of the Consent Order with the state. The board is required to review the employment status of all church employees, including the Simonses and DuPlessises, as well as all financial records and report back to the Division of Consumer Affairs. The board will determine the sales prospects for the Mendham property, which is located at 14 Kingsbrook Court. The Simonses currently reside there. The DuPlessises are required to repay the church $125,000 and turn over title and registration to the schooner. Eric Simons and Philip DuPlessis each must repay $50,000, the honoraria which were used to purchase the schooner. Eric Simons and Philip DuPlessis also must repay a total of $14,495 as reimbursement for "life-coaching" education. The state will be reimbursed $60,917 for its investigative and legal expenses.
Deputy Attorneys General Anna M. Lascurain, Chief, Securities Fraud Prosecution Section, and Isabella T. Stempler represented the state in this legal proceeding. Supervising investigator Larry Biondo led the investigative work.
An online directory of charitable organizations registered in New Jersey can be found at www.state.nj.us/lps/ca/charity/chardir.htm. Consumers also can call the Charitable Registration Hotline at 973-504-6215. Religious organizations are exempt from having to register but they must comply with the state's Charities and Non-Profit Corporation laws.
Arizona Attorney General to Investigate Sexual Abuse Cover Up at Planned Parenthood Clinics, Apr. 6, 2009
Lab Business Week
The Arizona Attorney General's Office has opened an investigation into Planned Parenthood after the student-led nonprofit Live Action released videos with undercover footage from three Planned Parenthood of Arizona clinics. The footage shows two Planned Parenthood clinics in Phoenix, AZ and one in Tucson, AZ deliberately disregarding mandatory reporting laws for sexual abuse, and offering secret abortions to sexually abused minors. The videos can be viewed at www.LiveAction.org (see also Live Action).
Live Action has sent complete footage from all three clinics to County Attorneys in Pima and Maricopa and to the Arizona Attorney General for use in prosecution. In response to receiving footage from the Tucson clinic, the office of the Pima County Attorney stated in a letter to Live Action that "this matter is under review and consideration by the Attorney General."
State courts have found Planned Parenthood of Arizona negligent before for failing to report sexual abuse. Arizona law requires state authorities to be contacted immediately if an adult-child sexual relationship is revealed. In response to Planned Parenthood's repeated violations, Arizona Right to Life is organizing a major protest on Sunday to draw attention to the abortion provider's disregard for the law.
Similar investigations conducted by Live Action through its "Mona Lisa Project" have resulted in state investigations and employment terminations at Planned Parenthood. One Planned Parenthood of Indiana employee was fired and another was suspended and then resigned after both were taped covering up sexual abuse. Also, the Indiana Attorney General opened a full investigation of the abortion provider. In contrast, Planned Parenthood of Arizona has appeared non-responsive, neither recognizing the severity of its sexual abuse reporting violations nor offering a public apology.
Rose, 20-year-old student president of Live Action, emphasizes the importance of enforcing the laws that protect minors from sexual abuse. "We expect the Arizona Attorney General to uphold the law and prosecute Planned Parenthood for returning victimized young girls into the arms of their abusers, rather than notifying the responsible authorities as required by law. When compared to all of the responsible organizations that carefully follow reporting laws, Planned Parenthood's negligent and outright subversive conduct stands out as both shameful and criminal."
Gift to Dominican Town Puts Spotlight on D.C. Nonprofit, Apr. 6, 2009
The Washington Post
Nikita Stewart; Washington Post Staff Writer
Ever since he was a kid mowing lawns and shoveling snow, Ronald Moten has known how to hustle.
"I was always the guy who went and got the money," said Moten, a onetime teenage drug dealer who runs a District nonprofit group called Peaceoholics that works with at-risk youths -- and recently tried to help the city donate a firetruck and ambulance to a town in the Dominican Republic.
For days, that seeming disconnect -- why would Peaceoholics be involved in such a donation? -- has been the subject of questions and consternation as members of the D.C. Council have sought answers from Mayor Adrian M. Fenty's administration.
Attorney General Peter Nickles noted that the donation involved outdated equipment originally purchased for $316,027, and he described the market value as "minimal." He also said the city has donated surplus property to nonprofit groups and foreign countries before.
The flap has drawn attention to the dizzying growth of Peaceoholics and to Moten, 39, the group's chief operations officer and a go-to man for the mayor.
In four years, the group has become a multimillion-dollar operation with 70 full- and part-time workers and consultants, including Moten's father and son. Much of the funding in those four years has come from city contracts and grants totaling $7.6 million. Moten's salary is $111,108, up from the $42,930 in 2005, when the nonprofit had $341,093 in contributions, according to public tax filings.
Fenty (D) said the city's support of the nonprofit is well worth it. "It's such a small fraction of our budget," he said. "They get us the bang for the buck."
The group, co-founded by Moten and another social activist, Jauhar Abraham, 41, boasts of breaking up gangs, keeping countless youths from returning to jail and helping 52 young people make it to college.
City officials and others often go to Peaceoholics for help -- to counsel public school students, to develop 32 units of affordable housing in a $4.4 million deal, to help get a used firetruck and ambulance to a town in the Dominican Republic.
Under questioning from council member Phil Mendelson (D-At Large) at a hearing last week, Fire Chief Dennis L. Rubin said he was recently made aware of the donation and a visit this year by fire and other government officials to determine the town's need for the equipment. But Mendelson noted that Rubin provided a March 4 report on travel expenses, showing that a deputy chief's six-day trip cost $810.
Nickles said in a report Friday that he found no wrongdoing. But Mendelson and council member Mary M. Cheh (D-Ward 3) have asked the inspector general to investigate.
Things got so heated that Moten returned the equipment, which had gotten as far as Miami, to the District last week. A council oversight hearing is scheduled for today.
"Will we give District property to an organization to allow it to immediately turn around and give it to someone else? And who will supervise this?" Cheh asked in a statement.
Moten said the donation was tied to efforts by Peaceoholics and another nonprofit, Faith Productions, to send teenagers to the Dominican Republic for a boxing tournament. The groups have established a cultural exchange program with the town of Sosua, and its mayor asked for help with fire equipment. Moten said he was simply the one who could get it done.
"I've known Mo since I was young," said Fenty, 38, who seemed unusually relaxed as he and Moten recalled old friends such as "Jim Jim" and "Rog."
Fenty and Moten grew up on the same streets of Mount Pleasant, Adams Morgan, Columbia Heights and Petworth.
Moten said he admired Fenty's work ethic. "He's a hustler, too," Moten said.
Last week, Moten and Fenty staffers gave the mayor a tour of Ferebee-Hope Elementary School in Southeast. Fenty, who has taken control of the public school system, had demanded that Ferebee's facilities be repaired and that more services be provided to the children. Peaceoholics works with children in the neighborhood.
During the walk-through, Fenty shot a game of bumper pool with a 13-year-old boy in an after-school program. He leaned on his pool stick and said, "Remind me of the rules, Mo."
Although Moten and Fenty reconnected as adults, their lives took different paths. Fenty was valedictorian at Mackin Catholic High School. Moten was kicked out of the public Roosevelt High School.
"He was a bad little boy," said Thaddina Floyd, Moten's grandmother, who reared her grandchildren on a maid's salary.
Moten's parents were addicts, he said. And at 15, he gave up an ice cream parlor job to sell cocaine. He hid his profits at a man's house so his grandmother wouldn't catch him. But the man stole from him, Moten said, and got him in trouble with his bosses. He stopped dealing for a while. He doctored a training certificate so he could work as a sitter for patients at Washington Hospital Center. He made good money.
But when the work dried up, Moten returned to dealing. "In six months, I had $100,000," he said.
A cocaine distribution charge sent him to prison in 1991. At the federal prison in Allentown, Pa., Moten said, he earned his GED and took community college classes. His younger brother, Demetrius Starks, was killed three weeks after Moten was locked up. That did it.
After his release, Moten began working for the nonprofit Cease Fire . . . Don't Smoke the Brothers. He met Abraham in 1995, when they were organizers for the Million Man March. Abraham was first locked up at age 9 and spent his youth robbing people.
The two men went on to form Peaceoholics. To make money, they promoted go-go concerts. Although there has always been tension between them, they find the relationship works for them. "We're like night and day," Abraham said. "They call him Malcolm. They call me Martin."
Abraham said that Peaceoholics reaches children that other groups can't and that he and Moten work round-the-clock. "We're probably the only executives of nonprofits that do direct work," he said.
"Young people trust them," Fenty said. "If the young people don't trust you, they won't respond."
Moten said his staff, which includes many ex-offenders, works with about 500 youths daily.
Peaceoholics became involved in housing development because some youths need to grow up in better environments, officials said. The idea is to create cooperative housing that residents can own. The group's other plans include a taxi service run by young adults in Southeast.
But the nonprofit's ideas will face more scrutiny from the council, Moten said.
"This town is so political," Moten said. "I know someday people will be like, 'Okay. Peaceoholics can't get any more money.' I'm prepared for that."
Staff writer Dan Keating contributed to this report.
New Mexico: Will ABQ move to restrict activities of nonprofits during election year? Apr. 3, 2009
Newstex Web Blogs, New Mexico Independent
Trip Jennings
Is Albuquerque taking up the fight to restrict the activities of nonprofits during an election year?
A member of the citys Charter Review Task Force suggested Thursday amending the citys charter with a proposal that bears a striking resemblance to ideas floated by state officials in recent months that would have accomplished that goal, including a bill that died during this years legislative session.
Member Chuck Gara proposed at a Thursday meeting of the task force amending the citys charter ” basically the citys constitution ” to require a host of entities that communicate anything in defense of or opposed to a candidate seeking elective office during an election year to register as a Measured Finance Committee, the citys equivalent of a political action committee.
Under the proposal, the organization ” be it a corporation, limited liability corporation, nonprofit or œany person or combination of two or more persons acting jointly ” would trigger the requirement if they communicated such information via newspaper, TV, radio, Internet, on a billboard, or by direct mail or in door-to-door within 120 days of an election.
Late last year Secretary of State Mary Herrera told New Mexico Youth Organized (NMYO) to register as a political committee and comply with the states campaign reporting laws.
NMYO was one of several nonprofits that sent out fliers months before the 2008 primary and general elections. Several incumbents lost their elections, and three of the ousted lawmakers unsuccessfully sued the organizations. Those legislators and others ” as well as state Attorney General Gary King ” characterized the fliers as political campaigning.
The nonprofits sued the state in federal court over the order that required them to register as political committees and list their donors.
Another attempt to restrict nonprofits occurred during this years 60-day legislative session.
A bill that had the backing of some legislative leaders would have required nonprofits to list donors who give more than $1,000 if the nonprofits participated in œelectioneering. Electioneering in that bill was defined as the naming of a political candidate in a piece of literature or a broadcast ad that targets the candidates constituency in the months prior to a primary election and general election. The nonprofits would have had to provide a list of donors to the secretary of states office.
That bill died in the Legislature, however.
While the proposal was suggested by Gara on Thursday, it is unclear if the charter review task force will include it in its report back to city officials. The City Attorneys office was asked to look into the constitutionality of the proposal, and report back on April 23.
Pennsylvania: Will Corbett charge Republicans in Bonusgate? Mar. 30, 2009
By Angela Couloumbis and Mario F. Cattabiani; Inquirer Harrisburg Bureau
HARRISBURG - He may be the one bringing the criminal charges, but the pressure is now on State Attorney General Tom Corbett.
His announcement last week of fresh charges against a former top House Democrat has again raised questions about whether Corbett, a Republican, will ever indict members of his own party.
So far, his 26-month-old Bonusgate investigation has ensnared a dozen former and current House Democratic legislators and staffers, including Mike Veon, the former No. 2 Democrat in Harrisburg's lower chamber. The 12 are accused of a conspiracy to use taxpayer money and resources, including bonuses, to help advance Democratic political campaigns.
No Republican has been charged, although there have been clear signs for months that agents have turned their focus on members of the House GOP.
Corbett has said repeatedly that his investigators are not working on anyone's timetable and that when and if he determines a case is ready, he will file charges.
"We do not run investigations to the timetable or the speculation of critics," Corbett told reporters Wednesday after announcing more corruption charges against two Democrats, including Veon. "We run investigations to complete them and to give you the most accurate picture of what we can find, and sometimes it takes us longer than what people want us to do."
But the political reality is that Corbett, who has all but announced a run for governor in 2010, is under pressure to show that he is not partisan, not afraid to pounce on his own, and not doing this for the headlines.
"If he only indicts more Democrats and no Republicans, there will be a large outcry," said Harrisburg activist Gene Stilp, who was the first to call for an investigation into the bonuses. "And his running for governor puts him under another kind of pressure: He can't be seen as doing this for political gain."
For months, Democrats have privately and publicly complained that Corbett is on a witch hunt.
T.J. Rooney, chairman of the Pennsylvania Democratic Party, has likened the Bonusgate probe to "an Alberto Gonzales-like investigation," a reference to the former U.S. attorney general, saying Corbett has ignored that "red flags exist on his side of the field."
Corbett's opponent in last fall's election - Northampton County District Attorney John Morganelli, a Democrat - accused Corbett of botching the Bonusgate probe. Morganelli said at the time that by executing search warrants only for records from House Democrats, Corbett had given the legislature's three other caucuses the opportunity to destroy possible evidence of wrongdoing.
Last week, Veon's attorney, Joel Sansone of Pittsburgh, pointed to Corbett's failure to charge any Republicans, and contended that lawmakers from both parties had for years done what Veon was accused of doing.
"Instead of Bonusgate . . . tomorrow's headlines should read Partisangate," Sansone said Thursday.
He called the new charges against Veon - that Veon used for political purposes a Western Pennsylvania nonprofit he had created - and a former Veon aide "clearly politically motivated" and "amateurish."
Corbett has remained steadfast in his statements that his office is investigating Democrats and Republicans.
And there are strong signs that his office is looking into former House Speaker John Perzel (R., Phila.) as well as Perzel's former right-hand man, Brian Preski.
The Inquirer has reported that Corbett's grand jury is investigating whether top House Republicans improperly used a $9 million taxpayer-funded database to improve their chances of winning elections. The database was developed by GCR & Associates of New Orleans under a contract signed in 2002 by Perzel, then the majority leader.
Perzel, now a rank-and-file representative, has said that neither he nor anyone in his office used the publicly funded GCR database for campaigns.
The Attorney General's Office has declined to comment on GCR or any other aspect of the investigation, citing grand-jury secrecy rules.
But in February, Corbett, in an unusually glib comment for a prosecutor, told reporters that the next round of charges in Bonusgate would "shock the conscience of people" because of the sheer amount of tax money involved.
He put it this way to the Pittsburgh Tribune-Review: "You will be stunned."
Washington: CONSUMER ALERT: DOOR-TO-DOOR MAGAZINE SELLER PRETENDING TO BE A CHARITY, Mar. 24, 2009
US State News
SEATTLE, March 23 -- The Washington state Attorney General issued the following news release:
The Washington Attorney General's Office today issued a warning about a company selling magazine subscriptions door-to-door in Washington and several other states. Fresh Start Opportunities claims that money from the subscriptions will be used to help young people get a "fresh start on life," but the company isn't a registered charity. The company lists a downtown Seattle address on its Web site at www.freshstartopportunities.com but the address is simply a mailbox and the company's owner is believed to reside in another state.
Solicitors represent that the purchase of subscriptions will help young people get off the street and back on their feet so they can earn money to go to school. The Web site describes Fresh Start Opportunities as a "job business training company designed to teach young adults about self discipline, personal growth, self esteem and setting goals for the future." Consumers have paid between $50 and $295 for subscriptions which, according to the company's site, may take up to 120 days to arrive. Calls to the company's phone number and letters sent to its Seattle address are ignored. The company has ignored inquiries from the Secretary of State's Office concerning its failure to register as a charity. It also hasn't responded to the many complaints received by the Attorney General's Office and the Better Business Bureau. A 19-year-old man working for Fresh Start Opportunities was arrested in October after he allegedly broke into an Edmonds home, attacked the owner and stole her purse. The man was also a suspect in burglaries in Sammamish and Tumwater. Incidents of theft by Fresh Start Opportunities employees have also been reported in California.
Always check out a charity with the Secretary of State prior to making a donation. Ask solicitors for the need of the charity that they are representing, as well as the name of their employer. Request paperwork. Then search www.secstate.wa.gov/charities or call the office's charities program at 1-800-332-4483. You can check whether a charity is registered and how much of each dollar raised is used to help.
US Department of Justice: Former Michigan School Official Sentenced to Serve 46 Months in Jail for Role in Fraud Scheme, Mar. 27, 2009
M2 PressWIRE
WASHINGTON - A former Michigan school official was sentenced to serve 46 months in jail and to pay $ 1.34 million in restitution for his role in a fraudulent scheme to obtain millions of dollars from the Detroit-area Ecorse Public School District, the federal E-Rate program and TCF National Bank, the Department of Justice announced today.
Douglas Benit, a former assistant superintendent at Ecorse Public Schools (EPS), was sentenced in the U.S. District Court in Detroit today after pleading guilty on Nov. 24, 2008, to one count each of mail fraud and bank fraud. Douglas Benit and his wife, Mary Ann Elam Benit, were previously indicted by a federal grand jury in Detroit on May 23, 2006. Mary Ann Elam Benit is scheduled to be sentenced tomorrow.
"The children of the Ecorse Public School District as well as countless others around the nation rely on the federal E-Rate program to provide funding for internet access, telecommunication services, and computer and communication networks," said Scott D. Hammond, Acting Assistant Attorney General in charge of the Department's Antitrust Division. "Douglas Benit exploited his position as a trusted school official and lined his own pockets with money that should have gone to these deserving children."
Among his duties at EPS, Douglas Benit was responsible for the management of the construction of multiple new facilities in the
district. While hiding his affiliation with Coral Technology Inc. (Coral), an Ohio corporation under his control, Benit recommended to the school board the awarding of contracts to Coral, effectively steering those contracts to his own company. Funding for these contracts came from EPS general funds, EPS construction bond funds and the federal E-Rate program.
Additionally, Doug and Mary Ann Elam Benit obtained a $ 200,000 line of credit from Minnesota-based TCF National Bank through the submission of loan application and supporting documentation which vastly overstated and misrepresented their personal and corporate assets and income.
The E-Rate program subsidizes the provision of Internet access and telecommunications services, as well as internal computer and communications networks, to economically disadvantaged schools and libraries. The program was created by Congress in the Telecommunications Act of 1996 and is administered by Universal Service Administrative Company, a non-profit corporation, under the auspices of the Federal Communications Commission.
As a result of the Antitrust Division's investigation into fraud and anticompetitive conduct in the E-Rate program, a total of seven
companies and 18 individuals have pleaded guilty or have been convicted and found guilty or entered civil settlements. Those companies and individuals have paid, agreed to pay, or been sentenced to pay criminal fines and restitution totaling more than $ 40 million. Including today's sentence, 12 individuals have been sentenced to serve jail time.
The investigation was conducted jointly by the Antitrust Division's Cleveland Field Office and the Detroit office of the FBI. Anyone with information concerning fraud or anticompetitive conduct in the E-Rate program should contact the Cleveland Field Office of the Department's Antitrust Division at 216-687-8400.
Pennsylvania: Corbett slams handling of Veon grant oversight, Mar. 28, 2009
Patriot News
Charges filed against House Democratic Whip Mike Veon on Wednesday raised serious questions about the oversight of state grants by the Department of Community and Economic Development, Attorney General Tom Corbett said.
Senate and House Republicans also questioned whether department officials fell down on the job by awarding grants to a nonprofit controlled by Veon that prosecutors allege were spent primarily for his personal and political use.
Veon and Annemarie Perretta-Rosepink, a member of his staff, were arraigned Thursday on theft and other charges related to the alleged misuse of money routed to the Veon-created Beaver Initiative for Growth. The stated purpose of the organization was to advance economic development in Beaver County.
The charges come two weeks after former Sen. Vincent Fumo, a Philadelphia Democrat, was convicted of 137 corruption counts in a fraud and obstruction case. The jury found Fumo used a nonprofit organization's money, which included state grants, for his political and personal gain.
"This is the second time now ... that the government has charged that money was misappropriated," Corbett said after announcing the charges against Veon. "That indicates to me that the Legislature, and everybody, needs to take a look at how monies, especially in these tight times, are being spent. ... How it's being directed, and who is controlling it."
Corbett said his investigators are looking into the flow of money into legislator-controlled nonprofits.
"When we are able to go forward and present something on that we will," he said.
A spokesman for Gov. Ed Rendell maintains the oversight at the Department of Community and Economic Development is sufficient.
"These grants were all issued [to Veon's group] according to statute, whether that be the annual budget or in accordance with established program guidelines," spokesman Michael Smith said. "All of the projects reflected in the applications were ... eligible and DCED has a mechanism in place to ensure accountability and that state funds were used as intended."
That mechanism is either an audit for grants of $100,000 or more or a closeout review of how grants under that threshold were spent.
The Beaver Initiative for Growth, created in 1991 by Veon, was awarded 20 grants, Smith said. But the amounts escalated sharply after Rendell took office in 2003.
Corbett's investigators said BIG was awarded grants totaling $9.9 million between 2003 and 2006, compared to $659,000 in the prior four years.
Smith said BIG did not receive all of the money it was approved to receive. For example, a $400,000 grant was held back because of compliance issues involving earlier grants. All told, officials stopped $1.8 million in approved grants from going to BIG, state economic development department spokesman Mark Shade said.
