Louisville Charity Under Fire for Expenditures; Excuses Are Feeble at Best

God, preserve us from ourselves!

Why do smart people in good organizations make their own lives so difficult? Today's non-profit pinata that needs to be thrashed with a sturdy stick is Dismas Charities, headquartered in Louisville, Kentucky. Andrew Wolfson of The Courier-Journal today reported that Dismas has spent $92,000 for a luxury suite at Louisville's new downtown basketball arena and $45,000 for a suite at Papa John's Cardinal Stadium for football games, plus has leased a converted caboose next to Papa John's for the next 12 years. (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2010308290017) Dismas is an inmate halfway house that gets virtually all its revenue from federal and state government. It employs 600 people in 12 states.

Further scrutiny by The Courier-Journal reveals that CEO Ray Weis drew a salary of more than $600,000 in 2008. James Simon Sr., the chairman of Dismas' board for 11 years, defended its executive compensation (The top four officers each receive more than $200, 000 a year) and the decision to rent the athletic suites. His reasoning: “to show our presence in Louisville. This is our corporate headquarters. It's to put our name out to the public.” However, just $761,000 of its $36.6 million budget in 2008 came from donations from that "public" Dismas is reaching out to. Among the 85 contributors were three schools and a kindergarten class.

Weis' justification for leasing the suites and caboose was even weaker. “We haven't done anything like this before.”

State Auditor Crit Luallen said, “These examples of spending by an organization funded primarily with public dollars raises serious questions.” Barbara Grosso, a past president and board member of CASA — Court Appointed Special Advocates — whose volunteers work with abused and neglected children, called the expenditures “unconscionable” during economic times in which other non-profit organizations and state and local governments are suffering. Just last week, a project near and dear to my heart, a Kroc community center planned by the Salvation Army in Louisville for many years, was cancelled for financial reasons. Give me the $million- plus being paid to the top Dismas employees and we could have our community center.

Danielle Clore, director of the Non-Profit Leadership Institute at the University of Kentucky, had some great advice for Dismas and other non-profits I have blogged about here in the past. She recommends the "front-page test" to see if salaries and other expenses would be reasonable if the community read about them on page 1. Clore added that $600,000 is a lot of money for a non-profit CEO, and that "it would be surprising" if leasing luxury suites would be considered a reasonable expense by state and federal government, which have to pick up the tab for these suites. “Perception is everything,” she noted.

But Weis and Simon still don't get the idea. Simon is quoted as saying, “We don't take any donations from the community, hardly.” Aren't taxpayers part of the community? The state Corrections Department has 17 contracts with Dismas Charities for 2011 worth a combined $1.2 million, and the Bureau of Prisons said it paid Dismas $28.5 million last year. Weis justifies the suites for marketing purposes, "but acknowledged that it would be illegal to try to woo state or federal corrections officials by taking them there. He noted that all of Dismas' contracts are competitively bid and that Dismas is recognized nationally for cost savings. 'We are very, very good stewards of our money,' he said."

There's no good reason for a fine non-profit organization to face this kind of crisis. If Dismas had done as much legwork as The Courier-Journal, it would have seen it badly failed the front-page test:

Dismas Charities
Revenue: $36.6 million
Compensation: President and CEO Ray Weis: $600,546

Seven Counties Services Inc.
Revenue: $84.9 million
Compensation: President and CEO Howard Bracco: $192,610

Hosparus – The Community Hospices of Louisville, Southern Indiana and Central Kentucky
Revenue: $41.2 million
Compensation: CEO Phillip Marshall: $254,203

YMCA of Greater Louisville
Revenue: 41.2 million
Compensation: CEO Steve Tarver: $243,378

Metro United Way
Revenue: $29.5 million
Compensation: CEO Joe Tolan: $196,121

Volunteers of America of Kentucky
Revenue: $27.5 million
Compensation: CEO Jane W. Burks: $170,265

Sources: Business First, Internal Revenue Service reports as cited in The Courier-Journal

Is Blockbuster Ready for the Tarpits?

I used to rent movies at Blockbuster up the street from my house. But I haven't rented a movie for years. There are less-expensive alternatives that are more convenient. And, hey, when have I had time to sit through a movie during the past five years or so?

Now I read that Blockbuster plans to file for bankruptcy in September. As of Friday, its stock was selling for $.04 per share. The company lost $1.1 billion in the past two years and carries a debt of almost another billion. "....reality has finally caught up with the troubled video chain, which has largely appeared to be stuck in the last century in recent years, having failed to properly upgrade itself to compete with the likes of Netflix and Redbox in the current Web-dominated market." (http://business.gather.com/viewArticle.action?articleId=281474978478169)

What does this have to do with crisis planning? Everything. If Blockbuster expects to reorganize, close many retail operations, and regain the favor of investors and customers, it needs a plan. It needs key messages, audiences, and media to reach those key stakeholders. Does such a plan exist at Blockbuster? I'm not sure, but the company so far hasn't even addressed rumors of filing for Chapter 11 next month. This reminds me a lot of Circuit City. Remember that retailer? It failed to keep up with the likes of Best Buy and Wal-Mart, and now the chain is gone. It will be interesting to see if Blockbuster's board and executive management can turn this dinosaur around better than the now-extinct Circuit City did.

