Bombshell internal report leaked on Shriners Hospital fundraising

An internal investigative committee established by the joint boards of the Shriners of North America fraternal organization and the Shriners Hospitals for Children has released some disturbing accusations about fundraising.

The New York Times published this copy of the 23-page report which is stamped CONFIDENTIAL and "Attorney-Client Priviledged." Stephanie Strom's article says:

"The committee found that the chairman of the Shriners Hospitals Board of Trustees, Ralph Semb, sought to dismiss a fund-raising executive who had refused to hire a direct-mail company Mr. Semb and another board member tried to steer him to."

Semb (who is pictured here) denies any wrongdoing, the documents go on to report:

"Most of the committee’s report relates to the dismissal and rehiring of Mr. McGonigal, who said he did not hire the direct-mail company favored by Mr. Semb and Mr. Bracewell because the company appeared to have ties with Vantage Financial Services, which had performed poorly for the Shriners in the past.

The Shriners employed Vantage to handle fund-raising for the hospitals from 1999 through 2003. Out of $46.2 million raised by Vantage, the Shrine received only $2.5 million, according to the report."

Seems like there might be a lot more funny business going on than just those tiny hats and the mini-cars they drive at parades.

UPDATE: I was referred to this website which has more juicy information on Vantage:

“The Vantage Group and its subsidiaries Vantage Financial Services Inc. and Vantage Direct Marketing Services Inc. have agreed to pay $4.5 million to settle civil postal fraud charges,” said directmag.com, also in 2003.

It continued, “The government’s complaint, which named Henry R. Lewis (then Vantage’s CEO) and Harry S. Melikian (then Vantage’s CFO), alleged that while conducting fundraising programs for nonprofits, the company improperly mailed 78 million pieces of mail at the reduced nonprofit rate, knowing they were not entitled to use the rate for their cooperative mailings.”

Apparently, the story goes like this:

"The complaint, filed in 1998, noted that in 1990 the Postal Inspection Service investigated Vantage for sending illegal cooperative mailings.

At that time, a U.S. Postal Inspector informed Vantage, Lewis and Melikian that mailings sent pursuant to Vantage’s standard contract were ineligible for the reduced non-profit rate because Vantage had a financial stake in the mailings. As a result of the 1990 investigation, Vantage and one of its non-profit clients paid a postage deficiency to the government.

In response to that investigation, the complaint said Vantage revised its standard contract to make clear that, in the future, Vantage would not have a financial stake in the programs it conducted on behalf of non-profit clients.

Based on the revised contracts, the Postal Service permitted Vantage to mail at the non-profit rate on behalf of its nonprofit clients.

The complaint alleges, however, that Vantage then entered into secret
“side letters” with many of its non-profit clients, agreeing to take a financial
state in the mailings."

I should would be curious who leaked the internal Shriners report...

Why the Bridge Conference really impresses me

You have to be impressed with the 2008 Bridge to Integrated Marketing & Fundraising Conference.
The award-wining event (which is being held this week in Washington, DC) has attracted more than 1,600 participants. The program guide boasts 14 separate tracks covering everything from direct response, major giving, marketing, creative, current issues, and many more. There are an unbelievable 75 sessions. They have more than 90 vendors in the exhibit hall.

...but wait, there's more.

They scheduled keynote speakers Jim Stovall and Lynn Price. They timed the DMAW MAXI Awards to be given out the night before. They've even set up their own LinkedIn Group, a Facebook Group, and a page on Twitter.

Don't forget... this was the conference that Beth Kanter's turned on it's head last year with her web 2.o coverage. Thanks to her trail blazing... the expected standard of online coverage for fundraising conferences will never be the same.

What if it doesn't get better in 2009?

Paulson might be about six months too late, but at least he is warning people that these tough times are going to last months. As long as only 10% of economists are predicting that the economy will contract in the second half of this year... it's obvious that people still don't understand the extent of this problem.

Personally, I think fundraisers need to prepare for the fact that there will be no recovery in 2009. This is not a typical six month recession... and all those "expert" fundraising jokers who are out there saying that they have 30 years of experience fundraising and have survived many recessions in the past should be reminded that we need to be prepared for an extended period of fear and economic stress.

How would your fundraising plans change if you knew for a fact that there would be no recovery until 2010?

Hillraisers with huge egos

Proving once again that major donors usually don't give a damn about the mission or the cause... they are more addicted to the power and recognition that goes with a major donor's ego.

The Wall Street Journal reports that Carly Fiorina, former Hewlett-Packard CEO and senior adviser to Sen. John McCain, met with a group of 25 prominent supporters and fundraisers for Sen. Hillary Clinton at a private home in Westchester County, NY. The group included several so-called "Hillraisers," each of whom have raised in excess of $100,000 for Clinton's failed primary campaign. The meeting was repeatedly sought by the Hillary supporters and is at least the second such meeting between backers of Clinton and the McCain campaign.