Corbett's investigators found the nonprofit spent more than $4.7 million between 2004 and 2006. The Pittsburgh Tribune-Review had raised questions on how that money was spent, and those stories had sparked Corbett's investigation.
Senate Majority Leader Dominic Pileggi, R-Delaware County, said oversight in place at the department should have uncovered "misappropriations on that grand scale."
"I frankly would like to see how DCED reconciles its failure to uncover this wrongdoing in the audits that were performed, assuming in fact that audits were performed," he said.
Rep. Glen Grell, R-Hampden Twp., summed up the frustrations of a lot of lawmakers with the latest black eye for state government: "There's clearly something wrong. Somebody needs to be doing a better job of monitoring those grants."
California: Controversial AIDS Charity Ad Remains On 'NY Times' and 'USA Today' Sites, Mar. 26, 2009
By Joe Strupp
Published: March 26, 2009 5:20 PM ET
NEW YORK It appears The New York Times will not remove an ad for an AIDS charity that ProPublica had claimed to be fraudulent.
"After publishing our inquiry into a shady AIDS charity, we asked the New York Times, whose Web site has been running prominent ads for the group, whether they’d drop the ad," ProPublica stated in a story online Thursday. "Their answer? No."
"Should there be allegations of fraud against an advertiser, we would discontinue advertising, until the matter is resolved. At this time, we have no indication of that," wrote Steph Jespersen, the Times director of advertising acceptability, in an e-mail forwarded by a spokeswoman to ProPublica.
ProPublica late Thursday posted an update: The ad was also running on the top of the USA Today web site.
The Center for AIDS Prevention was the focus of a ProPublica report earlier this week that claimed the Beverly Hills group "has spread factually inaccurate, and potentially dangerous, health information through its Web site."
ProPublica, the non-profit investigative reporting outlet, also noted the Times' online ads for the center. After contacting the newspaper, ProPublica reported today the Times had chosen to keep the ads going on the paper's Web site.
Diane McNulty, a Times spokeswoman, told ProPublica: "It is important to note that we review the ad, not the organization. We do not read a book in order to accept advertising for it. Likewise, we do not validate statements of fact made by advocacy groups, or their Web sites. We do, of course, expect all advertisers to present information factually."
McNulty added in another e-mail that the Times "does consider the legitimacy of an organization," and the Center for AIDS Prevention was "legitimate… according to the rules governing 501(c)3 organizations. It is the business of the Attorney General of California to police these guidelines."
ProPublic did note that the charity had changed a couple of claims in its ad since their report came out Monday.
Consumers have more information and options when considering charitable donations.
Jefferson City, MO - infoZine - Attorney General Chris Koster says the Check a Charity feature on his Web site recently added the 1,000th charitable organization to its records, giving consumers more information and options than ever before when considering charitable donations. The Check a Charity link can be found at the Attorney General’s Web site, ago.mo.gov. Consumers without Internet access can obtain the same information by calling the Consumer Protection Hotline, 1-800-392-8222.
“Consumers face a dizzying array of options when researching the charities they’d like to help financially, and it’s overwhelming when you add in all the telemarketing calls and mail solicitations,” Koster said. “Before making a donation Missourians need to do their research, and Check a Charity is a good place to start.”
Consumers can search for a charity by name or look at an alphabetized list. Online records for each charity will show the amount of money raised in the past year and what percentage of funds was spent on program services, as opposed to administrative costs like fundraising, overhead and payroll. Koster and most consumer advocates nationwide recommend consumers give to charities that spend at least 65 percent of their funds on program services.
Most of the data comes from the charities’ IRS 990, which includes a description of the charity=s mission as well as the financial information described above. Koster says a charity’s listing on the Web site should not be seen as a “seal of approval” from the Attorney General, but rather as one piece of information to be considered when researching a donation.
The Check a Charity site was launched by former Attorney General Jay Nixon in August of 2005. Koster says his office encourages any charity not yet registered to do so. Registration forms are available for download at the Check a Charity page at the Attorney General’s Web site, ago.mo.gov/checkacharity/
California: Orange Empire Railway Museum refuses to disclose names of board members, Mar. 11, 2009
By JULISSA McKINNON The Press-Enterprise
Despite a law that requires nonprofit organizations to disclose their officers and directors, the Orange Empire Railway Museum, one of Perris' oldest charities, has not included the information on its tax forms.
Museum President Thomas Jacobson refuses to say who sits on the museum's nine-member board of directors.
"You are not entitled to that information. We comply with the law," said Jacobson, a Riverside-based attorney, during a phone interview about the charity founded in 1956.
However, authorities with the state's Office of the Attorney General and the Internal Revenue Service, both charged with regulating nonprofit groups, say a nonprofit is mandated by law to disclose all of its key officers, including members of a board of directors, on its tax forms.
"That should be public information," said Kevis Foley, the registrar of charitable trusts for the state Attorney General.
Information tradeoff
Lisa Runquist, an attorney who specializes in nonprofit organization law, said it's a tradeoff: nonprofit groups make certain information public in exchange for not paying taxes.
"In exchange for tax-exempt status, nonprofits have to provide certain information to the people they are supposedly helping as well their contributors. The basic concept is to make them answerable to the public," Runquist said. Peter Scheer, of the California First Amendment Coalition, said the museum's accountability requirement is intensified by the fact that it recently benefitted from public funds.
Last fall, Perris spent $1.5 million renovating the old Santa Fe depot downtown. The museum transferred ownership of the buildings to the city in exchange for continued use of the depot for 99 years.
City officials do not know who sits on the museum's board, said city spokesman Joe Vargo. Perris Council members say they don't know, either.
"I don't see how or why it would be a secret for a nonprofit organization, especially when they were involved in a city partnership on the renovation of the depot," said Councilman Al Landers. Even though the museum's by-laws and other records filed with state agencies show that nine people serve on the board of directors, the museum's most recent tax forms list only three people: Jacobson as president; Sharlin Peters as secretary; and Corey Wylde as chief financial officer.
Missing tax forms
According to Foley, who oversees the state's charities, the museum failed to file the required 990 tax forms for 2002, 2003 and 2004. The museum's most current tax information shows that for the 2007-08 fiscal year it received $267,000 in contributions, part of its total $869,000 in annual revenue. It reported about $5 million in assets for that year.
The question about who leads the museum arose during interviews about the museum's ownership of property that has harbored an unpermitted truck and electrical equipment storage yard for one of the nation's largest utility contractors, Henkels & McCoy, for at least three years.
Henkels & McCoy, a multi-million dollar corporation based in Blue Bell, Pa. has worked until recently as a subcontractor for Southern California Edison, assisting the electric company on such projects as moving overhead electrical wiring underground for Perris City Hall and the sheriff's station.
Scheer said any charity that is reluctant to identify its leadership is raising a red flag. Many nonprofit groups advertise their board members on their Web sites, often with their photos, he said.
"If they have directors that no one knows about there's always the question is there a conflict of interest?" Runquist said. "What are they doing that they don't want people to know this?"
Texas AG Halts All Payments To Former Staff Of Tyler Hospital, Mar. 14, 2009
By CASEY KNAUPP
Texas Attorney General Greg Abbott announced Friday he has taken legal action to preserve charitable assets owned by the now-defunct Doctors Memorial Hospital in Tyler.
The 30-bed hospital, which opened in the late 1960s as a nonprofit organization, closed its doors in 2000 but millions of dollars in charitable funds were spent on salaries and severance pay years after the hospital ceased operations, according to a prepared statement from the attorney general's office.
The legal action, brought on by the top Texas prosecutor on behalf of the public interest, cites the Texas Non-Profit Corporation Act prohibits the compensation and severance packages that were paid to former executives of the Doctors Memorial Hospital (DMH).
Defendants named in the lawsuit, alleging breach of fiduciary duty, are: the hospital's former Chief Executive Officer Ollie Clem, his daughter and Chief Operations Officer Lisa Blaine, and directors Dr. David Norris and Dr. Norman Truitt.
Abbott asked a Travis County probate judge on Friday to appoint a receiver and take other measures to preserve the charitable assets.
A review by the Attorney General's Charitable Trusts Section showed Clem and Ms. Blaine were paid more than $2 million after DMH closed on Aug. 31, 2000, Abbott said.
The hospital's board of directors continued paying Clem and Ms. Blaine full salaries and benefits for four years. During that time, operations included archiving hospital records, selling and donating equipment and selling the hospital's real estate holdings, including its main building. The board of directors also authorized severance packages for Clem and Ms. Blaine so that they both received full salary and benefits in 2005 and 2006, Abbott said.
"By awarding these lavish severance packages to Mr. Clem and Ms. Blaine, the executives in charge of DMH at the time it was forced to close, the board of directors chose to reward them for the business failure of DMH," the lawsuit states.
A 2000 report by the Texas Department of Health that cited numerous deficiencies in care led to the hospital shutting down.
Abbott claims that compensation in a reasonable amount can be distributed to corporate officers, but in this case was not proper because the hospital's closure reduced the duties of Clem and Ms. Blaine.
The approval of the "improper severance packages � ultimately cost the public over $550,000 in charitable assets that should have been preserved and distributed to other health care charities in the Tyler area," the lawsuit states.
Two senior employees also received $550,000 in severance payments, approved by the hospital's board of directors, Abbott claims.
In 2005, the DMH board voted to hire Ms. Blain as the sole employee of the Doctor's Memorial Hospital Foundation, a separate organization from DMH, at an annual salary of $50,000 but the foundation did not have any assets and never applied for or received federal nonprofit tax status, Abbott said.
According to investigators, DMH assets were used to pay Ms. Blaine's foundation salary from 2006 through April 2008.
The lawsuit also claims that since 2002, decisions were being made by the board of directors, which no longer had an effect quorum of directors.
Abbott claims the defendants are liable for compensatory damages in the amount of any misappropriated or misdirected assets of DMH and for any dispensation of the non-profit corporation's assets that are more than the amounts determined to be reasonable compensation for services rendered. The defendants are also liable for all actual and exemplary damages, the lawsuit states.
The lawsuit requests that a temporary receiver be appointed to protect the assets and administer the business of DMH, then liquidate the assets of the hospital and distribute them to a non-profit corporation providing health care in the Tyler area.
WHITE HALL — Authorities seized 200 machines and hundreds of thousands of dollars from the city’s gaming center on Thursday.
Agents working for Gov. Bob Riley’s Task Force on Illegal Gambling raided the building early Thursday morning seeking illegal slot machines.
Alabama Beverage Control Board officers, Alabama State Troopers and Lowndes County Sheriff’s deputies surrounded the White Hall Gaming Center at 6999 U.S. Highway 80, about 24 miles east of Selma.
David Barber, retired district attorney for Jefferson County and director of the task force, said the agency will seek a court date to determine the legality of the machines.
A press conference is set for 10 a.m. today in Montgomery. Officials say they will explain more about the raid.
Authorities took most of the day to remove less than a quarter of the building’s machines. Barber said they would take at least one of each type as evidence.
“We suspect all the machines are illegal, but we’re not going to seize 900 of them,” Barber said.
Rental trucks backed up to the front of the building, and men began gradually loading machines around 11 a.m. Riley’s press secretary Todd Stacy said although laws on illegal gambling had not been enforced before, the governor’s office is now cracking down on violators.
In a press release from Jan. 11, Gov. Bob Riley announced his campaign on illegal gambling. He cited two cases, which ruled gaming machines that appear to be slot machines illegal.
“Well, the Alabama Supreme Court has already ruled that slot machine gambling, no matter if it’s called “bingo” or something else, is illegal (Barber v. Jefferson County Racing Association, 2006),” he said. “After this ruling, another court ruled specifically that electronic bingo was an illegal slot machine (VFW v. Green, 2008).”
White Hall resident Doris Gresham said she was inside the building when officers flooded in after 5 a.m.
“They were all over the place,” she said.
Gaming center security officer James McBride showed up 10 minutes early for his 8 a.m. shift, and was turned away. He said he noticed officials, including Attorney General Troy King, periodically checking machines for irregularities during the last month.
“It’s supposed to be a charity bingo hall, and whatever charity they represent is supposed to be on the game. And they didn’t see that,” McBride said.
Catherine Coleman Flowers works for non-profit organizations and previously worked in economic development for Lowndes County. She worried about the effects of an indefinite shutdown of the city’s largest employer. More than 100 people work at the gaming center. White Hall has a population of little more than 1,000.
“It’s the economic engine of this town,” Flowers said. “Think about what was here before the gaming center. There was nothing.”
Lowndes County already has one of the highest unemployment rates in the state at 17 percent.
Lowndes County Probate Judge John E. Hulett could not specify the gaming center’s economic contribution to the surrounding area, although he acknowledged the impact is significant. He is also worried about the potential loss of jobs.
“We’re one of the highest unemployed counties in the state, just about, so where’s that going to put us?” said Hulett.
Pennsylvania: Citizens' Alliance halting cleanups, Mar. 27, 2009
The Philadelphia Inquirer
By Mario F. Cattabiani and Robert Moran; Inquirer Staff Writers
Citizens' Alliance for Better Neighborhoods, the controversial nonprofit at the heart of the corruption case involving former State Sen. Vincent J. Fumo, will stop providing the community cleanup services that have been its primary mission in South Philadelphia for the last 18 years.
In a letter posted on the group's Web site, its executive director wrote that because of financial issues, Citizens' Alliance had decided to end on April 30 its street sweeping, bulk trash pickup and other services.
The decision was necessary, wrote Christian DiCicco, in part because the group has had to route resources to cover expenses from continuing government investigations.
The announcement, which raises a raft of unanswered questions, comes as state officials have stepped up their own probe into the disgraced charity in an expected effort to shutter it for good.
Still, it was unclear whether this marked a shutdown of the nonprofit or merely a ceasing of its community services - its most visible and popular function. Also unknown is what will happen to the group's assets, including numerous storefronts and two charter schools that it helps support and that have more than 1,400 students.
Fumo, along with codefendant Ruth Arnao, a former top Senate aide who for years ran Citizens' Alliance, were convicted last week of defrauding the nonprofit out of $1.5 million.
Federal prosecutors successfully argued that the two used the Wharton Street nonprofit's bank accounts as their own, buying, among other things, chests of tools for the senator and spending thousands of dollars for political purposes, such as polls.
DiCicco did not respond to several e-mail and phone messages seeking comment. And no one at the Citizens' Alliance office wanted to be quoted by name.
Looking for work
But one person, when asked what she would do after April, said she would be "looking for a job that you can't get."
Citizens' Alliance was founded by Fumo aides and allies, including DiCicco's father, City Councilman Frank DiCicco, in 1991. Philadelphia was going through a major fiscal crisis and the nonprofit's mission was to revitalize neighborhoods in South Philadelphia and to do what the city did not: sweep streets, shovel snow, and pick up trash.
For years, the once-tiny and obscure nonprofit was flush with cash.
In the late 1990s, Fumo secretly pressured Peco Energy to donate $17 million to it in exchange for his dropping a legal challenge against the utility in a regulatory matter. He also arranged for the Delaware River Port Authority to give it an additional $10 million.
At the end of 2007, the last year for which information is available, Citizens' Alliance had $17.8 million in assets.
Most of that, however, was tied up in real estate or other nonliquid assets. Only about $1.2 million was cash, according to the nonprofit's tax returns filed with the IRS in 2007.
The current financial shape of the nonprofit is unknown, although it has suffered from poor investments and heavy spending on lawyers defending Arnao and others. Legal expenses totaled $506,000 in 2007, and that does not include bills run up during the 41/2-month corruption trial.
In federal tax returns filed last year, the group said it would try to recoup money spent to defend Arnao if she were convicted. What happens to that pledge now is unknown.
After Arnao stepped down as executive director, her place was taken by DiCicco.
In his closing argument at the Fumo trial, prosecutor Robert Zauzmer described DiCicco, a former Fumo aide, as part of "a group that is committing a fraud" along with the senator.
DiCicco refused to talk to the FBI during the investigation and asserted his Fifth Amendment right to be silent before the grand jury, according to trial testimony.
Unhappy neighbors
Nearby residents on Wharton Street said yesterday they were upset by the news that Citizens' Alliance's equipment, from street sweepers to backhoes, would no longer work the streets of South Philadelphia.
"I know Fumo did bad, but why take it out on the block?" asked Carmen Masino, 71, a retired military investigator. "I don't think anybody wants them to leave."
Lucy Forgione, 81, who is featured in a Citizens' Alliance brochure praising the organization, called the move terrible and said she was worried about what would happen to the headquarters, which has a garage for heavy equipment that Citizens' Alliance deploys around the community.
Charles Mastripolito, 72, a retired bartender, said it would be up to the residents to take care of their neighborhood.
"It's not going to be the end of the world, but it was nice to have them," he said.
In December, The Inquirer reported that the state Attorney General's Office had launched its own probe into the nonprofit, focusing on its exorbitant legal bills and other spending not traditionally associated with charities.
Kevin Harley, a spokesman for Attorney General Tom Corbett, said on March 16, the day Fumo was convicted, that the office was "ramping up" its probe, which could lead the state to pull the charity's charter to operate and ask a court to liquidate its assets.
Yesterday, Harley would not comment specifically on the news that the nonprofit planned to end services other than to say, "Our investigation continues to be very active."
Assistant U.S. Attorney John Pease, who along with Zauzmer prosecuted the Fumo case, would say only, "We are going to pay attention to what develops here and we will address anything relevant at the appropriate time at sentencing."
When Fumo is sentenced in July, prosecutors plan to ask the court to force Fumo to pay restitution to Citizens' Alliance. That raises yet another question: If the group is gone, who would get the money?
CALIFORNIA REINVESTMENT COALITION; Jackson Hewitt Partnership Puts Earvin 'Magic' Johnson in a League With Financial Predators, Mar. 24, 2009
The California Reinvestment Coalition, Woodstock Institute, Neighborhood Economic Development Advocacy Project and the Community Reinvestment Association of North Carolina are calling on Earvin "Magic" Johnson to stop promoting predatory tax refund anticipation loans this tax season as part of his partnership with Jackson Hewitt, the franchise tax preparer notorious for preying on low-income people. Tax refund loans particularly target recipients of the Earned Income Tax Credit, one of the few federal safety nets for the working poor.
As part of a deal announced last November, Johnson is appearing in a marketing campaign throughout the 2009 tax season for Jackson Hewitt. He appears in television ads, radio spots on urban stations and billboards in communities of color endorsing the "Money Now Loan" -- one of the largest sources of refund anticipation loans in the nation. Jackson Hewitt's website offers a 20 percent discount for customers who order Johnson's book, 32 Ways to be a Champion in Business.
Refund anticipation loans are short-term, high-cost loans secured by a taxpayer's federal refund. Borrowers end up paying exorbitant interest (annual interest rates can range from 50% to nearly 500%) to receive what is billed as fast cash on their tax return. Jackson Hewitt charges fees with an APR of either 134% or 140%.
"Refund anticipation loans are part of a spectrum of abusive, high-cost small loans that have plagued low-income neighborhoods and communities of color, draining hundreds of millions of dollars in wealth, too often through deceptive practices," said Sarah Ludwig, co-director of Neighborhood Economic Development Advocacy Project.
IRS data shows that 8.7 million taxpayers took out refund anticipation loans in 2007, costing them almost $1 billion in fees. Two-thirds of these borrowers are recipients of the Earned Income Tax Credit (EITC), which supplements the wages of low-income workers. An estimated 4.5 million people, including 2.4 million children, are lifted out of poverty as a result of EITC, making it the most effective government anti-poverty program. EITC recipients make up only 17% of all taxpayers, but are vastly overrepresented among tax refund borrowers. Based on IRS data, consumer advocates estimate that about $523 million was drained from the EITC program by refund anticipation loan fees in 2007.
"At this time of widespread economic crisis when many families are experiencing financial hardship, especially in low-income communities of color, Magic Johnson should not get in the business of tax refund loans," said Kimberly S. Jones, policy advocate for the California Reinvestment Coalition. "Magic Johnson's developments have been positive for communities of color and low-income communities. We admire him and hope he will stop this collaboration with predatory lenders."
Jackson Hewitt, the second largest commercial preparation chain in the country, has been the target of several government lawsuits for its abusive practices. In 2007, the California Attorney General won a $5 million settlement from the company for violating state and federal laws in marketing its tax refund loans to low-income customers. That same year, the Department of Justice sued five Jackson Hewitt franchises for preparing fraudulent tax returns that falsely claimed $70 million in refunds. When preparers inflate refunds, or if the IRS denies or delays the refund, the consumer still has to pay back the loan.
On Feb. 20, Johnson announced another partnership with Rent-A-Center, another purveyor of high-cost lending whose rent-to-own stores can be found in low-income neighborhoods throughout the country.
"As a lifelong Laker and Magic Johnson fan, and as one who is enthusiastically reading his new book, 32 Ways to be a Business Champion, I am extremely concerned that Magic would endorse Jackson Hewitt and their Money Now Loan. These loans do exactly the opposite of what Magic has done and supported in minority communities -- these loans bleed money out of these communities, they deprive families out of hard-earned income and they keep minorities out of the financial mainstream," said Roberto Barragan, president of Valley Economic Development Center in Los Angeles, which also provides a free site for Volunteer Income Tax Assistance (VITA).
VITA sites have played a critical role in helping to process EITC refunds for low-income taxpayers so they can keep more of their hard-earned money. Tax filers with a total household income less than $38,000 can have their taxes prepared for free at these sites and then directly deposited into their bank accounts. The Internal Revenue Service can electronically deposit tax refunds into tax filers' accounts in as little as five to 10 days for free.
