Everything you’ll ever want to know about Mendo’s non-profits and then some — updated and complete as of April 8, 2016...
THE NUMBER is 686. That’s how many registered nonprofits we have in Mendocino County today. One for every 127 people. As opposed to 2,975 in Sonoma County. One for every 166 people. All of theirs report revenue. All but six show assets. Where poverty is eleven percent. With all the nonprofits here, we should be kicking ass. But we’re not. 385 of our nonprofits — over half — report no revenue and no assets. Our economy ain’t doing so hot either. The poverty level here is nineteen percent.
MARIN COUNTY has 2,372 nonprofits. All of them report revenue. All but six report assets. Just like Sonoma County. And a poverty level of nine percent. But everything goes south just north of the Mendocino County line. Where over half the nonprofits in Humboldt and Trinity counties are just as broke as ours.
THERE ARE 1.5 MILLION NONPROFITS in the United States today. Only twenty-five — that I could find — have written policies to hide tax returns from their boards of directors. Three of them are in Mendocino County. We’ll get to them later.
LOCAL NONPROFITS piqued my interest in 2013. After getting a forwarded email. About nonprofits needing ‘good by-laws.’ The word ‘good’ struck me. It was like being told that you need wet water. Stranger yet was the author of that email. It was one of the Nice People. A big shot in the local nonprofit scene. We’ll get to her later too.
MY MOTHER was a licensed tax preparer. A decent card player as well. Mom passed away in 2000. I’ve done my own taxes since then. So that was my starting point. Looking at tax returns of local nonprofits. Along with governing documents. At the Registry of Charitable Trusts. Online. On the hunt for ‘good by-laws’.
AT THE SAME TIME, a well-known nonprofit was in the news. It was the United States Navy Veterans Association. Raising $100 million for navy veterans. I wanted to see who ran that organization. And what their tax returns looked like.
WHAT I FOUND LOCALLY was no surprise. Right off the bat. There it was. A bad tax return. From the Mendocino Coast Hospital Foundation (MCHF). Back in 2009. Right after the crash. Nonprofit tax returns are normally signed by the tax preparer. This one wasn’t. Not only that, the balance sheet didn’t track. With the one for the year before. Or the year after. It was off by six figures. The most alarming thing was the cost of fundraising. For a volunteer event called Winesong! MCHF grossed a million dollars that year. But three-quarters of it was expensed. Making its Cost To Raise a Dollar (CTRD) $4.00. For every four dollars spent, only one dollar got raised.
THAT CLOUD had a silver lining. The tax return identified a company named Philanthropic Professionals, Inc. (PPI). Who’d raised money with a CTRD of twenty-five cents. For every dollar spent, four dollars got raised. But PPI was never hired again. So I tracked them down. And called them up. To find out what happened.
ACCORDING TO PPI, they’d been engaged by MCHF to raise a million dollars. On a flat fee for raising money from donors. And a percentage for grants. The amount raised on the 2008 tax return was $276,312. At a cost of $71,100. PPI said the income reported on the tax return was short. By half a million dollars. They told me that another half million came in through government grants. So I looked it up on the Tracking Accountability in Government Grants System (TAGGS) website. Sure enough, it had. PPI hadn’t been paid for it. But they left before the campaign was finished. I wanted to know why. The reason surprised me.
PAYMENT had nothing to do with it. Remember the email that started this? The author was in charge of MCHF back then. So there were problems. About ‘good by-laws’. And who they were good to. MCHF’s board of directors didn’t like PPI. All of whom were self-elected. Which was contrary to MCHF’s State endorsed by-laws. Where its board of directors was supposed to be elected by a general membership. There was another hiccup. With MCHF’s stated purpose. On the State endorsed Articles of Incorporation from years worth of meeting minutes from its website. Revealing that MCHF’s board of directors had never authorized that transaction.
MCDH’S ANNUAL WEAR AND TEAR is $2 million. On average, MCHF kicks in only $250,000. So by 2012, the shortfall had risen to $20 million. Pushing MCDH into bankruptcy. PPI couldn't reengage MCHF. So I volunteered as a collections agent on two local accounts. MCHF and the Frank R. Howard Foundation. Who’d also engaged PPI for grants.
SONOMA VALLEY had the same problem a few years ago. The Sonoma Valley Hospital Foundation (SVHF) struggled with fundraising for years. Coming up with only a fraction of what was needed. Until Sonoma Valley Hospital (SVH) finally put their foot down. Prompting a mass resignation from SVHF’s board of directors. That all took place in July of 2012. The tax returns show what happened. Before that, SVHF swore its assets amounted to only $77,480. But afterward, the total turned out to be $3,962,973. And that was after kicking down another $9 million. The largest contribution that SVHF made before that time was around $250,000. Just like the situation here. Sonoma Valley Hospital used that windfall to build a new hospital wing.
THE HOWARD FOUNDATION was founded in 1966. To raise money for Frank R. Howard Memorial Hospital in Willits. But twenty years later, Adventist Health bought the hospital. Making the Howard Foundation irrelevant. In 2007, Adventist was building a new hospital. So the Howard Foundation hired PPI to raise money for it. Four million dollars came in through one grant. All of which the Howard Foundation pocketed. And never paid PPI for it. Which is where I came in. To try and collect PPI’s grant fees. And maybe bring them back. But both MCHF and Howard balked at paying. So PPI pulled out of Mendocino County again. The Howard Foundation has no governing documents at the Registry of Charitable Trusts. No by-laws and no Articles of Incorporation. Which is weird. Because the Mendocino Art Center does. From way back in 1959. Howard has nothing on file there before 2010. When construction for a new hospital was already underway.
THAT’S OKAY. The IRS keeps tabs on the Howard Foundation too. At the National Center for Charitable Statistics. All the way back to 2001. When its mission was ‘to provide building facilities, equipment and financial assistance to ensure medical services to the community.’ Which was partly true. Howard was Adventist’s landlord. Charging the hospital $150,000 in rent for 2001. And jacking it up every year. By 2014, it was over $900,000. By then, Howard had no mission at all. Except making itself a boatload of money. Increasing its non charitable assets from $2 million to $14 million in just thirteen years.
IN 2015 the Howard Foundation’s mission changed again as it moved into the property management business. With construction of a 16,000 square foot medical office building on a thirty-three acre parcel it owned. By then its mission was ‘to establish, promote and support programs that maintain, as well as improve, health care for the community of Willits and the entire Northern Mendocino County area.’ Thus accommodating the hospital’s departure into ‘building facilities’ of its own.
