The Next Chapter in the Case of the Nonprofit Fundraiser’s Finder’s Fee

July 12, 2018; The Advocate

The board of a nonprofit HIV organization was rocked by scandal in May after the local press revealed that the CEO had been authorized to take a cut of any large donations that came in on his watch. Highly placed employees resigned in protest of the provision, but yesterday, Open Health Care Clinic’s board issued a statement of continued support for chief executive officer Timothy Young. In fact, it appears that the board had approved the compensation structure, so it’s unclear if it is ultimately passing judgment on itself.

At issue was a provision in Young’s compensation that would have given him a “finder’s fee” for any large donation that came in under his watch, a practice considered to be unethical in charitable fundraising. When Kimberly Hood, who had been Young’s second-in-command, resigned in April, she sent the board a letter describing the practice as a “kickback on a donation” and suggested that there were legal and ethical problems at play. The board responded by suspending the finder’s fee provision before Young received any money from the arrangement and hired attorney Greg Frost to investigate any potential legal problems. Other employees and a board member then resigned, complaining that the investigation was too narrow.

Frost completed the investigation, and yesterday the board released a statement asserting that there was no “wrongdoing or breaches of fiduciary duty” by either by the board or CEO. “The findings of Mr. Frost confirm that the actions of the Board and its Chief Executive Officer were in compliance with all applicable regulations and the accusations raised by the former employees in that regard were found to have no merit.”

Frost’s report was not made available, and therefore the reasons for the finding remain unclear. Further, Frost said he could not explain the reasons why his investigation said there was no wrongdoing unless the board agreed to let him do so.

There was no indication about whether or not the finder’s fee was reinstated, even though it has material meaning in the near term.

Baton Rouge philanthropist Angelina Wilson, who died in 2016, specified in her will that a portion of her estate should go to the HIV nonprofit. It’s unclear how much money the donation will amount to—likely in the millions of dollars range—because Wilson’s will created multiple charitable remainder trusts for the donations, and the nonprofits will not receive them until Wilson’s children die.

But the executor of her estate, Daniel Bevan, said in a recent interview that Wilson gave the money to the HIV nonprofit because of its mission, and not because of a special relationship with Young. He said she would not “look favorably” upon the idea that Young stood to receive a cut of her donation.

Watchdogs and standard-setters have been watching the case as it progresses. The Advocate reports that both CharityWatch and staffers at the Association of Fundraising Professionals (AFP) have confirmed that the concept of a finder’s fee is problematic. Meanwhile, a letter to the editor by the chairman of the New Orleans Regional AIDS Planning Council said their concerns about leadership at Open Health under Young prompted them to terminate a fiscal agency agreement with the group.

As we have reported recently, these kinds of scandals where public trust may be broken can cause long-term problems in revenue. We can almost guarantee that this story will have additional chapters.

“It is always courageous for leaders of an organization to stand up for the mission of the organization and their ethical principles,” reads a post from the Standards of Excellence Institute. “It appears that that is exactly what happened in Baton Rouge, where several executives left their jobs in protest over questionable fundraising practices that threaten the public’s trust in OHCC, and put its tax exempt status on the line.”—Ruth McCambridge