The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 270 nonprofit organizations and public agencies across the state.
For more information or to arrange interviews with advocates, please call CRC Media Coordinator Tram Nguyen at 213-3680.
Keywords: California Reinvestment Coalition, Pediatrics.
This article was prepared by Pediatrics Week editors from staff and other reports. Copyright 2009, Pediatrics Week via NewsRx.com.
Virginia: LEGAL FOOD FRENZY TO RAISE 1.5 MILLION POUNDS OF FOOD FOR HUNGRY, Mar. 23, 2009
States News Service
The following information was released by the office of the Virginia Attorney General:
Donations to Virginias food banks are down, and demand is hitting a record high. Thats the focus of this years Legal Food Frenzy. And the timing couldnt be better. The Attorney Generals 3rd annual Legal Food Frenzy aims to raise 1.5 million pounds of food for the hungry during the next two weeks.
Now in its third year, Virginias statewide food-and-funds drive by lawyers has become so popular that other states including North Carolina, Indiana, New Jersey, Florida and Nebraska -- may copy it.
According to Leslie Van Horn, executive director of the Federation of Virginia Food Banks, The Legal Food Frenzy competition could not come at a better time. Food Banks throughout the Commonwealth are currently experiencing an historic surge in demand for assistance.
The statewide competition pits law offices against each other. It starts Monday, March 30, and runs through April 10. It is open to all lawyers and members of the legal community across Virginia. Virginia law firms can sign up now by visiting www.legalfoodfrenzy.com.
Founded by former Attorney General Bob McDonnell, the benevolent contest raises food and funds for Virginias Food Banks during a traditionally slow period for donations. The Legal Food Frenzy is the first statewide food drive in the history of the Federation of Virginia Food Banks.
The competition was started in 2007 by the Attorney Generals Office, Virginia Bar Association and Federation of Virginia Food Banks. They based the idea on a similar regional event held every year since 1990 in Hampton Roads.
In the first year of the statewide Legal Food Frenzy, nearly 679,000 pounds of food were raised. That amount doubled in 2008, when more than 1.3 million pounds of food were donated, the equivalent of 1.1 million meals. Last years competition featured 181 law firms, ranging from sole proprietors to the largest firms in the Commonwealth.
The goal for this years 3rd annual Legal Food Frenzy is 1.5 million pounds. The law firm that raises the most food per capita wins The Attorney Generals Cup.
In this economy, the role of the food banks has never been more crucial, Virginia Attorney General Bill Mims said. This is a great way for the legal community to give back, and this competition has become a tradition in the Virginia legal community. Attorney General Mims has been personally kicking-off the competition this month at luncheons at law firms and food banks in McLean, Norfolk, Richmond, Roanoke and Charlottesville.
According to Greg Zoeller, Attorney General of Indiana, With the success of Virginias first-in-the-nation statewide Legal Food Frenzy, we look to similarly partner with food banks to combat hunger. I hope our efforts in Indiana help take Virginias successful Legal Food Frenzy to the next level nationally.
According to Roy Cooper, Attorney General of North Carolina, During these difficult economic times, more and more families are turning to local food banks for help. To help meet this need, Im pleased to work with North Carolina food banks and my states legal community to create a statewide food drive modeled after the successful Legal Food Frenzy in Virginia.
According to Chris Gill of the Virginia Bar Association and Christian and Barton law firm in Richmond, With the downturn in the economy sending so many more Virginians to the food banks' shelves, the success of this project is even more important this year. The Virginia Bar Association is pleased to work with Attorney General Mims to challenge all Virginia lawyers to expand upon the tremendous efforts over the last two years.
Last years winning firm was Schettine and Nguyen, PLC of Richmond, a three-lawyer firm that brought in 4,200 pounds of food per person. As a small law firm, we were excited about the opportunity to make a positive impact on our community, and pleasantly surprised that we actually won The Attorney Generals Cup, Jim Schettine said.
Van Horn, of the Federation of Virginia Food Banks, added, We have always said that there are three faces of hunger the working poor, children and senior citizens. But now there is a fourth face of hunger and one everyone knows your neighbor, or a co-workers spouse, who has been laid off or their company has closed and they are unable to find a new job. The legal community in Virginia has been extremely generous during the first two years of the statewide Legal Food Frenzy and we know they are more excited than ever to help us make a difference to so many in need.
Pennsylvania: Sturla's Nonprofit May Be Scrutinized By Ag, Mar. 26, 2009
Lancaster New Era
Tom Murse, Lancaster, PA
The case of the once-powerful state lawmaker accused of misusing money from a nonprofit he founded is likely to shed light on a small number of similar foundations in Pennsylvania, including one started by Rep. Mike Sturla here.
Investigators with the state Attorney General's Office are "scrutinizing" the nonprofits created by legislators who serve on their boards and get almost all their money from the state, said Kevin Harley, a spokesman for the office.
He declined to identify any of the nonprofits, but the one started by Sturla in 2004 - Lancaster Investment in a Vibrant Economy, or LIVE - matches the criteria of those falling under the attorney general's scrutiny.
"There are not that many lawmakers who have started their own nonprofits and then sit on the board and then use almost exclusively taxpayer funding," Harley said this morning. "That is not a large list."
Sturla started the nonprofit in 2004 with $750,000 in state money. Most of LIVE's funding since then has come from the government, according to its IRS filings.
Sturla, a Lancaster Democrat, is one of 11 members of his nonprofit's board of directors. In an interview today, Sturla said no one from the Attorney General's Office has requested records or had contact with LIVE.
"If they do, we'd cooperate," Sturla said today. "I'm hoping they wouldn't waste our time and theirs. Other than the fact that it would be a colossal waste of taxpayer money, we'd welcome them. I'd be more than willing to show them everything we've got."
Attorney General Tom Corbett said on Wednesday his office will scrutinize grant money given to all nonprofit groups headed up by other legislators, although Corbett did not identify any.
Corbett made the announcement after detailing new allegations against former Democratic House Whip Michael Veon. Veon is accused of using money meant for his nonprofit instead for his own personal comfort and rewarding various people and groups who supported him.
They are similar to allegations that federal prosecutors made two years ago against former state Sen. Vincent Fumo. Fumo was found guilty this month on all 137 counts brought against him.
"That indicates to me that the Legislature and everyone needs to take a look at how moneys ... are being spent and how it's being directed," Corbett said at a Pittsburgh news conference where he announced the charges against Veon.
Michael Young, a political analyst and former Penn State political science professor, said there are clear problems when elected officials run nonprofits.
"The inherent problem is a conflict of interest, which resides in the dual roles and temptations that apply in this environment: in the rush for campaign cash, you have a situation of a hungry man sitting over a bountiful table and the nonprofit is ripe to be raped," Young said.
Such offenses are clear in the Fumo case.
But no one has alleged or even suggested that Sturla or LIVE has done anything wrong. In fact, the nonprofit's IRS filings show the group has funded dozens of projects in the community - playgrounds, book drives, free smoke detectors and the like --with money it received from the state Department of Community and Economic Development.
Sturla said the idea behind creating the nonprofit was to make it easier for groups to get funds, and it worked: local agencies didn't have to apply to the state for legislative initiative grants, a time-consuming process that requires a $5,000 minimum.
They applied instead to LIVE, and got the money quicker.
Sturla had previously said he got the idea of starting his nonprofit directly from Veon. "The idea that I could take (a state grant) and start a nonprofit came from Representative Veon," Sturla told the Pittsburgh Tribune-Review.
LIVE and similar nonprofits, however, no longer act as a pass-throughs for state funding in the wake of the apparent abuses in the Fumo and Veon cases. Its one full-time and one part-time staffers now assist other local nonprofits get state money by helping to do audits and write grant applications.
The board now vets projects seeking funding from the state.
"Because somebody else abused the system," said Sturla, "we have to do it this way. If there's anything corrupt and illegal about helping nonprofits, woe is to all of us."
LIVE is still mostly funded by state money, but not through the DCED. Sturla, a leader in the state House, steers so-called legislative initiative grants to fund the nonprofit's operation and its grants to local efforts. LIVE got $202,000 in 2007, according to newspaper records.
Sturla also pointed out that he is one of 11 board members - not in complete control of how the nonprofit spends its money, as was the case, allegedly, in the Veon case.
"I've been outvoted more times than not by my board," he said.
He added that the board is made up of a wide cross-section of the Lancaster community - not a bunch of political pals. Among them are former county Commissioner Ron Ford, the Rev. Louis A. Butcher Jr., and Patrick Hopkins, who serves in the administration of Lancaster Mayor Rick Gray.
LIVE operates independently, from its own office.
"It's a completely separate entity that I helped found, but I sit on the board like everybody else," he said. "Do I bring something to that board because I know state government and what's available to them? I think so. Does that mean I shouldn't sit on any nonprofit board?"
Massachusetts: ATTORNEY GENERAL MARTHA COAKLEY RELEASES 2008 COMMUNITY BENEFITS HOSPITAL REPORTS, Mar. 26, 2009
States News Service
BOSTON
The following information was released by the office of the Massachusetts Attorney General:
Massachusetts residents received more than $408 million in community benefits from non-profit hospitals last year, according to the 2008 Community Benefits Hospital Reports released today by Attorney General Martha Coakley's Office. Disease prevention education programs, charity care, and assistance obtaining health insurance are among the benefits residents received through the Attorney General's Community Benefits Program. The program, established by the Attorney General's office in 1994, sets expectations on how non-profit acute care hospitals and HMOs should formally assess the health care needs of their communities, plan programs in concert with community partners, and report those activities to the Attorney General's Office. Today's reports are available at: www.mass.gov/ago/communitybenefits.
I am proud of these collaborative efforts between our hospitals and community organizations, said Attorney General Coakley. Community benefit programs provide our underserved citizens with invaluable health care services.
Fifty-seven non-profit hospitals and two for-profit hospitals participated in the Community Benefits Program in 2008, providing $249 million in programs and services and $158 million in charity care. Through the program, Massachusetts hospitals provide services through various initiatives that address the specific health needs of local residents. Highlights from the 2008 program include:
Berkshire Medical Center's Cardiovascular/Diabetes Prevention Program identified cardiovascular and diabetes risks through education programs. As of result of that program, 1280 Diabetic patients were educated and 500 patients received cardio-related screenings from visiting nurses.
Cape Cod Healthcare's Brazilian CPR and First Aid Training recruited and trained five bilingual members of the Brazilian community as Certified Red Cross CPR/ED and First Aid instructors. These trainers then trained 130 members of the Brazilian community in basic CPR and first aid.
Heywood Hospital's Gateway Health Access Program (GHAP) is a nationally- recognized model for enrolling people in health insurance plans. In 2008, the program screened more than 15,000 people, and helped 4,500 obtain health insurance.
Massachusetts General Hospital's Disparities Solution Center in collaboration with MGH Revere HealthCare Center, created a program to address barriers to care for Cambodian Diabetic patients.
Last month, as part of her ongoing effort to address unmet health needs in the Commonwealth, Attorney General Coakley issued new Community Benefit Guidelines for non-profit, acute care hospitals and health maintenance organizations (HMOs). The revised guidelines were the product of a year-long review by an Advisory Task Force of key stakeholders who share the common goal of improving the health of communities across the state. Under the guidelines, hospitals and HMOs submit annual reports to the Attorney General's Office on their community benefit programs and expenditures. This enables both Attorney General oversight, and public scrutiny of non-profit health care institutions. The revised Guidelines were designed to improve transparency and accountability in community benefit reporting, encourage pre-planning and community involvement, and align hospital and HMO community benefit activities with statewide health priorities. The new Guidelines go into effect in October.
All non-profit acute care hospitals are asked to submit their community benefits reports to the Attorney General's Office annually by February 28th. Health plans are due to file their Community Benefits Reports with the Attorney General's Office by May 31st.
The Community Benefits Program is coordinated by Assistant Attorney General Lois Johnson, Health Policy Analyst Kimberly Henry, and Division Chief Quentin Palfrey of Attorney General Coakley's Health Care Division and Division Chief David Spackman of Attorney General Coakley's Non-Profits/Public Charities Division.
Charity Navigator: How Much Donor Money is Wasted in Your State? Mar. 24, 2009
Matthew Viola
Mar. 24, 2009 (Charity Navigator delivered by Newstex) --
Many charities use professional fundraisers to solicit donations with only a small portion of the amount raised actually going to the charity. Many State Attorney Generals are now keeping track of this data and we have reviewed most of what is available. You will be surprised to see that sometimes the fundraisers keep anywhere from 20 to 90 cents of each dollar donated. Of the states we reviewed, Connecticut was at the bottom of the spectrum as that states professional fundraisers only gave 32% of what they collected to the charity. The highest percentage we found was in North Carolina where fundraisers in that state handed over 59% of what they collected. For data in more states please view our video on the topic:
Hawaii: State database launches on charity contributions, Mar. 24, 2009
The Honolulu Advertiser
ROB PEREZ
The next time you get a fundraising pitch from a charity, you should be able to check a new state Web site to get an indication of how much of your donated money will go to that organization's charitable programs - and how much will go to overhead.
Aiming to bring more openness to the charity sector, the state Attorney General's office yesterday launched a searchable database of charities that solicit money in Hawai'i. So far, more than 400 have registered with the state, and that number eventually is expected to roughly double once word spreads that all such organizations are required to register with the attorney general's office.
The new requirement took effect Jan. 1 as a result of a law legislators passed last year in response to an Advertiser series detailing lax regulation of Hawai'i charities.
The online registry "brings greater transparency to charities and allows Hawai'i donors to make better-informed decisions," said Hugh Jones, the deputy attorney general who pushed for the new registration requirement.
Among the information charities are required to report is what percentage of their contributions go toward fund-raising expenses and what proportion is spent on program services, the actual good deeds done by the organizations.
If the new system gives charities more credibility and donors more confidence, "we're all for that," said Lisa Maruyama, president of the Hawai'i Alliance of Nonprofit Organizations, which initially resisted a registration requirement.
The system can help donors judge how efficient charities are with donations.
Children's Wish Foundation International, for instance, reported that 53 percent of its contributions went to fund-raising expenses, according to the state's database.
Make A Wish Hawai'i, another wish-granting organization, said 3 percent of its contributions went to such expenses.
Before the new system was established, Hawai'i was one of 11 states that did not require charities to register.
Reach Rob Perez at rperez@honoluluadver tiser.com or 525-8054.
Drop-in:
CHECK OUT THAT CHARITY
A new state Web site allows the public to get detailed information on registered charities.
New York Times: As Detroit Struggles, Foundations Adjust, Mar. 22, 2009
By STEPHANIE STROM
Two years ago, a charity called Women Arise went to the Hudson-Webber Foundation with a plea for help.
Hudson-Webber, a fixture in Detroit philanthropy, was a longtime supporter of the organization's programs to help women rejoin society after being imprisoned. The foundation, however, did not typically get involved in the kind of messy personnel and financial problems that threatened Women Arise.
Worried about losing what the charity brought to the community, Hudson-Webber agreed to pay off its liabilities and settle the personnel issues -- but only by merging it into Matrix Human Services, which offers an array of social services to low-income families.
The long economic decline of Detroit has prompted Hudson-Webber and other foundations in the region to change how they operate. Faced with sharply declining resources and exploding need, they are being forced to pick winners and losers, engaging in what Larry M. Gant, a professor of social work at the University of Michigan, calls ''triage.''
''Insolvent organizations need to be dissolved, weak ones need to be merged and acquired, and only the strongest should receive the stimulus they need to become more financially sound,'' Dr. Gant said. ''It's simple in theory but hard in practice.''
Thus, the Hudson-Webber chief executive, David O. Egner, is asking himself whether Detroit needs both a world-class symphony and its Michigan Opera Theatre, and, if so, whether they could share an orchestra.
''These are the kinds of questions we need to be asking,'' Mr. Egner said.
At the Skillman Foundation, one local charity after another warns that without an infusion of cash, it will have to reduce services or shut down.
The Boys and Girls Clubs of Southeastern Michigan, for example, approached in December to say that one of its three facilities would need to be closed unless it received help from Skillman -- even though the foundation had never given it money.
''They're coming to us because they have nowhere else to go,'' said Carol Goss, the chief executive of Skillman.
Foundations like Skillman and Hudson-Webber that are embedded in their communities have a harder time turning away local charities than do large national foundations like the Bill and Melinda Gates Foundation and the Carnegie Corporation.
''As a local funder, you don't get to pick the best programs to work with or the problems you work on,'' said Tonya Allen, vice president for programs at Skillman. ''You have to deal with what you have in your own backyard.''
The decline of the auto industry, which has long been the bedrock of philanthropy here, is increasing the demand for help, even as assets at the local foundations have fallen.
The Ford Motor Company, financially the strongest of Detroit's Big Three automakers, expects its giving to fall by about 40 percent from last year's roughly $35 million, about $12 million of which went to organizations here. ''We're not making any long-term commitments at this time, nothing for capital campaigns, no new exhibitions with cultural partners,'' said James G. Vella, president of the Ford Motor Company Fund.
The disappearance of donations from car makers, their suppliers and dealers have dealt a particularly hard hit to Detroit's arts organizations, which Douglas Bitonti Stewart, the executive director of the Max M. and Marjorie S. Fisher Foundation, called ''the venerable and the vulnerable.'' The opera canceled one show, and question marks hang over performances and exhibits at other organizations.
And they, too, are turning to foundations to make up the difference. The McGregor Fund, for instance, increased its annual gift to the opera to $150,000, from $125,000. With the General Motors Foundation pulling out, ''I knew they were facing some serious challenges,'' said the fund's president, C. David Campbell.
At the same time, Mr. Campbell and others are pressing cultural organizations to overhaul their operations.
''One of them,'' Mr. Stewart said, ''has been running an operating deficit of $20 million for two years, which suggests the problem goes beyond the crisis in fund-raising.''
''People won't come back to Detroit without these organizations, so we have to support them,'' Mr. Stewart added. ''But they also have to make some hard choices to make our support worthwhile.''
Detroit's foundations are also supporting each other more than they have in the past and are working to attract national philanthropic money. The Kresge Foundation, in suburban Troy, is considered a national foundation, but it recently gave a $300,000 grant to Matrix Human Services for emergency repairs to its boiler, windows and a parking lot.
Recently, more than a dozen local foundations gathered to discuss whether to pool their money into an emergency fund for struggling charities and to share ideas about how to use resources limited by the stock market's plunge. A year ago, 10 of them pledged a total of $100 million over eight years to help restructure Detroit's economy to attract skilled workers and fill its empty houses and storefronts.
That effort attracted money from three national foundations with headquarters in Michigan -- W.K. Kellogg, Kresge and Charles Stewart Mott -- as well as the Ford Foundation, which is based in New York but came under pressure last year from the Michigan attorney general to spend some of its money in the state where its founder made his fortune. (The Ford Foundation is not affiliated with the Ford Motor Company. )
Detroit's foundations are also prodding the nonprofit groups they support to share resources. ''Strategic pooling of resources by foundations and nonprofits is what is going to get us through this crisis,'' said Edsel B. Ford II, a Skillman board member. ''Living in silos is a thing of the past.''
YouthVille Detroit, a youth development organization, recently struck an agreement with the Detroit Science Center to create a science program, ''Think Squad,'' for local public television. The science center is providing money and scientific expertise, and YouthVille is contributing its production facilities and the production expertise of its teenage clients.
''The collaboration doesn't benefit us financially,'' said Judith D. Jackson, the chief executive of YouthVille. ''But it does benefit our kids, and it brought us a lot of publicity, too.''
Under the same pressure from foundations to work together to obtain money, the Detroit Hispanic Development Corporation has joined with Southwest Detroit Weed and Seed, a crime prevention program that involves the Detroit Police Department and local businesses and residents. By participating in the program, the Hispanic development organization got federal money to train police officers and school staff members in gang awareness and to run gang-prevention sessions in middle schools.
Angela G. Reyes, the group's founder and executive director, said her organization would not have received any money for those efforts without the collaboration.
''It has helped us work better together and make better use of resources,'' Ms. Reyes said.
The Atlanta Board of Ethics issued a subpoena Thursday to force Councilman H. Lamar Willis to hand over records about his charitable foundation, saying he has not responded to its attempts to gather documents for its inquiry.
The board gave the councilman 30 days to respond after Ethics Officer Ginny Looney said he missed a Dec. 15 deadline to supply documents and hasn't replied to subsequent e-mails.
Willis said in a telephone interview he had not personally received any notice to gather records. The councilman said he would have his attorneys contact Looney.
"I trust that my counsel will continue to be cooperative with any other agency, as we have been in this matter," he said.
In July 2007, an Atlanta Journal-Constitution investigation found Willis' charity was raising money even though it was not registered with the IRS or the state to do so.
Georgia Attorney General Thurbert Baker filed a civil lawsuit against Willis in September, accusing him of spending scholarship donations on himself and putting other contributions into his personal and campaign bank accounts.
The suit calls on Willis to pay the state all the money he raised through the H. Lamar Willis Foundation, which could be more than $150,000.
The suit accuses Willis of violating state law by using a charitable organization to defraud the public.
The councilman's attorneys have said there are some accounting issues that need to be worked through and they hope to have the matter resolved.
Looney said her staff needs the records to determine if Willis violated any city codes.
In another matter Thursday, the board dismissed a complaint against police Chief Richard Pennington after Looney found the chief did not order motorcycle officers to escort him and others riding their Corvettes in a motorcade through the city last summer.