MEANWHILE, a fellow named Jim Miwa found out what’d happened here. Miwa is the State representative for all Community Development Block Grants in Northern California. All state and federal grant applications go through him. He was particularly alarmed at the situation with Winesong! And the four million dollars in grant money that Howard kept. Neither MCHF nor Howard have received any government grants since then.
ABOUT THAT TIME I started looking at the Mendocino Art Center (MAC). With the same routine. According to State records, the board of directors there is elected by a general membership. But just like MCHF, things have changed. The last State endorsed quorum was fourteen directors. That was in the 1960s. No current bylaws are on file at the Registry of Charitable Trusts. The ones appearing periodically on MAC'S website have no signature, and include a provision for self dealing. The number of directors has dwindled to nine. Only seven of which are identified on the latest tax return. And net assets are half of what they were a decade ago. State filings swear that independent audits have been prepared, but none of them are available to the public. According to one current director, curious people shouldn't set foot on Art Center property. Because they might get hurt. In December, the Art Center’s CEO fled the scene. And the local grapevine says there’ll be no replacement.
MAC’S ORIGINAL MISSION was the ‘study’ of fine art. That was in 1959. By 2014, it’d become a full-blown ‘educational institution’. But after fifty years of existence, MAC still has no accreditation. And has yet to fund a single scholarship. Fifteen percent of MAC’s revenue comes from renting run-down apartments to self-proclaimed artists. And a firetrap to the local theatre company. Net assets are currently $426,864. Down significantly from $713,783 in 2002.
MEANWHILE, the story behind the U.S. Navy Veteran’s Association was unfolding. The man in charge was a colorful individual named Bobby Thompson. He was quite a force in Washington. Posing for photos with president George W. Bush, Karl Rove, John Boehner and John McCain. The very picture of respectability.
THEN I MOVED ON to the Redwood Coast Seniors, Inc. (RCSI). With the same drill. RCSI was founded in 1986. But no governing documents are on file at the Registry of Charitable Trusts. Tax returns there go back to 2010, but not before. All tax returns since are done in-house. By an accountant who won’t sign them. In 2013, there was a mass resignation on the board of directors. Six directors walked out after details of a closed-session board meeting were made public. Resulting in death threats to a former president. Since then, the board of directors has continued to shrink. Until December, the number of directors was nine. Now it’s four. By-laws are constantly updated to accommodate the ever-shrinking board. Board meetings are open to the public, but rarely attended. No independent audits are available. And the board of directors appears to have no interest in any future audit. Even for one that’s completely funded.
IRS records for Redwood Coast Seniors, Inc. go back to 2003. With a somewhat blurry mission. Providing meals, transportation and daycare to seniors. But for no specified geography. And no particular age group. RCSI Articles of Incorporation show a more specific mission. Providing the same services from Hales Grove to Gualala and east to Comptche. Plus employment services. To citizens aged fifty-five and older. By 2014, net assets were reported to be $456,670. Over $200,000 of which is reported to be publicly traded securities. Which yielded income of only $95 that year. According to an accountant named Janice Thomaides. With no license on file at the State Board of Accountancy.
FROM THERE I went to MRB Research (MRB). A nonprofit exposed by a near-million dollar Yurok embezzlement scandal in 2014. MRB was operated by ‘life partner’ officers. Ron LeValley and Charlene McAllister. According to law enforcement, the embezzled money had been laundered through MRB. But none of it showed up in the tax returns. No governing documents are available at the Registry of Charitable Trusts. LeValley pled guilty to federal charges, and served a ten-month prison sentence. MRB’s president was an award-winning professor at Humboldt State named Mark Colwell. Who had no clue what LeValley had done. MRB was dissolved in 2015. The money was never recovered.
MRB shared a post office box in Little River with another nonprofit named Pacific Seabird Group (PSG). In 2010, PSG received a $50,000 grant from the David & Lucille Packard Foundation. Something that never showed up in PSG tax returns. The treasurer there was Ron LeValley. Like so many other nonprofits, PSG has no governing documents on file at the Registry of Charitable Trusts. After LeValley got busted, PSG skipped town. Moving first to Hawaii. And then to Alaska.
THEN I MOVED ON to Mendocino County Public Broadcasting (MCPB). Also known as KZYX. MCPB is one of the twenty-five nonprofits in the country that hides tax returns from its board of directors. To its credit, MCPB conducts independent audits every year and posts them on a website. However, MCPB has something called a ‘Community Advisory Board’ comprised of outside members. Non-voting directors have been outlawed by the State since January 1, 2015. MCHF and the Mendocino Art Center also use non-voting advisory boards. It’s easy to see where MCPB got the idea for hiding tax returns. Another nonprofit, Mendocino Coast Botanical Gardens (MCBG) started doing that in 2008. Along with another secretive practice — withholding governing documents from members of the public. But like Redwood Coast Seniors, the number of directors on the board there has dropped below the minimum set by its own bylaws. Eleven directors are declared on the latest tax return. But only four are identified. Nonetheless, MCBG’s revenue has somehow tripled over the last eight years. Coincidentally, Mendocino Coast Botanical Gardens is the perpetual location of Winesong!
MY NEXT STOP was the one contract to the effect that it has. One director reportedly rents housing to MCHC clients, but it’s not disclosed on MCHC tax returns. The same housing is apparently paid for by MCHC. Which has become very unpopular. Particularly with Fort Bragg neighbors. As MCHC’s unlicensed staff struggles with an increasing caseload, the area is experiencing a crime wave. Amplified by the fact that at least one licensed therapist reportedly carries a handgun to deal with an increasingly violent clientele. Putting a crippled nonprofit in the crosshairs.
MCHC’S DRIFTING PURPOSE is obvious in IRS records. In 2001 it was ‘Providing housing and meals for the homeless.’ By 2013 it grew to include ‘basic shelter services’. A catchall phrase that transformed MCHC into a mental health care provider. Under a standard document request, MCHC provided me with something that appears to be amended Articles of Incorporation from 2002. Including a stated mission for ‘programmatic services to those deemed to be in need.’ But no original Articles. And no program.
IT WAS THE DEEMING that bothered me. And who was doing it. MCHC bills itself as a ‘faith based’ organization. With bylaws prohibiting ‘sinful’ conduct. On and off the board. None of which appear at the Registry of Charitable Trusts.
