A Climate Ripe for the Pickings

Virtually everyone has seen the financial and trust problems facing the charitable sector explode because of the leap in malfeasance. Last year estimates have pegged nonprofit fraud as high as $18- $40 billion each year. Last year, Nonprofit Imperative has documented, solely from public sources, more that a billion dollars in misdeeds. Some say that number represents 6% of all transgressions.                            

For years we have been comforted to know that our prosecutorial system would weed out the bad apples. But the tide is turning in favor of the crooks and with more frequency they are turned out on the street with little more that a slap on the wrist. There are several reasons for lack of strict enforcement.                           

The current situation in a Michigan county is quite common. In August, 2007, the chief judge of the circuit court ordered sentence reductions for 266 prisoners at the county jail to alleviate chronic overcrowding. The day the order was issued, 45 percent of the inmates were released. Since August 2005, more than 1,800 inmates have been released.                            

The overcrowding and other issues have other consequences. We are seeing prosecutors suggesting lighter sentences. In California, a judge disregarded a probation recommendation from prosecutors and imposed a jail term on a woman who embezzled $110,000 from the Red Cross while working as a financial manager. On the other hand, the head of the Juvenile Diabetes Research Foundation in Southfield Michigan pleaded guilty to stealing $250,000 and got no jail time.                         

In Alaska, a former Salvation Army employee was convicted of stealing an estimated $160,000 and sentenced to 37 months in jail. The case was prosecuted by the U.S. Attorney’s office. Such sentences are apparently going to become rarer. Because of an inability to fill senior positions at the Department of Justice and because of a budget squeeze at the U.S. Attorney” offices, there has been declines in crime prosecutions and delays in major investigations. Prosecutions are down in white collar offenses such as charitable embezzlement. In a two year period, 2004-2006, the number of prosecutors fell 2.4% and continues falling to this day. Prosecutors have had to raise thresholds for prosecution which means more money can be stolen before it reaches the radar for investigation.                              

For decades, the nonprofit sector has maintained a well-deserved imagine that has endeared it to the general public. The basis of that relationship has been trust. Trust is a precious resource. As recent studies have shown, the public’s trust in charities has plummeted. Even though those nonprofits involved in malfeasance are small it is growing exponentially, the amount of dollars involved is huge. With the sector’s trust breaking down, all nonprofits begin to look suspicious.                                                       

Something must be done and eliminating culpability is not a good road to travel. 

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications. His website: www.garyrsnyder.com

Red Cross in For a Change?

The appointment of a tough regulator, Mark Everson, head of the IRS, to the presidency of the beleaguered American Red Cross was good news.

Just as Everson‘s selection was announced, the Red Cross was stripped of its leadership role in coordinating the provision of shelter, food, and first aid to victims in disasters. The Federal Emergency Management Agency will assume that role.

To further tarnish the agency’s image, there have been several indictments, arrests, or convictions recently at chapters in California, New Mexico, and
West Virginia involving questionable spending totaling several hundreds of thousands of dollars.

Everson has to deal with a major structural change in the way in which the agency is governed. Many of the Red Cross problems are attributed to governance. In the past, there has been significant board trouble, with its choice of staff leadership, husbanding of its resources, conflicts of interest, and board-attendance issues.

Everson comes to an organization that has been replete with problems that span decades. He follows a number of presidents that had been forced out, the last two with sizeable (and controversial) golden parachutes. The Red Cross continues its decade-long fight with the Federal Drug Administration over violations of blood-safety rules and failing to comply with a 2003 agreement to correct such practices.

Hopefully the past is not a precursor for the future. In one instance the board criticized a previous national Red Cross president for firing an executive after finding that the executive was involved in a $1-million embezzlement. In another case, the Red Cross settled for less than half of the $120,000 stolen by a chapter executive.

