Nonprofit Scandals, Nonprofit Lessons

I am fascinated with stories about nonprofits gone wrong. So many to choose from, all of them fascinating as well as educational - so this is the first of two blog posts featuring the best of the worst:

United Way 1992
William Aramony built the United Way into a cornerstone of philanthropy from 1970 to 1992. And then he spent six years in federal prison after being convicted on 23 counts of felony charges including conspiracy, fraud, and filing false tax returns. His gross misuse of this venerable institution's funds included luxury condos, lavish travel, and payments to his mistress.
The result: You know all those forms and policies that are now required of nonprofits? They were the direct result of this scandal that precipitated much greater legal scrutiny of nonprofit management and compensation.

Feed the Children (FC) 2009
You might have seen Larry Jones appearing in FC's ubiquitous television infomercials featuring malnourished kids. Here's what happened during Jones' nearly three decades at FC: staff members were nailed for helping themselves to donated goods, the financial director forged the signature of an accounting firm on financial statements, a $40 million contract was award to a company that employed Jones' son, the charity's phones were wiretapped, and  a big stash of pornography was discovered in Jones' office. When the board finally decided to fire him, he filed a wrongful termination suit. Then the board countersued.
The result: At great expense to FC, all suits were finally settled in 2011, and Jones is gone.

Central Asian Institute (CAI) 2009
Greg Mortenson, founder of CAI (1996) and author Three Cups of Tea, was the hero of the philanthropic and literary communities. And then in 2009, reports emerged that the nonprofit was funding Mortenson's book promotion events without receiving any of the substantial revenue from sales or speaking fees. A 60 Minutes survey revealed that half of the 30 schools CAI boasted of building were either empty, built by someone else, or not receiving any support from CAI. 
The result: A 2012 decision restructured the organization, requiring Mortenson to pay back $1 million and be removed from the board. His reputation was severely damaged, though he remained a salaried employee until he retired in November 2015.

National Children's Leukemia Foundation (NCLF) 2015
Avi Shor founded NCLF in 1991 after his son died of leukemia, serving as president for over 20 years. NCLF raised millions of dollars - but the programs being touted never existed. The cancer research center, the bone marrow registry, the umbilical cord blood bank, the patent application for a cancer cure - all of these were elaborate make-believe. Shor continued to run NCLF even after his 1999 conviction of bank fraud, securing himself a 10-year position with a $130,000 salary, lifetime pension and lifetime medical insurance.
The result: Shor's ten lives ended in 2015 when NCLF was finally closed by the Attorney General.

All of these stories have recurring themes: greed and entitlement; prominent, influential leaders running wild; a shocking lack of transparency about programs and finances; boards without a clue.

The lessons: Get your policies and programs in order. Read and understand those financial statements. Evaluate your board and your staff meticulously. Pay attention. Don't automatically defer to leaders, even if they are founders and donors. And never be afraid to ask questions. Make sure your organization isn't chosen for my next list of top scandals.