SO I RETURNED to the story of the U.S. Navy Veterans Association. And Bobby Thompson. To see what was on file for them. I couldn’t find any bylaws. It was the same for Articles of Incorporation and tax returns. I couldn’t find any government filings at all. As it turns out, neither could the government. On December 16, 2013, Thompson was convicted on charges of theft, fraud and money laundering. In Ohio. Also for embezzling all the money he’d raised. And Bobby Thompson wasn’t his real name.
THE WORST PLACE IN CALIFORNIA is Sutter County. Where over sixty percent of nonprofits report no revenue or assets. And a poverty level of fifteen percent. Home to Ortner Management Group (OMG). A for-profit organization with nonprofit subsidiaries. All of them doing just fine. Reporting revenue and assets. By the millions. Much of it from Mendocino County.
bio on OMG’s website claims that Mr. Ortner was the recipient of a NAMI (National Alliance on Mental Illness) award. But the people at NAMI have no record of it. At this writing, all the bios on OMG’s website have inexplicably vanished. Jeff Payne claims to hold a Masters Degree in business there. But according to the Department of Consumer Affairs, his only license was as a security guard. Something that got ‘denied’ in 2010.
AS MENDOCINO COAST HOSPITAL FOUNDATION snuck out of modernizing the Fort Bragg Hospital, Willow Glen crept into providing adult mental health care. The mission on WGCC’s 1996 Articles of Incorporation was providing mental health services ‘to senior citizens.’ In 2001 the word ‘dementia’ was added. But by 2014, the mission had grown to include ‘other adults.’ And the word ‘dementia’ disappeared. It paid off too. Quintupling WGCC’s annual revenue to $8.1 million over that time period.
PRIORITIES INC. (PI) is Sutter County’s seventh largest nonprofit. Operated by Jeff Payne. For another $301,628 a year. Yeah, baby. PI reports only four directors on its board. None of them independent. All of whom ‘delegate’ the review of PI’s tax return. To Mr. Payne. The tax returns are prepared by Melissa Callicott. OMG’s Chief Financial Officer. No Articles of Incorporation or bylaws are available at the Registry of Charitable Trusts.
PI’S STATED PURPOSE is a moving target. In 2002 it was ‘job coaching, preparation and placement for non-custodial parents who are delinquent on their child support’ — i.e.; deadbeat dads. But by 2014, it was serving ‘adults with developmental disability and mental illness.’ That move paid off too. Elevating PI’s revenue nearly 1,000 percent to $2.1 million over twelve years.
INTEGRATED CARE MANAGEMENT SOLUTIONS (ICMS) is Sutter County’s seventeenth largest nonprofit. Also operated by Jeff Payne. For an additional $25,500 a year. Bringing Mr. Payne’s total annual salary to nearly half a million dollars. ICMS reports four directors on its board. One of which is Jeff Payne. Who just can’t seem to keep up with all the paperwork.
ICMS RUNS TWO LOCATIONS in Mendocino County. One in Ukiah and one in Fort Bragg. Also known as access centers. Where people in crisis can get help. For mental health problems. Before ICMS showed up, there were no delays. But afterward, patients waited months for assistance. Both locations are reportedly managed by a pistol-packing therapist, Dr. Todd Harris. Who micromanages a beaten-down staff. None of them licensed. Credentialed professionals are few and far between. Most of them contractors. Few of whom know that ICMS is a nonprofit, or that Jeff Payne is in charge. A detailed Electronic Health Record (EHR) is reportedly maintained at ICMS. But according to the Kemper Report, it wasn’t available to government auditors.
ICMS started out serving adults with dementia too. That was its stated purpose in 2001. But by 2014 that word had been completely written out. With the phrase ‘mentally ill’ replacing it. That paid off too. Allowing ICMS to more than double its revenue.
AT THIS WRITING, ICMS is listed as ‘DELINQUENT’ at the Registry of Charitable Trusts. For failing to register with the State for six years running. What Jeff Payne lacks in record keeping, he makes up for in humor. Operating under hilarious acronyms like OMG (Oh-my-God) and ICMS (I-see-a-mess). Laughing himself all the way to the bank.
SPEAKING OF JOKES — there’s a nonprofit called The Sustainability Fund at 5798 Ridgewood Road in Willits. You can find it at the Registry of Charitable Trusts. And the IRS as well. Reporting zero revenue, expenses and assets. For fourteen years running. A peek at Google Maps for that area shows what might be sustaining it. And why nothing can ever get reported.
MANZANITA SERVICES is a local nonprofit that contracts with OMG. Much like MCHC does. Providing mental health services to the homeless. Without licenses. Manzanita’s tax returns are prepared by a CPA in Redding named Wayne Brown. But the State Board of Accountancy reports no such licensee. Manzanita is operated by Carol Mordhorst and Susan Wynd Novotny. Neither of whom appear to be licensed with the State Department of Consumer Affairs. The only paperwork I could find for Manzanita is a HIPAA license for Ms. Novotny. Classifying her not as a therapist. But as a ‘case manager/care coordinator.’ Another level of bureaucracy to bleed the system. Which appears to have contributed to at least one death in Mendocino County.
‘PATIENT 10’ appears in a report by the Department of Health and Human Services. If true, he was a Navy veteran suffering from psychosis and alcoholism. Treated by a nurse practitioner at Manzanita who identified himself/herself to government auditors as a psychiatrist. ‘Patient 10’ was abandoned by Manzanita for several months, who billed MediCal for nonexistent services. Until he was found dead in his apartment. After that, his chart was ‘sequestered’ by Mordhorst and Novotny. ‘Patient 10’ could have been a fabrication. Yet another charade to empty public coffers.
ANNE SHAPIRO is a real fatality connected to OMG’s nonprofit network. A 32 year old, her body was found north of Fort Bragg on January 7. Ms. Shapiro suffered from bipolar disorder and severe depression. She’d left a ‘facility’ in Willits earlier that morning. Her death has been ruled ‘suspicious’ by local authorities.
THE FACILITY was Redwood Creek. Operated by Sutter County nonprofit WGCC. Shapiro was identified only as ‘client C1’ in a State inspection. The inspector arrived on January 8 to find two local policemen interviewing administrator Jennifer ‘Kelly’ Mannel. About ‘an incident’ that happened the day before. According to the Department of Consumer Affairs, Mannel is licensed only as a vocational nurse. Not a registered nurse. Meaning that she couldn’t give patients medications or treatments. Something that might have saved Anne Shapiro’s life.