 For years, the agency has been criticized for raising money for one disaster, and then withholding a large chunk of it for other operations and fund raising.
Everson has a big challenge ahead. He deserves a chance to wade through the morass, gather the necessary leadership, and change the course of a ship that has gone astray. Those that had considerable trust in the American Red Cross want to renew that trust. All Americans want to see an organization with the wherewithal to erase its compromised past and fulfill its mission.

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications. His email address: gary.r.snyder@gmail.com; website: www.garyrsnyder.com                                             

Nonprofit Imperative « Nonprofits Amiss

Nonprofit Imperative « Nonprofits Amiss

Nonprofit Imperative

Nonprofit Imperative…           Nonprofit Imperative | Who Are We? | Contact US | Nonprofits On the Brink May, 2007

Nonprofit News        -In Case You Missed It	Red Cross makes a decision, finally
Nonprofit Mischief (April)	$30.593 million (2007 to date-$165.093 million)
Political Charity Chicanery	Prosecutors Caught Abusing
Charity Check Up                                                         Comings and Goings	Addressing a Nonprofit Problem
Let Us Hear From You

Nonprofit News-In Case You Missed It:Finally Good Red Cross News… after a search that lasted more than a year the American Red Cross has chosen Mark Everson, the commissioner of the Internal Revenue Service, as its new chief executive, the organization announced today. Bad news for the Red Cross… The Federal Emergency Management Agency will replace the American Red Cross as the agency in charge of coordinating the provision of shelter, food and first aid to victims in disasters under an agreement disclosed by a Senate panel. The Government Accountability Office reported in June that FEMA and the Red Cross had made little progress in easing conflicts coordinating “mass care” for millions of 2005 storm victims. FEMA workers chafed at Red Cross policies that rotated staffers and volunteers every two to three weeks. More good news, the House passed an amendment to the Congressional Charter of The American National Red Cross to modernize its governance structure. The House version is similar to the recently passed Senate version.Foundation Giving- Giving by foundations climbed past $40 billion last year, according to estimates by the

Foundation
Center, breaking a record of $36.4 billion set in 2005.  Some of the increase is almost certainly attributable to the donation of drugs by foundations associated with pharmaceutical companies.The leader of a nationwide nonprofit, We the People Foundation for Constitutional Education, which contends most Americans are not required to pay income tax, was sued by the Justice Department, which said that his followers have used a tax scheme that he sells to avoid paying $21 million of income taxes.The World Jewish Congress, the nonprofit group that compelled European banks to pay billions of dollars in Holocaust restitution, has dismissed its longtime leader, Israel Singer, after three years of controversy.
Singer’s departure follows a tumultuous period for the organization that began when its Swiss affiliate discovered $1.2 million in odd transfers of money between accounts in
New York, Switzerland and
London, where it was held in the name of an Israeli lawyer. Donations fell in 2005, and, according to its financial statements, its expenses were $17 million and its revenues were $9.4 million Some accusations…More museum problems… Smithsonian Institution officials repeatedly used government resources and employees for personal projects, according to an internal investigation by the museum. The officials commissioned work for friends. The museum said it took “administrative action,” including verbal admonishments, to punish officials, but no serious action.

Not only in
America… Scandals Embarrass Spanish Charities…An investigation into the mismanagement of $60-million and the arrest of a prominent charity official for embezzlement have provoked distress among Spanish charities

The
Barcelona attorney general’s office has accused
Fundacion Intervida, an organization that delivers meals and textbooks to schools in poor countries, of illegally channeling $60-million into subsidiaries without approval of the group’s board. The attorney general also will investigate whether Intervida directors siphoned some of that money for themselves. (Thanks to Chronicle of Philanthropy)Hospital Inspection? Senate Finance Committee Ranking Member Charles Grassley asked the Government Accountability Office (GAO) to conduct a study to determine whether “nonprofit hospitals are providing services and benefit to the public commensurate with their favored federal tax status.”More Smithsonian…Two leaders of the Smithsonian held highly paid seats on the museum’s insurance company’s board. Each received over $150,000 in compensation while the nonprofit paid over $548,341 in premiums. Despite the appearance, these seem to be perfectly legal!Get this…I have recently been an advocate for fair and equitable sentencing (see below). Now we have a guy caught filing false time cards for fictitious employees, collecting paychecks, and forging signatures for the checks over five years which was followed with false statements on tax returns until his arrest on state charges in 2004, which were followed by federal charges in August 2006. A federal judge spared former
Hillhouse Assistant Principal Ben Hunter prison time as he was sentenced for stealing federal funds from a nonprofit sports program he ran. The judge departed from sentencing guidelines of 12 to 18 months in prison because of Hunter’s “extraordinary” record of charitable deeds in
New Haven. Not quite fair for the guy who stole $400 and got 11-12 years.So much mischief, so little room to report it:

