logo
    • Magazine
    • Membership
    • Donate
  • Racial Justice
  • Economic Justice
    • Collections
  • Climate Justice
  • Health Justice
  • Leadership
  • CONTENT TYPES
  • Subscribe
  • Webinars
    • Upcoming Webinars
    • Complimentary Webinars
    • Premium On-Demand Webinars
  • Membership
  • Submissions

Fraud Cleanup Gets Going in Arkansas

Marian Conway
September 20, 2018
Share
Tweet
Share
Email
Print
“Make a Mess – Clean It Up,” ATIBens

September 18, 2018; Talk Business & Politics, KCUR, and the Northwest Arkansas Democrat-Gazette

“If you see something, say something.” Because, if what you are seeing is fraud and felony in a nonprofit, your silence will get you in trouble, too. You’ll be in even bigger trouble if you profit from your silence. And then there’s the mess to clean up afterwards.

The ongoing case of fiscal malfeasance at a mental and behavioral healthcare nonprofit has been a long, twisting road. The investigation of the organization, which served Missouri, Kansas, Arkansas, Oklahoma, and Illinois, has revealed executives who allegedly took money meant for Medicaid services, bribed politicians, and raised funds for political campaigns. The head count so far has been a former lobbyist and an Arkansas state legislator who pled guilty. One state legislator was found guilty by a jury, and another has been indicted. Now, Preferred Family’s former chief clinical officer has pled guilty to knowing what was going on.

Keith Noble, a psychologist, pled guilty to concealing knowledge of a felony in federal court. He had been with Preferred Family for 23 years, and according to the court papers, knew about the fraud for twelve of those years. The plea bargain does not name the three top former company executives; they are listed only by number and by title in testimony—CFO, COO, and CEO. Noble and the three executives were on what was named the Resource Team. They have not been charged at this time.

The court agreed that Noble was not a decision-maker in the schemes, but he made $4.3 million, which he must pay back in restitution according to the plea deal.

[Noble’s] 28-page plea admits that he knew between 2005 through June 2017 that the company’s top three former executives and Arkansas lobbyist Rusty Cranford “embezzled, stole, obtained by fraud” and misapplied and converted to their use money and property from the nonprofit.

Sign up for our free newsletters

Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

The list of fiscal mismanagement and outright fraud is long. Some of the schemes covered in the inquiry include:

  • Causing the nonprofit to pay unneeded, excessive management fees to another company the conspirators owned that generated more than $17.6 million in income for the Resource Team.
  • Embezzling $566,250 from the company to pay David Hayes, the company’s internal auditor, for illegal financial transactions. Hayes pled guilty to a $3 million fraud scheme in June 2017 and died of an apparent suicide in November.
  • Paying excessive amounts for leased vehicles to a company owned by top Alternative Opportunities executives. The arrangement generated an overpayment to them of $18,700 per month.
  • Causing the charity to lend money at zero interest to for-profit companies owned by the executives. That arrangement benefited Alternative Opportunities executives by about $4.75 million, Noble’s plea agreement said.

There were also rents the nonprofit paid for luxury homes (owned by a for-profit company the executives owned), pet travel, charter flights, and premium sports tickets on the list. A great deal of money can be misdirected in a dozen years.

Now, as the cleanup goes into high gear, the rebuilding begins, as others must step in to serve Preferred Family’s clients. Quapaw House, Inc. (QHI), which received their 501c3 in 1981 to treat drug abuse and addiction, announced they are completing an agreement to obtain the Arkansas assets of Preferred Family—more than 50 clinics in both cities and rural locations. QHI has grown from $2 million in 2002 to a $5 million organization in 2016, but Preferred Family had more than $28 million in Arkansas state contracts for fiscal 2018.

QHI expects to scale up more than five times their present size and they are hoping to begin operating in less than a month. Chief Executive Casey Bright says they intend to use many of Preferred Family’s employees:

We desire to retain as many PFH staff members as possible and will immediately begin to extend offers. QHI will continue operations in the same manner as PFH is now doing and as it has been doing in the past until an integration plan is developed. We are working to reach a final agreement that will allow QHI to purchase PFH assets. By doing so, we hope to continue providing quality services to the current PFH clientele, and for the dedicated PFH staff to join the QHI team.

The hope is that they will not continue all operations in the same manner as Preferred Family, at least not at the executive level.—Marian Conway

Share
Tweet
Share
Email
Print
ABOUT THE AUTHOR
Marian Conway

Marian Conway, the executive director of the NY Community Bank Foundation, has a Masters in Interdisciplinary Studies, Writing and a Ph.D. in Public Policy, Nonprofit Management. She has discovered that her job and education have made her a popular person with nonprofits and a prime candidate for their boards. Marian keeps things in perspective, not allowing all that to go to her head, but it is difficult to say no to a challenge, especially participating in change, in remaking a board. She is currently on eleven boards of various sizes and has learned to say no.

More about: Management and LeadershipNonprofit NewsOrganizational MismanagementScandals

Become a member

Support independent journalism and knowledge creation for civil society. Become a member of Nonprofit Quarterly.

Members receive unlimited access to our archived and upcoming digital content. NPQ is the leading journal in the nonprofit sector written by social change experts. Gain access to our exclusive library of online courses led by thought leaders and educators providing contextualized information to help nonprofit practitioners make sense of changing conditions and improve infra-structure in their organizations.

Join Today
logo logo logo logo logo
See comments

NPQ_Winter_2022Subscribe Today
You might also like
Hierarchy and Justice
Cyndi Suarez
Salvadoran Foreign Agent Law Threatens Human Rights Movements
Devon Kearney
Charitable Tax Reform: Why Half Measures Won’t Curb Plutocracy
Alan Davis
Healing-Centered Leadership: A Path to Transformation
Shawn A. Ginwright
Into the Fire: Lessons from Movement Conflicts
Ingrid Benedict, Weyam Ghadbian and Jovida Ross
How Nonprofits Can Truly Advance Change
Hildy Gottlieb

Popular Webinars

Remaking the Economy

Black Food Sovereignty, Community Stories

Register Now

Combating Disinformation and Misinformation in 21st-Century Social Movements

Register Now

Remaking the Economy

Closing the Racial Wealth Gap

Register Now
You might also like
Hierarchy and Justice
Cyndi Suarez
Salvadoran Foreign Agent Law Threatens Human Rights...
Devon Kearney
Charitable Tax Reform: Why Half Measures Won’t Curb...
Alan Davis

Like what you see?

Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.

See our newsletters

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

Independent & in your mailbox.

Subscribe today and get a full year of NPQ for just $59.

subscribe
  • About
  • Contact
  • Advertise
  • Copyright
  • Careers

We are using cookies to give you the best experience on our website.

 

Non Profit News | Nonprofit Quarterly
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.