Cheating Ourselves: Embezzlement Bedevils LGBT Non-Profits
Even in the midst of an ongoing recession, LGBT organizations continue to rake in donations. With so much at stake and emotions running high, people are throwing their dollars behind organizations leading fights on various fronts. The emergence of out-gay multi-millionaire like Chris Hughes has certainly helped.
Unfortunately, where there’s money, there’s also the potential for abuse. In recent years, gay organizations have been the victim of embezzling. Those who were supposed to be superintending the purse were instead using the money to pay for lavish lifestyles that ranged from Caribbean vacations to pricey dog walkers.
On Monday, the former director of the Bronx Community Pride Center in New York City, Lisa Winters, was sentenced to at least two years behind bars for embezzling more than $338,000. Court documents show that she used the money for vacations with her partner, $15,000 to a dog walker, and thousands on fine restaurants and shopping trips. The center was forced to close last June after 16 years serving a diverse population in desperate need of its services.
A Depressingly Long List of Embezzlement
Winters’ case is the most recent, if the largest such, incident of embezzlement at LGBT and AIDS organizations. Here’s a depressing litany of such cases of LGBT people preying on their own:
• A few months ago, a federal investigation found that a former employee at the Nebraska AIDS Project may have embezzled $60,000 of federal grant money.
• In 2011, the former executive director of Boston Living Center, an AIDS service organization, pleaded guilty to embezzling more than $125,000. Only a merger saved the organization from disappearing altogether.
• Also in 2011, the volunteer treasurer and board member at the Billy DeFrank LGBT Community Center in San Jose, Calif., was caught embezzling $40,000.
• In 2009, the former executive director of Philadelphia’s largest black LGBT organization was found to have embezzled $138,000 in government-allocated funds.
• In 2011, the former executive director of Verbena Health, a Seattle health clinic and health center that catered largely to lesbians, was convicted after having gambled away $500,000 in Las Vegas. The clinic was forced to close its doors.
• From 2007 to 2008, the head of People of Color in Crisis, an AIDS service group in Brooklyn, N.Y., spent $80,000 on items that included gym memberships. POCC was forced to close in 2008.
Why They Do It
Greed, or a desperation to pay off personal debts, obviously motivates people to such extreme behavior. They could be motivated by personal issues such as a drug habit, a sick child, gambling debts, or a need to satisfy a demanding spouse.
"For some reason, they have a gap in their ethical framework, see an opportunity and take it," said Marc Owens, former director of the Exempt Organizations Division of the IRS. In his 10 years there, he saw widespread nonprofit embezzlement, which cost organizations an average of 6 percent of their revenue each year.
"It could be everything from a person stealing money in order to buy food for somebody, to someone stealing money because they want to buy a new car or take a trip,"Owens said. "It’s as much based on opportunity as it is on anything else."
There’s also a tendency to assume that the people attracted to nonprofit work are motivated by altruism, Owens noted. "People tend to assume that people who run charities have a white hat; that they are almost by definition well-intended people," he said.
The swindling happens in a number of ways: bogus payroll claims, skimming, inflated reimbursements, kickbacks with vendors. Sometimes embezzlers target charities for their unassuming nature, but often, employees turn on their employers out of resentment.
"It’s very much people either becoming very desperate and making bad decisions, or acting out of anger against the organization," said Michael Montgomery, a Michigan-based nonprofit consultant.
In most cases, Montgomery added, the ones stealing forget the fact that they are taking money away from the communities they are meant to serve. Such employees become frustrated with being overworked and underpaid in the nonprofit sector and decide to take it out on their organizations.
"Nonprofits are passionate environments and when people get angry, they get very angry," Montgomery said. "They truly have lost sense of the larger goal. It’s all about them and their relationship to their little piece of the world."
The ramifications nonprofits face after embezzlement scandals nearly always put their future in jeopardy. As was the case in the Bronx, Brooklyn and Seattle, the organizations simply can’t recover and must close their doors. Those that manage to survive face a long, hard slog trying to persuade donors that there will be safeguards in the future.
"There are always donors out there looking for reasons not to give," Montgomery said. "So nonprofit fraud is a corrosive problem. It really does keep donors on the sidelines and it gives the community a black eye."
Because nonprofits are often cash-strapped and overseen by people with day jobs, Owens said, it’s easier for fraud to go unnoticed. Poor auditing enables people with keys to the lockbox to get away with it for so long.
"Nonprofits are usually pressed for money," Owens said. "They don’t have the resources of outside accounting reviews or software that tracks expenses carefully."
Renewal in the Bronx
In the Bronx, at least, the community has rallied to support a new center. A February gala was the first step. Another is having a CPA, Mark Rodriguez, audit the new center’s books.
Rodriguez, who also heads the the Bronx chapter of the NYC LGBT Chamber of Commerce, said he intends to enforce strict and sound accounting to prevent a future collapse. ""What happened before was it was just a handful of people who had total control with no checks and balances in place," he said. "I will run a tight ship."
Among the innovations Rodriguez has already pitched to the group building the center are requiring two signatures and board approval of checks for more than $5,000, and close monitoring of invoices.
"Regardless of what your organization is, if your heart is true to the mission, you’ll have good people on board," Rodriguez said. "Things happen for a reason, and the people coming on board at the new center will be very true and sincere, not people there for the wrong reasons."
Rodriguez was referring to allegations that at least one employee of the closed Bronx center made in the wake of Winters’ arrest. "Employees reportedly contacted the center’s board of directors to complain that Winters not only misused funds but was often drunk at work." A report from the New York City Department of investigations uncovered that one of a former board member’s daughter stayed in Winter’s home and went on a cruise with her. The mother dismissed the employee’s allegations as "unfounded" and claimed the employee" has an issue with Winters.