STATE INSPECTORS paid another visit to Redwood Creek on March 2, 2016. Where they found a ‘House Manager’ named Alyson Blair running the place. Not then licensed for adult residential facilities. Only for elderly care. Or so the inspectors said. In 2014, Ms. Blair advertised a mental health lecture at MCHC. Billing herself as a ‘mental health first aid trainer.’ But with no license appearing at the Department of Consumer Affairs.
THE SOLE STATE LICENSEE at Redwood Creek is a fellow named David J. Gilbert. An administrator who ‘frequently’ visits the place. According to Gilbert’s resume, he’s in Yuba City. With two California licenses. One for RCFE — Residential Care Facilities for the Elderly. And one for ARF — Adult Residential Facilities. But neither license appears at the Department of Consumer Affairs. The only license showing for him there is as a security guard. One that got cancelled in 2010. The very same year that Jeff Payne’s license got ‘denied’.
REDWOOD CREEK is registered with CalQualityCare.org. As a sixteen bed facility. Owned by Willow Glen Care Center. A for-profit entity. Without a license. At Redwood Creek, patients are at ‘Serious or Immediate Risk’. With a HIPPA license registered to Willow Glen Care Center. Who’s got sixty beds. And a ‘Serious or Immediate Risk’ to patients.
CREEPIEST OF ALL is what took place at MCHC’s homeless shelter in Fort Bragg. For years it confiscated prescription medications from residents. And then redistributed them. Once a day. From an unlocked cabinet. Where substitutes could be made. Keeping detailed electronic records on every resident. Including Social Security numbers. With the assistance of unlicensed, minimum wage employees. Some of those residents were on psych meds. Prescriptions that stopped working. Suddenly.
HOMELESS SHELTERS are popular places for clinical testing. Particularly for psych meds. Most clinical tests are registered with the FDA. Some aren’t. But all clinical tests have one thing in common. Detailed electronic record keeping. And the use of placebos. Prescriptions that stop working. Suddenly.
BIG PHARMA has a burnin’ love for new products. In 2012, patents expired on five brand name drugs. Two of them psych meds. One of them was Seroquel. An antipsychotic medication that accounted for forty percent of AstraZeneca’s revenue. Also linked to the suicide of Robin Williams. The other was Lexapro. An antidepressant responsible for more than half of Forest Laboratories’ earnings. And increased suicide risk. The only way out was developing new psych meds. With new clinical trials.
NONE OF MCHC’S RESIDENTS that I spoke with were aware of any clinical testing. And those detailed records never got to the authorities. But somehow an extra $95,239 managed to find its way into MCHC’s bank account. As a ‘contribution’ from OMG. Something that never got reported to the State. But I got a copy. Through a standard document request. For MCHC’s latest tax return. Furnished by Jerry Thomas. MCHC’s treasurer. The tax return that Mr. Thomas gave me was twenty-seven pages long. Six pages longer than the one at the Registry of Charitable Trusts. A simple trick that Mom taught me. Trust the dealer after you count the deck. The going rate for clinical test subjects is $4,000 a head. MCHC has twenty-four beds. Which multiplies out fairly close to OMG’s contribution. There’s no concrete proof that human experimentation ever took place at MCHC’s homeless shelter. But considerable circumstantial evidence that it did.
ANOTHER MYSTERIOUS DONOR was the Kathleen Kohn Fetzer Family Foundation. For $10,000. Way out in Falls Church, Virginia. Which sounds prestigious. But isn't registered there. Or anywhere else. The closest thing I could find was a for-profit corporation similar to that name in Colorado. It went delinquent in 2010. But somehow the check cleared three years later.
KOHN FETZER spread plenty of joy around Mendocino County. Mostly in the media. It's managed by Kathleen Fetzer, who's claimed to be a financial planner. But she ain't certified. Not according to the Certified Financial Planning Board anyway. Fetzer is a brand associated with wine and roses around here. Unless you're looking at County courthouse records. Where the Fetzer name is connected to twenty-one criminal proceedings.
BOBBY THOMPSON’S PHOTOGRAPH can still be found on an FBI wanted poster. But under a different name. John Donald Cody. Along with thirteen aliases. He was an attorney on the run for robbing elderly female clients in Arizona back in 1987. Cody had graduated with honors from the University of Virginia and Harvard Law School. He was convicted on twenty-three separate charges and sentenced to 27 years in Federal prison. And ordered to pay $6.3 million in fines and investigative costs. Cody’s earliest possible release date is April 27, 2039. When he’ll be 91 years old.
NONE of the nonprofit operators in this report are licensed by the State of California. They don’t have to be. Which seems strange. Because barbers and beauticians need licenses. So do veterinarians. At the Department of Consumer Affairs. But not nonprofit operators. Lowering the risk. And raising the reward. For tax evasion. According to the Washington Post, it’s rampant in nonprofits. And has been for a decade. Starting a nonprofit is cheap too. As low as $49. And it can all be done online.
THE FAILURE of local nonprofits became apparent in the Kemper Report. After the County of Mendocino outsourced mental health services to two organizations. Ortner Management Group and Redwood Community Services. OMG is a for-profit entity that subcontracted the task to broken nonprofits. Including MCHC. Three years into the contract, Ortner gave up. Handing a $7 million a year contract to its competitor. A nonprofit in perfect health.
SPOTTING NONPROFIT WINNERS is easy. It’s all in the tax returns. Look at their expenses. And the directors on their boards. Nine of the top ten revenue earners in Mendocino County have something in common. Legal expenses. One of them has a parliamentarian director on the board. Who’s a lawyer. That’s Redwood Community Services.
REDWOOD COMMUNITY SERVICES (RCS) was founded in 1995. By annual revenue, it’s Mendocino County’s sixth largest nonprofit. Earning just over $11 million a year. Virtually all of it comes from government grants. RCS has $6 million in assets. Half of what the Howard Foundation holds. RCS employs 221 people. Howard employs only two. RCS has bylaws and Articles of Incorporation posted at the Registry of Charitable Trusts. All the nonprofits earning more than RCS report legal expenses.
