Lack of Evidence Prevents Investigation of Nonprofit's Questionable Expenses
posted on: Wednesday, March 22, 2006
“The actions of a former low-income housing builder may be unethical, but there’s no evidence they were illegal,” according to the county district attorney. He was talking about a Greensboro, North Carolina nonprofit housing group with a history of luxury cruises, thousands of dollars of other dubious travel, and a variety of assorted “questionable expenses.” (“No Criminal Charges to Be Filed in Homestead Investigation,” Winston-Salem Journal, March 10, 2006).
When the likes of Rick Santorum disingenuously say that the problems of charitable accountability are simply a problem of enforcing the laws on the books, it’s not that easy. The laws might not be strong enough, and obviously the sector’s self-regulation is on the thin side.
With this organization, the signs of organizational dysfunction had been obvious for years. The current investigation began two years earlier, the result not surprisingly of press inquiries that led to a government audit of the $18 million the City of Greensboro had invested in the nonprofit’s affordable housing development activities.
Money that disappeared from the project included some $8 million owed to the nonprofit’s creditors. The nonprofit ultimately declared bankruptcy. The bankruptcy trustee remarkably seized the estate of the organization’s executive director, a charismatic faith-based leader, who had purchased the properties with funds misappropriated from the nonprofit he directed (“Homestead Bankruptcy Trustees Goes after Estate”, News & Record, January 13, 2005).
The DA found scads of challengeable expenditures, but the bad memories of the board members and the nearly scratch-pad quality of the organization’s financial records made employees’ use of the nonprofit’s credit cards for employees’ personal expenses, employees’ diversion of the nonprofit’s construction supplies for their homes, employees’ flipping (quickie purchase and sales) of the nonprofit’s homes for their own profiteering, and much more. The local paper helpfully printed records of the nonprofit’s credit card payments, with dozens of payments to cruise lines such as Carnival, and Royal Caribbean and hotel and casino expenses in Puerto Rico, the Bahamas, and elsewhere (“Homestead Raced Up Thousands in Travel”, News & Record, February 5, 2004.
Also included were payments by the nonprofit to Tom Joyner Enterprises, trying to link the failing nonprofit to Ton Joyner’s nationally syndicated radio show and foundation in the hope that the nonprofit might be able to find a “benefactor” to bail it out of its financial troubles. The nonprofit paid $20,000 to participate in one of Joyner's own fundraising cruises, a fundraiser Joyner holds to raise money for his eponymous foundation. The nonprofit’s CEO also tried to reach Oprah Winfrey with the same bailout agenda. Neither the Joyner nor Winfrey ploys worked.
Somehow the audits weren’t all that revealing. The CFO wasn’t talking either. He and two other employees had accepted a payment from the nonprofit’s insurance companies, Nationwide and Allstate, to settle litigation they filed charging the executive director with having pressured them to have sex (“Nonprofit Settles Cases Saying Minister Tried Forcing Sex”, Abuse Tracker, http://ncrnews.org/abuse2005archieves/008605.html, January 14, 2005). According to their attorneys, taking the payment from the insurance companies was preferable to lining up behind dozens of other creditors looking for payments from the bankrupt organization.
“A bitter pill to swallow” was the DA’s characterization of the inconclusive investigation (“No Charges in Homestead Investigation”, News &-Record, March 10, 2006). Nothing could be proven worth legal action, in part because the CEO kept nearly all the operations in his head—and he was dead.
On December 6, of 2003, the 44 year old CEO, also a minister of a local Baptist church, overdosed on a combination bupropion, an antidepressant better known by its trade names Wellbutrin, and cittalopram, advertised commercially as Celexa (“King’s Death Ruled Suicide, Official Says”, News & Record, February 20, 2004). The suddenly awakened board had forced the CEO to resign not long before, after the City and the DA dismissed his complaints that he was being picked on by being forced to accede to the audits and investigations (“King: Homestead Treated Unfairly”, News & Record, September 3, 2003). In the absence of reliable written records, trustworthy memories of board members, employees whose ability to speak had not been compromised, or auditors from the previous 12 years of the nonprofit’s operations able to produce basic information, the details went to the grave with the once powerful faith-based nonprofit director.
This is more than the personal tragedy of a faith-based leader, a man of power and influence who had been able to corral the likes of Maya Angelou to attend the 2002 opening of a Krispy Kreme store developed by the nonprofit, not to mention state and national politicians who came to the city looking for his support. It is a story of the multiple means by which one nonprofit was able to misuse and abuse several hundred thousand dollars of tax exempt money—charitable donations as well as government contract funds—and escape punishment not to mention required rectification.
In their opposition to strengthened government standards and oversight of nonprofits, nonprofit leaders suggest that the nonprofit sector itself can self-police just fine. In this case, dozens of nonprofits, foundations, and government agencies had the ability to call out this organization and expose its rather obvious wrongdoing. No one did until the local newspaper sniffed around and found enough to warrant a look, and that prompted the city to get off its haunches. There’s no evidence in the newspaper reports that the state’s attorney general or the Internal Revenue Service had taken action in the dozen years the organization took to go from inception to bankruptcy.