An organizer of the meeting, Amy Siskind, said that the pro-Hillary groups represented pledged to help deliver, "hundreds of thousands and maybe millions of votes," to McCain if the groups find areas of agreement between themselves and his campaign.

...oh yeah... no way they can get, "maybe millions of votes."

Kate Barr is not happy with ACORN

I agree with Kate... it's hard to think of how anyone can justify ACORN's reaction to this story. I know it's painful to say. Trust me, I love ACORN and the important work they do.

I'm not saying I agree with the wackos like Michelle Malkin or the Consumer Rights League, but this is a really big fuck-up.

Thank god for whistle blowers. This one was a true hero.

Four CRM case studies

Reed over at the AFP blog pointed out a great article yesterday by Anthony Pisapia and Brett Bonfield from Idealware:

"Managing Constituent Relationships: Four Case Studies" tries to explain how four organizations have implemented CRM and what their experiences can offer others. The authors take a complete look at the product, the cost, the implementation, the challenges, and the words of advice.

The examples they cite are the NY-NJ Trail Conference, which used a database software called ebase; Hispanics in Philanthropy selected Microsoft CRM 3.0; Washington Toxics Coalition recently migrated from ebase to Salesforce and finally, Easter Seals uses a combination of Convio and Team Approach.

The rest of the article is on the TechSoup website.

Where do mail recipients go for info on charity?

Mark Hrywna reported yesterday that The NonProfit Times engaged the Opinion Research Corporation (ORC) in Princeton, N.J., to repeat a study it performed three years ago for The NPT. ORC asked 1,000 people: "When you receive a mail solicitation from a charity, which of the following places on the Internet do you look at before deciding whether to give money?"

Here are the results:

Yup. I guess you can call that a dramatic shift. It seems just as soon as everyone was just beginning to understand that their website is their authoritative online voice...

Those rules have changed.

More than four out of ten people look up their information on an independant rating agency, an online discussion group, or a blog. That's quite a change from just 36 months ago.

Not so blind item

Which disgraced former executive for a well-known disaster relief organization was rumored to be applying for the vacant position of Gautier City Manager down in Mississippi so that the alleged baby daddy can be closer to his Southern Belle's new baby?

Vastly different approaches

Stephanie Strom at the New York Times compares the vastly different approaches taken by Acorn and the Points of Light Institute when each learned off potential financial embezzlement.

Acorn chose to treat the embezzlement of nearly $1 million eight years ago as an internal matter and did not even notify its board. After Points of Light noticed financial irregularities in early June, it took less than a month for management to alert federal prosecutors, although group officials say they have no clear idea yet what the financial impact may be.

A whistle-blower forced Acorn to disclose the embezzlement, which involved the brother of the organization’s founder, Wade Rathke.

The brother, Dale Rathke, embezzled nearly $1 million from Acorn and affiliated charitable organizations in 1999 and 2000, Acorn officials said, but a small group of executives decided to keep the information from almost all of the group’s board members and not to alert law enforcement."

Yuck. But wait it gets worse:

"Wade Rathke said the organization had signed a restitution agreement with his brother in which his family agreed to repay the amount embezzled in exchange for confidentiality.

Wade Rathke stepped down as Acorn’s chief organizer on June 2, the same day his brother left, but he remains chief organizer for Acorn International L.L.C.

He said the decision to keep the matter secret was not made to protect his brother but because word of the embezzlement would have put a “weapon” into the hands of enemies of Acorn, a liberal group that is a frequent target of conservatives who object to its often strident advocacy on behalf of low- and moderate-income families and workers."

Don't you see... they kept it a secret so as not to give their enemies a weapon.

Travel voucher horror story hits Points of Light Foundation

The NonProfit Times broke a story this week about an unfolding scandal at the Points of Light Institute.

"An estimated 1,100 customers who purchased travel vouchers for airline flights from the Points of Light Institute’s store on eBay have been left with nothing. The Points of Light Institute has closed that area of the eBay store and is working with law enforcement to investigate what it is calling “significant financial and operational irregularities.”

Each reservation is for one to four people, so as many as 4,400 travelers could be impacted. Sources told The NonProfit Times that travel had been booked through May 2009 that could total more than $1 million."

Michelle Nunn, president and CEO, was interview by The NonProfit Times on Tuesday and tried to explain how the organization uncovered the scandal.

"Two senior managers learned of the irregularities through customer complaints, which they explored and ultimately verified through an independent contractor, and reported to Nunn on the evening of June 26, she said. Customers were notified of the situation late Friday, July 4, at which time the refund application process began.