NONPROFIT PROLIFERATION in Mendocino County is obvious. When I started this report in early March, there were only 677 of them. Today that number is 686. That’s only for registered nonprofits. A friend of mine told me about a neighbor who’d started their own foundation. To buy themselves a new car. All tax deductible. So I looked it up. It’s registered as a corporation. But not as a nonprofit. The agent for service of process is legalzoom.com. Advertised on television by cofounder Robert Shapiro. The attorney who got O.J. Simpson acquitted.
LEGALZOOM itself is open to question. According to thirteen law professors, it’s illegal. In 2008, the North Carolina State Bar published a cease and desist letter, informing the company that its services were ‘illegal in North Carolina and must end immediately.’ Three state bar associations followed. When it came to setting Legalzoom up, Shapiro went the other way. Registering his company with the Secretary of State as a for-profit corporation. According to Dun & Bradstreet, Legalzoom now grosses $5 - 10 million a year. In Los Angeles County. All of it taxable. Los Angeles County has 40,760 nonprofits. The
FAKE FOUNDATIONS are another can of worms. Nonprofits that identify themselves as foundations to attract donors. But operate at obscene CTRDs nearing $100. Like the Seabiscuit Heritage Foundation. According to the Registry of Charitable Trusts, twenty-three entities representing themselves as foundations in Mendocino County are either delinquent or unregistered. Outnumbering the nineteen legitimate foundations here. Even real foundations can take a toll. Last year the Frank R. Howard Foundation raised more money than its eleven peers combined. But at a CTRD far greater than theirs. By several orders of magnitude. And most of the proceeds went to a related nonprofit. The Howard Community Healthcare Foundation. Which is another fake foundation. Worse yet is the amount of dead wood there. Fourteen of the fake foundations report no assets at all. Some of which have been around for decades.
THE BLUE RIBBON for climbers goes to The Community Foundation of Mendocino County (CFMC). With assets of $20+ million. And revenue topping $9 million. Filings with at the Registry of Charitable Trusts appear on the up-and-up. With one tiny exception. A letter from the Franchise Tax Board. Saying that CFMC is good-to-go as a corporation. But nothing about being a nonprofit. On request, CFMC provided me with its letter of exemption from the IRS. Clearly stating that it wasn’t a private foundation. That letter was dated February 6, 1998. So on July 1, 2001 CFMC amended its Articles of Incorporation. To change its name from ‘Mendocino County Community Foundation’ to ‘The Community Foundation of Mendocino County’ (emphasis added). What’s in a name? Plenty. CFMC was founded in 1993. But seven years later, its assets were only $699,718. After becoming The Community Foundation, they’ve raised over $20 million.
AMONG THE TRULY BIZARRE is a special district that poses as a nonprofit. Mendocino County has only one of a kind there. It’s the Mendocino Coast Health Care District (MCHCD). Also known as Mendocino Coast District Hospital. According to the IRS, it registered as a 501(c)(3) nonprofit in 2010. But never filed a tax return. No records are on file at the Registry of Charitable Trusts. Nor with the Secretary of State. The only place that MCHCD appears is at the TAGGS website. Where it’d pocketed $558,707 in grant money in 2008 and 2009. Thanks to grants written by PPI.
STRANGER STILL is what happened to that money. According to an audit for that time period, MCHCD never got it. It’s possible that the auditor missed it. Particularly in light of who the auditor was — TCA Partners. The same accounting firm that got its license revoked for doing bad audits. And for the exact same time period. TCA had been doing audits for the hospital since 2004. When Charlene McAllister was president of the board. McAllister resigned during a Grand Jury investigation in 2006. And joined the Hospital Foundation’s board immediately thereafter. Which is precisely when TCA audits started showing up for MCHF. Including the one with the $250,000 addition error.
MCALLISTER served on a board of directors with me once. For about two years. I was the majority stockholder and president at Mendocino Game Company. A for-profit corporation. It produced a board game I invented. Called Pirateer. Charlene was a minority stockholder. With strange views on what her role as a director was. She definitely wanted to run the show. Without licensed attorneys. Or licensed accountants either. She wanted an advisory board. I disagreed. So did my licensed attorney. And my licensed accountant. So she quit. But not before doing considerable damage. By fueling speculation that six-figures in corporate money was somehow missing. And that I was somehow unfit to lead the company. Quietly. But not quietly enough. I took her to court for that later. Over meddling. I prevailed. For a settlement that we both agreed would be confidential. She paid up too. In 2009. Right before MCHF’s bad tax return turned up. The one with Charlene’s signature. And the six figure tracking error.
ADVISORY BOARDS aren’t all bad. They’re usually made up of high profile people. Wealthy and influential. Who know little about the board they’re on. Here it was coastal hoi polloi. Identified not on tax returns. Like directors and officers. But on brochures, mailers and websites. These elusive entities have no leaders. They’ve got instigators instead. People who function as messengers. On behalf of fabricated experts. Like licensed attorneys. And licensed accountants. These instigators will ‘pull’ meetings together. Not as board of directors meetings. And not as advisory board meetings either. But then later identify them as advisory boards. After the fact. These meddlers will then leverage the purported opinions of advisory boards to influence actual opinions of the legitimate boards. Particularly to keep key people away. Like licensed attorneys and licensed accountants.
YOU CAN SEE how this played out for MCHF. In third-party online record archives. Where four MCHF advisory board members are named on a 2013 board meeting minutes. Where none of those people are identified as present. After they were identified in one of my online video cartoons, their names were purged from MCHF’s website. Leaving only Charlene McAllister as the chairman. Further obscuring who was — or wasn’t on the advisory board. The absence of licensed attorneys is evident on MCHF tax returns. With no legal expenses in twelve years of filings. The closest that MCHF got to having a licensed attorney around was in 2005, when lawyer Jim Rainie joined the board of directors. But by August of 2008, Rainie was gone. Replaced by Charlene McAllister. Who’s been there ever since. It’s the same with licensed accountants. In November of 2009, MCHF’s first bad tax return showed up. Prepared — apparently — by a licensed accountant. But without their signature. It was the same for six years worth of independent audits. All of them without signatures. Beginning in June of 2008. Accompanied by tax returns for the same years. Swearing that independent audits hadn't been done.