ATTORNEY GENERAL WARNS OF IDENTITY THEFT SCAMS IN NEW HAMPSHIRE Mar. 20, 2009
BYLINE: States News Service
DATELINE: CONCORD, NH
The following information was released by the office of the New Hampshire Attorney General:
Cyber Thieves are at it again. Attorney General Kelly Ayotte announced two identity theft advisory warnings today.
Attorney General Ayotte reminds consumers that as April 15th approaches, they should be on the lookout for tax-related scams. Each year, the Consumer Protection and Antitrust Bureau receives complaints about scams where consumers receive e-mails and faxes seeking personal information allegedly for the purpose of processing refunds or other purposes. These e-mails and faxes will typically look like authentic IRS forms and correspondence. Most recently, a scam IRS fax targeted "non-resident aliens" and asked them to provide personal information, including the name and address of their bank, account number, social security number and asked for copies of their passports. Ayotte warns consumers not to fall for any e-mail or fax scams. If you need to contact a business or agency, obtain the contact information from a reliable source. Never reply to requests made for personal information in unsolicited e-mails, faxes, telephone calls or mail.
The Internal Revenue Service does not ask for detailed personal information by e-mail, Attorney General Ayotte emphasized. "Scam artists can reproduce the IRS insignia perfectly, so you cannot rely on the official looking appearance of the e-mail," she said. Ayotte strongly encourages citizens to visit the Internal Revenue Service web site dedicated to recognizing bogus IRS phishing e-mails. This is located at www.irs.gov/privacy. "Consumers should be alert about receiving mail or e-mails similar to this from other governmental or private agencies that appear genuine." Ayotte said.
Consumers who wish to check on the status of their refunds can visit the IRS website at: and click on "Where's My Refund". Consumers may forward tax related e-mails or faxes to phishing@irs.gov, the address established by the IRS to receive, track, and shut down these scams.
The Attorney General also issued a second advisory warning consumers to beware of pre-recorded telephone calls advising them that their credit card has been compromised. The pre-recorded message states that the message is being distributed on behalf of a valid bank, credit union or other credit card issuer, and requests consumers to confirm or reactivate their credit card by entering their credit card number on the telephone keypad. Consumers with caller identification on their phones will see the name and phone number of a legitimate business. Unfortunately, it is relatively easy masquerade as a legitimate business on caller identification.
Attorney General Ayotte offers the following recommendations to consumers to avoid falling victim to these scams:
Do not respond to e-mails asking for information relating to tax refunds. The IRS's website is the only legitimate source for checking on refund status.
Do not let anyone purporting to be an agent for the IRS into your home unless he or she has proper identification.
Research charities before sending them money and do not respond to e-mail solicitations for money.
Do not give your checking or credit card account information to anyone unless you initiated the contact.
Do not assume the phone number appearing on your caller ID is correct.
If you have doubts about the caller, hang up and contact the company using a phone number of record. Do not call back to a number provided by the caller.
Consumers may also file complaints about unfair or deceptive practices by filing a complaint with the Attorney General's Office online at www.doj.nh.gov/consumer.
In addition, a copy of the New Hampshire Consumer Sourcebook can be obtained on the Attorney General's website.
ANOTHER INDICTED, TWO MORE PLEAD GUILTY IN BATON ROUGE, LOUISIANA, ON DISASTER RELIEF FRAUD CHARGES, Mar. 19, 2009
US Fed News
BATON ROUGE, La., Feb. 26 -- The U.S. Department of Justice's Federal Bureau of Investigation New Orleans Field Office issued the following press release:
United States Attorney David R. Dugas announced today that another Louisiana resident was indicted and two more pled guilty in federal court on fraud charges related to a hurricane disaster relief program. CRYSTAL G. JOHNSON, age 26, of Baton Rouge, Louisiana, was charged in an indictment today with three counts of mail fraud and one count of making a false claim in connection with the filing of a fraudulent claim with the Federal Emergency Management Agency (FEMA) for Hurricane Katrina disaster assistance benefits.
The indictment alleges that CRYSTAL JOHNSON presented a claim to FEMA that fraudulently stated her primary residence at the time of the storm was at an address in New Orleans, Louisiana. The indictment further alleges that as a result of JOHNSON's fraudulent claim, FEMA mailed three checks to her totaling over $14,000. The charges resulted from an investigation conducted by the Federal Bureau of Investigation and the U.S. Department of Homeland Security's Office of Inspector General. If convicted on all four counts of the indictment, CRYSTAL JOHNSON faces a maximum sentence of a term of imprisonment of sixty-five years, a $1,000,000 fine, or both.
THADDEUS JOHNSON, JR., age 29, and SUSAN J. JOHNSON, age 50, both of Clinton, Louisiana, pled guilty yesterday before U.S. District Court Judge James J. Brady to Count One of an indictment charging each of them with wire fraud in connection with the filing of fraudulent claims with FEMA for Hurricane Katrina disaster assistance benefits.
In response to Hurricane Katrina, FEMA made available rental assistance payments to qualified individuals in need of such assistance. According to the factual bases in the plea agreements, from in or about June 2006 through in or about August 2007, THADDEUS JOHNSON, JR., was living rent-free with his mother, SUSAN J. JOHNSON. During this time period, SUSAN J. JOHNSON created and signed false and fraudulent rent receipts that appeared to show that THADDEUS JOHNSON, JR., had paid monthly rent. The fraudulent receipts were submitted to FEMA in support of claims for rental assistance payments, causing funds totaling $10,731.40 to be transferred by FEMA into a bank account accessed by THADDEUS JOHNSON, JR. The case was investigated by the U.S. Department of Homeland Security's Office of Inspector General. As a result of the guilty pleas, THADDEUS JOHNSON, JR. and SUSAN J. JOHNSON each face a maximum sentence of twenty years imprisonment, a $250,000 fine, or both.
As a condition in the plea agreements, THADDEUS JOHNSON, JR. and SUSAN J. JOHNSON will jointly be responsible for $10,731.40 in restitution to FEMA. Today's indictment brings the total number of individuals who have been charged in the Middle District of Louisiana with violations related to hurricane disaster relief funds to one hundred seventy-two.
In September 2005, Attorney General Alberto R. Gonzales created the Hurricane Katrina Fraud Task Force, designed to deter, investigate and prosecute disaster-related federal crimes such as charity fraud, identity theft, procurement fraud and insurance fraud. The Hurricane Katrina Fraud Task Force - chaired by the Assistant Attorney General of the U.S. Department of Justice's Criminal Division - includes the FBI, the U.S. Inspectors General community, the U.S. Secret Service, the U.S. Postal Inspection Service, the Executive Office for United States Attorneys and others.
For further information, contact David R. Dugas, U.S. Attorney for the Middle District of Louisiana, or Lyman Thornton, First Assistant U.S. Attorney, at (225) 389-0443. Anyone suspecting criminal activity involving disaster assistance programs can make an anonymous report by calling the toll-free Hurricane Relief Fraud Hotline, 1-866-720-5721, 24 hours a day, seven days a week, until further notice. Information can also be emailed to the Hurricane Katrina Fraud Task Force at HKFTF@leo.gov or sent by surface mail, with as many details as possible, to Hurricane Katrina Fraud Task Force, Baton Rouge, LA 70821-4909.
NOTE: An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by the defendant. The defendant, of course, is presumed innocent until and unless he/she is proven guilty at trial.For more information please contact: Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com
New Mexico: Nonprofit Disclosure Measure Fizzles; Issue's Complexity Hinders Measure, Mar. 18, 2009
Albuquerque Journal, Mar. 18, 2009
By Colleen Heild Journal Staff Writer
SANTA FE - A legislative measure to require disclosure by New Mexico nonprofits that engage in electioneering appears all but dead this session.
"I think it mostly is (dead for now)," said Rep. Al Park, D-Albuquerque. "It's not even dead on the merits. It's dead on the complexity of the issue."
Park said the measure, HB 808, was introduced relatively late in the session and now requires "legislative surgery to make it a bill that's workable." That's not likely to happen in the waning days of the session that ends Saturday, said Park, who chairs the House Judiciary Committee, where the bill is assigned.
The bill's sponsor, Rep. Paul Bandy, R-Aztec, said there's still a possibility that a disclosure requirement for nonprofits might be tacked onto a campaign contribution bill on the House floor, but he offered no details.
Bandy noted the stiff opposition that turned out Monday night for a hearing before Park's committee. Nonprofits ranging from the American Cancer Society to AFSCME to advocates for the homeless and for reproductive choice condemned the measure, as did several committee members.
"No one liked it except me," Bandy said Tuesday.
Under the bill, nonprofits that engaged in certain "targeted election-related communications" prior to an election would lose their tax exempt status with the state if they failed to disclose donations of $1,000 or more.
No one in the packed audience spoke in support of the measure at Monday's hearing. Representatives from the Center for Civic Policy, the nonprofit at the center of the controversy, attended the hearing but didn't address the committee. The center helped sponsor mailings that criticized nine legislators last year. Five of the nine lawmakers lost their bids for re-election.
The center, which is headed by a former political consultant, aims to educate voters on the issues, to increase voter turnout and train new leaders for civic life, according to its Web site. Its representatives contend its actions have been informational and nonpartisan.
But Attorney General Gary King's office concluded otherwise, and on his advice, Secretary of State Mary Herrera required the center and another nonprofit sponsor of the mailings to register as political committees and disclose their donors.
The center voluntarily released a list of its major contributors, but has sued the state, saying the political committee registration requirement violated free speech.
On Monday night, lawmakers learned some legislative staff thought Bandy's measure ran afoul of the U.S. Constitution.
"I thought we were supposed to uphold the constitution," said Rep. Mimi Stewart, D-Albuquerque. "I just don't see how we can do it." The bill was drafted by King's office, which defended its legality Monday.
Assistant Attorney General Phil Baca told the committee the bill would also cover churches, which he said in other states have been found to have crossed into the political realm by providing their mailing lists to the Republican Party.
House Majority Floor Leader W. Ken Martinez, D-Gallup, told the audience there were "no villains" in the controversy, but said he remained concerned that capping campaign contributions would lead to big money being moved to nonprofits. Nonprofits aren't bound by either federal or state law to report their donors publicly.
"It's a difficult issue," Martinez said. "I don't think we're going to get it done this session."
U.S. moves to seize Fumo's properties, Mar. 18, 2009
The Philadelphia Inquirer
By Emilie Lounsberry, Craig R. McCoy, and Mario F. Cattabiani; Inquirer Staff Writers
Now that former State Sen. Vincent J. Fumo is facing the prospect of a long prison term, federal prosecutors moved quickly yesterday to go after his money.
In court papers filed yesterday, Assistant U.S. Attorneys Robert A. Zauzmer and John J. Pease said that the government intended to seize a portfolio of Fumo real estate - his 27-room Philadelphia mansion, his 100-acre farm outside Harrisburg, his properties at the Jersey Shore, and his place in Fort Lauderdale, Fla.
Zauzmer and Pease told jurors that Fumo's scheme had cost taxpayers and a pair of nonprofits nearly $4 million - and now they contend he should cough up his ill-gotten gains.
The prosecutors are also gearing up for what is expected to be a fierce legal battle with the defense over what would be the appropriate sentence for Fumo, 65, who over a three-decade career representing Philadelphia in the Senate became one of the most powerful Democrats in the state, and who on Monday was convicted of 137 counts of fraud, conspiracy, obstruction of justice, and other offenses.
His codefendant, Ruth Arnao, 52, a former legislative aide who once headed Citizens' Alliance for Better Neighborhoods, one of the nonprofits she and Fumo defrauded, was convicted of 45 counts involving Citizens' Alliance and obstructing justice.
The prosecutors listed three of her properties as assets that could be forfeited, including her home in the Spring Garden section of Philadelphia; her place near Miami; and a condo in Ventnor, N.J.
One day after the jury's sweeping verdict, the impact of it continued to reverberate:
The state Attorney General's Office said it was "ramping up" its own investigation into how Citizens' Alliance spent hundreds of thousands of dollars in ways inconsistent with charitable purposes.
Gov. Rendell said he was looking into whether he should try to dismiss Arnao's husband, Mitchell Rubin, as chairman of the state Turnpike Commission.
And a state official said a review would begin of Fumo's $101,000 annual pension.
Fumo and Arnao are due back in court tomorrow for a hearing before U.S. District Judge Ronald L. Buckwalter on the government's effort to seize their assets.
Both are free on bail pending sentencing, which is expected to take place in the next three to six months.
Pease and Zauzmer are expected to seek a sentence of more than 10 years in prison for Fumo, and several years behind bars for Arnao.
For prosecutors, seeking lengthy prison terms in political-corruption cases has become the norm.
Former City Treasurer Corey Kemp, who served under Democratic Mayor John F. Street, is doing a 10-year stretch following a 2005 corruption conviction.
Former City Councilman Rick Mariano, another Democrat, is serving a seven-year prison sentence. Former Democratic Councilman Leland M. Beloff was sentenced to 10 years for a 1986 extortion scheme involving the mob. And former City Councilman James Tayoun, another Democrat who pleaded guilty to corruption charges, received a 40-month sentence.
John S. Carter, the former head of the Independence Seaport Museum - the other nonprofit Fumo was convicted of defrauding - is serving a 15-year prison term for bilking the museum of more than $1.5 million in a case that did not involve the state senator. Fumo was found guilty of defrauding the museum of $115,000 for yacht trips provided for him by the museum.
Fumo's sentence would likely be more than whatever sentence is given to his former computer technician, Leonard Luchko, who played a subordinate role in the scheme to obstruct justice.
Luchko is scheduled to be sentenced in May on his guilty plea last year of conspiring with Fumo to obstruct justice by permanently deleting numerous e-mails sought by the FBI. Luchko originally agreed to be a prosecution witness in return for leniency at sentencing, but prosecutors dropped him as a witness after they learned he had exchanged many e-mails with Fumo before and during the trial.
Buckwalter will have to decide whether any prison sentence should begin immediately, or whether Fumo and Arnao should be allowed to remain free pending the outcome of their appeals, which probably would take about two years.
Citizens' Alliance A spokesman for Attorney General Tom Corbett said yesterday that the jury's findings established that Citizens' Alliance was indeed victimized.
"Now that the trial is over, this is no longer about alleged criminal activity. It is about criminal activity," said spokesman Kevin Harley. "We are certainly ramping up our investigation."
The verdict gave renewed impetus to the office's review of the nonprofit's heavy spending on lawyers for Arnao, Harley said.
Harley said the investigation could eventually lead to the state stripping Citizens' Alliance of its state charter to operate as a charity, and forcing it to liquidate its assets.
It was unclear yesterday just how big the legal bills had become.
In its last IRS tax return, Citizens' Alliance reported spending $506,00 on lawyers in 2007 - bringing total legal fees since the start of the probe to that point to $2 million. It is not known what share of that went to Arnao's representation alone.
The nonprofit said in its 2007 tax document that it would try to recover legal fees paid on Arnao's behalf and "any assets taken" by her or Fumo if the two were convicted.
After Arnao stepped down as executive director, her place was taken by lawyer Christian DiCicco.
In his closing argument, prosecutor Zauzmer described DiCicco, a former Fumo aide, as part of "a group that is committing a fraud" along with Fumo.
DiCicco refused to talk to the FBI during the Fumo investigation and asserted his Fifth Amendment right to be silent before the grand jury, according to trial testimony.
He did not respond to e-mail and phone requests for comment yesterday.
Mitchell Rubin Responding to a reporter's question yesterday, Gov. Rendell said he was looking into whether he should try to remove Rubin from his Turnpike Commission post.
Fumo was convicted of one charge contending that he gave Rubin, a close friend, a "no-work" Senate consulting contract.
"I think it's something that warrants investigation and I know the jury convicted [Fumo] on all counts, so we will have to take a look at it," the governor said.
Rendell added, however, that he was not certain that he could easily remove someone from that post. Rubin's four-year term does not expire until 2010.
"Once I appoint a turnpike commissioner, I think it is very difficult to dismiss them," said Rendell.
On some occasions, he said, some appointees have outright refused his request they quit.
Pressed by a reporter about his plans regarding Rubin, Rendell said, "We are going to review this. Hang on."
Rubin, who was not charged in the case, declined to comment yesterday.
Fumo's pension In an interview yesterday, Robert Gentzel, spokesman for the State Employees' Retirement System, said state officials normally start the process of ending a corrupt official's pension at the point of sentencing, not at the time of a jury's verdict.
However, in Fumo's case, officials have gotten a head start.
"Obviously, this office is aware of the case and is aware that it will have to be reviewed for a potential forfeiture," Gentzel said.
He said he could not offer an estimate on how long the process might take.
While Fumo seems virtually certain to lose his lucrative annual pension, he will be permitted to keep the money he put into the system through payroll deductions over his state service - but without the years of interest. That works out to just less than $100,000, according to figures provided under the state Right-to-Know law.
NH: Former employee accused of embezzling from clinic, Mar. 18, 2009
New Hampshire Union Leader, by Mark Hayward
CONCORD -- A former employee of a Concord abortion clinic was arrested yesterday on charges stemming from the embezzlement of more than $26,000 from the organization, Concord police said.
Police said they charged Manchester resident Janet Curtin, 55, with two Class A felony theft charges when she turned showed up at the police station yesterday afternoon to turn herself in. Police accuse Curtin of stealing "approximately $26,082.72" while employed at the Concord Feminist Health Center from March 2004 to June 2006.
Police said Curtin was a health worker who also had the responsibilities of managing the clinic's finances. She lives at 47 N. Reading St., according to a telephone directory.
"It hurts. It hurts not only the organization but it hurts the population we're serving," said MaryAnn Manoogian, executive director of the non-profit center. Manoogian said she found about the arrest yesterday afternoon, about the same time Concord police issued a press release.
But the clinic had previously known about the possible thefts, which were brought to the attention of the staff based on some improper practices that had been going on, she said.
The clinic notified the New Hampshire Attorney General's Charitable Trust Division, which alerted the Concord police, Manoogian said.
Throughout the ordeal, the health center cooperated fully with authorities, she said.
No such theft had previously happened at the South Main Street facility, but Manoogian said non-profit organizations have been experiencing such losses as of late.
"For those of us in the non-profit world, it has a chilling effect because we're looking to fulfill our mission and do good community work," she said. The clinic provides abortions and gynecological care on a sliding-scale basis, as well as contraception and pregnancy-related services, according to its Web site.
Manoogian said trust develops between an organization and its employees, which can allow for abuses to take place. Since Curtin's departure, the board and staff have revisited procedures and have instituted some additional checks and balances on center finances.
The organization employs about 24 people, both full- and part-time, and has an annual budget of about $850,000.
Curtin was a "general health worker" who answered the telephone and provided some counseling, Manoogian said. She also was in charge of bookkeeping and finances.
Police said Curtin is free on her own recognizance and is scheduled to appear in Concord District Court on April 20.
Oregon: State Sues Crooked River Ranch Water Co. Mar. 18, 2009
KOHD News
Oregon Attorney General John Kroger announced Wednesday that the Oregon Department of Justice has joined a lawsuit seeking to force out management that had improperly used the Crooked River Ranch Water Company for personal gain.
"The management abused a non-profit water district for personal gain in violation of the law, and we're going to put a stop to it," Attorney General Kroger said.
The Department of Justice filed a motion to intervene in a lawsuit that accuses the general manager of improperly borrowing money and equipment from the water district and taking excessive pay.
The lawsuit also accuses two district directors of using their positions to arrange contracts between their personal businesses and the Crooked River Ranch Water Company, which serves more than 3,800 people in Deschutes and Jefferson counties.
According to the suit, the directors invalidly dissolved the Crooked River Ranch Water Company and established the Crooked River Ranch Water Cooperative in an effort to avoid regulators.
The litigation seeks to remove the board and the general manager and turn over control of the district to professionals who will run it for the benefit of its members.
The Crooked River Ranch Water Company is a mutual benefit non-profit organized for the purpose of delivering domestic and irrigation water to the properties located on the Crooked River Ranch.
The Department of Justice on March 18 filed a motion to intervene in a 2008 lawsuit filed by Charles Nichols, a resident of Jefferson County and a Crooked River Ranch member.
The lawsuit is against the Crooked River Ranch Water Company and the Crooked River Ranch Water Cooperative; Richard A. Keen Jr., Randolph M. Scott, Brian A. Elliott, Richard J. Miller and John Coombs, who were board members of one or both of the entities; and James H. Rooks, general manager of the Crooked River Ranch Water Company and board member of the Crooked River Water Ranch Cooperative.
The Oregon Public Utility Commission has repeatedly taken action against the Crooked River Ranch Water Company.
Attorney General John Kroger leads the Oregon Department of Justice. The Department's mission is to fight crime and fraud, protect the environment, improve child welfare, and defend the rights of all Oregonians.
New York: Charities Give to State Campaigns, Despite Law, Mar. 17, 2009
The New York Times, By DANNY HAKIM and JEREMY W. PETERS
ALBANY : For more than half a century, charities have been barred by federal law from making contributions to political campaigns.
But the news does not seem to have reached Albany.
A review of campaign-finance and federal tax records shows that at least 81 tax-exempt charities have given contributions to legislative candidates since 2005, with some organizations giving more than once to multiple candidates. While the amounts were not eye-popping, the contributions often flowed to lawmakers who helped the charities secure state money.
The donations -- by museums, churches, hospitals, even Little Leagues and soccer clubs -- underscore the lack of oversight of lawmakers' fund-raising practices in the state.
