CEO’s pay at Chimes more than reported

Perl’s compensation in fiscal 2002 was $686,506, not $542,101 as Chimes
said last year and not $257,625 as Chimes originally told the Internal Revenue
Service. Perl made $714,592 in fiscal 2003. The amounts include base pay,
bonuses, benefits, retirement plans and deferred severance.

Chimes blames the lapse on a misunderstanding of accounting rules.

“I’m clearly aware that my personal credibility … is on the line here,”
Perl said in an interview Friday. “I believed when I met with [a Sun reporter
last fall], based on the input that we got from our then-advisers, that the
information I gave you was complete and accurate and appropriate.”

The new documents also reveal the size of insider business deals at the
Chimes that were disclosed last year in The Sun.

In two cases, companies run by Chimes board members each received close to
$1 million for providing leasing and vehicle services to the charity in fiscal
2003. Another board member got $129,422 in consulting fees.

Last month, the IRS pledged to examine hundreds of charities to see if they
are complying with tax laws, and Sen. Charles E. Grassley, an Iowa Republican
and chairman of the Senate Finance Committee, said he would introduce bills to
strengthen governance and disclosure at nonprofit groups.

“The apparent lack of transparency at Chimes makes sense now that we see
what they might want to hide,” Grassley said of the new disclosures. “These
findings are troubling. Charity executives and board members are supposed to
govern, not profit.”

Chimes receives hundreds of thousands of dollars in charitable donations
and tens of millions in government contracts to serve the disabled. A $43.9
million, three-year job to have disabled people do janitorial work at
Baltimore-Washington International Airport is up for approval before the state
Board of Public Works on Wednesday.

The group denies any impropriety, saying that its business deals with board
members provide good value for disabled clients, that Perl’s pay is in the
range of what other big-nonprofit executives make, and that disclosure lapses
were based on misconceptions, not a desire to hide anything.

Chimes has revamped its policies in the wake of the articles in The Sun
last year and amid a wider, national examination of the pay and ethics of the
caretakers of charitable resources and nonprofit capital.

Last year’s articles, in which experts described disclosure lapses, insider
business deals and millions in executive pay, “served as a fulcrum for the
Chimes to implement effective improvements in its organizational financial
reporting and its corporate governance structure,” Chimes lawyer Theodore A.
Offit said in a letter to the newspaper.

For example, Chimes board members who do business with the group can no
longer help set the pay of Perl and other executives. A new code of ethics
enjoins board members “to take no actions that could benefit them personally
at the expense of Chimes.” There is greater oversight by outside directors of
contracts and auditing.

And the group’s latest IRS filings, which are public documents, show
unprecedented levels of financial detail, apparently correcting numerous
lapses identified by experts last year. Chimes has revised its 2002 filings
and is working on revising 2001, officials said, in addition to recently
submitting its returns for last year.

But the nature of those disclosures raises unsettling new questions, said
nonprofit governance specialists.

For charitable groups, “the IRS is really focused on highly compensated
executives. And this is certainly high,” Daniel L. Kurtz, a lawyer in New
York, former charity regulator and author of Managing Conflicts of Interest: A
Guide for Nonprofit Boards, said of Perl’s pay. “The other thing that looks
troubling is the conflicting interests of board members – at a healthy level.”

Kurtz examined Chimes’ IRS filings last year at the request of The Sun.
Recently, he has been in discussions with Chimes about working for the group
as a governance consultant, both sides said.

Federal law bans executives and directors from profiting from charities
they work for and requires disclosure of financial relationships between a
charity and insiders so donors can spot potential abuse and see where their
money is going. Chimes says its executive pay is legitimate compensation for
work, not a banned “excess benefit.”

At least four Chimes executives make more than $200,000 a year, the new
filings show. Chief Operating Officer Albert Bussone had 2003 compensation of
$373,749. Martha Perl, the human resources manager and Terry Perl’s wife, made
$188,830.

Last year at Chimes, the new filings show, at least five board members
owned or worked for companies that did business with the group. Several of the
relationships were substantial:

In fiscal 2003, then-Chimes Inc. Chairman Allan Levine received $910,123
from Chimes in payments to Madison Capital, a vehicle and equipment leasing
firm of which he is chief operating officer and a partner, according to
Chimes’ 2003 IRS filing, known as a Form 990.

Yellow Transportation/Connex, Chimes’ main transport service for disabled
clients, received $988,008 in fiscal 2003. Mark Joseph, a Chimes Foundation
board member that year, is president of Yellow/Connex.

Huell Connor, a longtime board member of Chimes Inc., received $129,422 in
“strategic planning” consulting fees from Chimes organizations in fiscal 2003,
which ended June 30, 2003.

Connor declined to comment. Joseph did not return a phone call. Levine also
declined to comment except to say his term as Chimes chairman has expired.
“Your reporting was not really fair or accurate,” he said. “I really don’t
want to have this discussion.”

Chimes said the business deals were reviewed by one of its law firms, which
deemed them proper. The organization has hired several lawyers and consultants
to review and improve its executive pay and conflict-of-interest and
disclosure practices. But it moved to cut off what was apparently the only
examination by an independent authority.

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The Chimes Foundation, an affiliate that raises money for the larger Chimes
network, recently left the Maryland Association of Nonprofit Organizations,
ending that group’s examination of Chimes’ pay and governance practices.

The association had begun a review of the Chimes Foundation’s
qualifications for membership after The Sun articles. But the Chimes
Foundation let its membership lapse April 1, said Peter V. Berns, the
association’s executive director, quashing the association’s authority.

“So we ended up discontinuing our inquiry about whether they would be
entitled to continue as a member or not,” Berns said. “I can’t speculate about
their motives for resigning.”

Chimes said it left because Berns’ group refused to sign a confidentiality
agreement regarding information divulged in any examination.

Chimes announced last year that it would invite the Internal Revenue
Service to examine the propriety of its executive-pay and director
business-deal disclosures. But it said that, after contacting the IRS’
Baltimore office and being referred to Washington, it hasn’t heard back from
the agency.

The IRS doesn’t comment on investigations.

Chimes originally told the IRS that Perl’s 2002 compensation was $257,625.
Upon questioning last year by The Sun, Chimes furnished documents showing Perl
received another $284,476 in salary and benefits from a Delaware corporation
that derived most of its revenues from Chimes, yielding total compensation of
$542,101.

Now Chimes says it should have included another $144,405 in the total,
including pension contributions, an executive retirement plan and other
“deferred” pay that the law requires to be disclosed to the IRS.

Although Chimes no longer defends its previous lack of disclosure, Perl and
other Chimes officials said the compensation practices are reasonable for an
organization with more than $120 million in revenue.

“We run a business,” Perl said, pointing out that Chimes derives most of
its funds not from contributions but from government contracts. “We compete in
the business workplace. Our board has to pay reasonably competitive wages
based on business. And they’ve got four studies to document that.”

Bennett Weiner, chief operating officer of the Better Business Bureau Wise
Giving Alliance, a nonprofit watchdog based in Arlington, Va., said of Perl’s
$714,592 pay for 2003: “Even for a national charity, that would be very high
compensation.”

Grassley, the Senate Finance Committee chairman, has proposed reforms,
including banning or restricting insider business deals at nonprofits,
improving disclosure, increasing penalties for violations and requiring
executive-pay consultants to report to boards outside the influence of CEOs.

The irregularities at Chimes, Grassley said,”would raise questions if
Chimes functioned only with donors’ funds. But Chimes also operates with
millions of dollars from taxpayers. I question how donors and taxpayers can
know whether Chimes is using their money wisely if disclosure has been
lacking.”