THE FOUNDATION’S NEWEST advisory board member is a former employee. That’s Jeri Erickson. Who’s signed every MCHF tax return since 2009. Including the most recent. Erickson’s resume claims grant writing experience. As do the resumes for 2015 president Susan Warner and secretary Charlene McAllister. But the Fort Bragg Hospital’s 2012 bankruptcy speaks volumes for their effectiveness. Erickson and MCHF’s current president — Steve Lund — both work for a company called A+ Events. According to that website, it only does business with ‘educational organizations.’ Which MCHF technically qualifies for. At least according to its IRS classification. It certainly accounts for MCHF’s infatuation with Winesong!
EVENTS ARE A BUST for raising money. Everyone in the fundraising industry knows that. They burn volunteers out. And the CTRD for events outside the Emerald Triangle can reach $2. Half of what Winesong! runs here. Most of its revenue comes from auctions. And mostly for premium wine. But not always. In 2013 it reportedly included a broken down sailboat. Something the buyers weren’t happy with. So they returned it. Triggering a six figure loss for that year. And the need for an amended tax return. To hide it.
WHEN YOUR HOUSE IS ON FIRE the first responders in Mendocino County are usually volunteer firemen. Trained and equipped by nonprofits. All of them trustworthy. Like the Mahopac Volunteer Fire Department. Way out in upstate New York. In the scenic Hudson Valley. Where $5.2 million went missing. At the hands of a trusted treasurer. By the name of Mike Klein. Who’d held that position for a decade. Now under investigation by Federal authorities. For embezzlement. Take a peek at his 2013 tax return. At the top of the next-to-last page. See anything strange? ‘No review was or will be conducted’ of that tax return. So the fire department never saw it.
MENDOCINO VILLAGE’S fire department is a nonprofit too. With tax returns that seem to add up. Most of the time anyway. But not the 2013 tax return. Check out the front page. On line 10. Where it says that $2,000 in grants were paid. And detailed on Schedule O. Then look at that on the last page. Where it becomes $500. No bylaws are on file at the Registry of Charitable Trusts.
THEN WE’VE GOT FORT BRAGG. With another nonprofit fire department. Look at their famous pool table.
TO THE NORTH, there’s the Westport Volunteer Fire Department (WVFD). According to its 2010 tax return, WVFD paid $6,487 for property insurance. On $19,305 worth of property. And $4,605 in workers compensation insurance. On zero paid employees. The treasurer there at the time was Gary Quinton. Who showed up in the local newspaper a year later. Busted for a 231 plant indoor grow. Authorities claim that Quinton made a tidy profit of $1.3 million over a three-year period. He even kept track of it all on a spreadsheet. But WVFD just hasn’t been able to keep up with four years worth State filings. According to the Registry of Charitable Trusts, it’s now delinquent. And the 2013 tax return reports that Mr. Quinton is still the treasurer.
AND ALBION-LITTLE RIVER Volunteer Fire Department (ALRVFD). Led by fire chief Jeff Wall until 2012. According to tax returns at the Registry of Charitable Trusts. And the IRS. Local media missed that fact. The Santa Rosa Press Democrat reported Wall as ‘a dependable volunteer’. But not one word about him being a fire chief. The publicity happened over Wall’s involvement in a 103 count indictment. For conspiring to sell $17 million worth of marijuana, cocaine and methamphetamine. After Wall’s indictment, something strange happened at ALRVFD. When $45,000 in grants were paid. To the Albion-Little River Fire District. For ‘Use of District Fire Trucks’. That’s what the 2012 tax return says. Which is odd. Because ALRVFD had never done that before. IRS records show no such grants before that time. Or since. In fact, nothing’s been filed there since June of 2013. Which appears to be why ALRVFD is currently listed by the Registry of Charitable Trusts as delinquent. At least partly, anyway. ALRVFD filed nothing with the State for 2009. But it did with the IRS. Showing that $61,222 was paid for ‘Scott Airpacks.’ Which were then ‘distributed’ the same year. To an unnamed recipient at 100 North State Street in Ukiah. With no Employee Identification Number. That’s the address of the County Courthouse. Leaving a big fat question mark on $100,000+ in ALRVFD equipment expenses. Which is precisely how the Mahopac Volunteer Fire Department got ripped off.
SOUTHWARD there’s the Elk Volunteer Fire Department (EVFD). According to its website, EVFD has raised a lot of money via grants ‘administered from local sources.’ But not according to the Registry of Charitable Trusts. It hasn’t filed anything with the State since 2002. And is now delinquent as well.
DON’T GET ME WRONG. We’re all indebted to the brave men and women at the local volunteer fire departments. They’re trusting people. Just like they are out in Mahopac. ‘As a fire department, we put a lot of trust in our members,’ said Mahopac chairman George Jones. ‘We relied on our accountant too much to come back with an audit.’ Jones and his fellow volunteer firefighters paid dearly for it too. Losing $500,000 a year in funding ever since.
IT WASN’T A FIREMAN who broke that story. And it wasn’t a detective. It was a journalist named David McKay Wilson. In a column called Tax Watch. For a lowly newspaper. The Journal News in White Plains, New York. Wilson was inspired by a local public radio station. WAMC. Who reported another fire department embezzlement in 2012. But stories like this are evidently off limits to KZYX. Up to its eyeballs in hidden tax returns. And our local newspaper — The Mendocino Beacon and Fort Bragg Advocate — ran a public service announcement for two individuals indicted in the MRB Research scandal. But didn't bother to report the indictment.
THE MAHOPAC EMBEZZLER’S MISTAKE was a lulu. Echoed by a clueless Mahopac Volunteer Fire Department spokesman named Ed Scott. Insisting after-the-fact that MVFD was a ‘private nonprofit.’ Here’s how ridiculous that is. Fire up your Internet browser and go straight to Google. Then type in nccsweb.urban.org. Now go to the category titled, ‘Search for Specific Organizations.’ And hit the link titled ‘Search Active Organizations.’ Okay? Next enter ‘Mahopac Volunteer Fire Department’ in the search field. And hit return. Bingo. Mr. Scott’s ‘private nonprofit’ just went public. So let’s keep going. Hit the link titled ‘Mahopac Volunteer Fire Department.’ Then click the tab titled ‘Form 990.’ What you’ll see are the links to twelve years of MVFD tax returns. All of ‘em in perfect working order. Just for grins, open any of them. And read what it says in the upper right hand corner. ‘Open to Public Inspection.’ In every single one. Now tell me what you see for legal expenses. It’s on page ten of the 2014 tax return. Zero.