1. Gateway to a Cure (MO) -$1.9 million
2. National Kidney Foundation of the Virginias Accountant-$169,000
3. Friends of the Homeless Inc- $145,000
4. Temecula Valley Soccer Association-(CA)-$50,000+
5. Shelton State Community College- up to $500,000
6. 
   Utah Public Education:

·        Davis School District-$4 million·        Weber School District Foundation-$1 million; pleads guilty·        Snow College- to be determined

1. Long Term Care Authority of Tulsa - $50,000
2. The Southampton Soccer Association-up to $250,000
3. Down Syndrome Association of Central Ohio- $173,000
4.  Alaska Council of School Administrators-$57,000 
5.  American Red Cross (MI)- thousands 
6.  American Red Cross (WV)- $14,000+
7.  The Living Planet Aquarium – (UT) – up to $5300
8.  ChildNet- hired felons; agency closed
9.  Easter Seals, Salvation Army –(
   Alaska)- $75,000
10.  Community with a Heart –(FL)- $90,000
11.  Southampton Soccer Association (PA)- $250,000
12.  Heisey Youth Center – (MT) – $156,253
13.  NY State Training Council- $50,000

*update 

Political Charity Chicanery (just a few):  

Mayor Jim Nehmens was arrested and charged with embezzling roughly $20,000 from the city’s Little League baseball program, officials said. Springfield (MA) former City Council President was given a 36 month prison sentence for stocking his
Rhode Island house using $145,000 worth of The Friends of the Homeless funds. The sentence was after the former director pleaded guilty to conspiracy, extortion, mail fraud, witness tampering and perjury.  

Former Fairbanks mayor, was indicted on multiple charges of theft, fraud and money laundering associated with their alleged misuse of $450,000 in funds given to LOVE Social Services, of which
Chris Hayes is executive director.
Jim Hayes was indicted on 23 counts,
Chris Hayes on 92 counts.                                                                                                   LOVE Social Services received nearly $3 million through a total of five federal grants from the Department of Housing and Urban Development and the Department of Justice from 2000 to 2005. The government alleges the Hayeses diverted a large portion of that money for personal use and to help build the new home of the Lily of the Valley Church of God in Christ.Politicos travel on nonprofits tickets in
California. Sixteen
California state administrators, regulators and lawmakers have traveled to the
Far East on the dime of those that they regulate. The trick is simple: the companies donate to a nonprofit and the nonprofit pays the way. These shenanigans were put on hold at the federal level as both houses of Congress were embarrassed by such revelations. Guess the west coasters don’t get the message. Will they Learn?- Some of the same California corporate interests that dominate the Capitol through high-priced lobbyists and campaign donations also bankroll nonprofit organizations that in turn spend tens of thousands of dollars a year entertaining state lawmakers and administration officials far from home — gifts that otherwise would exceed state limits.
California law prohibits public officials from accepting gifts valued at more than $390 from any source. But when it comes to travel expenses “reasonably related” to a legislative or governmental purpose, nonprofit groups are allowed to spend unlimited amounts Charity Check Up: 

I expressed puzzlement in my article, Does the Penalty Meet the Deceit, about the sentencing standards for those that misbehave in the nonprofit sector.  We see that the $4,000 theft at the Washington Teacher’s
Union received an eleven year sentence and the $47,000 thievery from the Vietnam Veterans of America received 5 years in prison. . On the other hand, an $880,000 theft from the Whitney
Museum received 200 hours of community service, the executives that looted the Gloria Wise Boys and Girls Club of $1.2 million were ordered to repay $70,000, and 4 of the leaders of the $550 million embezzlement at the Baptist Foundation of Arizona were sentenced to probation. Is there skewed punishment for those that have yanked big chunks of money and therefore can afford a better defense?   