The State Board of Elections said it did not have the jurisdiction to screen contributions by nonprofit groups, calling it a matter for the Internal Revenue Service. ''There's nothing we can say or do about it,'' said Robert Brehm, a spokesman for the board.
The I.R.S. would not comment on the activities of specific charities. Attorney General Andrew M. Cuomo's office oversees charities on the state level, and a spokesman said the office can take action when there is evidence of systemic abuse of charitable money.
Federal law prohibits nonprofits classified as 501 (c) 3 organizations from making political donations or participating in campaigns. Those that do risk losing their tax-exempt status.
Asked about the contributions last week, legislators and charity officials offered several responses, including apologies, suggestions of clerical errors and defiance. Some of the contributions were given as the cost of admission to political fund-raisers, which some donors said they did not realize counted as campaign contributions.
Some politicians insisted it was legal to accept the money even if the charities were barred from giving it.
''This clearly documents a system that's out of control,'' said Blair Horner, legislative director for the New York Public Interest Research Group.
Since 2005, 55 legislative candidates -- a vast majority of them incumbents -- received at least one contribution from charities.
Legislators insist there is no connection between their acceptance of these donations and any actions they might take to support the charities' interests. The charities say they are supporting legislators who do good work, without regard to any assistance they may have provided.
''He's been a friend for years,'' said Michael Crinnin, the executive director of AIDS Community Resources in Syracuse, of Assemblyman William B. Magnarelli, to whom Mr. Crinnin's group gave $250. ''He's really good on health issues and AIDS issues.''
Mr. Horner said that the Board of Elections should be required to monitor such contributions and that state law should be changed to make it explicitly illegal for politicians to accept them. Currently, the responsibility of avoiding such donations appears to fall solely on the nonprofit organizations.
''All I can say is, 'Mea culpa, mea culpa, mea culpa,' '' said Fred W. McPhilliamy, president of Helen Keller Services for the Blind, which donated $2,000 in February 2008 to State Senator Carl L. Marcellino, a Long Island Republican who helped win $55,000 in state aid for the group last year. ''We goofed.''
He said that representatives of his group bought tickets to a campaign fund-raiser for Senator Marcellino in Albany at the urging of a lobbyist but ''never thought of it as a political contribution.''
Senator Marcellino, who the records showed also accepted money from other nonprofit groups, said, ''It was a dumb mistake on our part, and they shouldn't have done it either.''
The campaign of Senator John J. Flanagan, another Long Island Republican, received $500 in April 2007 from Helen Keller Services, which is based in Brooklyn. He said he was returning the money.
''You try and be diligent,'' he said, ''but we are by no means perfect.''
Assemblywoman Rhoda S. Jacobs, a Queens Democrat, received contributions from several nonprofits, according to the records, including Maimonides Medical Center, which gave her campaign $2,500 in 2006.
That summer, Ms. Jacobs secured state financing to help Maimonides buy a CT scanner.
''I don't think we did anything wrong,'' said Mary Jo Ehrlich, chief of staff for Ms. Jacobs. ''The onus isn't on us to find out what their tax status is.''
Asked if the campaign did any vetting of donors, she said, ''I don't know that we go through and say, 'We can't take this,' or 'We can't take that.' ''
A spokeswoman for Maimonides, a nonprofit hospital, said she believed the contribution was made in error when hospital officials attended a brunch at which Ms. Jacobs was the host.
Assemblyman Peter J. Abbate Jr., a Brooklyn Democrat, accepted a total of $900 from 2005 to 2008 from the Italian Board of Guardians, a Brooklyn nonprofit that provides social services like marital counseling, tutoring and housekeeping for the elderly and the disabled.
Mr. Abbate said in an interview that he was not aware the organization had given him money.
''They gave how much?'' he asked when told that the group had given him donations going back to at least 2005. ''They shouldn't have,'' he said. ''And if they have, I will return the money.''
He later said that some of the donations may have been recorded improperly and may have come from people who work for the board.
Maria Patalano, the executive director of the Italian Board of Guardians, said she believed the contributions reflected her purchases of tickets to fund-raising dinners, but did not consider them political donations.
''That's P.R. work,'' she said. ''You need to be out there. But as far as I see, that's not really a donation.''
Mr. Crinnin called his group's contribution to Mr. Magnarelli ''an honest mistake.'' After the assemblyman sponsored a $10,000 member item, or earmark, for the group in 2007, Mr. Crinnin received an invitation to a fund-raiser for Mr. Magnarelli, a Democrat. Mr. Crinnin said he now realized he should have paid for his ticket himself.
There have been periodic efforts to overhaul Albany's campaign finance system, which is considered among the nation's weakest, including a push by Gov. Eliot Spitzer in 2007.
But little momentum has been generated, despite the pleas of government watchdog groups, and the issue of charities giving to lawmakers' campaign accounts has not received broad attention.
At least one national campaign finance watchdog said the situation in New York appeared unique. ''I'm not aware of any situation where 501 (c) 3 groups have made contributions because it so obviously does not comply with campaign finance laws,'' said Fred Wertheimer, founder of Democracy 21, a government watchdog group.
Asked on Friday about the practice, a spokesman for the Assembly speaker, Sheldon Silver, said he was ''concerned'' about the donations, but declined to comment further.
The office of the Senate majority leader, Malcolm A. Smith, had no immediate comment.
Texas AG halts all payments to former staff of Tyler hospital, Mar. 14, 2009
Tyler Morning Telegraph
Casey Knaupp, Tyler Morning Telegraph, Texas
Mar. 14--Texas Attorney General Greg Abbott announced Friday he has taken legal action to preserve charitable assets owned by the now-defunct Doctors Memorial Hospital in Tyler.
The 30-bed hospital, which opened in the late 1960s as a nonprofit organization, closed its doors in 2000 but millions of dollars in charitable funds were spent on salaries and severance pay years after the hospital ceased operations, according to a prepared statement from the attorney general's office.
The legal action, brought on by the top Texas prosecutor on behalf of the public interest, cites the Texas Non-Profit Corporation Act prohibits the compensation and severance packages that were paid to former executives of the Doctors Memorial Hospital (DMH).
Defendants named in the lawsuit, alleging breach of fiduciary duty, are: the hospital's former Chief Executive Officer Ollie Clem, his daughter and Chief Operations Officer Lisa Blaine, and directors Dr. David Norris and Dr. Norman Truitt.
Abbott asked a Travis County probate judge on Friday to appoint a receiver and take other measures to preserve the charitable assets.
A review by the Attorney General's Charitable Trusts Section showed Clem and Ms. Blaine were paid more than $2 million after DMH closed on Aug. 31, 2000, Abbott said.
The hospital's board of directors continued paying Clem and Ms. Blaine full salaries and benefits for four years. During that time, operations included archiving hospital records, selling and donating equipment and selling the hospital's real estate holdings, including its main building. The board of directors also authorized severance packages for Clem and Ms. Blaine so that they both received full salary and benefits in 2005 and 2006, Abbott said.
"By awarding these lavish severance packages to Mr. Clem and Ms. Blaine, the executives in charge of DMH at the time it was forced to close, the board of directors chose to reward them for the business failure of DMH," the lawsuit states.
A 2000 report by the Texas Department of Health that cited numerous deficiencies in care led to the hospital shutting down.
Abbott claims that compensation in a reasonable amount can be distributed to corporate officers, but in this case was not proper because the hospital's closure reduced the duties of Clem and Ms. Blaine.
The approval of the "improper severance packages" ultimately cost the public over $550,000 in charitable assets that should have been preserved and distributed to other health care charities in the Tyler area," the lawsuit states.
Two senior employees also received $550,000 in severance payments, approved by the hospital's board of directors, Abbott claims.
In 2005, the DMH board voted to hire Ms. Blain as the sole employee of the Doctor's Memorial Hospital Foundation, a separate organization from DMH, at an annual salary of $50,000 but the foundation did not have any assets and never applied for or received federal nonprofit tax status, Abbott said.
According to investigators, DMH assets were used to pay Ms. Blaine's foundation salary from 2006 through April 2008.
The lawsuit also claims that since 2002, decisions were being made by the board of directors, which no longer had an effect quorum of directors.
Abbott claims the defendants are liable for compensatory damages in the amount of any misappropriated or misdirected assets of DMH and for any dispensation of the non-profit corporation's assets that are more than the amounts determined to be reasonable compensation for services rendered. The defendants are also liable for all actual and exemplary damages, the lawsuit states.
The lawsuit requests that a temporary receiver be appointed to protect the assets and administer the business of DMH, then liquidate the assets of the hospital and distribute them to a non-profit corporation providing health care in the Tyler area.
MUSEUM WON'T DISCLOSE BOARD; Perris: Officials Say The Orange Empire Railway Group's Information Should Be Public; Mar. 12, 2009
The Press Enterprise, by JULISSA MCKINNON, THE PRESS-ENTERPRISE
Despite a law that requires nonprofit organizations to disclose their officers and directors, the Orange Empire Railway Museum, one of Perris' oldest charities, has not included the information on its tax forms.
Museum President Thomas Jacobson refuses to say who sits on the museum's nine-member board of directors.
"You are not entitled to that information. We comply with the law," said Jacobson, a Riverside-based attorney, during a phone interview about the charity founded in 1956.
However, authorities with the state's Office of the Attorney General and the Internal Revenue Service, both charged with regulating nonprofit groups, say a nonprofit is mandated by law to disclose all of its key officers, including members of a board of directors, on its tax forms.
"That should be public information," said Kevis Foley, the registrar of charitable trusts for the state Attorney General.
Lisa Runquist, an attorney who specializes in nonprofit organization law, said it's a tradeoff: nonprofit groups make certain information public in exchange for not paying taxes.
"In exchange for tax-exempt status, nonprofits have to provide certain information to the people they are supposedly helping as well their contributors. The basic concept is to make them answerable to the public," Runquist said. Peter Scheer, of the California First Amendment Coalition, said the museum's accountability requirement is intensified by the fact that it recently benefitted from public funds.
Last fall, Perris spent $1.5 million renovating the old Santa Fe depot downtown. The museum transferred ownership of the buildings to the city in exchange for continued use of the depot for 99 years.
City officials do not know who sits on the museum's board, said city spokesman Joe Vargo. Perris City Council members say they don't know, either.
"I don't see how or why it would be a secret for a nonprofit organization, especially when they were involved in a city partnership on the renovation of the depot," said Councilman Al Landers. Even though the museum's by-laws and other records filed with state agencies show that nine people serve on the board of directors, the museum's most recent tax forms list only three people: Jacobson as president; Sharlin Peters as secretary; and Corey Wylde as chief financial officer.
According to Foley, who oversees the state's charities, the museum failed to file the required 990 tax forms for 2002, 2003 and 2004. The museum's most current tax information shows that for the 2007-08 fiscal year it received $267,000 in contributions, part of its total $869,000 in annual revenue.
The question about who leads the museum arose during interviews about the museum's ownership of property that has harbored an unpermitted truck and electrical equipment storage yard for one of the nation's largest utility contractors, Henkels & McCoy, for at least three years.
Henkels & McCoy, a multi-million dollar corporation based in Blue Bell, Pa. has worked until recently as a subcontractor for Southern California Edison, assisting the electric company on such projects as moving overhead electrical wiring underground for Perris City Hall and the sheriff's station.
Scheer said any charity that is reluctant to identify its leadership is raising a red flag. Many nonprofit groups advertise their board members on their Web sites,he said.
"If they have directors that no one knows about there's always the question is there a conflict of interest?" Runquist said. "What are they doing that they don't want people to know this?"
Missouri: ATTORNEY GENERAL'S 'CHECK A CHARITY' DATABASE REACHES 1,000 ORGANIZATIONS SEARCHABLE FOR CONSUMERS, Mar. 12, 2009
US Fed News
JEFFERSON CITY, Mo., March 10 -- The Missouri Attorney General issued the following news release:
Attorney General Chris Koster says the Check a Charity feature on his Web site recently added the1,000th charitable organization to its records, giving consumers more information and options than ever before when considering charitable donations. The Check a Charity link can be found at the Attorney General's Web site, ago.mo.gov. Consumers without Internet access can obtain the same information by calling the Consumer Protection Hotline, 1-800-392-8222.
"Consumers face a dizzying array of options when researching the charities they'd like to help financially, and it's overwhelming when you add in all the telemarketing calls and mail solicitations," Koster said. "Before making a donation Missourians need to do their research, and Check a Charity is a good place to start."
Consumers can search for a charity by name or look at an alphabetized list. Online records for each charity will show the amount of money raised in the past year and what percentage of funds was spent on program services, as opposed to administrative costs like fundraising, overhead and payroll. Koster and most consumer advocates nationwide recommend consumers give to charities that spend at least 65 percent of their funds on program services. Most of the data comes from the charities' IRS 990, which includes a description of the charity=s mission as well as the financial information described above. Koster says a charity's listing on the Web site should not be seen as a "seal of approval" from the Attorney General, but rather as one piece of information to be considered when researching a donation.
The Check a Charity site was launched by former Attorney General Jay Nixon in August of 2005. Koster says his office encourages any charity not yet registered to do so. Registration forms are available for download at the Check a Charity page at the Attorney General's Web site, ago.mo.gov.For more information please contact: Sarabjit Jagirdar, Email:- htsyndication@hindustantimes.com
More Grant Makers Support Efforts to Help Charities Operate Effectively, Study Finds, Mar. 12, 2009
The Chronicle of Philanthropy
BYLINE: Marty Michaels
A growing number of grant makers nationwide are taking innovative steps to ensure good governance in the nonprofit world, says a new report.
While grant makers have pushed nonprofit groups to do a better job of getting results over the past decade or so, they more recently have started to finance specific efforts to strengthen and clarify the role of boards of directors, a crucial component of what the report calls "the leadership equation."
There is no "one size fits all" approach to promoting effective governance, caution the report's authors. But they say that grant makers should focus on helping boards provide oversight of a charity's programs and finances, guarantee openness and ethical accountability, assist chief executives in managing day-to-day operations, and protect their organization's long-term viability.
The new publication is a joint project of BoardSource, a Washington organization that works to improve nonprofit governance, and FSG Social Impact Advisors, a research and consulting group in Boston.
Asking Questions
The report says such efforts are more important than ever given increased scrutiny of nonprofit boards by the Internal Revenue Service, the Senate Finance Committee, and some state attorneys general. At the same time, the bad economy is putting pressure on many organizations to prove their effectiveness as they compete for shrinking grant dollars and other contributions.
Kathy K. Hedge, strategic-initiatives adviser at BoardSource and one of the report's authors, says that over the past few years her organization has fielded more and more questions from grant makers about what information to seek and which policies to include in grant requirements and evaluation.
For the report, the authors interviewed individuals from 54 grant-making organizations, including corporations and community, family, and private foundations. Based on the interviews, the report offers a framework of three "contexts" for grant makers to consider in their dealings with nonprofit groups: "governance and the grantee," "governance and the community," and "governance and the field."
While the report offers advice on each area -- outlining advantages, challenges, and ways to overcome those challenges -- it says many of the grant makers surveyed are involved in two or three of them.
For example, the New Hampshire Charitable Foundation, in Concord, has worked with the state attorney general's office and others to develop a set of recommendations that resulted in two publications, one outlining all legal requirements for nonprofit groups in the state, and one focusing on board responsibilities and conflict-of-interest guidelines. In addition, the foundation helped run workshops on those themes throughout New Hampshire.
The report advises grant makers to ask themselves three questions:
* How do investments in governance align with our mission, values, and grant-making style?
* Who is our audience and what are its needs?
* What resources can we build on to improve governance?
Asking those questions can be particularly helpful when grant makers are dealing directly with a single grantee, says Ms. Hedge. She was struck, she adds, by the extent to which survey participants were aware of the "power dynamics" that affected their work and by how they worked to bridge that gulf with candor and open-ended, "exploratory" questions.
"They were clear in terms of their expectations, but weren't being prescriptive," says Ms. Hedge.
She adds that most grant makers weren't concerned with "just pure due diligence, not just a checklist, but how best to educate their grantees. It's not just about, Is the board meeting their legal requirements, but going beyond that in the spirit of trying to be helpful. You don't go into it trying to find the right answers, you're not trying to get to just Yes or No."
'Walk the Talk'
Ms. Hedge says another finding of the report was that many grant makers feel compelled to "walk the talk" with regard to their own boards. Particularly those grant makers that work in smaller geographic regions, she says, have said in conversations with local grantees, "I know it's not always easy, but look, we've done this too."
She cites Teri A. Hansen, chief executive of the Gulf Coast Community Foundation of Venice, in Florida, who is quoted in the report as saying, "I don't see how someone could think it is a good idea for others to engage in board development if you haven't gone through it yourself. It would be like working for Ford and driving a Chevrolet."
The project was supported by a $90,000 grant from the Evelyn and Walter Haas Jr. Fund, in San Francisco, and a $30,000 grant from the W.K. Kellogg Foundation, in Battle Creek, Mich.
Oregon Anti-tax activist barred from charities Mar. 7, 2009
Lewiston Morning Tribune, March 7, 2009 RYAN KOST
PORTLAND, Ore. - A Multnomah County judge Friday permanently barred anti-tax activist Bill Sizemore from operating, managing or being a key employee of any charity.
Late last year, Judge Janice Wilson found Sizemore had violated a previous injunction that ordered any charity run by Sizemore to, among other things, comply with Oregon and federal campaign and charitable reporting laws and not donate to political action committees.
At the time, Wilson simply ordered that injunction extended another five years.
But on Friday, at the request of Oregon Attorney General John Kroger and two union organizations, she placed a permanent injunction on Sizemore from operating any charity and said Sizemore must get court permission to operate nonprofit political committees.
Sizemore has run afoul of previous court decisions more than once. That's why, explained Tony Green, a spokesman for the attorney general, the organizations sought the amendment.
"We have the expectation that if the injunction is crystal clear - 'You cannot operate a charity' - that there will be no misunderstanding," he said.
Added Greg Hartman, a lawyer for the Oregon Education Association: "This has all been about Bill following the rules, which he's had an extraordinarily hard time doing."
The OEA is one of two unions that has sued Sizemore.
The ruling was part of an ongoing case in which Wilson found Sizemore had violated the original injunction by creating the American Tax Research Foundation, then using it to funnel money to himself as compensation for work on various ballot measures. Both the judge and the unions have called it a "sham."
When Wilson made her initial ruling, she ordered Sizemore to repay the amount he and the charity transferred to him for personal and political uses, but she didn't say to whom he should repay that money.
On Friday, she clarified her decision. She said Sizemore should repay the American Tax Research Foundation, an organization for which he no longer works.
Attorneys from both sides are working to determine how much Sizemore received. Hartman said a conservative guess is between $500,000 and $700,000.
Sizemore's attorney, Gregory Byrne, has also been representing the foundation. On Friday, he asked the judge to unfreeze the organization's assets so he and an accountant could be paid.
Wilson declined, saying she had no evidence that those now controlling the foundation were operating it legitimately.
"It was created as a sham," she said. "It was run as a sham."
Wilson said she might lift the restriction if there were proof it was operating under its stated purpose to educate people about state tax laws. "If it wanted to actually perform that work, it would be fine."
Byrne had said earlier that if the judge declined to unfreeze the organization's accounts, she would effectively shut it down but declined to say Friday whether it would actually dissolve.
Sizemore was not at the hearing, but earlier in the day he dismissed Kroger's move to amend the injunction as politically motivated.
"What this is is an attempt by the (Department of Justice) to do the unions a favor and to make it as hard for me as possible to raise money for politics," he said. "This is nothing more than the attorney general's office helping the unions get rid of a political opponent."
NY Times: Bad Guys Set to Pounce In Bad Times Mar. 6, 2009
BYLINE: By CLYDE HABERMAN.
In this Age of Madoff, the bar for ne'er-do-wells has been set exceedingly high.
But we are a nation of strivers here in the land of E pluribus unum, to borrow from that world-class flimflammer, the Wizard of Oz. Few are likely to soar to the heights of deception that Bernard L. Madoff is accused of having reached. All the same, so many blackguards, lowlifes, scalawags, scoundrels, miscreants and other masters of skulduggery are ever about that we would all be wise to keep hands placed firmly on wallets.
That, more or less, was the warning on Thursday from an array of government and nonprofit agencies at the United States Customs House on Bowling Green.
In case you missed it, this is National Consumer Protection Week. If ever the consumer needed protecting, it is now. Hard times, Leonard L. Gordon said, have created ''a target-rich environment for scammers'' who are all too eager to pick your pocket and even steal your identity.
Mr. Gordon is the northeast regional director of the Federal Trade Commission. On Thursday, he was in effect the M.C. at a news conference on consumer fraud that was held by agencies sometimes better known by their initials -- employing enough of the alphabet for the people at Campbell's to create a new line of soup. The Customs House was an appropriate setting. It is where federal bankruptcy judges sit.
The Better Business Bureau was present. So were representatives of the state's attorney general, the state's Consumer Protection Board, the city's Department of Consumer Affairs and AARP -- the last, perhaps, because those of us who entered the world a few letters before Generation X are more vulnerable to fraud than some others.
The message from them all was rather grim: fraud is on the march, whether carried out by store owners or online hucksters. Each agency had its own take, though.
The ''most troubling sign'' for Marla Tepper, general counsel of the Consumer Affairs Department, was the sharp rise in complaints about underhanded and aggressive debt-collection agencies. They replaced home-improvement contractors as her department's No. 1 source of grievances. Many of them, way too many, she said, harass people mercilessly, phone at all hours, use abusive language and go so far as to threaten recent immigrants with deportation.
