About Checking References When You Do That Transition

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June 7, 2015; Sarasota Herald-Tribune

According to the Sarasota Herald-Tribune, the most recently filed 990 for the Center for Building Hope in Sarasota, Florida, shows a deficit of more than $785,000, the largest in its history. Last year, the nonprofit was six months late in making required payments into employees’ accounts. It blew off loan payments to a local community foundation that had lent it money to buy another failing nonprofit that was also in deficit. Meanwhile, the salary of the CEO, Carl Ritter, has almost tripled to more than $335,000 since 2010 when he joined the organization.

Ritter was chosen for his business credentials. If this article is accurate, a look at his track record reveals a pattern pretty quickly.

Where to start?

Apparently, once hired by the Center, Ritter sold the board on a social enterprise, so the Gulf Coast Community Foundation loaned the Center $675,000 in 2011 to buy and expand a small nonprofit based out of Oregon that sells donated wedding dresses, according to Mark Pritchett, the Foundation’s senior vice president for community investment. The Making Memories Breast Cancer Foundation of America had distinguished itself by making the Oregon Department of Justice’s “20 Worst Charities” list in 2011 due to the fact that it devoted only 12 percent of its donations to programs. At that point, the Center had an operational deficit of $650,000.

Though Ritter describes the wedding dress endeavor as a success that is producing a profit, it may be that some of the costs of the social enterprise are hidden. This report states, “The Center’s new venture caused overhead costs to go through the roof. The board spent more than $1.5 million on salaries in 2012—a 55 percent increase from the previous year.”

The Community Foundation began to get a real sense of Ritter’s management style at that point. First, Ritter stopped sending financial updates, Pritchett said. Then, in December 2014 and in March 2015, the Center neglected to send the agreed-upon payments of $24,000 apiece.

“When they weren’t sharing information with us like they had been and then they’re late with payments, that changes the business relationship because they’re not filling their part of the bargain,” Pritchett said.

The Gulf Coast Community Foundation spoke with the Center about the loan at least seven times in the last five months and it intends to follow through. “We’re not going to turn our heads,” Pritchett said. “We’re going to jump into it and make sure no laws have been broken and people are on top of this thing. If organizational changes need to occur they’re going to occur.”

Ritter seems unfazed by the fact that he has driven the community foundation to speak out publically about the Center’s management. “A business like ours,” he says, “there is always going to be a quarter of a million dollars of payables.”

Dave Shaver, a longtime board member, says that the organization first got into trouble when, pre-Ritter, it began a capital campaign and building project right as the recession hit. In this, the center was in good company—many nonprofits did the same things and got caught in the same kind of chokehold, though it does seem that the board was not as clear on what was occurring as it should have been. “We were too stupid to realize that we had an operational deficit because we had a lot more money coming in the door than we were spending, but it was designated for the building,” Shaver said.

When the former CEO moved on, the organization had an outstanding debt of $3 million left over from the $5.5 million in recession fueled debt associated with its building. Accordingly, the board decided to look for a business-oriented person to lead them. “We needed someone with more of an entrepreneurial mindset that might help us figure out some creative ways to dig ourselves out of this,” Shaver said. The headhunter the organization used was already representing Carl Ritter, who was out looking for a job, and recommended him despite the conflict of interest.

Neither the headhunter nor the Center’s board caught on to the fact that his references were colleagues from a very failed business venture. After filing for bankruptcy for the second time, Ritter went to work at Carbiz, a chain of “buy-here, pay-here” used car lots that changed interest rates weekly and moved quickly to repossess vehicles when buyers fell behind. Over five years, though Carbiz lost almost $42 million, Ritter’s salary more than tripled; in 2009, Ritter was paid $802,000—including a $500,000 bonus. And so the pattern was set.

CEO Salaries

So who better to run a charity for cancer survivors (into the ground)?

Of course, Ritter has the support of both his son and daughter, reportedly also on payroll at the center.—Ruth McCambridge


  • David A. Milberg

    Your repurposing and commentary on the Herald-Tribune would have benefitted journalistically from including a comment from the Center for Building Hope to get their side of the story. That is what the Herald-Tribune did in their online edition, when they posted the response from Jim Braun, Board Chair of the Center for Building Hope,. So, I have done this for you by cutting and pasting it below.