Because of the ongoing investigation, Nunn could not elaborate on the type of “irregularities.” She said the U.S. Attorney’s Office in Washington, D.C., was contacted within 24 hours, as was the organization’s counsel -- McKenna, Long & Aldridge -- which is doing its own investigation."

It's amazing what kinds of problems managers can actually uncover when they explore customer complaints. Sounds like whoever was pulling off the scam set-up a complex way of hiding what they were doing. Apparently, the organization is still trying to figure out exactly what happened.

"The independent contractor was terminated “as soon as we learned of these issues,” Nunn said. The contract was created and begun in 2003 as a program of the Points of Light Foundation, which merged with the Hands On Network last year. The independent contractor, Maria Herrmann, was a former employee in business development at the Points of Light Foundation, but Nunn did not know the duration of her employ prior to that.

Herrmann is no longer listed on the organization’s Web site and calls to her cell phone and home phone were not returned. A woman answering the door at Herrmann’s Washington, D.C. residence told a reporter she could not help her and declined to say if she was in fact Maria Herrmann."

Call me a cynic, but the whole idea of people raising money for charities by selling discounted travel vouchers sounds shady. Call me a purist, but I get really queasy when the donor's motivation is driven by the idea of "getting something for free" instead of for the donor intent being on helping support the mission.

In hindsight, I wonder if the Board of Directors sees this observation by The NonProfit Times as a damning indictment of the senior management and their own culpability is allowing this to happen:

Despite thousands of tickets being sold, Nunn described the eStore as a “very small enterprise,” grossing about $100,000 and netting $15,000 in the fiscal year ending 2007. She explained that the numbers "are the totals that were reported on our books and in our audited statements of Points of Light Foundation (pre-merger). The recent discoveries obviously do not align to these numbers and that is what is under investigation.”

The NPT story can be from here and to read about a traveler's horror story, go here.

UPDATE: Some people at the eBay Forums website think that incentive travel company Mitch-Stuart, Inc. is to blame. I wonder if there is going to be a blame game coming next? Hermann was quoted in the NPT in May of 2007 talking about Mitch-Stuart.

What’s Eating The List Industry?

For the sixth month in a row, they published one of my columns on The NonProfit Times web editorial page. You should go read the entire post on their site... along with an articles by Eleanor Clift and Rick Cohen.

Here's a teaser:

"During the past year, the [list] industry has endured a combination of: shrinking list universes, a weakening economy, lots of bad publicity, increasingly organized backlash against “junk mail,” and the aggressive expansion of cooperative databases. More importantly, nonprofits with established mail programs are beginning to ask questions about the saturation of the shared donor universes and whether there are better ways to reach new donors."

I tried to explore each of those factors in the piece... although, admittedly I'm not really what you could call "knee-deep" in the list industry... so I'm observing many of these patterns from afar. If you disagree, I'd love to hear about it.

Do you wanna know where I've been?

In addition to the thousands of people who visit this website every month or read my stories via RSS, more than 700 people are signed up to receive Don't Tell the Donor by email. In the two weeks since I last posted to this blog, many of you have emailed to ask where I've been or why I stopped writing. So... I'm going to tell you:

I bought a time machine.

That's right, a small metal chair rigged to flux capacitor which only requires 1.21 gigawatts of electrical power to send me flying forward or backward in time. Despite my lifelong promise to myself that if I should go back in time and steal someone else's invention or stop myself from making all those mistakes I made in high school... alas... I decided to use the time machine to travel into the future to share with you what fundraising will look like next year at this time.

It's worse than just not good... it's downright scary.

The housing market isn't going to get better. As a result, I guess it was inevitable that banks like Wachovia, Washington Mutual, PNC Bank, and Fifth Third were going to go belly-up... but, even I was surprised to see General Motors and American Airlines file for bankruptcy.

Unemployment soars above 6% and many of you lose your jobs as smaller nonprofits begin to disintegrate in larger numbers. I hate to say I warned you this was going to happen... but I even ran around with my hair on fire trying to get your attention.

This isn't a normal recession. Unfortunately, this is an unraveling of a massive credit bubble... and it will not end through the normal cyclical economic patterns.

The truth of the matter is that you don't need a time machine. The writing is already on the wall. Target Analytics reported yesterday that revenue declined in the 1st quarter of 2008 for 60% of the 72 large organizations in their benchmarking study. Giving USA Foundation and the Center on Philanthropy at Indiana University reported individual and corporate giving actually declined in 2007 when adjusted for inflation.

So... go back to living in denial if you want to... or you can adjust yourself and your fundraising programs for the new economy... either way, it's not going to get better for at least another year.