Cohen Report Short Takes 02/27/08

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Touring the Countrywide: A recent CR examined the charitable generosity of the Countrywide mortgage empire, whose subprime depredations contributed mightily to the nation’s current national economic turbulence, noting how its philanthropic grantmaking paled in generosity compared to the 9-figure payoff it gave to its departing CEO, Angelo Mozilo. CR was hardly alone in questioning Mozilo’s $115 million gold watch (some sources have suggested that the figure is much higher, though others say he has decided to forego some of the additional benefits he might have been entitled to as a result of Countrywide’s pending acquisition by Bank of America). The indefatigable Congressman Henry Waxman, chairing the House Committee on Oversight and Government Reform, plans to ask Mozilo a few questions about his employer’s longstanding executive compensation generosity (Mozilo has frequently ranked in the top 10 highest paid corporate CEOs in recent years) on Thursday, February 28th. No doubt a few community-based nonprofits might have been able to use 8 or 9 figures’ worth of capital to help shore up some neighborhoods likely to be destabilized by a tsunami of mortgage foreclosures, with Countrywide’s subprime mortgage business playing a leading and precipitating role.

Transparency After the Fact: CR has had a number of articles on the nonprofit and philanthropic involvements of various presidential candidates, both major and minor. The one we haven’t addressed yet has been Hillary Clinton, in part because her philanthropic connections merit more research and investigation than the brevity of an 800-1000 word online comment. Part of the complexity is that she is married to Bill Clinton, whose foundation, the William J. Clinton Foundation, with fundraising for his presidential library, has been the subject of recent news coverage raising questions about his soliciting funding from dubious characters, such as Canadian financier Frank Giustra whose relationship with the former president and his foundation ended up with Clinton giving political cover to human rights monstrosity, Kazakhstan dictator Nursultan A. Nazarbayev, Kazakhstan’s awarding Giustra a phenomenal mining deal giving Giustra access to that nation’s uranium deposits (overnight making Giustra’s previously tiny unknown company into one of the world’s largest uranium producers), and Giustra’s donating over $100 million to the Clinton Foundation. Clinton’s access has helped Giustra elsewhere too, including Columbia with President Alvaro Uribe. With complex financial operations associated with her family foundation and her husband’s post-presidential operation, candidate Clinton has chosen not to release her tax returns nor to divulge the names of donors to the Clinton philanthropies. She apparently has not vocally opposed a bill to disclose the names of donors to presidential libraries (one of her husband’s foundation’s activities) initiated in the House of Representatives by Congressman Henry Waxman and reported out of the Senate Committee on Homeland Security and Governmental Affairs under Senator Joseph Lieberman this past October, but it would begin, if passed, only after the November elections, and she and her husband have not chosen to demonstrate the point with a voluntary disclosure in compliance with the pending statute. Not surprisingly, CR guesses, Senator Harry Reid and his colleagues have not seen fit to push the Presidential Library Donation Reform Act of 2007 for a rapid Senate vote—or any vote at all.

Extravagant Credit Card Thinking: Our op-ed on the United Way’s plan to link up with credit-card issuing banks generated a very helpful letter to the editor from a United Way of America VP, Alex Sanchez. His letter to the Christian Science Monitor declared the op-ed simply wrong, that “People can make missteps by spending big dollars on unneeded things, but not by donating pennies to people in need.” The studies cited in the op-ed weren’t that people get in trouble spending big dollars on unneeded things, but that poor and even middle income households people were increasingly using credit cards for necessities like food and health care (there are many reports on this subject, but look at The Plastic Safety Net for a good overview of this credit card problem, and, distressingly in this subprime mortgage foreclosure environment, even mortgage payments. Sanchez’s letter also noted that the United Way’s Pennies for Change plan isn’t just about linking up with credit cards. It’s about debit cards too, which we omitted in the original CSM op-ed. Here’s a link to a report (Debit Card Danger) from the always excellent Center for Responsible Lending addressing some awful debit card practices—that, like the credit card issues being explored by Senator Levin and Senator McCaskill, happen to be standard industry practices. There’s so much that the United Way can accomplish for good through its community impact strategies and their emphasis on addressing poverty. Getting banks to stick a penny into charity for credit card usages isn’t the problem, it’s the charitable gloss given to credit cards and debit cards at a time (particularly now, leading into recession) when industry policies are a factor in the economic hardships of the people United Way affiliates are trying to help so diligently.

Courageous Whistleblowers: CR was honored to contribute a couple of sidebar items to an important article by former Massachusetts AG Scott Harshbarger on the need for a culture that supports appropriate nonprofit whistleblowing in the Winter 2007 issue of Nonprofit Quarterly, and it has parked our attention to examples of whistleblowers who have the courage to do the right thing even though, as our sidebars noted, most whistleblowers still get crunched regardless of Sarbanes-Oxley or any other law. We take note of an executive assistant at a program for the disabled in New York State who took note of the agency’s propensity for rewarding staff with 33-inch flat screen televisions and the whistleblower at a Dallas charter school who helpfully pointed out the school’s use of artificially inflated enrollment numbers in order to qualify for more funding (and its shifting designated charter school education funds into a job training nonprofit run by the school’s directors.) Nonetheless, there’s a long way to go before our society lives up to Harshbarger’s admonition: the 2007 National Government Ethics Survey showed that only 30 percent of federal workers and 14 percent of state and local government workers believe their agencies have solid ethics programs, 70 percent of survey respondents reported having witnessed on-the-job misconduct in the past year, 17 percent of state workers who reported misconduct experienced retaliation, and only 1 percent of government workers used confidential whistleblower hotlines to report on the misconduct they personally witnessed.

Cry Me Five Rivers: In Spring 2007, we did a piece in the Quarterly about conflicts of interest in nonprofits, how easy it was for some unsuspecting nonprofits to drift into conflicts followed, on some occasions, by the attention of state and federal investigations. One of the saddest stories was the Five Rivers CDC in South Carolina, a nonprofit created in one of the poorest coastal small community areas of the state (surrounding otherwise upperclass tourist areas like Myrtle Beach) to help poor families with affordable housing and jobs. The ED of the CDC and the chief operating officer—her daughter—allegedly took most of the $5 million that the CDC received over the years and used it for themselves and their relatives, until the federal government caught on and shut the organization down. Now the CDC’s execs are under indictment for criminal conspiracy, embezzlement, and fraud, though both defendants are represented by public defenders, because they claim to be without resources (despite the ED’s $80,000 plus salary). While the state discusses plea deals with them, the CDC’s property—undeveloped lots donated by banks or purchased with federal funds, designated for affordable housing development and community facilities—may now be lost due to tax liens, though the state apparently is thinking about holding the indicted ED personally responsible for the nonprofit’s tax problems. As we described in the Quarterly, Five Rivers was once touted as a model of rural community development, though in large measure a model before it had actually done very much. People want models, they want successes, they want nonprofits that serve the communities—such as the largely African-American, incredibly low-income populations of the South Carolina coast—that have been left behind by the private markets. It makes reminders of the dangers of conflict of interest all the more important to those of us concerned with the probity of the nonprofit sector.