RIIIING. IT’S the National Federation of the Blind of Oregon, calling
across that state. They want money “to help the blind of the area,” according
to a fund-raising script from 2003.
“This year we are working to make more reading materials accessible to the
blind and to provide more help to blind seniors and blind children,” says the
telemarketer. “We were hoping you could help us with a donation of, say, $25
or so?”
Helping blind children. What a great cause. You write the check. (“That
would be wonderful!” the telemarketer is supposed to say.) Too bad the script
left out several pertinent details, the main one being that most of your $25
would get nowhere near blind children or any other blind people in Oregon.
Beware, philanthropists. Despite progress in recent years, information on
where charity donations go is still obscure and often disturbing when it
emerges, even when the practices appear completely legal.
An examination of the Baltimore-based National Federation of the Blind and
its affiliates offers another case for better disclosure laws and, in their
absence, more openness by nonprofits.
Of a $25, phone-solicited gift to the National Federation of the Blind of
Oregon, $15 – 60 percent – would be taken off the top by a for-profit
fund-raising company called CMS Inc., according to a contract on file with
Oregon’s Department of Justice, one of the few state regulators to police
nonprofits. The contract is dated 2002, but other documents furnished by the
regulator indicate that CMS continues to work for NFB Oregon.
The president of CMS for many years has been Ramona Walhof, a longtime
director of one nonprofit, American Action Fund for Blind Children and Adults,
which shares NFB’s Baltimore headquarters and has NFB president Marc Maurer as
its top-paid employee, and another, the Jacobus tenBroek Memorial Fund, which
owns the NFB headquarters building.
Taking that $15 cut leaves $10. Half of that would be sent to NFB
headquarters in a big building in South Baltimore that NFB and affiliates
recently expanded at a cost of $19.5 million.
The other $5 would arrive at NFB Oregon, which provides scholarships for
blind students, lobbies on issues important to the blind and does other good
work. But $5 is only a fifth of the $25 donation.
In January, NFB Oregon agreed with the state Department of Justice to
correct alleged violations that included failure to tell donors that some
funds were sent to Baltimore and misrepresenting big fund-raising commissions
as “community outreach” expenses benefiting the blind. In correcting the
deficiencies, NFB Oregon denied “liability of any wrongful acts,” according to
the settlement.
Back in Baltimore, legal records and NFB documents show, a house owned by
Mary Ellen Jernigan, NFB’s executive director of operations and the widow of
late NFB President Kenneth Jernigan, was bought in 2003 for $490,000 by the
Action Fund. For 2005, the Maryland Department of Assessments and Taxation
assessed the house, in Baltimore’s Irvington section, at $154,040.
Despite the fact that charity business with insiders often raises questions
about whether the nonprofit is getting the best deal with donor money, the
house’s purchase was not disclosed in IRS filings by either the Action Fund or
NFB.
Nor was the fact that Walhof, a director of both the Action Fund and the
tenBroek Fund, has been doing big business as a fund-raiser with an NFB state
affiliate. NFB of Oregon paid $176,836 to CMS in 2002.
Still glad you wrote the check? NFB says you should be.
NFB of Oregon President Carla McQuillan did not return my phone call.
But in its battle with the Oregon Department of Justice, the nonprofit
contended that the phone solicitations were “community outreach” programs
worth the 60 percent commission because the script had the telemarketer say,
“Do you know anyone who is losing vision or blind and may need our help?” NFB
Oregon contended the calls helped it identify frequently isolated blind
people.
More Top Picks Creality 3d Cr 10s
“There are many number of people going blind who simply don’t know about
the National Federation of the Blind or the National Federation of the Blind
of Oregon,” said Andrew Freeman, a Baltimore attorney who represented NFB
Oregon in its dealings with regulators. The calls did identify blind people,
he said, although he didn’t know how many. “From our point of view it is
outreach, but it is also fund-raising.”
Many calls, however, were directed to people who had a history of giving to
NFB Oregon, a 2004 letter from CMS to the nonprofit shows. And according to
the American Institute of Certified Public Accountants, fund-raiser
compensation hinging on percentages of contributions must be reported by
nonprofits as a fund-raising expense, no matter what other service the
fund-raiser may perform.
