Charity Governance

SHOULD I STAY, OR SHOULD I GO? NO RESPECT FOR DIRECTORS OR DONORS AT ACORN

Should I stay or should I go now?
If I go there will be trouble
And if I stay it will be double
       The Clash, Should I Stay or Should I Go

DATELINE: June 10, 2008, Chicago

Maude Hurd, the president of ACORN, a nonprofit group, certainly has a warped sense of what is right and what is wrong when she calls ACORN's response to an alleged near-million-dollar embezzlement a judgment call. According to Stephanie Strom's recent reporting in the New York Times last week, the brother of the organization's founder is alleged to have embezzled $948,607.50 from the organization. Funds Misappropriated at 2 Nonprofit Groups, June 9, 2008.  The alleged embezzler, Dale Rathke, apparently also was an Acorn employee. We would like to put that number in perspective by comparing it to ACORN's gross revenue, but we are unable to...

WHAT'S THE MICHIGAN ATTORNEY GENERAL DOING TODAY?

DATELINE: May 29, 2008, Chicago

Ah sugar, ah honey honey
you are my candy girl
and you got me wanting you
Oh honey honey, sugar sugar
You are my candy girl
            The Archies, Sugar Sugar

The Michigan Attorney General must be busy today after reading Mary Williams Walsh's front page piece in today's New York Times, In Stock Plan Employees See Stacked Deck. The focus of this in-depth article is on U.S. Sugar and its employee stock ownership plan. In a nutshell, the employee participants who retire are cashed out of the ESOP based on an appraised value for their stock. But in a lawsuit, they contend that U.S. Sugar received two offers from third parties to acquire the company at significantly higher amounts. Walsh points out that offers were at $293 a share, but that at the same time, the ESOP was cashing employees out for as little as $194 a share.

In an apparent effort to demonstrate why it was not selling out for the $293 offer price, U.S. Sugar hired an appraiser that said the company was worth...

GOVERNANCE IS MORE THAN A PAPER FIG LEAF: THE LATEST FROM WALL STREET

DATELINE: January 14, 2008, Chicago

Everybody in the nonprofit world is rushing to or has adopted conflicts-of-interest, whistleblower, and record-retention policies. The paper chase will undoubtedly accelerate this year so that tax-exempt entities can indicate on their Form 990 that they have these policies in place. As far as we are concerned, these policies are fine, but they are not the solution to the major governance policies facing the nonprofit sector. Papering over a problem is never the solution. What is really required is...

WHAT TO DO WHEN THE BANK IS THE WHISTLEBLOWER: TROUBLESOME REVELATIONS ABOUT THE BOARD CHAIR AND VICE-PRESIDENT

DATELINE: January 9, 2008, Chicago

We saw an interesting question on a listserv e-mail list the other day. Normally we ignore these, but this question was not only an interesting one, but offered a challenge. Here are the facts. A social service agency with a relatively large board (probably somewhere between 18 and 25 members) had just elected a new board chair, vice-president, and treasurer. The organization asked its bank to add these three individuals as authorized checking account signatories. The bank refused to do so in the case of the new chair and the vice-president because of what the bank claimed were frequent...

THE IRONY: TERRY GAOUETTE COULD EASILY BE CHARACTERIZED AS ONE OF THE MILWAUKEE PUBLIC MUSEUM’S BIGGEST BENEFACTORS

DATELINE: December 1, 2007

And someday if God's in heaven overlookin' His preserve
I know the men that shot him down will get what they deserve.

Joey, Joey,
King of the streets, child of clay.
Joey, Joey,
What made them want to come and blow you away?

Bob Dylan, Joey, appearing on Desire (1976)

It is hard to be critical of Terry Gaouette's decision to plead guilty to one misdemeanor count of falsifying a financial report. Steve Schultze, Ex-Official Gets Fine, No Time: He Pleads Guilty in Museum Case, Milwaukee Journal-Sentinel, Nov. 30, 2007. But we nevertheless find the plea to be an unfortunate action on Gaouette's part because, in our view, he was the one responsible adult in the room as the Milwaukee Public Museum's finances collapsed. That collapse was rooted...

SILENCE AND CONFLICTS OF INTEREST: ORU BOARD HAD BETTER START TALKING

DATELINE: November 27, 2007

Everybody thinks of conflicts of interest in terms of a nonprofit buying plumbing, legal, or insurance services from one of its directors. The unfolding scandal at ORU reveals another type of conflict, one that could be far more damaging than purchasing services from a related party. Yesterday, ORU's board of regents met to discuss last week's resignation by ORU President Richard Roberts amidst allegations of financial improprieties, mismanagement, and inappropriate political activity. Rumored to be on the agenda was discussion of the Miller & Chevalier report detailing its findings regarding the alleged financial improprieties that triggered independent investigation.

And so far, no comment ...

EVER SO PREDICTABLY THE END CAME: ORU PRESIDENT RICHARD ROBERTS RESIGNS

DATELINE: November 24, 2007, Chicago

The pattern is always the same, making the end result inevitable. A charismatic leader of a nonprofit is accused of wrongdoing. He or she resists. More and more unflattering revelations end up on the front page of the local newspaper. After much resistance, the leader resigns. The ultimate question: At what cost to the institution?

The scandal de jour is the one that has engulfed Oral Roberts University. Given the allegations, we were not surprised to learn this past Wednesday that...

LET US BE THE JUDGE: MORE TRANSPARENCY NEEDED FROM THE MILWAUKEE PUBLIC MUSEUM

DATELINE: November 12, 2007

Last Friday, Milwaukee Journal-Sentinel reporter Steve Schultze reported that Milwaukee Public Museum officials claim that the financial crisis that two years ago brought the once venerable and respected museum to its knees is over. Museum Officials Say Is Over, Nov. 9, 2007. Wasn't it...

MERRILL LYNCH OFFERS A MAJOR LESSON FOR NONPROFIT BOARDS

Dateline: November 5, 2007, Chicago

The vast majority of nonprofits cannot relate to Merrill Lynch's $8.4 billion loss for its third quarter. Most would say, "If only we had that type of money to lose." Despite the disparate numbers, Merrill Lynch's problems have great relevance to nonprofit boards, as should be apparent to anyone who reads the excellent article by reporters Graham Bowley and Jenny Anderson appearing in yesterday's New York Times—Where Did the Buck Stop at Merrill?, Oct. 4, 2007. Bowley and Anderson focus less on the astronomical losses and more on...

NETWORK FOR GOOD V. UNITED WAY OF THE BAY AREA: A CASE THAT HOLDS MANY LESSONS FOR CHARITIES AND THEIR BOARDS

DATELINE: October 22, 2007, Chicago

Last Friday (Oct. 19, 2007), the Superior Court for the County of San Francisco issued its tentative findings of fact and conclusions of law in Network for Good v. United Way of the Bay Area. Coming in at 87 pages, the opinion is not only too long, but it is treacherous going, relying on highly technical interpretations of accounting entries and presentations. It would be easy to dismiss this opinion as involving a unique set of facts that are unlikely to repeat themselves. That would be...