    As an adjunct professor of media law at a respected Chicago Law School, as well as a former CBS Radio News executive, I urge you take a balanced approach to your reporting on this story.

    Here is Mr. Braun’s above-mentioned response:

    The Center for Building Hope has a 20-year history of providing free support to cancer patients and their families in this area. We began in a small office condo in a strip mall on Clark Road. Later we knocked down a wall and expanded to a small office space next door. It wasn’t a great environment to provide psycho/social support, but since all our programs and services are provided free of charge, it was the best we could do at the time.

    Nearly 10 years ago, our board began to envision a place that would allow us to support the growing numbers of patients and caregivers impacted by cancer, and to provide a more serene and healthful environment that could help enhance their quality of life and chances for recovery. That vision ultimately resulted in our current facility in Lakewood Ranch.

    Your recent article questions the wisdom of this move. As you point out, our timing – at the height of the recession – could not have been worse. In retrospect, how true that is! Yet, on paper, at the time we committed to construction, we had enough contributions, pledges and real estate value in our former location to cover all the anticipated costs.

    Your article takes many liberties with the facts and presents many of our comments out of context to imply questionable behavior. Nevertheless, if we knew then what we know now, we probably would have postponed our plans. Because it is true that by the time we opened the doors to our new location in late 2010, we found ourselves in a recession-induced financial hole.

    In the same month that we moved, we hired a businessman with no non-profit experience to help us formulate a strategy to save our organization from defaulting on our debt and closing our doors. Although hiring an entrepreneur with a strong financial background apparently seems strange to some people, it seemed to us like a necessity. We knew that we couldn’t shrink our way to success, so we hired someone with a strong passion for our mission who also had a long track record of growing revenue.

    Much of your article is devoted to attacking our CEO, Carl Ritter, for his previous career in an industry which your reporter characterized as “predatory” in an interview with us. However, despite her bias and/or inability to absorb the intricacies of his performance in a complex credit-dependent industry, his former colleagues and investors give him the highest marks for integrity and his ability to turn around struggling business units.

    His performance since joining the Center is much easier to understand. In addition to strengthening traditional fundraising efforts, Carl began building a revenue-producing unit to support our mission. He acquired what your reporter described as “one of the worst nonprofits in Oregon.” That’s true, but contrary to the implication of nefarious activity, it was a brilliant and completely above-board move that has generated more than $1.2 million in net contributions to our mission.

    Under Carl’s leadership, we have dramatically expanded and diversified the revenue from venture philanthropy initiatives. And, unlike the Oregon charity we acquired, every dollar after expenses goes to cancer support programs. Yet, the expenses we incur in producing these net contributions to our mission are criticized by an out-of-state consultant unfamiliar with our operations.
    That’s because your reporter emphasizes the increase in administrative expenses without pointing out the significantly greater increases in income from these activities. She leads her experts to conclude that we need to cut back on people and expenses. But every single revenue-producing position we add carries an obligation to pay for itself plus contribute to the mission within 60 days. Why would we cut these people?

    That brings us to the most negative criticism of expense; namely, Carl’s compensation. The unwritten rule in the non-profit world is that you pay low salaries to prevent alienating donors. Performance is less important than perception. Author Dan Pallotta has written extensively on how such restraints undermine the potential for nonprofits.

    Regarding Carl’s compensation, we would make the following points: He is worth more than we can afford to pay him for his unique job and talents. As pointed out in the article, his salary was established by the board with advice from a pre-eminent compensation consultant who specializes in nonprofits. Finally, and most important, Carl has forgiven and/or deferred a significant portion of his “official” compensation.

    Finally, we have been accused of not having the cash to pay all our bills on time. We have to plead guilty to that. Like most nonprofits, we struggle with cash flow, particularly at certain times of the year. We serve more than four times as many cancer patients and caregivers than we did at the old Clark Road facility, and operating costs keep rising.
    We’re making progress each year in digging out of a deep financial hole, but we still need another 18-24 months to get current with all our payables. We are grateful for the individual donors and foundations that have stuck with us through challenging times. We hope that their support will not be undermined by innuendos and distortions presented in Sunday’s newspaper.

    Jim Braun, board chair

    Center for Building Hope
    5481 Communications Parkway
    Sarasota, Florida 34240
    Office: 941.921.5539
    Fax: 941.921.5061