As the local DA noted, the story was not just a “bitter pill” for his investigators and litigators, but would in the end be a bitter pill for the taxpayer and the public.
When the likes of Rick Santorum disingenuously say that the problems of charitable accountability are simply a problem of enforcing the laws on the books, it’s not that easy. The laws might not be strong enough, and obviously the sector’s self-regulation is on the thin side.
With this organization, the signs of organizational dysfunction had been obvious for years. The current investigation began two years earlier, the result not surprisingly of press inquiries that led to a government audit of the $18 million the City of Greensboro had invested in the nonprofit’s affordable housing development activities.
Money that disappeared from the project included some $8 million owed to the nonprofit’s creditors. The nonprofit ultimately declared bankruptcy. The bankruptcy trustee remarkably seized the estate of the organization’s executive director, a charismatic faith-based leader, who had purchased the properties with funds misappropriated from the nonprofit he directed (“Homestead Bankruptcy Trustees Goes after Estate”, News & Record, January 13, 2005).
The DA found scads of challengeable expenditures, but the bad memories of the board members and the nearly scratch-pad quality of the organization’s financial records made employees’ use of the nonprofit’s credit cards for employees’ personal expenses, employees’ diversion of the nonprofit’s construction supplies for their homes, employees’ flipping (quickie purchase and sales) of the nonprofit’s homes for their own profiteering, and much more. The local paper helpfully printed records of the nonprofit’s credit card payments, with dozens of payments to cruise lines such as Carnival, and Royal Caribbean and hotel and casino expenses in Puerto Rico, the Bahamas, and elsewhere (“Homestead Raced Up Thousands in Travel”, News & Record, February 5, 2004.
Also included were payments by the nonprofit to Tom Joyner Enterprises, trying to link the failing nonprofit to Ton Joyner’s nationally syndicated radio show and foundation in the hope that the nonprofit might be able to find a “benefactor” to bail it out of its financial troubles. The nonprofit paid $20,000 to participate in one of Joyner's own fundraising cruises, a fundraiser Joyner holds to raise money for his eponymous foundation. The nonprofit’s CEO also tried to reach Oprah Winfrey with the same bailout agenda. Neither the Joyner nor Winfrey ploys worked.
Somehow the audits weren’t all that revealing. The CFO wasn’t talking either. He and two other employees had accepted a payment from the nonprofit’s insurance companies, Nationwide and Allstate, to settle litigation they filed charging the executive director with having pressured them to have sex (“Nonprofit Settles Cases Saying Minister Tried Forcing Sex”, Abuse Tracker, http://ncrnews.org/abuse2005archieves/008605.html, January 14, 2005). According to their attorneys, taking the payment from the insurance companies was preferable to lining up behind dozens of other creditors looking for payments from the bankrupt organization.
“A bitter pill to swallow” was the DA’s characterization of the inconclusive investigation (“No Charges in Homestead Investigation”, News &-Record, March 10, 2006). Nothing could be proven worth legal action, in part because the CEO kept nearly all the operations in his head—and he was dead.
On December 6, of 2003, the 44 year old CEO, also a minister of a local Baptist church, overdosed on a combination bupropion, an antidepressant better known by its trade names Wellbutrin, and cittalopram, advertised commercially as Celexa (“King’s Death Ruled Suicide, Official Says”, News & Record, February 20, 2004). The suddenly awakened board had forced the CEO to resign not long before, after the City and the DA dismissed his complaints that he was being picked on by being forced to accede to the audits and investigations (“King: Homestead Treated Unfairly”, News & Record, September 3, 2003). In the absence of reliable written records, trustworthy memories of board members, employees whose ability to speak had not been compromised, or auditors from the previous 12 years of the nonprofit’s operations able to produce basic information, the details went to the grave with the once powerful faith-based nonprofit director.
This is more than the personal tragedy of a faith-based leader, a man of power and influence who had been able to corral the likes of Maya Angelou to attend the 2002 opening of a Krispy Kreme store developed by the nonprofit, not to mention state and national politicians who came to the city looking for his support. It is a story of the multiple means by which one nonprofit was able to misuse and abuse several hundred thousand dollars of tax exempt money—charitable donations as well as government contract funds—and escape punishment not to mention required rectification.
In their opposition to strengthened government standards and oversight of nonprofits, nonprofit leaders suggest that the nonprofit sector itself can self-police just fine. In this case, dozens of nonprofits, foundations, and government agencies had the ability to call out this organization and expose its rather obvious wrongdoing. No one did until the local newspaper sniffed around and found enough to warrant a look, and that prompted the city to get off its haunches. There’s no evidence in the newspaper reports that the state’s attorney general or the Internal Revenue Service had taken action in the dozen years the organization took to go from inception to bankruptcy.
As the local DA noted, the story was not just a “bitter pill” for his investigators and litigators, but would in the end be a bitter pill for the taxpayer and the public.
posted by NCRP at
5:24 PM
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