Recent Comings and Goings:q      Tax Records Show No Staff, No Controls (The
Virgin Islands Daily News)q      International Baptist Collegeq      My Health Helpq      BusinessCrp.comq      Does the Penalty Meet the Deceit? (ncrp.org.)q      Nonprofit organization roles and responsibilities of the United States—based on a comparative analysis of perspective. –(NANKAI (
China) BUSINESS REVIEW)q      HANO, Hawaii Alliance of Nonprofits q      Philanthropy at the Crossroads, (ncrp.org)q      Tough Call (
Trent Stamp’s Take)q      Despite What Some Might Say… (The Charity Governance Blog)q     
Grant Thornton Study Reflections, (WWJ Radio)q      2006: A Memorable Year, (ncrp.org)q      Board quit, but trouble persists (The Sun News)q      Should the Public Feel its Being Duped by Charities? (ncrp.org)q      Corruption thrives as nonprofit boards forfeit oversight (
Palm Beach Post)q      Why Don’t Charities and Lawmakers Want to Curb Nonprofit Abuses? (eisenhowerfoundation.org)q      Is there an Epidemic of Parent, Teacher, and Student Fraud? (ncrp.org)q      Reviving charities will take some trust (
Oakland Press) q      Five Rivers paid for controversial King visit (The Sun News) q      Board not consulted on wages (The Sun News)q      Local Authors…Nonprofit Consultant to Appear (
Detroit Frees Press)q      Nonprofits: On the Brink (iUniverse, 2006) Let Us Hear From You 

Our intent is to keep you informed….

You may send an e-mail that will remove you from our contact list and future mailings by emailing to nonprofitsonthebrink@gmail.com with the word “remove” in the subject line.  Email: gary.r.snyder@gmail.com             6584 Pleasant

Lake Court

          
West Bloomfield, Michigan
48322            248/324-3700Website: www.garyrsnyder.com                                                                             

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications.   The book can be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store) and iUniverse.com (publisher).                                                  
©
Gary Snyder, 2007

Can Bigger Misdeeds Lead to Smaller Sentences?

Can Bigger Misdeeds Lead to Smaller Sentence?

                                    ByGary Snyder

As those of you that follow the strengths and weaknesses of the nonprofit sector know, billions of dollars have been taken from those in need by trusted agency leadership. The regular e-newsletter, Nonprofit Imperative, has documented hundreds and hundreds of convictions of those in control being punished in some manner or another. I thought that it may be instructive to take a look on the disparity of sentencing based on the severity of the crime.

Just recently, five members of one of the largest nonprofit schemes—Baptist Foundation of Arizona—were sentenced. This was one of the biggest frauds perpetrated on contributors in the history of the charitable world. Eleven thousand, principally elderly, were taken-in by a Ponzi (pyramid) scheme. (Other similar nonprofit Ponzi schemes in the late nineties were the New Era Philanthropy Foundation-$135 million loss; Great Ministries International-$353 million loss). The $550 million was embezzled over several years by the Baptist Foundation, ending in 2002. While a significant amount of the money was regained from insurance claims, it was nevertheless a precursor of the current climate. Baptist Foundation fraud parallels the for-profit Enron activities resulting with
Arthur Anderson executives paying $217 million to those defrauded and a number of accountants losing their licenses. The sentence: three of the four executives received probation and restitution; one was sentenced to prison.    

