Nonprofit Newswire | Econ. Dev. Loans on Friendly Terms for Family

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September 24, 2010; Source: WWL-TV | OK, repeat after me: For a nonprofit that gives loans for economic development, it may be a conflict of interest if it gives loans to businesses controlled by family members of the executive director or the deputy director. Pretty obvious, but it seems to have escaped Greg St. Etienne during the time he ran Citizens United for Economic Equity.

Our examination of an auditor’s report [PDF] on CUEE for 2009 shows $556,000 in loans to businesses owned by St. Etienne’s relatives (brother and sister-in-law) and $93,000 in loans to relatives of the Executive Vice President, Barbra Major. CUEE also gave a loan to an organization that has St. Etienne on its board. Making matters worse is that St. Etienne had been appointed deputy mayor by the administration of New Orleans Mayor Mitch Landrieu with responsibility for overseeing the city’s chief financial officers.

The Executive VP, now in charge of CUEE, explained that the board had allowed the Executive VP to approve loans below $100,000 without board approval, but he might have exceeded that threshold. She announced that “The Board of Directors of Citizens United For Economic Equity had no knowledge, nor did we approve any of the transactions that are in question regarding Greg St. Etienne [and] (w)e are extremely disappointed in Mr. St. Etienne’s actions.”

Major said that the board knew about the $58,000 loan to a business she owned and the $35,000 loan to one owned by her son. The board’s awareness of those loans doesn’t make them immune from the reality that they too look like examples of conflict of interest. Oh, and Landrieu appointed Major as chair of the Regional Transit Authority and to a seat on the New Orleans Redevelopment Authority board of directors. St. Etienne doesn’t appear to be talking, except for handing in his resignation as deputy mayor, but Major said that CUEE did nothing illegal and no money was missing. Maybe she ought to read the audit again.

The auditor found inadequate financial controls, to say the least, including nonexistent prior authorizations of purchases of goods and services, nonexistent receipts or documentation for various disbursements, and three disbursements totaling $9,472 for “donations and season tickets to athletic events that do not appear to be appropriate expenditures of the organization.” This was from CUEE’s own auditor. Imagine what might be uncovered if the city, the state of Louisiana, or the federal government (much of the money was federal) undertake their own audits of the organization.—Rick Cohen