ALL 1.5 MILLION NONPROFITS in the USA can be found here. Instantly. Broken or not. Along with every last director. Each dollar reported. And every attempt to hide it. Immortalized by our friends at the IRS. So if you’re already a nonprofit operator, you might give that some thought. Particularly if you’ve got plans for a nonprofit tax shelter of your own.
FROM MAHOPAC TO MENDOCINO, these troubled volunteer fire departments have one thing in common. You can see it on their tax returns. No legal expenses. And no licensed attorneys. Just like Mendocino Coast Hospital Foundation.
THE GOING RATE for broken down sailboats is under a hundred grand. Like the ‘Contessa.’ A forty-four foot yacht moored in Marin County. With a ‘REDUCED PRICE’ of $84,750. The last registered owner is Rich Brandes. Of A+ Events. But the listing price hardly squares with the difference between the amended tax return at the IRS and its predecessor at the Registry of Charitable Trusts. Which is $245,047. Nearly the entire net proceeds from Winesong! that year. Even more peculiar is that Winesong! catalog. Where the sailboat is missing. Which figures. Because selling sailboats requires a license. And according to the California Division of Boating and Waterways, MCHF doesn’t have one. And neither does Jeri Erickson. The lady who filed MCHF’s 2013 tax return. Without a lawyer. Twice.
ERICKSON has moved on to a position with Leadership Mendocino (LM). As a Steering Committee Member. Supposedly. LM is a component of North Coast Opportunities (NCO). Another nonprofit reporting zero expenses for attorneys or accountants. In thirteen years of operation. At $12+ million in annual revenue, it’s hard to imagine operating without them. Especially since it reports having audited financial statements. NCO doesn’t hide tax returns. Not outright anyway. But it does obscure them. With the following written policy: ‘The audit firm prepares the tax return and upper management reviews and makes any necessary corrections before it is filed’ (emphasis added). Giving ‘upper management’ the upper hand. Over the board of directors. This policy has been in place since 2008.
LEADERSHIP MENDOCINO goes unreported on all NCO tax returns. Ditto for any steering committees. There’s only one record for LM on file at the Registry of Charitable Trusts. Which is an expired raffle from 2006. And nothing on file with the California Secretary of State. Or the IRS. But that doesn’t keep it from receiving grants. It got one for $25,000 in 2008 from the S.H. Colwell Foundation. And another one for $5,000 from the PG&E Foundation in 2014. If anything, LM appears to be something of a vagabond. Surfacing recently in a press release from the Arts Council of Mendocino (ACM) as a 10-month program. ACM is yet another local nonprofit reporting zero expenses for attorneys or accountants. Yet has scored $671,856 in public support over the past five years.
ACM’S BIG FEAT was offering a class on Running a Successful Nonprofit Organization. The instructor was Catherine Marshall. Whose claim to fame was serving as CEO of something called CAMEO for ten years. Which was easily traceable to her online resume. And then to the Registry of Charitable Trusts. Where CAMEO is currently listed as delinquent. In the twelve tax returns that I looked through, there were none reporting legal expenses. In spite of taking in over $3.3 million in public support over the period from 2007 through 2011. Ironically, Marshall’s class offered instruction on legal issues. Which is hard to imagine. Since she has no accreditation on file with the State Bar of California. It’s worth noting that Marshall advertised her class at the Mendocino College Coastal Campus. And that students could sign up by telephone at (707) 962-2664. But that phone number doesn’t work. Because it’s a leftover from College of the Redwoods. An operation that got mothballed in 2014. Over accreditation issues.
REGULATION is nonexistent with nonprofits. According to the Washington Post, they get robbed all the time. And never go after the perps. Between 2008 and 2012, over half a billion dollars was admittedly missing from nonprofits. Nonprofit leaders don’t pursue embezzlement complaints over fears of negative publicity. And the impact on their bottom line. So charges are never filed. The California Department of Justice is hamstrung by sheer numbers. At this writing, there are 162,089 registered nonprofits in the Golden State. And Sacramento is a long, long way from Mendocino County. The dissolution at MRB Research was voluntary. It only happened after LeValley went to prison. Who was initially charged in Del Norte County. Federal officials aren’t inclined to help either. Leaving a region famous for criminal enterprise to stew in its own juices.
STATE PROSECUTIONS are few and far between. The last one I could find appears on the State website. Against a nonprofit called Cars 4 Causes (C4C). In Ventura County. Where there are 3,323 nonprofits. All of which report revenue. Only five report no assets. According to the Registry of Charitable Trusts, C4C reported assets of less than $1 million in 2014. But according to the Department of Justice, it’d taken in over $90 million. Distributing most of it to themselves, family and friends. This was one of only three actions filed in 2015. All of them in Southern California. In counties with healthy nonprofits.
KZYX AND THE BOTANICAL GARDENS are two Mendocino County nonprofits with written policies to hide tax returns from their boards of directors. What’s the third? It’s the Mendocino Coast Hospital Foundation. With an advisory board chaired by Charlene McAllister. And who’s the big shot that suggested ‘good by-laws’? Once again. It’s Charlene McAllister.
THE LANGUAGE of that policy is pretty darned specific. Right on the tax return. Filed under penalty of perjury. Under the section titled, ‘Organization’s Process to Review Form 990.’ Where it says, ‘No review was or will be conducted.’ Exactly like the ones for KZYX and the Botanical Gardens. And the Mahopac Volunteer Fire Department. Leaving me to wonder who’s actually operating these nonprofits. So I took a peek at MCHF’s newly minted bylaws. To see who’s calling the shots there.
THE ANSWER is on page six. It’s called a ‘Finance & Investment Committee.’ Made up of ‘not less than three (3?) members.’ But no mention of directors. Or trustees. Like the State endorsed bylaws say. At the Registry of Charitable Trusts. Where the word ‘safeguards’ appears. Something sadly lacking from MCHF’s new bylaws. Leaving non-directors with the keys to the store. And the fate of the Fort Bragg Hospital.
OUR SITUATION is no secret. Grant makers outside of Mendocino County have known it for years. Ever since the Packard Foundation got burned back in 2010. Word is out — to avoid Mendocino County nonprofits. You can see evidence of that in the tax returns. I did. You can also see it in the failure of vital institutions. Like our hospitals. And our mental health system. Who relied on those nonprofits. And were gravely disappointed.