Another noteworthy example of nonprofit greed was at the local

United Ways

. We can document that 7 agencies that intentionally miscounted or understated expenses and as far as we can tell there were no consequences. The sentence: of the

twenty-one United Way

agencies that have been involved with criminal activity totaling more than $17 million, sentenced varied. One took $102, 000 and received 7 years in prison, whereas another that took $72,000 received probation; and other that took $2.1 million got four years in prison; and yet another repaid $227,000 and was hired as a consultant to UW.

Schools are the up and coming center for nonprofit malfeasance. At the Roslyn schools in
New York, about $11 million was taken by the superintendent and others. Some senior employees had the school district pay their personal credit card bills, which included more than $1 million in cash advances withdrawn from automatic teller machines, and pay for mortgages on luxury homes, personal automobiles and much more.  Sentence: superintendent 4 to 12 years; another, one to three years in prison.

As the chart below shows, there is a significant disparity in sentencing. A $4,000 theft received an eleven year sentence whereas hundreds of thousand dollar embezzlements got either probation or restitution.

Some others:

Theft Amt.  Sentence                               Charity

$300,000	Restitution	Niles Schools/Parker Foundation
$135,000	6 yrs. prison/restitution	Litchfield Performing Arts
$180,000	16 months prison	Paralyzed Veterans
$10,000	5 years prison	US Dept. HHS
$111,000	5 years prison/15 years probation	Humane Society South Coastal
$4,000	11 years  prison	Washington Teachers Union
$300,000	10 years prison	Metro Ministries Loaves and Fishes
$100,000	10 years probation/restitution	Quincy College
$600,000	8 years prison	Super., Georgia State Schools
$235,000	26 months prison; 5 years probation	Bristol Speech and Hearing Center
$20,000	20 years prison; 15 years suspended	Henrico County-Arthur Ashe PTA
$238,000	3 years probation	Macomb-Oakland Regional Center
$70-120,000	300 hours of community service	Progressive Training Associates
$2.3 million	4 years prison	Hyman Foundation
$3.6 million	5 years/restitution	African Christian Relief
$480,000	5 years in prison	Richmond Metro. Youth Soccer League
$400,000	2.25 years in prison	Cherokee Elementary School
$42,000	2-20 years	Upper Ohio Valley Italian Festival
$223,000	30 days in jail; restitution	Lower Currituck Volunteer Fire Department
$300,000	6-12 months	Our Lady Queen of Peace
$1 million	3.1 years; restitution	National Crash Analysis Center
$6 million	4.75 years prison	Prepared Table Charter School
$10,000	2 months jail	On Our Own
$875,000	18 months; restitution	North Bay Health Care Group
$48,000	5 years probation	Ensemble Studio Theatre
$500,000	1 year in jail	Long Island Schools for the blind
$500,000	13 months	SE Arkansas Community Dev. Corp.
$47,000	5 years in prison	Vietnam Veterans of America
$880,000	200 hours of community service	Whitney Museum

If you have a understanding of this inconsistency in sentencing or want to comment, let us know.  

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications. His email address: gary.r.snyder@gmail.com; website: www.garyrsnyder.com                                       

Nonprofits Amiss

Nonprofits Amiss

Nonprofit Misdeeds

…I love good charities. I think bad charities, however, should be excised from the sector, allowing more money to flow to those that do good work.  (Trent Stamp, President, Charity Navigator) 

Want to see previous editions? Go to www.garyrsnyder.com 

In Case You Missed It: 

 American Red Cross: This is unbelievable! The Federal Drug Administration is fining the Red Cross another $5.7 million for violating blood safety rules and failing to comply with a 2003 agreement to correct such practices. Previously, the FDA had fined the Red Cross a total of nearly $10 million. The Red Cross has been working on “persistent and serious violations” for 17 years. ( Boston Herald, November 27, 2006)  This is an example of feeble board leadership: The current Interim CEO was promoted from his previous position of Executive Vice President of Biomedical Services, the position he assumed in March 2004. “He has spent the last two years applying his vast experience and proven leadership toward improving the safety and availability of the blood supply while assuring the quality of our biomedical services meets the requirements of the FDA”. (From the Red Cross website)  