''Consumers have rights even when they owe debts,'' Ms. Tepper said.
Judging from complaints registered with the Better Business Bureau, companies selling consumer electronics are the top offender in the city. But Claire Rosenzweig, the bureau's president for the New York region, said that unsavory practices by telecommunications companies became a significant and growing problem in 2008.
AT the Federal Trade Commission, identity thieves are archvillains, but Mr. Gordon cited unscrupulous collection agencies as being of particular concern. ''As the economy gets tighter and tighter,'' he said, ''debt collectors may be getting more desperate.''
Not nearly as desperate, though, as victims of phishing. This is a form of online fraud that uses devious e-mail messages to gull the unsuspecting out of account passwords and other vital information. Phishers are phlourishing, said Mindy A. Bockstein, chairwoman of the Consumer Protection Board.
And the federal economic stimulus program, she said, has already created new opportunities for criminals. They phone people and tell them they are entitled to stimulus money. But first the callers demand banking information and the like, cautioning their marks that they must act fast. ''Given the state of the economy, people are more anxious and more desperate,'' Ms. Bockstein said. Some will believe anything.
To add a personal touch, the agencies brought along a few victims to tell their stories. One was Mikel Rouse, a composer and director of operas, who recounted how he had been hounded ruthlessly by collection agencies for a $20,000 debt that he had cleared up several years earlier. ''It's just a shell game,'' said Mr. Rouse, who turned to Consumer Affairs for help.
It's enough to make one pine for the three-card monte players of the old days. They at least had some style.
Actually, Mr. Rouse said, he fell for a three-card monte scheme soon after moving to New York from Missouri in 1978. He lost $5. Back then, that was real money for him.
But I only had to fall for it once,'' he said, and then nevermore.
Georgia: FBI raid, lawsuits against big Georgia food charity raise questions about financial dealings Mar. 6, 2009
By DIONNE WALKER, Associated Press March 6, 2009
ATLANTA - For more than a decade, Angel Food Ministries seemed like a godsend for families who purchased its low-cost food boxes and the churches that shared millions in revenue for distributing the goods.
It became an economic juggernaut in the faith community, employing hundreds, feeding thousands a month and pouring $19 million into its network of more than 5,000 host churches in 35 states.
Now, a lawsuit coupled with an FBI raid at the group's headquarters has raised accusations of financial mismanagement at the nonprofit. The raid and ensuing FBI investigation have left congregations and church leaders weighing whether to cut their ties to the high-profile charity after the reported disclosure that six-figure salaries were paid to its founders.
"We get signed up and I start hearing this," said the Rev. Chad Massey, whose Unadilla First Baptist Church in central Georgia planned to place its first Angel Food order this month. "It's kind of hard to know what to do."
FBI officials haven't disclosed the nature of the investigation surrounding the ministry.
Angel Food has acknowledged that a grand jury investigation is looking into what it called "alleged financial irregularities" involving unspecified individuals — but not the ministry itself.
Meanwhile, Angel Food Ministries board members and former employees have filed lawsuits accusing Angel Food leadership of using the non-denominational nonprofit as a moneymaking venture.
The Rev. Joseph Wingo and wife Linda founded the ministry in 1994 to help 34 families hurt by plant closings in the manufacturing town of Monroe, about 45 miles east of Atlanta.
Since then, Angel Food Ministries has grown to hundreds of workers supplying food for anti-poverty programs at more than 5,000 churches spanning several denominations. There are 473 distribution centers listed in Georgia and more than 1,400 concentrated in Texas, Missouri, Tennessee and Pennsylvania.
All told, the ministry says it serves more than 500,000 families a month. It has no plans to interrupt food delivery
Families typically order multi-meal boxes of meatballs, ham and other staples from monthly menus, spending roughly $30 for an estimated $65 worth of groceries, Angel Food says. Later, they collect boxes at churches that are rewarded with at least $1 for every box delivered.
At Ebenezer United Methodist Church in Conyers, administrative assistant Glenda Evans said leaders are sticking by Angel Food. "Hopefully it gets worked out," Evans said.
In 2006, the ministry reported revenue of $96 million dollars and $17 million in expenses. Tax records from that year show the Wingos and two of their sons earned a combined total in excess of $2.1 million for leading the ministry, up from just less than a combined $323,000 a year earlier.
Their combined salaries dipped to $501,472 in 2007, records showed.
Wingo did not respond to repeated AP requests to be interviewed.
In December, the salaries prompted a national Christian charity watchdog group to flag Angel Food as one of 30 ministries donors should avoid.
"One family for one year making ... more than the president of the United States of America is just kind of outrageous," said Rodney Pitzer, a top official at Wall Watchers. "That should be enough for donors to be concerned."
Two Angel Food board members alleged in a lawsuit last month that the Wingos enriched themselves by at least $2.7 million and sought to bar the Wingos from their Monroe headquarters. The board members accused the Wingos of directing $600,000 from Angel Food to their church as a "housing allowance."
In a settlement reached behind closed doors Friday, the Wingos agreed to an audit and to stopping questionable financial practices — like using corporate credit cards for personal expenses — in lieu of being barred from the premises, according to Thomas Rogers, an attorney representing the board members.
Attorneys representing the Wingos would not reveal further details of the settlement, and the Wingos themselves declined to comment.
A statement on Angel Food's Web site called the lawsuit an effort "by two directors who are interested in removing the founders of the ministry — Pastors Joe and Linda Wingo — only to install themselves in the founders place. This is a power grab."
In an earlier statement, Angel Food portrayed the FBI's Feb. 11 search as part of an "investigation of an individual or individuals connected to the organization, and not regarding the ministry itself."
In disputing the suit, Angel Food said it has been "a model corporate citizen," donating $5.2 million to more than 5,000 communities in 2008.
Luke Erickson, a pastor at Mountain Christian Church near Baltimore, Md., said church leaders like himself received an explanation from the ministry for the high salaries.
"They've invested a lot in it ... there was some kind of compensation given back to them by Angel Food and it was reflected in a large salary in one year," Erickson said.
Finances of prominent ministries have come under scrutiny of late, including a Senate probe begun last year of claims of extravagant spending by some leaders of Christian broadcast ministries nationwide.
The FBI involvement in the Angel Food case could imply far more than just overpaid staff, said Dean Zerbe, former senior counsel with the U.S. Senate Finance Committee. Though not involved with the Angel Food case, Zerbe said, "If you have ... the FBI knocking on your door of a charity, you've got issues beyond just paying a fellow too much."
FBI officials had no comment Wednesday, and no charges have been filed.
In Georgia, Donna Foster attends Emmanuel Praise — the Wingos' church — and her son works at Angel Food. Recently, "Pastor Joe found out I was unemployed and he sent me a box of food."
She blamed honest mistakes for any perceived financial mix-ups.
"There are some people you can tell if they're faking it," Foster said. "You can tell that these people are real."
NY Times: Charities Say Government Is Ignoring Them in Crisis Mar. 5, 2009
By STEPHANIE STROM
Like many for-profit companies, charities are seeking help from the government, and they are upset that policy makers do not understand how much the recession has hurt them.
Last week, nonprofit leaders representing thousands of organizations across the country signed on to a manifesto that calls on political leaders to support the work of nonprofits.
“One of the messages of this declaration is that the partnership between us and the government isn’t working, and that’s not good for the country,” said Lester M. Salamon, director of the Center for Civil Society Studies at Johns Hopkins University and author of the manifesto, titled “Forward Together: Empowering America’s Citizen Sector for the Change We Need.”
President Obama’s budget proposal came as a slap in the face to many nonprofits, which had thought they had a friend in him because of his early work as a community organizer.
The administration has also asked nonprofit leaders to serve on advisory panels and called on Americans to do volunteer work.
While the Independent Sector, a nonprofit trade association in Washington, has proposed increasing tax deductions for donations to nonprofits, the Obama budget calls for limiting such deductions for the most wealthy.
Diana Aviv, chief executive of the organization, has been making the rounds on Capitol Hill and at the White House, pushing ideas that would buoy nonprofits, including a bridge-loan fund to help strapped charities and eliminating the excise tax that foundations pay on their investment income so they will have more money to give away.
“We heard from lots of staff people on the Hill that some of them were getting tired of nonprofit organizations coming to them with their hands out when they were working on the stimulus package,” Ms. Aviv said. “They felt it was unseemly — now, how are we supposed to respond to that?”
In a blog post, Peter R. Orszag, director of the Office of Management and Budget, defended the proposal to limit the tax break for charitable donations by the rich, noting that it would not take effect until 2011, presumably after the economic crisis has passed. He also said it was a matter of fairness.
“If you’re a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150,” Mr. Orszag wrote. “If you are Warren Buffett or Bill Gates and you make that same donation, you get a $350 deduction, more than twice the teacher.”
(Actually, Mr. Buffett’s overall tax rate was somewhere around 17 percent, according to his testimony before Congress, and thus his deduction would be less than the teacher’s. Mr. Gates has not disclosed his tax rate.)
Many of the organizations that provide the services most in demand rely heavily on government financing through community block grants, Medicaid and many other federally financed, state-administered programs.
But these days, states are taking longer to reimburse nonprofit groups for the services they provide under contract. At the same time, banks are reducing access to or withdrawing lines of credit, and donations.
Some portion of the money allocated for increased Medicaid spending and community block grants in the economic stimulus package will flow to nonprofits, but so far, Congress appears unmoved by the various suggestions nonprofit groups themselves are making.
The Center for Civil Society Studies at Johns Hopkins, for instance, pulled together a list of some $10.6 billion in “shovel ready” projects at nonprofit organizations, items as varied as a youth center in San Antonio and a theater in New Hampshire.
The White House supported the Independent Sector’s concept of a nonprofit bridge-loan fund, nonprofit leaders said, but the House Appropriations Committee rejected the idea.
A spokeswoman for the committee did not return a call seeking comment.
Senators Charles E. Schumer, Democrat of New York, and Charles E. Grassley, Republican of Iowa, introduced an amendment to the stimulus bill that would have allowed charities to reimburse their volunteers at a higher rate for mileage, and Mr. Grassley proposed requiring states to pay nonprofits what they owed them before receiving any additional money through the bill. Those provisions, however, were dropped.
Peter Goldberg, chief executive of the Alliance for Children and Families, an association for nonprofit social service providers, said a large part of the problem was that while organizations have morphed into government contractors, more akin to highway construction companies and military contractors, Congress and the public continue to think of them as charities supported by private donations and volunteers.
“The government needs to understand that, for better or worse, it has bought a substantial chunk of the nonprofit, human-services delivery system through its contracts,” Mr. Goldberg said. “It therefore has a vested interest in making sure the system functions, particularly at a time like this."
Not everyone in the nonprofit sector, however, agrees that government needs to do more.
Pablo Eisenberg, a scholar at Georgetown University who is normally a champion of nonprofit groups, said he would not sign on to the “Forward Together” document because he believes wealthy foundations should be doing more to support those groups.
“Nonprofits need to first look to their own community to help them out before asking the government to pitch in,” Mr. Eisenberg said.
This article has been revised to reflect the following correction:
Correction: March 7, 2009
An article on Thursday about complaints by charities that they are not receiving enough help from the federal government referred incorrectly to the tax rate on which Warren Buffett, the Omaha billionaire, takes deductions for charitable gifts. It is 35 percent — not 17 percent, which is his overall tax rate.
Pennsylvania: Concerns about health care system sale will be center stage at today's hearing Mar. 4, 2009
The Citizens’ Voice, March 4, 2009 Denise Allabaugh, Wilkes-Barre, Pa.
Mar. 4--Some local health and social service officials are concerned about how the proposed $271 million sale of the non-profit Wyoming Valley Health Care System to the for-profit Community Health Systems of Franklin, Tenn., will impact health care.
Those concerns are expected to be raised at a public hearing conducted by the state attorney general's office today at 1 at the Thomas P. Saxton Medical Pavilion in Edwardsville.
Carol Hussa, program director of Steps to a HealthierPA Luzerne County, said she will raise concerns about how Wyoming Valley Health Care System's charitable assets will be affected if it is sold to the largest publicly traded hospital chain in the country.
Gretchen Hunt, director of nutrition health and children's programs at the Commission on Economic Opportunity, and attorney Joseph Vullo also will attend. Commission on Economic Opportunity officials want to ensure the nonprofit health system's charitable mission continues and indigent people receive the maximum benefit, said Executive Director Gene Brady. They have sent letters to the state attorney general's office expressing their concerns, he said.
"We're not trying to stop the sale. Our interest is to make sure that if this goes through, that charitable assets are used in the best interest in servicing the most needs of the community," Brady said.
Community Health Systems owns 110 hospitals and has 17,000 licensed beds in 28 states and more than 90,000 employees.
Wyoming Valley Health Care System, Luzerne County's largest employer with about 3,200 employees, owns several charitable assets, including Wilkes-Barre General Hospital, which has 392 licensed acute care beds, and First Hospital Wyoming Valley in Kingston, which provides mental health services at Nesbitt Memorial Medical Center in Kingston. Formerly called Nesbitt Memorial Hospital, it was incorporated in 1912 as a nonprofit corporation and merged with Wilkes-Barre General Hospital in 1993.
Other charitable entities at Nesbitt Memorial Medical Center include Advanced Psychological and Counseling Services; Wyoming Valley Family Medicine Residency Program; CHOICES, which provides substance abuse treatment and recovery services, and the Nurse-Family Partnership Program of Wyoming Valley for low-income first-time mothers and their young children.
"Services these community hospitals offer aren't necessarily money-making, such as care for the indigent population," Hussa said. "The community doesn't really know what services it's going to lose."
Wyoming Valley Health Care System also is affiliated with other charitable entities, including the Heritage House, Community Counseling Services of Northeastern Pennsylvania, Rural Health Corp. of Northeastern Pennsylvania, the Visiting Nurse Association and Hospice Care of the VNA.
The health system's charitable assets have accrued over the past 130 years, and Hussa said officials should address how services will be impacted if it is sold to a for-profit corporation.
"This is a huge community asset, and if it's not protected and preserved, it can drift away," Hussa said. "As health care consumers in the community, we should know what the plan is. We really need to be vigilant so this community protects those charitable assets and the focus remains on health."
A 130-page document filed in Luzerne County Orphans' Court states Community Health Systems will maintain indigent care policies for a decade, operate Wilkes-Barre General Hospital and First Hospital with the same mission in place for the next five years and offer employment to all current staff members.
According to the documents, the sale could top $271 million. Community Health Systems says it would invest $135 million in capital improvements, mostly at Wilkes-Barre General Hospital, including a new 30,000-square-foot emergency room, a renovated testing center, 30 to 40 single-occupancy intensive care rooms, a new patient tower, a 500-space parking garage and a cancer center.
Bill Cruice, director of the Pennsylvania Association of Staff Nurses and Allied Professionals, which represents 470 nurses and nurse anesthetists at Wilkes-Barre General Hospital, anticipates an increase in employment opportunities if and when the sale is complete.
"With an expanded emergency room, there is a need to recruit additional nurses. The same goes for an expanded intensive care unit," Cruice said. "Any time you expand services, the most important and the most difficult job is to recruit nurses. We are hopeful that if and when the deal closes, that Community Health Systems makes it a top priority to work with us right away to fill these positions."
Some registered nurses plan to attend today's hearing, Cruise said. He said appropriate staffing levels are a top priority.
Donna Sedor, vice president of the Greater Wilkes-Barre Chamber of Business and Industry, also plans to attend the hearing.
Chamber board members have discussed the sale's impact with Wyoming Valley Health Care System officials since it was announced in August 2008, said chamber President and CEO Todd Vonderheid.
The chamber has not taken an "official position" on the sale, but Vonderheid stressed the importance of having a strong and profitable health system that will provide quality care. He said the sale is the "best way to take a very good system and make it great." If Wyoming Valley Health Care System was able to raise $135 million for capital improvements, they wouldn't sell, he said.
"That's what is required to make it great," Vonderheid said. "That's the whole point behind this transaction."
State Rep. Phyllis Mundy, D-Kingston, had asked the attorney general's office to postpone today's hearing to provide additional time to review 130 pages of transaction documents. The hearing will proceed as scheduled. Chief Deputy Attorney General Mark A. Pacella responded to Mundy's request in a letter that stated, "Due to the influence our volatile markets may have on the viability of the transaction ... we feel compelled to go forward with the hearing as scheduled.
"We share your concerns about the outstanding financial information surrounding the transaction, including the nature, amount and disposition of the charitable assets implicated in the transaction," Pacella wrote. "Accordingly, we will not draw any final conclusion on the merits of the transaction until all of that information is available."
Dr. William Host, president and CEO of Wyoming Valley Health Care System, and Rosemary Plorin, spokeswoman for Community Health Systems, could not be reached for comment Tuesday.
In a prepared statement, U.S. Rep. Paul Kanjorski, D-Nanticoke, and U.S. Sen. Bob Casey, D-Pa., said as the sale goes forward, they will continue to monitor it to "ensure the interests of our community and the employees and patients of the health system are protected."
New York Times: Brandeis Committee Will Weigh Future of Rose Art Museum, Mar. 4, 2009
By The New York Times, March 4, 2009
Brandeis University announced that it will form a committee to consider the future of its Rose Art Museum, which university trustees voted to shut down on Jan. 26 with the goal of selling art to raise money.
In a written statement on Tuesday, the university’s provost, Marty Wyngaarden Krauss, said he she would consult with the university’s faculty senate council in forming the committee, which is to include one museum employee, one museum trustee, one university trustee and an unspecified number of faculty, students and alumni.
The university’s Jan. 26 decision to sell art from the Rose, made in response to a plunge in the value of Brandeis’s endowment and an anticipated slump in donations, stirred broad controversy in the art and academic worlds. Later the university backtracked, saying the museum building could be used as an art-study center and that no works would be sold in the immediate future. The Massachusetts state attorney general’s office has said it will scrutinize the university’s moves to ensure that the legal terms of any art donation to Brandeis are not being violated.
After Madoff: Charities Still Picking Up The Pieces Mar. 4, 2009
The Nonprofit Times
As the initial shock and awe subsides, the huge dollar figures swirling around Bernard Madoff’s alleged Ponzi scheme have become clearer, and while they might be a bit smaller than originally feared, they’re still big.
The Associated Press tallied some $30 billion in losses to the Madoff scheme. Meanwhile, Yeshiva University estimated its initial investment with Madoff was $14.5 million, according to Bloomberg News, after early indications of having $110 million with Madoff Securities by way of Ascot Partners.
Madoff, the founder of Bernard L. Madoff Investment Securities LLC, was arrested Dec. 11 after admitting that his $50 billion hedge fund was nothing more than a Ponzi scheme. He faces up to 20 years in prison and a maximum fine of $5 million if convicted.
Investigators say Madoff's crime originated in a separate and secretive investment-advising business that had a total of about $17.1 billion in assets under management. According to authorities, Madoff told investigators the scheme involved upward of $50 billion.
Foundations that were invested in Madoff have suffered huge losses, some even announcing that they have closed or plan to close. Some did not invest with Madoff but their funders -- now out of money -- did. The Palm Beach, Fla.-based Picower Foundation is the largest organization so far to announce it will cease operations. With almost $1 billion in assets, Picower was ranked as the 71st largest foundation in the nation by The Foundation Center, and the second largest in Florida. Most all of its assets were invested with Madoff.
The lawsuits also have begun to be filed. J. Ezra Merkin -- like Madoff, a Yeshiva trustee who resigned -- is being sued by New York University. Merkin’s Ascot Funds had invested virtually all of its holdings with Madoff, including Yeshiva’s investment. Connecticut Attorney General Richard Blumenthal is seeking the names of Connecticut-based victims, including nonprofits to find if trustees failed to perform due diligence.
In its most recent statement from Ascot, Yeshiva’s investment was valued at about $110 million, or approximately 8 percent of its $1.4-billion endowment, according to a Dec. 16 letter from Yeshiva President Richard Joel. But Bloomberg News reported on Dec. 30 that the university’s initial investment was $14.5 million, explaining that any gains above that, as well as losses below, were “fictitious.”
Madoff joined Yeshiva’s board in 1996, becoming treasurer in 2002, the same year that Merkin was elected to the board. University funds had been invested with Madoff for about 15 years.
The university hired Sullivan & Cromwell and Cambridge Associates “to ensure our policies and procedures and structure reflect not only best practices,” Joel said in his letter, “but the gold standard -- the standard to which we aspire all our endeavors.”
Yeshiva University referred Madoff-related inquiries to Rubinstein Associates, a New York City-based public relations firm. A spokesperson, in response to a request for the board’s conflict of interest policy, said the policy “as well as other internal policies are generally not made public. The university has conflict policies consistent with those of other major educational institutions. As indicated already, we have now engaged Sullivan & Cromwell and Cambridge Associates to review our policies and procedures and structure to ensure that they reflect not only best practices but are the gold standard.”
Investing organization dollars in board members’ firms would be “questionable at best,” said Linda Crompton president and chief executive officer at BoardSource, a Washington, D.C. nonprofit focused on policy and governance.
“Creating this kind of a relationship there’s a factor of due diligence that has to be done, and there needs to be transparency to the decision. If you go through that, and follow conflict of interest guidelines, and it still seems like a good opportunity for the organization, that’s a pretty complicated trail to walk,” Crompton said. “You might make the case that it makes sense, but that would be a pretty unusual case,” she said.