THE PROBLEM — to be blunt — is identity theft. On a massive scale. What does a nonprofit have aside from its identity? Nothing. What does an unscrupulous operator have to gain from taking that identity? Everything. So it happens a lot. Particularly in the Emerald Triangle. For some strange reason. Banks completely enable nonprofit identity theft. The only protection in place for top-rated Savings Bank of Mendocino County is two signatures. One for Bonnie. And one for Clyde.
THE SOLUTION is twofold. First, nonprofit operators should be licensed by the State of California. Including any person in a nonprofit authorized to sign — or cash — a check. Licenses should only be authorized by a vote from the nonprofit’s board. On a resolution that’s certified, filed and endorsed at the Registry of Charitable Trusts.
TO QUALIFY for licenses, each nonprofit should be required to furnish the Registry of Charitable Trusts with a simple pedigree. Like something for a dog. Documenting the election of any of its nonprofit operators. From startup to present. Including minutes for each election. Signed and certified by the nonprofit’s secretary. On the date of the election. Under penalty of perjury. If such records can’t be located, these mutts could be invited to re-apply. Under new charters. Forfeiting their ill-gotten gains to other nonprofits. With better record keeping. The same should apply to bylaws and amendments.
GETTING a license should require passing a test. Overseen by the California Department of Consumer Affairs. By a specialized board. Once they pass, licensees could be listed at the State website. Like barbers, beauticians and veterinarians. For the whole world to see. Including banks, title companies and post offices. Connecting each license holder with their authorizing nonprofit. Making it a lot more difficult for folks like ‘Bobby Thompson’ to take advantage of a nonprofit. At least in California.
SECOND, local governments should be granted the authority to dissolve failed nonprofits. The Mendocino Coast Hospital Foundation is a prime example. A colossal failure that drove the Fort Bragg Hospital into bankruptcy. Which is also a nonprofit. In a dissolution, all assets are automatically transferred to another nonprofit. Like the Fort Bragg Hospital. Which would then be motivated to get its own house in order. Or else get dissolved.
COUNTY MENTAL HEALTH would benefit mightily from such a dissolution. The Howard Foundation has the perfect property — a vacant hospital in Willits. And with Adventist gone, its original mission is vacated as well. In a dissolution — voluntary or not — title should pass to Redwood Community Services. A nonprofit that best serves Howard’s original mission. But nothing is easy. Or cheap. Especially a contested dissolution. In this case, nonprofit prosecutions by Mendocino County should be eligible for reimbursement by State and Federal grant programs.
NONPROFITS would benefit too. Just do the math. California early has 150,000 nonprofits. Ten percent of the 1.5 million in the United States. So that’s ten million dollars that Golden State nonprofits lose every year. To unscrupulous operators. Tax free.
NONPROFITS WITHOUT Articles of Incorporation or bylaws on file at the Registry of Charitable Trusts might could be granted amnesty for a brief time period. To either get with the program. Or to get lost. This should bring prudence back into the picture. Along with licensed attorneys. And licensed accountants. Putting the kibosh on scheming advisory boards. Once and for all.
LEGISLATION is completely doable. AB 2755 is the bill that outlawed non-voting directors on nonprofit boards. It was introduced by Assemblyman Raul Bocanegra. Sponsored by licensed attorneys at the California State Bar. Who were understandably miffed at their jackleg competitors. AB 2755 passed in the California Senate on August 28, 2014. Unanimously. So it’s hard to imagine why anyone would oppose requiring State licensing for nonprofit operators. Or local control over nonprofits. Least of all the licensed attorneys. All of whom would benefit.
INCENTIVES for compliance would be strongest for legitimate nonprofits. And weakest for the scams. Attrition would be immediate. Half of local nonprofits would dry up. Noncompliant ones without assets could be suspended along with all of their licensees. End of problem. Dissolutions with assets would be distributed to legitimate nonprofits. Providing a welcome jumpstart for those who play by the rules.
THE UPSIDE would be seen within two years. Particularly in the form of large grants. Like ones from Jim Miwa. Or the David & Lucile Packard Foundation. And not a moment too soon. SB 1953 mandates a new hospital in Fort Bragg by 2030. That’ll run fifty million dollars at least. And another thirty million to fund the current wear-and-tear. Certainly by the time it gets raised. Other big projects are on the horizon. If the current trend continues, many of those will be operated by nonprofits. And hopefully, they’ll be legitimate. But I know one thing. If nonprofit reform happens, it’ll give the phrase ‘good by-laws’ real meaning.
SKEPTICS OUT THERE might want more info. About the other twenty-two nonprofits. The ones with written policies to hide tax returns from voting directors. And what happened to the organizations. As well as the policies. Me too. So I looked ‘em all up. Two only started that last year. So they were excluded. Of the remaining twenty, only four thought that policy was worth keeping. One was the Mahopac Volunteer Fire Department. The others dropped it like a hot rock. Because it was stupid. Pushed onto them by behind-the-scenes operators. With carefully crafted vocabulary. And traces of it left behind. Like fingerprints.
AMONG THAT SPOOR is a particular title. Known as a ‘board member.’ Not a director or trustee. But a board member. You won’t find that description at the Registry of Charitable Trusts. Or the IRS. But you’ll sure find it here. Where fact and fantasy become one. To bypass elections. It’s the same with the word ‘financials.’ You might want to write that one down. Financials. Something to throw accountability under the bus. Along with balance sheets and operating statements. In favor of ‘strategic plans’ and ‘financial plans’. The scoundrels who launch that vocabulary are careful enough to fire and forget. Leaving well-meaning — but gullible — nonprofits to pick up the tab. And taxpayers too.
BEFORE YOU GO, there’s a video to look at. It’s the television ad about the importance of licensing. You can find it on YouTube. It’s titled, ‘Can You Tell the Difference? (30-second TV Ad).’ It demonstrates my point. Watch the ad. And see how convinced those people were. Ready to bet their entire life’s savings on a smooth talker. Without a license. Yeah. Just imagine what somebody like that can do to a nonprofit. In a cash rich region like Mendocino County.
ON A CLOSING NOTE. A few weeks ago I was talking to a source for this report. A licensed clinician who’d worked at ICMS. I asked if they’d ever considered the ‘I-see-a-mess’ play on words. The response was total shock. It’d never crossed their mind. Then I thought about the phrase that started my quest. But this time as a farewell. Goodbye laws. Hah!
Scott M. Peterson
PS: You can see more nonprofit nonsense at my weekly video comic strip, Mendopia.