     Combined Federal Campaign:  The U.S. government’s version of the United Way handed out hundreds of millions of dollars to 1,280 charities last year that owe $36 million in taxes dating back as far as 1988.At the same time, other federal agencies gave $1.6 billion in grants to at least 170 of the delinquent charities.  About one in 15 charities that underwent a detailed audit by investigators at the Government Accountability Office was found to be engaged in “abusive and potentially criminal activity.” (MSNBC.com, November 27, 2006) 

Michigan:

1.    The Parent, Student, Teacher Association at Pierce Elementary School is conducting an investigation about $17,000 missing from its bank account. (Birmingham-Bloomfield Eagle, November 22, 2006)

2.    A former treasurer of the Pontiac Education Association pleaded no contest to misdemeanor charge of embezzlement, with $12,000 misappropriated. The 16-year veteran teacher has agreed to pay back the money. (The Oakland Press, November 23, 2006)

3.    The former treasurer of the McKinley Elementary School Parent-Teacher Association has been indicted for embezzlement between $1,000-$20,000. ( Macomb Daily, November 28, 2006 

Nonprofits: On the Brink: Chapter Three Best Practice: “The board should define board roles regarding fiscal management and oversight.”

  Virginia: The former accounting director for the National Kidney Foundation of the Virginias is charged with embezzling about $175,000 from the charity over the last six years. (Times-Dispatch.com, November 22, 2006) 

 Florida: The former White City Cemetery manager pleaded no contest to charges that he stole $50,000. If he repays the entire amount he will probably stay out of prison. The cemetery’s bookkeeper is accused of stealing more than $135,000. ( Palm Beach Post, November 22, 2006)    

Arizona: top Maricopa County Superintendent of Schools top administrator has been indicted for stealing, misusing and bid-rigging more than $2 million. (The Tribune, November 21, 2006) 

Nonprofits: On the Brink: Chapter Fifteen: Board, staff, and volunteers must disclose any related party issues.     

 California:

1. The former head of the Filipino-American Senior Opportunities Council has been indicted for embezzlement and fraud of $219,000 over a several year period. (Mercury News, November 16, 2006)

  Nonprofits: On the Brink: Chapter Eleven Best Practice: “…nonprofit should have written financial policies governing…internal control procedures…salaries and benefits; expense account reporting…”

1.   The Auxiliary at the UCSF Medical Center got back $166, 000 in charitable funds that a past president embezzled from the agency. Previously, the past president was convicted of grand theft and forgery. (jewishsf.com)
2. The president of the Friends of Jamul-Dulzura Schools is accused of stealing $131,000 over a seven-year period.  (NBCSanDiego)

  Nonprofits: On the Brink: Chapter Eleven Best Practice: “A nonprofit should create and maintain financial reports on a timely (at least quarterly) basis, accurately reflecting the financial activity of the organization, including the comparison of actual to budgeted revenues and expenses.”   

Wisconsin: The former president of the Blue Huron Wildlife Foundation is charged with embezzling more than $900,000. The foundation’s board of directors consisted of four of the president’s family. (journalsentinel.com, November 14, 2006) 

Nonprofits: On the Brink: Chapter Three: (board members should)…”follow conflict of interest and confidentiality policies”

  Texas: The former director of the Austin Community Access Center was sentenced to seven years in prison after pleading guilty to stealing more than $350,000. ( Austin American-Statesman, November 28, 2006) 

 Nonprofits: On the Brink: Chapter Three Best Practice: The board should recognize that audits are a key component in fulfilling its financial oversight. 

 Missouri: The longtime leader of the Veterans of Foreign War’s Ladies Auxiliary is charged with stealing over $10,000 from the organization. (ky3.com, November 21, 2006) 

                  © 2006 by Gary Snyder All rights reserved 

Our intent is to keep you informed….