Most conflict of interest policies prohibit a board member from receiving an organization’s funds. “There might be certain circumstances, I don’t want to say no, never…but those are few and far between. In general, I wouldn’t have an organization investing with a board member,” Crompton said. Part of the roles and responsibilities of a board member, she added, are that they are not meant to be a beneficiary in any way personally. The North Shore-Long Island Jewish Health System in Great Neck, N.Y. had $5.7 million invested with Madoff Securities, which stemmed from an individual donor who stipulated the funds be invested there. The sum represented less than 1 percent of the total investment portfolio and the donor has agreed to reimburse it for any financial loss. The hospital estimated that Madoff contributed $216,000 to North Shore-LIJ over the last 36 years, but stressed that he was not a founder of LIJ Medical Center nor had any personal relationship with executives.
Terry Lynam, vice president of public relations at North Shore-LIJ, said the board’s investment committee made an exception to its policies to invest with Madoff Securities. The donor, who Lynam declined to identify, felt very strongly that the money would grow much faster with Madoff. “What happened with Madoff, certainly there are lessons to be learned from it,” he said, adding that similar exceptions in the future likely will not be granted, with stricter adherence to policies.
While restricted gifts are not uncommon, Crompton said, for a donor to stipulate where their donation is to be invested is “extremely unusual,” but the recipient can still decide whether to accept it or not. “That would be part of the due diligence they’d have to follow. They need to know who these people are, if it’s invested in a certain way, who are principals involved. The board has to make sure it understands what’s going on,” she said.
The American Technion Society (ATS) had an endowment estimated at $274 million at the time the Madoff scandal broke, according to Kevin Hattori, media relations manager. Its initial investment with Madoff was $29 million, he said, with “unrealized gains’ of $43 million, for a total exposure of $72 million.
ATS had been working with Madoff since 1995, Hattori said, and followed established procedures and approvals by its investment committee. A former donor, now deceased, who knew Madoff personally and had money invested with him, suggested the investment to the ATS board chair, he said. That’s when the investment committee followed its procedures, vetted the firm and “found nothing,” Hattori said. “Without a doubt,” he said, revising its policies and procedures is a possibility.
This article is from NPT Instant Fundraising, a publication of The NonProfit Times.
State Charity Regulators Should Explain Plans to Deal With Expected, Unprecedented Fraud in Stimulus Bill, Says Mark Fitzgibbons, President and Legal Counsel of Fundraising Pioneer Mar. 3, 2009
PR Newswire, March 3, 2009
MANASSAS, Va., March 3 /PRNewswire-USNewswire/ -- Mark Fitzgibbons, President of Corporate and Legal Affairs at American Target Advertising, Inc., issued the following statement regarding his letter to Chris Cash, the President of the National Association of State Charitable Officials (NASCO), the umbrella organization for attorneys general and other state officials which regulate nonprofit organizations:
"Theft and embezzlement in the nonprofit sector was over $40 billion in 2006 alone, according to Mr. Cash's predecessor at NASCO, who cited a New York Times report in response to a request in 2007 for data substantiating the amount of nonprofit fraud.
"Nonprofit organizations will now receive untold billions of taxpayer dollars under the hastily prepared, controversial American Recovery and Reinvestment Act (ARRA), otherwise known as the Stimulus Bill. This unprecedented, rushed federal spending on nonprofit organizations is likely to result in fraud and abuse both by recipients and government dispensers of funds in proportion to the dollars spent, which likely means fraud will be at record-breaking levels.
"ARRA transparency measures are unfit for donors contemplating contributions, or for identifying all the various potential misuses of funds by nonprofits and other sub-grantees of these new funds. Nonprofits, politicians, and government officials will have unprecedented amounts of taxpayer money for the pickings for political patronage, quid pro quo, preferential payments to associates, kickbacks, etc."
Fitzgibbons' letter asks state regulators, who have gone on record claiming a unique role in regulating nonprofits, protecting charitable assets, and protecting the public:
1. What are their plans to make sure nonprofits receiving, and government dispensers of, ARRA funds are not engaging in fraud and abuse;
2. Whether they will require nonprofits to disclose to donors how much taxpayer funds each nonprofit receives; and
3. Whether state regulators will issue special reports about amounts of public funding for nonprofits.
Pennsylvania: $271 MILLION HOSPITAL BILL Mar. 3, 2009
The Citizens’ Voice, March 3, 2009 Nicholas Sohr and Denise Allabaugh, Wilkes-Barre, Pa.
Mar. 3--The proposed sale of Wyoming Valley Health Care System to the largest publicly traded hospital chain in the country would tip the scales at $271 million, according to documents filed in Luzerne County Court.
WVHCS is the county's largest private employer with about 3,200 on its payroll. The system includes Wilkes-Barre General Hospital, First Hospital Wyoming Valley in Kingston, and specialty clinics, out-patient centers and testing facilities throughout the region.
The WVHCS board settled on suitor Community Health Systems of Franklin, Tenn., on Aug. 4, 2008, and negotiations started later that month. The proposed sale, according to the court documents filed Feb. 25, stipulates CHS would:
- Transfer about $136 million to WVHCS to pay off its debt, which is unspecified in the documents. The remainder would be used to start a foundation to channel money to local health charities.
- Commit at least $135 million to capital improvements, most of which are planned for Wilkes-Barre General, including a new 30,000-square-foot emergency room, a renovated testing center, 30 to 40 single-occupancy intensive care rooms, a new patient tower, a 500-space parking garage and a cancer center.
- Offer all WVHCS employees equivalent positions and pay.
- Continue for at least a decade the "indigent care policies" now in place and "treat any patient presented to the (Wilkes-Barre General) emergency room who has a medical emergency or who, in the judgment of a staff physician, has an immediate emergency need."
- Maintain ownership of Wilkes-Barre General and First Hospital for at least five years.
WVHCS president and chief executive Dr. William Host, board chairman Rusty Flack and CHS spokeswoman Rosemary Plorin could not be reached for comment Monday afternoon. Both sides have been operating under a nondisclosure agreement during negotiations.
A sale would have to be approved by the Luzerne County Orphans' Court judge and the state attorney general's office because it would transfer ownership of a charitable organization to a for-profit company.
The next step is to file a petition in the Luzerne County Court of Common Pleas Orphans' Court Division and a judge will make the final decision. The attorney general scheduled a public hearing for 1 p.m. Wednesday on the ground floor of the Thomas P. Saxton Medical Pavilion Building in Edwardsville. The Orphans' Court proceeding is set for 10:30 a.m. March 19 in the Bernard C. Brominski building, 113 W. North St., Wilkes-Barre.
Mundy asks for delay
State Rep. Phyllis Mundy, D-Kingston, has asked the state attorney general's office to delay the public hearing on the proposed sale of the nonprofit Wyoming Valley Health Care System to the for-profit Tennessee-based Community Health Systems Inc.
While Mundy said she is glad there is opportunity for public comment, she is "deeply concerned with the lack of details that have been released, particularly with regard to how Wyoming Valley Health Care System's charitable assets will be managed."
To find out more about the deal, Mundy asked her staff to contact the attorney general's office in advance of the hearing. It wasn't until Friday that her office received 130 pages of documents filed Feb. 25 by Wyoming Valley Health Care System and Community Health Systems in Luzerne County Orphans' Court.
"The reason I'm asking for a delay is that I just got these documents on Friday and the general public had no idea that these documents were available," Mundy said Monday. "I'm not even sure that these are the final documents. The bottom line is the general public that is supposed to be offering comment doesn't know what they're commenting on. I don't know how they're supposed to comment on documents they've never seen."
In a letter sent to the attorney general's office Monday, Mundy wrote neither she nor the public had "sufficient time to review all the transaction documents."
"Not all of the transaction documents -- particularly as they relate to the creation of a charitable foundation to protect the community assets of Wyoming Valley Health Care System, as well as the indigent care policies for each party to the transaction -- were filed in Orphans' Court," Mundy wrote.
Mundy added she believes the documents, as well as others related to Wyoming Valley Health Care System's charitable assets, are part of the public domain and must be "reviewed thoroughly by the public so that citizens may provide adequate comment" to the attorney general's office about whether the sale is in the "best interest of our community."
Kevin Harley, spokesman for the state attorney general's office, could not be reached for immediate comment Monday afternoon. During a previous interview, Harley said all persons the sale could potentially affect would have the chance to voice their opinions at the public hearing.
Anytime there is a proposed sale of a nonprofit health system to a for-profit health system, the state attorney general's office reviews it to ensure the hospital's charitable mission remains.
Search for a buyer
According to the court filings, the WVHCS board began exploring a sale in September 2007 after a deal with Blue Cross of Northeastern Pennsylvania unraveled following concerns over the amount of funding Blue Cross would provide and other "terms of the agreement" that were "unacceptable."
From a pool of 19 potential suitors, WVHCS visited two bidders -- CHS and Legacy Hospital Partners -- before settling on CHS on Aug. 4. An exclusive negotiating agreement was signed Aug. 18 and WVHCS officials announced the framework of the deal two days after. The court documents state the deal outlined would not change substantially before the county court hearing.
CHS is the nation's largest publicly traded hospital chain with 110 hospitals and 17,000 licensed beds in 28 states, and more than 90,000 employees. It owns nine hospitals or health systems in Pennsylvania, including Berwick Hospital Center, Easton Hospital and Sunbury Community Hospital. The company's stock fell $2.25 in Monday's trading to close at $14.11, well off its 52-week high of $40.05.
Ohio: 'Charity' has little help for veterans Mar. 2, 2009
Plain Dealer, March 2, 2009 Margaret Bernstein, Mike Scott, Sarah Jane Tribble, Plain Dealer reporters
Whatever happened to the Disabled Veterans Associations, headquartered in Parma Heights, which was sued in 2001 for falsely claiming to help veterans?
Since 2001, it has continued to collect millions from people who don't realize how little of their donation actually goes to veterans. However, a recent settlement reached with the Ohio attorney general's office may have forced the charity to change its practices.
Disabled Veterans Associations has been investigated in several states since 2001 and slapped with fines. Yet it continued to pour most of its money right back into its fund-raising operation until at least 2007, the most recent year for which figures are available.
Of the $9 million it raised in 2007, only $216,848 went to programs for disabled servicemen, netting the nonprofit a rating of zero stars from Charity Navigator, an online guide to nonprofits.
"It's just horrible," said Sandra Miniutti, Charity Navigator's spokeswoman. "We see this a lot with veterans' issues. These bogus groups do exist.
"They're able to capitalize on people's goodwill."
Following the money in this case has been challenging. The Ohio attorney general's office said its investigation focused on the charity's expensive relationship with its hired fund-raiser, New Jersey-based Civic Development Group, which for years pocketed nearly all the money it raised for Disabled Veterans Associations.
On Feb. 6, state lawyers reached an agreement with Civic Development Group that requires the company's telemarketers to stop representing themselves as employees of charities they're raising money for. The fund-raiser also was fined $35,000.
Ted Hart, spokesman for the attorney general's office, said he has heard the disabled veterans' group has cut its ties with Civic Development Group. "I don't know whether they're doing any fund raising now," he said.
Yet the Parma Heights charity still maintains a Web site and appears to be in business. Executive Director Pamela Seman did not return calls last week seeking comment. The charity's 2007 records show she earned $97,000 as its chief officer.
Hank Thierry, a 58-year-old Maryland veteran who has complained about the charity's fund-raising practices to various authorities, scoffed at the Ohio fine and called it "chump change." He said the discredited veterans group always bounces back.
"Big deal. They'll do this all day long for $35,000," said Thierry. "In the meantime, $9 million has been skimmed away from programs that would help disabled veterans," he added, vowing to keep working to shut Disabled Veterans Associations down.
He said it's likely that many people confuse the group with the similarly named Disabled American Veterans, which is highly rated for its efficient use of donations but doesn't pull in as much money as the Parma Heights outfit does.
Hart said state law does not regulate what percentage of donations actually goes to charity, and he urged consumers to question solicitors on the subject before they donate.
NY Times: A Hole in One That Feels More Like a Sand Trap Mar. 1, 2009
By JOE WOJTAS
LAST September, when Lou Montello made a hole in one at the Marine Corps League's golf tournament in Stamford and won $20,000, he called his wife, Rosemarie, from the course.
''Guess what, Sweetheart? You're going to get that bracelet you wanted,'' he told her.
But a week later, before he could buy the $5,000 piece of jewelry, Mr. Montello got a call from the apologetic organizer of the charity tournament, who told him he would not be getting his money.
That, state officials say, is because Kevin Kolenda, the Norwalk man who owns the company that sold hole-in-one insurance to the tournament, refused to pay the $20,000 to Mr. Montello, as well as an additional $20,000 that was to go to the Marine Corps League in the event of a hole in one. The league, a nonprofit organization, had planned to use the money to help Marines overseas and those who return home with injuries.
Lux Bond & Green, the West Hartford-based jewelry store chain, said the same thing happened in 2007 with the par-3 16th hole it sponsored at the PGA Tour's Travelers Championship in Cromwell. Bo Van Pelt, a professional golfer, aced the hole and won $20,000 in jewelry from the Italian designer Roberto Coin. Lux Bond & Green made good on the prize but was unable to collect on its insurance policy with Mr. Kolenda.
Now, the Connecticut Insurance Department has fined Mr. Kolenda $5.9 million for failing to pay claims on coverage he sold on prizes at golf tournaments, other sporting events and advertising promotions.
Thomas R. Sullivan, the state insurance commissioner, had accused Mr. Kolenda of operating without a license and engaging in unfair business practices and appealed for those ''who have been duped by Mr. Kolenda and his sham organizations'' to contact him.
Connecticut's attorney general, Richard Blumenthal, a member of the Marine Corps League chapter in Stamford, has also filed a lawsuit against Mr. Kolenda and his firm, Hole-In-Won Worldwide.
''If Hole-In-Won's illegality is allowed to stand, the losers will be wounded warriors whom the Marine Corps League sought to benefit through its golf tournament,'' Mr. Blumenthal said. ''Hole-in-Won made the worst possible choice in victims by scamming the Marines. The company betrayed its promise and dropped the ball when a hole in one happened.''
Mr. Kolenda, who continues to operate Hole-in-Won Worldwide, said Mr. Sullivan and Mr. Blumenthal are ''bullying a mom-and-pop business'' that has been operating for 25 years with hundreds of satisfied customers. He said he had paid out a million dollars in prize money.
Mr. Kolenda said Lux Bond & Green did not pay him until two days after the tournament while the Marine Corps League did not pay him at all. League officials said Mr. Kolenda told them they did not have to pay until after the tournament and when they sent him a check for $350 to pay for the insurance, he refused to accept it.
Mr. Kolenda also said there is no state law that says he has to be licensed to sell hole-in-one insurance.
Seven years ago, the State Insurance Department ordered Mr. Kolenda to stop selling the insurance and fined him $9,000. A department spokeswoman, Dawn McDaniel, said her agency thought Mr. Kolenda had been complying until it received the most recent complaints, from Lux Bond & Green and the Marine Corps League. During the seven years since it fined him, the Insurance Department said, Mr. Kolenda has negotiated at least 41 similar contracts in the state. He has also been the subject of similar complaints and fines in other states, Massachusetts, Maryland, North Carolina and Washington State among them.
Mike Loughran, the Marine Corps League member who organized the tournament, said he hired Mr. Kolenda because he had seen that his firm was used in other tournaments in which he had played.
''It takes a real special person to rip off troops in a time of war,'' said Mr. Loughran, a retired Stamford police detective.
The experience was not as troubling for Lux Bond & Green, which had used Mr. Kolenda for years to insure the prizes it offers on two of the par-3 holes in the Travelers Championship at TPC River Highlands. The company said Mr. Kolenda kept asking for more information but then did not respond to its request for the money.
''It didn't affect our financial condition, but you never want to lose that kind of money,'' said Dave Bonney, Lux Bond & Green's chief financial officer. ''Hopefully we'll be able to collect someday.''
Mr. Montello, meanwhile, is not blaming the Marine Corps League, but he still hopes to get his money and buy that bracelet for his wife.
''I know all these guys. What are you going to do?'' he said. ''You let them do the best they can. I'm sure they can come up with a solution.''
Chronicle of Philanthropy: Now's the Time to Push for Changes in How Foundations Operate Feb. 26, 2009
Pablo Eisenberg
The downturn in the economy and the budget troubles of nonprofit groups have made it painfully clear that many of the problems that have long plagued the foundation world have not yet been solved.
In these troubled times, it is important for nonprofit groups, enlightened foundation executives, and members of the Obama administration and the public to push for needed changes in a more comprehensive manner.
To improve foundation responsiveness to today's needs will take legislative and regulatory changes, as well as efforts by foundations themselves to improve their performance. Here's a list of what I believe should be on the agenda, starting with those that should be imposed by government and state officials:
* Increase the minimum amount foundations must distribute annually. Federal rules that require foundations to give 5 percent of their net investment returns have not been changed for almost two decades, despite the enormous increase in foundation assets. Moreover, foundations are allowed to include all administrative and operating costs, including trustee fees, as part of the distritbution calculation, thereby substantially reducing the actual amount provided to charities. As a result, taxpayers are cheated by foundation donors who have received enormous tax benefits for their contributions.
Congress should require foundations to give at least 6 percent of their assets to charities annually in the form of grants. That change could add at least $8-billion a year to the coffers of nonprofit groups.
* Abolish or tightly limit trustee fees for foundation board members.
Foundations probably spend $300-million on fees to their trustees each year. That means money that could go into grants is instead put into the hands of people who, for the most part, are among the wealthiest people in the country. Those fees should be abolished or, at a minimum, limited to payments that allow low-income or working-class trustees to devote their time to foundation business.
* Eliminate the loophole in federal regulations that permit foundation officials to realize a financial gain from their insider roles.
Internal Revenue Service rules prohibit "self-dealing," but nevertheless permit trustees and foundation managers to receive compensation not just for their board and managerial duties, but also for providing legal, accounting, and other professional services to the foundation that are "reasonable, necessary and not excessive." Many abuses result from the fact that all kinds of self-gain are not prohibited. Legal, accounting, consulting, and investment services, as well as many of the other services handled by foundation trustees, should be provided by outsiders.
* Limit the maximum size of foundations. The growth of mega-foundations like the Bill & Melinda Gates Foundation pose a danger to democracy. With trillions of dollars projected to be transferred from superwealthy Americans to foundations and charities in the next three decades, many new foundations could have assets larger than the budgets of all but the biggest countries in the world and might be run by two or three family members. Huge amounts of money -- billions of dollars -- will be distributed without any public discussion or political process, and without any public accountability.
A legislative limit -- say $15 billion -- should be placed on the size of new large foundations, while existing giants like Gates would be given 15 to 20 years to reduce their size or spin off a portion of their assets into one or more new foundations.
* Require family foundations to shut down within a specific period of time if they do not add outsiders to their boards.
Family foundations should be required to develop boards with at least five members, a majority composed of people who are not family members, or their retainers and advisers. Foundations that refuse to expand their boards would be required to close within 15 to 20 years of their creation.
Small boards are not sufficiently broad to bring adequate perspectives and points of view to the grant-making process. Nor generally are boards composed solely of family members; such boards often are insular and their grant making focuses primarily on family interests.
* Prohibit foundation executives from sitting on corporate boards. Serving as a corporate board member takes a lot of time and effort, energy that should be devoted to the full-time work of running a foundation. In some cases, corporate products and policies may be closely aligned with a foundation's priorities, thereby creating a conflict of interest. In others, corporate practices may conflict with foundation investment policies.
Foundation executives already earn substantial salaries; they do not need to augment their earnings with corporate trustee fees.
* Require all private foundations to pay a flat excise fee of 1 percent on their net investment returns. A uniform rate should be levied on the investment returns of private foundations, instead of the complex variable rate they now pay. The money produced by this tax should be dedicated to the Internal Revenue Service's efforts to provide oversight of nonprofit organizations and to enforce laws that govern such groups.
* Give the IRS and state attorneys general adequate resources to effectively oversee both foundations and charitable organizations.
The IRS has had neither the will nor the resources to do a competent job of regulating foundations, not to mention other nonprofit groups. Congress not only should provide additional resources so that the tax-exempt division of the IRS can properly do its job, but also should make it clear that the agency is expected to enforce accountability and ethical practices.
Congress should also allocate a substantial sum of money to the states so that their nonprofit regulatory offices, starved for money, can competently complement the federal government in regulating foundations and nonprofit groups. All barriers to the sharing of information between the IRS and the state attorneys general should be eliminated.
* Make federal data about all foundations and their grant making available to the public at no charge.
Grant seekers and others who want information about grant makers now have to pay fees to get it. To remedy this, the IRS should make all data about foundations available free through GuideStar and other online sites.
* Prohibit foundations from forbidding grantees to lobby. The law permits nonprofit groups to undertake a limited amount of lobbying. Some foundations, however, still include in their grant agreements a requirement that grantees not use any of their general-support money for lobbying. This is against the spirt of federal law that permits charities to lobby.
Foundations typically reject any effort to add new regulations, and suggest that they can regulate themselves.
Rarely has action followed the rhetoric. Now may be the time for foundations to overcome their inertia. Here are some ideas foundations should pursue to demonstrate they understand the need to change:
* Provide 50 percent of all grants in the form of general operating support and earmark another 25 percent for public-policy and advocacy activities.
The overwhelming majority of nonprofit organizations say that general-support money is their highest priority and what enables them to retain top staff members and become strong organizations.
In many cases, advocacy provides more bang for the buck than direct services and other programs.
Advocacy efforts help charities meet the needs of their clients and constituencies and is an important tool for nonprofit groups that seek to keep both government institutions and businesses publicly accountable.
