Not a Penny for Overhead? If It Sounds Too Good to Be True, It Probably Is

December 6, 2017; Denver Post

A little common sense at this refugee aid nonprofit could have gone a long way toward saving it from an ignominious fate, and saving their employees and constituents from fear and heartache.

Andrew Baron, the CEO of the Boulder-based charity Humanwire, was grief-stricken by the suffering he saw among Syrian refugees when he and his wife visited her home country of Lebanon, so he started a nonprofit that would put money in the hands of those who needed it. Now, while some studies have shown this to be an effective model for charity, Baron’s distaste for “the charity which acts as the intermediary” proved fatal to his mission, when he failed to create the practices and structure that would have allowed his organization to grow, or even just stay within the bounds of the law.

Baron told the Daily Camera, “‘One hundred percent goes to the refugees,’ adding that Humanwire accepts separate donations for its operational costs, but it is not required.”

The organization’s model seems like it was unsustainable from the start. The idea was that once donors chose a particular person or family to support, they could track their money as it was allocated to relief expenses for the chosen refugees—without any diversion for overhead. As NPQ has explained repeatedly, low overhead costs are not a good way to evaluate a nonprofit’s effectiveness, and claims of “no overhead” are often largely smoke and mirrors, as they turned out to be in this case. But wait—there’s more! Baron also appears to have been trying to generate the revenue for “overhead” with a social enterprise.

Gordon Clark of Denver, who gave Humanwire $45,000, told the Denver Post that “Baron also wanted to sell software he developed for Humanwire to nonprofits and private companies…There was initially a schematic in mind for creating a model that was for-profit, and we spent a lot of time trying to disabuse him of this.” Clark told the Post he thought “Baron should hand Humanwire’s operations over to someone with nonprofit experience.”

Before we go on, let us remind our readers that, at least in early stages, creating a business eats more capital than it generates. However, from here, the organization’s practices migrated from unsustainable to criminal. Humanwire continued to rely on individual donations, and when money was needed for overhead, Baron simply used funds that had been donated for refugees. Even worse, he began using the funds for his personal expenses. An earlier Denver Post article noted, “He said in past interviews that he took some of the money from Humanwire…to help him deal with his own financial stresses and as a form of salary. But the salary was never authorized by the nonprofit’s board of directors and was done in a haphazard fashion.”

Donors began noticing that their contributions weren’t all making it to refugees, and the refugees began to endure late rent and utility payments and other defaults on promised funds. Baron is accused of stealing $130,000 from Humanwire’s accounts. Unfortunately, since the organization was founded only recently, no Forms 990 are available online.

The organization has also engaged in some shady fundraising practices, reports the Denver Post. Former employees Anna Segur and Kayra Martinez said “they repeatedly have asked Baron to remove from the Humanwire website photos and stories of refugees whose cases had been transferred to other nonprofits or who no longer needed assistance. Instead, Baron continued soliciting aid for those refugees.” Additionally, “About 50 refugees in Turkey convened a meeting this past summer and confronted Baron over the phone at 2 a.m., accusing him of using their images to solicit money that hadn’t been delivered,” which Baron blamed on “organizational disarray.”

With help from former employees Segur and Mona Ayoub, police are investigating Baron. Ayoub said that “Baron began sending her threatening emails, threatening to sue and telling her that he would accuse her of theft” once he learned she was cooperating with the police.

For now, Humanwire has ceased operations; its website reads, “Humanwire has been required to halt its operations to resolve certain operational issues. We appreciate your interest in Humanwire and please bear with us while we work to hopefully ensure that Humanwire is as strong and efficient as it can be.” This is one of those sad situations where no one wins: Ayoub, now out of a job, is living on a friend’s couch. Baron faces criminal charges. Worst of all, more than four million refugees are still in desperate need of help. The best outcome to hope for is that this cautionary tale does not discourage other efforts by donors to provide refugee support.—Erin Rubin