The Goodwill Omaha Case Is a Poster Child for Media’s Role in Nonprofit Investigations

December 4, 2016; Omaha World-Herald

Following what’s become a classic pattern for the nonprofit sector, after more than a month of cascading revelations about Goodwill Omaha in a local media outlet, the Nebraska Attorney General’s Office has launched a review of the nonprofit.

The office of AG Doug Peterson has declined to reveal what this investigation is trying to find, but the series written by Henry Cordes of the Omaha World-Herald raised a variety of issues that may be of concern to the AG’s office. Assistant Attorney General Abigail Stempson, chief of the public protection bureau and consumer protection division under Peterson, has said only that the case is under review.

Among the issues that may be under review are salary and bonus levels, conflicts of interest among both board members and administrative staff, and deceptive trade practices.

While former CEO Frank McGree resigned soon after the series began to appear, followed by other select administrators, the board remains relatively intact even though it would have had the final oversight responsibilities over both the salaries and the business model. The organization’s practices, which include relatively high compensation for executives (combined with the hiring of family members of staff and board) and the issuing of no-bid contracts to related parties, could result in action on the basis of the nondistribution constraint.

The Nebraska Supreme Court has ruled the nondistribution constraint is essentially what sets a nonprofit apart from a for-profit corporation. In return for tax-exempt status, nonprofits are required to devote their net earnings to the services the organization was set up to provide.

The attorney general has the authority to ask a court to remove the current directors or to require strict reporting and monitoring. It could also theoretically order the recovery of assets from directors and officers or even dissolve the organization altogether.

The board of directors and the interim CEO (Pauli Bishop, a reassigned Goodwill chief financial officer) have already committed to a thorough review of the nonprofit’s compensation practices and have contracted for external assessments of operations and ethics.

This is a big change in the willingness to be transparent. Cordes has said that he was stonewalled when he asked McGree for information as he originally pursued the case. That’s the sort of move that does little to convince reporters that there is no “there” there. Other local agencies appear to be trying to help with the reviews, but the very public reputational hit may be hard to overcome.—Ruth McCambridge