 You may send an e-mail that will remove you from our contact list and future mailings by emailing to nonprofitsonthebrink@gmail.com  with the word “remove” in the subject line.   Email: gary.r.snyder@gmail.com ; 6584 Pleasant

Lake Court,West Bloomfield, Michigan 48322 ;

248/324-3700;

Website: .garyrsnyder.com                                                                            

Gary is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and numerous other articles.  The book can be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store) and iUniverse.com (publisher).

He/she That Giveth Getteth

As the politicos generously give your tax money to nonprofits, they expect much in return. Many have done extremely well. Have you received your thank you note yet? As the lifestyle of your publicly-elected official (and many staff) increase, we see an ever-increasing reciprocal agreement between them and you…you pay, they spend and keep. And guess what, you don’t even know that you are even a player.  

For several years, I have been studying nonprofit malfeasance. In the past two years I have noticed an increase of quid-pro quo activity between those that represent you and those that support them. I have detected, with alarm, the use of nonprofit organizations as intermediaries for the misdeeds. This has become the latest stick-it-to-the public de jour.  The stains of dishonesty throughout the charitable world are becoming ever-present. We have seen fraud and self-dealing, excessive compensation of executives and trustees and other abuses of the public trust. But most recently we have seen an explosion wrongdoing from public officials.  

But the public servant misdeeds are too hard to ignore. Whether the amount is large or small, it could we see our elected officials or their staff almost becoming commonplace.  We see examples such as a senator exploiting a nonprofit for $35,000; a county executive pocketing $500,000; or congressman, their families and their staff filling their pockets with millions of dollars. All involve charities.  The list includes mayors, pastors, U.S Senators, state senators, Assemblymen, Congressmen and Congresswomen, governors, candidates for office, leadership at the local, state, and federal level, as well as those that are attempting to influence them.  Many misdeeds are greased by lobbyists where former elected officials and former staffers make millions of dollars from clients to nudge along proposals. That is why there are twice as many registered lobbyists plying their trade than did so just six years ago.  Obviously the payoff is great for the clients, as well. They often get a $100 yield for every dollar spent for a lobbyist.  

As you will see, indictments and frequent investigations are seemingly not a deterrent. The malfeasance involves a person who has been entrusted with the community’s resources. For example, the long-serving
Efrain Gonzalez, State Senator from the West Bronx (NY), has been indicted for using tens of thousands of nonprofit funds for Yankee baseball tickets and membership fees at a
Dominican Republic vacation club.  Another, the former Mayor of
Lynchburg (VA) and pastor was recently sentenced for raiding his church’s charity and stealing from disabled Social security recipients.  

At the FBI, subpoenas are flying fast in the investigation of Congressman Allan Mollohan (W.VA.) The Representative has funneled at least $179 million in
U.S. government contracts, over the past six years, to companies that gave contributions to the Congressman’s family-run charitable trust. As if that wasn’t enough, more than 240 million in federal dollars that the House Appropriations Committee had earmarked, loads went to five nonprofits that are in Mollohan’s control. In return, hand picked employees of the nonprofits gave in excess of $400,000 to his campaign coffers. Incidentally, the Congressman’s personal wealth has soured into the millions.  More…  Remember
Randy Cunningham?  He’s the convicted Congressman (CA) who admitted to taking $2.4 million in bribes. Well, he had a foundation that grew because of his powerful position. His charity won many federal contracts with his wife and daughter as board members. The nonprofit’s treasurer: convicted defense contractor and recipient of the Congressman’s largess–
Mitchell Wade.  

