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Washington Post report finds fraud, embezzlement at more than 1,000 non-profits

October 27, 2013 at 12:00 AM EDT
A startling report in today's Washington Post shows more than 1,000 of the nation's nonprofit organizations have each acknowledged losses of a quarter million dollars or more because of theft, investment fraud, embezzlement or other unauthorized use of funds. Joe Stephens, the co-author, reports from Washington D.C.
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HARI SREENIVASAN: A startling report in today’s Washington Post, the newspaper says more than a thousand of the nation’s non-profits have each acknowledged losses of a quarter million dollars or more, because of theft, investment fraud, embezzlement or other unauthorized use of funds. The report is based on tax filings by the non-profits during the past five years. Each non-profit disclosed the problem by checking a box on the tax form indicating what’s called a significant diversion of funds. For more about all this, we’re joined from Washington by Joe Stevens, he’s an investigative reporter for the Post and the co-author of today’s piece. So your article says just the ten largest losses you’ve identified add up to more than five hundred million dollars, give us some examples.

JOE STEPHENS: That’s right, almost half a billion dollars, they’re all across the board, all kinds of non-profits and major amounts, the largest potential amount lost we found was a hundred and six million dollars, that was to Yeshiva University and its affiliates, they got caught up in the Bernie Madoff Ponzi scheme, which is pretty famous, and actually a lot of non-profits got caught up in that and a lot of those lost tens of millions of dollars to that Ponzi scheme, so that was a major source of losses, however there were a lot of large losses from many different sorts of scams and schemes, there’s a global fund to fight AIDS, they had a problem, they found that they had tens of millions of dollars had gone missing through a whole range of financial problems, they’re working at getting some of that money back.

There’s also the Conference on Jewish Material Claims against Germany which, pays reparations of a sort to victims of the Holocaust. They were victims of a scheme involving some insiders and they took tens of millions of dollars that were supposed to go to Holocaust survivors. Some of these are sort of horrifying to hear about, and these groups a lot of them, they’ve lost a lot of trust. A lot of these schemes involved insiders, executive directors, bookkeepers, very trusted long time volunteers sometimes, and you find ten million here, ten million there, but it also goes all the way down to your neighborhood groups, boy scout groups, volunteer fire departments, and non-profits across the board are losing a lot of money and a lot of this hasn’t been known because to begin with, in the past, before 2008, they didn’t have to disclose like they do now. They have to actually check a box on an annual disclosure report. They also, what we found is the new reporting requirements, require you not only to check that box, that you attach a description of what happened to your annual disclosure form.

HARI SREENIVASAN: In your reporting there, it actually shows that not everybody chose to disclose what was happening, and so, this is , when you’re looking at these findings, which are startling, but this is of the people who chose to disclose it, of the people who actually check the box, of the people who are actually registered of all the non-profits that are out there. So really, how much bigger is this problem?

JOE STEPHENS: That’s exactly right. The thousand, more than a thousand we found are just a sliver of the total universe and it makes it almost impossible to estimate how big the losses are, but they obviously are larger than we had known, and a lot of gritty details in these reports, but the other major finding of our investigation is that an awful lot of these groups aren’t giving out many details. Even the ones who checked the box, said we had a major, significant diversion as they’re called. They don’t disclose exactly what happened. A lot of them don’t give an amount. Some of them just say call for an explanation. Some don’t put down anything. So it raises a lot of questions about really what’s going on out there, how bad is this, well what we’ve seen is bad enough.

HARI SREENIVASAN: Do you think that this could cause a deterrent effect in people giving, or what could people do to be smarter about it and hold the organizations that they donate to more accountable?

JOE STEPHENS: Well just because a group has been victimized, isn’t in and of itself, doesn’t mean it’s a bad organization or they did anything wrong. But the experts say this should be a sign to donors, to supporters, to volunteers, if you see this on the form, go your group and say what happened, give us details and what have you done to make sure there is not a reoccurrence? And to help in this, at the Post we took all the data we collected, readers can now go to our website, they can search for themselves, we put together the first public searchable database of these significant diversions, you can put in the name of your city, your state, your favorite group, and you can see if they have disclosed a significant diversion if so you can click, go directly to the form and read what they said, and if you’re not satisfied, experts say the next step is pick up the phone, call that group and ask them what happened.

HARI SREENIVASAN: Joe Stevens from the Washington Post, thanks so much.

JOE STEPHENS:Thank you.