Of the 60 percent commissions, Freeman said that “my understanding is that
it’s a market rate” and that because community outreach occurred CMS did more
than raise money. Regulators’ criticism of NFB Oregon for not telling donors
that funds went to Baltimore was “nitpicking,” he said, because NFB national
serves blind people across the country, including those of Oregon.
CMS head Walhof declined to comment. James Gashel, executive director for
strategic initiatives for the national NFB, says that he is unfamiliar with
the Oregon details but that as a blind person Walhof understands the needs of
NFB affiliates, “is doing a credible job” and “is not living a lavish
lifestyle.”
(Does the National Federation of the Blind of Maryland hire fund-raisers
who take similar percentages? President Sharon Maneki says NFB Maryland
sometimes uses a professional fund-raiser for a small part of its revenue and
like other affiliates shares half of what’s raised with national headquarters.
She declined to say what percentage the fund-raiser is paid, saying it’s
proprietary, and there is no Maryland or federal law that says she has to.)
Gashel, who is an Action Fund director in addition to working for NFB, also
defended the fund’s purchase of the Jernigan house. First, $232,696 of the
$490,000 purchase price was for rare, vintage Braille books that came with the
property, Gashel said. He showed me the books and supporting appraisal.
Second, he said, the house dates to the 19th century, is much bigger and older
than neighboring rowhouses and is surely worth $300,000 or so – again
producing an appraisal.
He’s probably right. It’s a dignified old mansion, with wide-plank floors,
nine fireplaces and 12-foot ceilings with plaster rosettes.
And the house is historic, Gashel said, because it was lived in for years
by Jernigan, a leading figure in the civil rights struggle of the blind by
virtue of his longtime NFB presidency. Mrs. Jernigan has moved and the house
is used by NFB for meetings, parties and quiet work by executives, Gashel
said.
“Dr. Jernigan was in effect our Martin Luther King,” added Gashel, who like
all top NFB officials is blind. The Irvington home and the expensive NFB
headquarters are held in trust for all blind people, and their upscale appeal
“tells us that we can be first-class citizens,” he added. “Most blind people
don’t have that.”
OK, but how about a little more voluntary disclosure and less of what looks
like somersaults to avoid disclosure requirements?
Other than perhaps the NFB Oregon issues, alleged by the state Department
of Justice to constitute “fraudulent and dishonest conduct,” all of what is
described in this column appears to be within the laws governing nonprofits.
Because the Jernigan house was bought with Action Fund money and not NFB
money, and by waiting until five years after Kenneth Jernigan’s 1998 death to
make the purchase, the NFB could sidestep requirements to list the purchase on
IRS forms asking about insider transactions.
There is little legal limit on what fund-raisers can make; as long as some
money trickles into a nonprofit, it’s OK. Because Walhof is a director of NFB
siblings tenBroek and Action funds and not NFB itself, there appears to be no
requirement by NFB to report her work for NFB Oregon as an insider transaction
on its IRS forms, says Daniel Kurtz, a New York lawyer specializing in
nonprofit law and a former charity regulator.
And in a landmark case in the 1980s that involved the National Federation
of the Blind itself, the U.S. Supreme Court ruled that free speech rights
prohibit regulators from interfering much with nonprofits’ solicitation
pitches. Neither the Oregon Department of Justice nor any other regulator can
require fund-raisers to disclose fees when they’re asking for money.
But is that the best we should expect from a large, nationally respected
charity and its affiliates?
NFB does many worthy deeds, furnishing meaning and resources to many of the
nation’s blind. But the disclosure trigger in any charitable transaction
should be: Is this information that a potential donor and the public would
want to know? The answer for the items mentioned here, I believe, is yes.
It shouldn’t take a snoopy columnist or Oregon regulators, however, to find
out. Congress ought to make charities disclose, say, a fraction of the
information required from a mutual fund. And charities should try hard to
avoid even appearances of conflicts of interest and always err in the
direction of letting in too much sunshine rather than too little.
That really would be wonderful. Meanwhile, caveat donor.