Had enough?  Tom Delay (TX), the disgraced powerful former Congressman has a soft spot for children. His Delay Foundation for Kids took care of his board member-wife by collected $115,000 from a lobbying firm. The U.S. Family Network, another nonprofit of Delay’s, generously subsidized the lobbying firm that was paying the wife of his chief of staff over $1 million and got most of its contributions from convicted lobbyist
Jack Abramoff. Some of the money was used for attack ads and another $500,000 was used on political radio advertising.  The other Delay charity, Celebrations for Children, was used for receptions and wine and cheese parties until watchdog groups found out and then all of the affairs were nixed. So much for the kids! Not satisfied? Senator Rick Santorum (PA), believing that nonprofits were not regulated, started a charity. Why not? In a few years he collected over $1 million. A big contributor to his campaign and charity, and chairman of the charity, arranged favorable financing for Santorum’s
Virginia home. That arrangement is under investigation.  

A fundraiser left after an expose about fundraising practices and his large salary. The charity, Operation Good Neighbor, is being investigated because it spent only 40% of the money collected with over $216,000 in unexplained travel and meeting expenses in 2004. A former associate of convict
Jack Abramoff is executive director. The Senator is also is paying 12 members of his personal staff from his charity in addition to being paid as members of his campaign staff Want more?
Congressman Harold Rogers (KY), chairman of the House Committee that controls the budget of the Department of Homeland Security gave the American Association of Airport Executives the contract to handle background checks. Guess what?
Rogers got a check in return. He and his wife got $75,000 worth of trips and got a special treat, the Association’s Congressional Leadership Award.  It keeps going on and on…. 

1.     Representative (N.C.)
Charles Taylor used earmarks to create a nonprofit overseas program run by his friend and business partner. This is under investigation.
Taylor was involved in another federal investigation that only implicated him, but his campaign manager and top campaign donor pleaded guilty….2.     A developing story is the hundred+ millions of dollars in earmarks to schools and nonprofits that Congressman Jerry Lewis (CA), chairman of the House Appropriations Committee, has made. As a result he is under federal investigation into congressional corruption. Another federal investigation is in the works focusing on the relationship between earmarks and 41 acres of pristine land that Lewis got from one of the recipients of earmarks…3.     There is a federal criminal probe of a rental deal between U.S. Robert Menendez and a nonprofit in which the Senator collected more than $300,000 in rent from the organization while helped the organization win millions of dollars in federal funding…4.     Des Moines City Councilman said that he was a “rubber stamp…that was my function” as an agency board member as the top three officers got $1.8 million over a 30 month period. One of the executives ended up as one of the highest paid public officials in
Iowa. A major investigation is currently under way.5.     And it keeps going on and on… A million dollars here, a billion dollars there–much at the expense of those in need. Certainly the nonprofit sector leadership doesn’t seem to be concerned about its image and how it impacts on donors. They’ve turned their heads on any malfeasance.  

The Congress has given the appearance of concern. John A. Boehner of
Ohio, Majority leader, of the corruption-rocked House of Representatives, suggests that there is a growing perception that the Congress is for sale. The House is where many Representatives have been linked with a series of scandals involving contracting abuses and other special-interest favors.  Reform advocates have denounced, as toothless, any of the proposals suggested by the Congress to clean things up. Nevertheless any proposal’s bite was still too sharp for the majority in Congress. They watered down any substantive change to stop current corrupt practices. The world in which nonprofits currently operate is rapidly changing for the worse. The current way in which charities operate must be transformed. Traditional approaches such as we have seen lately have led to misbehavior and led to distrust of the entire sector. Current modes of practices are outdated and need to be infused with new ideas and new blood. The sector can no longer rely on our legacy and turn a blind-eye on the turmoil within its family. It must step up and change or the consequences are too hard to fathom.  

—
Gary R. Snyder
Managing Director, Nonprofit

Management
Center
 Gary Snyder is the managing director of Nonprofit Management Center, the West Bloomfield, Michigan-based leadership forum for nonprofit advancement. A noted expert with a recent book, Nonprofits: On the Brink, and two e-newsletters—Political Charity Chicanery and Nonprofit Misdeeds–focusing on the major issues affecting the philanthropic community. Snyder is a frequent speaker on the accountability and transparency of nonprofit organizations with unique solutions to the sectors plight.