* Make grants throughout the year, not just at a few specific times. Foundations routinely grant money only two to four times a year, generally approving money only when their boards meet. That timetable, however, often doesn't meet the needs of nonprofit groups. Why should the procedures of grant makers trump the requirements of nonprofit groups that do the actual work? Such rolling deadlines have already been adopted by several foundations.
* Make the foundation's mission a key element in deciding how to invest the foundation's assets. The $600-billion or more that foundations hold in their investments could make a huge difference in setting corporate priorities.
At least 10 percent of a foundation's assets should be dedicated to mission-related investments.
* Provide sabbaticals to program officers. Only the rare foundation routinely provides sabbaticals for its program officers. Not only are sabbaticals an effective way to regenerate staff energies, enthusiasm, and loyalty, they could also be an opportunity for program officers to experience life among nonprofit groups, even their grantees. Too often, foundation executives have lost touch with what it means to work at a nonprofit group, and some have never even worked for a charity.
In addition to such conventional sabbaticals, foundations might find it useful to include a three-month residence at a nonprofit group as a requirement for a new program officer's first year in office.
* Operate frequent training sessions for foundation executives. The Council on Foundations used to hold one or two annual training sessions for new program officers. Those sessions focused much, if not most, of their attention on the relationship of foundations to grantees. Nonprofit executives played a prominent role, both in formal speeches and by participating in discussions.
There were healthy and productive exchanges, sometimes sharp, between foundation representatives and nonprofit officials. Both sides received a good education.
In recent years such training sessions have been few and far between, rarely geared to spirited discussions with people from outside the foundation world.
* Create an ombudsman organization for foundations. There is no place today where grantees or would-be grantees can go to complain about the way they have been treated by foundations. Nor is there an institution to which foundation personnel can voice concerns about grantees, colleagues, and foundation practices.
The creation of an independent ombudsman organization financed by foundations but governed by a board composed of foundation representatives, nonprofit executives, and academics could serve as such a place. Partly a center to receive, investigate, and resolve complaints and problems, partly an institute to tackle ethical issues in philanthropy, and partly an organization to start an effort by foundations and nonprofit groups to improve their relationships, the ombudsman could serve as a means to reduce tensions between donors and grant recipients and to improve practices on both sides.
* Build career ladders for young people interested in devoting most of their lives to philanthropy. Many of the best young people are leaving the foundation world, discouraged about their prospects for a foundation career, troubled by the indifferent treatment they have received by their bosses, and dismayed by the lack of change in the way foundations conduct their business.
Currently, few program officers stand a chance of heading a small or mid-sized foundation let alone a large institution, regardless of their merits. The selection process for such positions through search firms almost guarantees that only certified, well known, and safe candidates will be chosen.
To offset this process, a national clearinghouse for both open foundation positions and potential candidates should be established, making it possible for program officers, especially young ones, to know what is available.
Outstanding program officers should be encouraged by their bosses to apply for these positions. For their part, foundation boards should periodically review with their CEO's how their foundations have done in recruiting and promoting young program personnel.
* Schedule regular staff meetings with nonprofit representatives. Too many foundations don't meet regularly with either grantees or other nonprofit representatives. Such meetings would educate foundation staff members about developments and problems both locally and nationally. This discourse would be helpful in setting foundation priorities, and it would give the public a better idea of foundations' programs and activities.
An open meeting once a year could be one way for foundations to reach out to the people they service, and in the process receive useful ideas and recommendations for change.
* Foundations should respond to all proposals they received.
Many nonprofit groups never receive a response to a proposal they have submitted to a foundation. A prompt response to a proposal should be the minimum reply by a foundation, either declining the request or explaining the process for consideration. In cases in which the proposal is turned down, a reason should be given for the decision.
With the advent of a new presidential administration and the collapse of the nation's financial institutions, now is a good time to think about the future of foundations. Taxpayers subsidize a substantial part of foundations' efforts. They should get their money's worth.
Pablo Eisenberg, a regular contributor to these pages, is a senior fellow at the Georgetown Public Policy Institute. His e-mail address is pseisenberg@verizon.net
Chronicle of Philanthropy: Salary Under Scrutiny Feb. 26, 2009
Ian Wilhelm and Grant Williams
A new Internal Revenue Service report about tax-exempt hospitals has triggered questions about compensation of all nonprofit executives and may embolden investigations by federal and state regulators who already are taking a hard look at how charities compensate their top officials.
What's more, recruiters and others say the scrutiny may contribute to organizations' decisions to freeze or cut salaries, moves that already are starting to become more prevalent as organizations face pressure to trim costs because of weak fund-raising returns in the down economy.
The IRS surveyed nearly 500 nonprofit hospitals, asking them about their compensation practices and how they provide charitable health services to needy people.
According to the 178-page report, the average total compensation -- including noncash benefits and payments to employee-benefit plans -- paid to hospitals' top management officials was $490,000; median compensation was $377,000.
The IRS, which did not reveal the names of the hospitals it examined, also audited 20 hospitals that provided larger salaries relative to institutions with similar revenues and geographic locations.
At those organizations, the average total compensation paid to top management officials was $1.4-million, while median compensation was $1.3-million.
The IRS said at least one hospital had paid excessive compensation and may be assessed a fine. And while the other compensation did not violate the law, the IRS said, it may raise concerns among the public.
'May Be a Disconnect'
"Amounts reported appear high but also appear supported under current law," the IRS said. "For some, there may be a disconnect between what, as members of the public, they might consider reasonable and what is permitted under the tax law."
Or as Steven T. Miller, commissioner of the IRS's tax-exempt division, said last month in a speech previewing the report's findings: Regarding "pretty high" pay, "while permissible under current law, I wonder how it will be received in the court of public opinion."
Indeed, Ken Berger, president of Charity Navigator, a nonprofit watchdog group in Mahwah, N.J., said the million-dollar salaries were too much.
"Six-figure incomes? Okay. But seven figures? I mean, give me a break. It just doesn't sit right," said Mr. Berger. "From a donor perspective, this is absolute abomination."
The American Hospital Association, a Washington group that represents 5,000 hospitals and other health organizations nationwide, argued that given the size and complexity of health-care systems, large salaries for hospital leaders are warranted.
In response to the report, the association touted the fact that the IRS found almost no examples of excessive compensation and also said that the tax agency's survey was "poorly worded and incomplete" and overcounted the pay of top hospital leaders by including bonuses and deferred compensation that may be one-time payments.
Legislative Attention
The report arrives at a time when big paydays are a hot-button issue in Washington.
Sen. Charles E. Grassley, an Iowa lawmaker who is the senior Republican on the Senate Finance Committee, has concerns about the compensation disclosed in the report, said Jill Kozeny, a spokeswoman for the lawmaker. "Some of those that provide very little charity care are paying their executives the biggest salaries," she said.
In addition, President Obama last week signed a new law that limits pay to $500,000 a year for executives at financial-services companies that receive federal aid.
While charity leaders don't receive the massive bonuses of Wall Street investors -- and most earn far less than the level of compensation identified in the IRS report -- Michael W. Peregrine, a lawyer in Chicago who advises nonprofit organizations, said charities need to take heed: Lawmakers and the American public today are questioning any institution that receives government assistance -- whether it's bailout money or beneficial tax treatment.
"They are saying, In this environment, with huge economic problems and deficits, tell me again why we are providing certain groups with tax exemptions," he said. "The IRS is saying, Everybody here play by the rules. And the broader charitable sector should say, All right, let me understand again what are those rules and double-check that we are complying with them." (To read more about Mr. Peregrine's view, see his opinion article at http:// philanthropy.com/extras.)
Pay Comparisons
One question raised by the hospital report: Are the IRS rules that govern how charities establish their compensation levels adequate?
The IRS said nearly all hospitals in the study followed "important elements" of a voluntary section of the federal rules. The section provides a series of steps -- including the use of data to compare salaries earned by executives at similar charities and for-profit institutions -- by which charities can establish that they have done everything possible to set a reasonable salary.
That threshold is known as the "rebuttable presumption" of reasonableness.
Of the 20 hospitals that had high salaries in relation to their peers, 85 percent met the requirements of the rebuttable-presumption process, the IRS said, putting the burden of proof on the tax agency to show that compensation was not justified.
But the report also said that the salary rules -- and efforts to measure whether hospitals met standards for providing charitable services -- "have proved difficult for the IRS to administer.
"Both involve application of imprecise legal standards to complex, varied, and evolving fact patterns."
The tax agency said it "will seek a better understanding of the impact of certain aspects of existing law."
Specifically, the IRS said that it would look at whether nonprofit organizations should be allowed to compare their salaries to those at for-profit institutions and that it would review an exemption from many compensation-setting rules that currently applies to an organization's first contract with an individual.
The agency said it will use the new 990 informational tax return to collect better data on nonprofit pay.
'Silly' Measure
Some charity experts applauded the IRS's examination of compensation, but said it should scrap the approach that allows charities to justify their salaries by comparing them to similar organizations.
"Rebuttable presumption is the equivalent of a school-aged child defending their actions by saying, 'Everyone else is doing it,'" said Trent Stamp, executive director of the Eisner Foundation, in Los Angeles, and former head of Charity Navigator. "It's silly, and it's time for Congress to step in."
Susan Egmont, a recruiter in Boston who works with many nonprofit clients, took a more modest stance, saying that the IRS may want to adopt different rules to govern health-care and higher-education institutions, where the bulk of the nonprofit world's big salaries are.
"I do believe that clearer IRS guidelines would be helpful," she said. The tax agency should say, "This is what we consider egregious and this is what isn't."
Other observers caution that the current standards work well -- and that the report reinforces that point.
"We don't need new laws," said Betsy Buchalter Adler, a San Francisco lawyer who represents charities and a former member of the IRS Advisory Committee on Tax-Exempt and Government Entities.
The rules "are causing boards to pay attention, to consider what's reasonable, to focus on objective data, and to act responsibly."
The questions about federal regulation may embolden state attorneys general, said Mr. Peregrine, the Chicago lawyer. States do not allow the rebuttable-presumption "safe harbor" and can be more aggressive in their investigations of nonprofit pay, he said.
Karl E. Emerson, a nonprofit lawyer in Philadelphia who used to head Pennsylvania's Bureau of Charitable Organizations, disagreed, saying the report showed that IRS rules worked.
At the same time, he said, state attorneys general are keeping tabs on nonprofit pay. "The whole idea of excessive compensation is definitely a hot topic right now," he said.
With so much scrutiny of nonprofit and for-profit pay these days, Mr. Peregrine described the situation as a "toxic environment" for board members and trustees who set the compensation levels within groups.
"The boards of charities cannot be tone deaf to the broader concerns," he said. "You'd be nuts in this environment not to take a closer look at executive compensation."
But Ms. Egmont, the nonprofit recruiter, said the stigma on pay couldn't have come at a worse time. The sour economy has already put pressure on charities to scale back administrative expenses -- and the watchful eyes of regulators may increase it.
"I am very concerned that many [organizations] are freezing salaries," she said. "CEO's as well as senior staff are taking cuts -- as much as 20 percent -- when their salaries were quite low to begin with."
Connecticut: Getting fundraising right Feb. 24, 2009
Elm City Press, February 24, 2009 Helen Bennett Harvey (New Haven Register delivered by Newstex) --
NEW HAVEN - The New Haven Public Library will hold a seminar to help boards and staff of nonprofit organizations update their understanding of government regulations relating to fundraising from 5:30 to 7:30 p.m. Mar. 12, at the library at 133 Elm St.
Attorney Priya Morganstern, director of the Hartford Program of the Pro Bono Partnership, and Thomas M. Fiorentino, assistant Attorney General of Connecticut, will discuss:
Is your organization properly registered to conduct fundraising?
Are you appropriately reporting the donations you receive to the IRS?
Do your solicitations contain required disclosures?
Are the proper acknowledgements being provided to your donors?
If you are generating income from a business venture, do you owe taxes on this income?
There is no charge for the seminar, and free parking is available. Registration is required at http://www.nonprofit.eventbrite.com/ or call the library at (203) 946-8835.
Utah: Nonprofit group formed to help polygamists makes its debut Feb. 23, 2009
Deseret Morning News, February 23, 2009 Ben Winslow Deseret News
WEST JORDAN: It was detente over a chicken dinner. Polygamists, ex-polygamists, activists, lawyers and government officials were all in the same room Saturday night, supporting the newest organization to reach out to offer help to people in Utah's cloistered polygamous communities.
A fundraiser gala at Gardner Village drew nearly 200 people for the debut of Holding Out HELP (Helping, Encouraging and Loving Polygamists).
"People from all walks of life are here," said executive director Tonia Tewell, as she stood in a crowded room where a debate for or against polygamy would be conspicuously absent from the evening's festivities. Tewell launched the group after sheltering a couple of women and four children who were leaving a bad situation in polygamy. Speaking to the crowd, one of those women (who asked her name not be used) said everyone's situation is different.
"In the midst of my own crisis, my own heart went out to those from other polygamous communities who are struggling," she said. "Maybe they just need a listening ear or a nonjudgmental heart. Maybe they wish to leave but can't for a variety of reasons. As I see the faces of the people I left behind in my polygamous community, I have no desire to hurt them. I just wish that I am able to help them in any way I am able to. I don't resent them."
Holding Out HELP is unique in its mission to offer help and support services for people who want to leave as well as those who want to stay. "We aren't getting in the debate of for or against polygamy," Tewell said. "We're coming alongside them where they are at and loving them where they are at."
It is a mission supported by Utah Attorney General Mark Shurtleff, who embraced the group as part of his much-touted Safety Net Committee, a coalition of activists, polygamists, government officials and social service agencies working to combat abuse and neglect in isolated polygamous communities. Many polygamists are wary of Shurtleff, despite his assurances that he doesn't have the resources to prosecute polygamy alone but will instead focus on crimes like abuse and underage marriages. "We're going to keep fighting crime in certain groups," he told the crowd Saturday. "But we realize that (victims) have to fear me less than their abuser if they're ever going to seek help."
Since starting up, Holding Out HELP has already been contacted by a couple of families seeking assistance. Tewell said she's actively searching for people willing to open their homes and wallets to her cause.
Ohio: Officials at nonprofit hospitals say experience, competition key to pay; Consumer advocates protest, saying tax breaks, public funding, donations should make a difference Feb. 22, 2009
Dayton Daily, February 22, 2009 By Jim DeBrosse Staff Writer
In 2001, as Premier Health Partners Chief Executive Tom Breitenbach neared age 55, he was given an executive investment plan in addition to his supplemental retirement benefits that paid him nearly $9 million from 2002 to 2007. The requirements were that Breitenbach assume the risk of the investment and stay on as head of Premier until age 60.
In 2004, Frank Perez, chief executive of Kettering Adventist Health Care, received a $117,000 housing allowance on top of his $1.5 million in salary, bonuses and deferred compensation.
When George Miller was hired as chief executive at Springfield Medical Center in 2006, he received a salary of $346,563 and another $144,686 in expenses for relocating from Illinois.
When it comes to cash incentives and other perks, the difference between forprofit executives and those who head nonprofit hospitals is getting harder and harder to distinguish . The average total compensation for nonprofit hospital and health network chief executives in the Dayton area rose 59 percent between 2002 and 2007, from $647,000 to $922,000, according to a Dayton Daily News analysis.
Only two hospital CEOs among 13 in the region - Mary Boosalis of Miami Valley Hospital and Thomas Boeckner of Wilson Memorial Hospital in Sidney - were compensated at or below the Ohio averages in 2007, according to data provided by ERI Economic Research Institute.
In setting compensation levels, local hospital officials say they must compete with for-profit enterprises that can offer top executives hefty stock options, country club memberships and other perks that nonprofits can't. "For-profit or nonprofit, it really has to do with attracting and retaining talent," said Pete Luongo, who sits on the compensation committee of Kettering Adventist Healthcare, the parent of Kettering Health Network and its six hospitals.
NCR Corp. paid chief executive William Nuti a base salary of $1 million in 2007 but threw in another $15.8 million in stock and option awards, incentive plan payouts and other compensation for a total of $16.8 million. NCR's total revenues that year were nearly $5 billion, or about four times Premier Health Partner's $1.3 billion.
In 2001, MedAmerica Health Systems Corp., the parent company of Premier Health Partners and six smaller for-profit subsidiaries, found a novel way to help keep Breitenbach at the helm - they invested some of the supplemental retirement benefits he had accrued over 25 years into an executive option plan of mutual funds, in which Breitenbach assumed all risk. Breitenbach cashed out $6.7 million from the plan in 2003, another $660,000 in 2006 and a final payment of $1.5 million in 2007, for a total of $8.9 million, IRS documents show.
Breitenbach said he is no longer eligible to withdraw money from that plan or any other supplemental retirement plan at MedAmerica or Premier.
Investment plans like the one awarded Breitenbach were originally devised in the late 1990s by not-for-profit private universities like Harvard and Stanford to retain key faculty members, Breitenbach said. He said such plans "morphed over" to the nonprofit hospital industry, although he added, "They're not very common because a lot of people who work for not-forprofit institutions would not be willing to assume the investment risk."
Consumer advocates say nonprofit hospitals have no business competing with for-profits because of their tax-exempt status, their ability to raise donations from the community and their revenues from tax-supported programs like Medicare and Medicaid, which account for more than half of the average hospital budget. In Montgomery County, hospitals receive a total of $5 million per year from the Human Services Levy for indigent care.
"Whose money is this?" asked Cathy Levine of the Universal Health Care Action Network of Ohio, a Columbus-based grassroots organization pushing for broader health care coverage. "The hospitals believe it's theirs, and that they should be free to build multiple heart hospitals as revenue-generators and spend millions on CEO compensation packages rather than addressing the unmet needs of their communities. They're crippling people with medical debt while bestowing obscene wealth on their nonprofit CEOs."
If hospital boards of trustees won't limit soaring CEO salaries, she said, it's up to the state attorney general's office or state or federal legislators to take action.
Board officials at both Kettering Adventist Healthcare and MedAmerica say they base their CEO compensation on annual salary surveys of the industry and recommendations of nationally recognized consultants. They also cite the multiple skills and decades of experience that Breitenbach, 61, and Perez, 65, bring to their jobs and their successes in guiding the recent expansions of the two competing health networks. Kettering has affiliated with Grandview/ Southview Medical Center and Greene Memorial Hospital while Premier has partnered with Upper Valley and Atrium medical centers.
In a written statement, Allen M. Hill, chairman of Premier Health Partner's board of trustees, said Breitenbach's compensation recognizes his leadership in making Premier "the pre-eminent health care system in the region. Miami Valley Hospital has been named the region's best for 13 consecutive years and in 2008 Miami Valley Hospital and Good Samaritan Hospital were named among the best hospitals in the nation.
"Tom's blend of leadership, financial and executive skills has benefited all of our institutions and, more importantly, the entire community for nearly three decades," Hill said.
Kettering officials released a statement noting that, under Perez, Kettering Health Network's market share has grown from 33 percent to more than 45 percent in the past decade, and its hospitals have received top honors from health care evaluators such as JD Power and Associates and U.S. News & World Report.
The public should be aware that the turnover rate among hospital CEOs is high - an average of just 5.6 years, said Jim Nelson, a Minneapolis-based compensation consultant whose firm works with 1,200 nonprofit organizations, including Kettering. Long-serving executives like Breitenbach and Perez are going to accumulate more bonuses and retirement benefits, he said.
Bryan Bucklew, chief executive of the Greater Dayton Area Hospital Association, believes local hospital executives should get credit for the huge economic benefit their organizations provide to the region. Hospitals here have the largest economic impact ($5.7 billion) of any industry in the region, and employ 31,000 people in the Dayton area, he said.
But Levine noted that nonprofit hospitals also receive hefty tax breaks. According to a 2002 report by the congressional Joint Committee on Taxation, nonprofit hospitals receive an estimated $12.6 billion per year in local, state and federal tax exemptions.
Hospitals should not be imitating a for-profit model, she said. "People don't choose to buy their health care. It's a necessity and a basic right, not a product for sale."
Nationally, pay raises for nonprofit hospital executives show no signs of slowing down, according to a recent survey done for Modern Healthcare magazine. From 2007 to 2008, their median base pay rose anywhere from 6 percent to 10 percent, depending on the nonprofit organization's size and structure.
Increases in median incentive payouts also rose anywhere from 5 percent to 10 percent, according to the survey by Sullivan, Cotter and Associates, an executive compensation consulting firm based in Chicago.
Contact this reporter at (937) 225-2437 or jdebrosse@Dayton DailyNews.com.
The deal to use state money to build a new rehearsal hall at the Santa Fe Opera has the backing of one very powerful legislator - House Speaker Ben Lujan, D-Nambe.
But it is drawing criticism from others, who say it amounts to using public money for the benefit of a private institution. They also note that in a year when government agencies everywhere are facing budget shortfalls, government workers face losing their jobs and major area employers like the College of Santa Fe are folding, shelling out $1.5 million to build auxiliary space for opera - among the arts one of the most acquired tastes - is, at best, inappropriate.
Questions about the legality of the deal are certainly in order. To circumvent the state constitution's "anti-donation clause" - language that forbids the use of taxpayer money to benefit private entities like corporations or, in this case, private nonprofits - the Opera has agreed to donate the site for the new hall to the state and then "buy back" the building. But the buyback won't involve money - instead the opera will offer in-kind services such as programs for children, tours and concerts. Keep in mind that at least some of these programs are not new; rather, they'll be a continuation of the kind of community outreach the Opera has already been doing.
