[Marxism] SEIU charity scam

Louis Proyect lnp3 at panix.com
Sat Dec 13 07:46:54 MST 2008


Union-founded nonprofit spent zero on its charitable purpose in two years
The charity was founded by a scandal-ridden Los Angeles chapter of 
the Service Employees International Union. Its stated aim was to 
provide housing to low-income workers.
By Paul Pringle

December 13, 2008

A nonprofit organization founded by California's largest union local 
reported spending nothing on its charitable purpose -- to develop 
housing for low-income workers -- during at least two of the four 
years it has been operating, federal records show.

The charity, launched by a scandal-ridden Los Angeles chapter of the 
Service Employees International Union, had total expenses of about 
$165,000 for 2005 and 2006, and all of the money went to consulting 
fees, insurance costs and other overhead, according to its Internal 
Revenue Service filings.

Charity watchdogs say that nonprofits should never have zero program 
expenses in two successive years and that well-performing charities 
direct at least 70% of their annual spending to their charitable purpose.

"Of the 5,000-plus charities we've looked at, I don't think we've 
ever seen one that didn't spend anything on its charitable programs," 
said Sandra Miniutti, vice president of Charity Navigator, an online 
rating service.

Last year, the nonprofit reported spending $513,000 in connection 
with a Compton housing development, and $59,200 in consulting fees 
for its charitable programs, which together accounted for about 88% 
of its total outlays.

The primary mission of the charity -- the Long Term Care Housing 
Corp. -- is to provide affordable homes for the local's members, most 
of whom earn about $9 an hour caring for the elderly and infirm. But 
SEIU officials declined to discuss the charity, saying it is a 
separate legal entity from the union, even though its board is 
dominated by officials from the local. The charity is located at the 
local's headquarters.

Tyrone Freeman, then president of the 160,000-member United Long-Term 
Care Workers, helped start the charity in 2004. Freeman and the local 
are the subjects of a federal criminal probe and a congressional 
inquiry because of his spending practices. After an internal 
investigation, the SEIU accused Freeman and another former union 
officer of receiving improper payments from the nonprofit.

Freeman, who stepped aside in August, less than two weeks after The 
Times first reported on his financial dealings, has been banned for 
life from SEIU membership or employment. The SEIU has ordered him to 
pay the union more than $1 million in restitution. Attorneys for 
Freeman and others involved in the charity declined to comment.

The nonprofit is also caught up in the federal and internal 
investigations. The Times reported that the charity had listed the 
home of a union official as its administrative address, had failed to 
obtain a federal tax exemption and had lost the right to do business 
in California.

The charity had also claimed to have a relationship with the 
prominent California Community Foundation, which said it had never 
heard of the organization.

Exemption granted

Despite the legal troubles, the IRS has since granted the group an 
exemption retroactive to 2004, and its right to do business has been 
restored, according to the California secretary of state's office. 
IRS officials declined to discuss the matter.

The charity did not file an IRS return -- a Form 990 -- in 2004, 
apparently because it had revenues of less than the reporting 
threshold of $25,000. In 2005, it sold $495,000 in unspecified 
"inventory" and made nearly $87,000 in gross returns from the sale, 
its sole reported source of revenue that year, according to the IRS 
documents. Los Angeles County assessor records show that the 
nonprofit sold two Compton homes in 2005 for amounts that totaled $495,000.

It could not be determined why the nonprofit did not report where it 
obtained the $495,000 in inventory, or why it did not list any part 
of the transaction as a charitable program expense.

The charity reported paying consulting fees of $31,000 in 2005 and 
nearly $68,000 the following year but did not specify who received 
the money. In 2006, the union donated $50,120 to the nonprofit, which 
appeared to be the charity's only income. The nonprofit ended the 
year with a $56,000 deficit and a negative net worth.

In 2007, the charity reported revenue of $633,000, although it did 
not specify the source. It listed its biggest expenses as the 
$513,000 for a contractor for the Alameda Court project in Compton, 
described on the city's website as a 28-town-house development; and 
$60,385 for consultant services from Kenya Nelson, who is identified 
on the nonprofit's website as the organization's executive director. 
The charity again had a negative net worth, and a $17,850 deficit.

Attempts to reach Nelson were unsuccessful.

John Ronches, an SEIU trustee who has been running the local since 
Freeman stepped down, declined to comment.

Transparency urged

Laurie Styron, vice president of the American Institute of 
Philanthropy, said the nonprofit should be more forthcoming. 
"Charities have an ethical obligation to be transparent," she said.

The SEIU has accused Freeman of taking about $2,400 a month in 
improperpayments from the housing nonprofit from January through June 
of this year, in addition to a lump sum of $14,500. The payments were 
part of a self-dealing "consulting agreement," the SEIU said in a 
report. The union said Freeman "controlled and directed" the charity.

Freeman's former chief of staff, Rickman Jackson, whose Bell Gardens 
home was listed as the charity's address, has been ousted as 
president of the SEIU's largest Michigan local because, the union 
alleges, he received improper lease payments of $33,500 from the 
nonprofit. Jackson, who was president of the nonprofit's board, could 
not be reached.

Former California Atty. Gen. John Van de Kamp, who has been advising 
the SEIU on its internal investigation, said the union could 
determine that only one nonprofit meeting was held at the Bell 
Gardens home. Jackson is repaying the $33,500 in installments plus 
interest, an SEIU spokeswoman said.

In the meantime, Compton is investigating whether Freeman and the 
nonprofit defrauded the city by accepting a gift of municipal land 
when it had no tax exemption.

An attorney for the charity, former Assemblyman Dario Frommer, said 
the charity is cooperating in the investigation. He declined to 
comment further.

Attorneys for the nonprofit have said the initial failure to obtain 
the tax exemption was the result of a "routine" IRS request for more 

Pringle is a Times staff writer

paul.pringle at latimes.com

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