Famous Last Words: "Nah, That Couldn't Happen Here"

So, you work for a nonprofit? Do you believe everyone connected with the organization would do anything for the good of your company? Consider Exhibit A, Thomas Schroeder, who used to head the Rock Island County Council on Addictions.

Schroeder is on trial for "allegedly conspiring with former University of Louisville education dean Robert Felner to steal more than $2 million from U of L, the county council, and the University of Rhode Island. The board chair of Rock Island testified that the organization "almost had to close its doors in the wake of Schroeder's indictment.'" (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2010308260068 )

“'We basically, for the past year, have been fighting' for the council’s existence, said William Burruss, during his testimony at Schroeder’s trial on fraud and other federal charges in U.S. District Court Thursday. 'We’re still hundreds of thousands of dollars in debt.' The agency’s finances were on such shaky ground it had to lay off employees, and rely on a board member’s donation to make payroll. It also lost use of one of its buildings, and temporarily lost its license to conduct DUI evaluations, he said."

Think it can't happen to the nonprofit where you work or volunteer? It happens every week somewhere. "On Wednesday, Linda Bergendahl, the county council’s office manager, testified Schroeder would submit requests to her each month for Felner to get paid for his work with the county council. 'I thought they were in cahoots with each other and splitting it or something,' said Bergendahl, who said she did not tell board members about it because she thought she would be fired."

Such an environment of fear of retaliation, whether for-profit or not-for profit, is a smoldering crisis ready to erupt. Board members need to be vigilant, auditors need to be detail-oriented, and employees need to report activities that smell bad. The Institute for Crisis Management writes crisis communications plans for many organizations where, "that can't happen here." Oh, yes it can.

Whistle Blowers Protected -- Even in the Coal Industry

Back in my chemical industry days, we had a policy that anyone at anytime could shut the facility down for safety reasons. I guess it doesn't work that way in the coal mining business.

Cumberland River Coal Company is a privately held firm based in Virginia and without a web site. How can companies, private or public, big or small, exist without a web site? But that's not what I am writing about.

The federal Mine and Safety Health Administration -- See the word safety there? -- failed to stand up for a Cumberland River Coal employee who took videos in 2007 of faulty seals. You would think that a federal "safety" organization would take such evidence seriously. He showed the video to MSHA at a public hearing, resulting in an MSHA inspection the next day for "'an alleged failure to conduct a preshift examination of the seals prior to work.' A week after the first citation a second one was issued for the same faulty seals." (http://www.istockanalyst.com/article/viewiStockNews/articleid/4439178)

What did whistle-blower Charles Scott Howard get for his testimony? A disciplinary note in his personnel file and a lay-off from his job. His attorney, Tony Oppegard, said "he told MSHA upon the completion of Howard's testimony (in 2007) it was protected by section 105(c) of the Mine Act. Oppegard said the anti-discrimination provision should have protected Howard from being discriminated against."

It didn't, until the MSHA Review Commission recognized the discrimination and got back Howard's job plus legal costs. "'This was a case that MSHA, without question, should have accepted for prosecution,' said Oppegard. 'When a miner risks his career by testifying about unsafe conditions at a public hearing, then MSHA has a moral obligation to protect that miner from retaliation. In this instance, MSHA failed to do that. The agency let Scott down.'"

We've had two tragic accidents in coal mines in the past several months. MSHA has some issues that need resolved to better protect miners instead of coal companies. And Cumberland River Coal, like other coal companies I've blogged about previously, better take the safety message to heart. Like other crises, a coal mine disaster is cheaper to prevent than it is to fix.

And guess what? "A spokesperson from Cumberland River Coal Company was also unavailable for comment."

A mosque, a Church -- What's All the Ruckus About?

The best summer I ever had was after my freshman year at Point Park College. Through my church, I was able to spend that summer on the Nez Perce reservation in Idaho. I read history books before I went, studying how Chief Joseph in 1877 led the Nez Perce away from soldiers and forced "incarceration" on the reservation in Lapwai. Chief Joseph had to give up near the Canadian border because the people were suffering so much in the snow and cold. Instead of allowing them to live in Lapwai, Joseph and his followers were forced to Oklahoma, far from their mountains around what is now Wallowa Lake in eastern Oregon.

One of my tasks was to clean up a cemetery at First Presbyterian Church in Kamiah. When I was staying on the other side of the reservation, I attended another Presbyterian church. Most Christians on the reservation are Presbyterian because a bunch of missionaries got together and compromised on who would be Presbyterian, who would be Lutheran, who will be Catholic, etc. The Presbyterian McBeth sisters were sent to the Nez Perces.

Hold on, I'm going somewhere with all this. Christianity was forced on the Nez Perce. They had to physically construct the church buildings for a country that warred with them, were confined to a reservation, and were forced to dress and talk like their American captors. Please tell me how building churches on land attacked by "Christian" soldiers is any different than building a mosque two blocks away from Ground Zero?

This controversy has mushroomed into a crisis for local, state, and federal government, in addition to New York City's Muslim population. Christians didn't attack the Nez Perce or the Lakota or the Cheyenne or any other people who were here long before my European ancestors. It was soldiers who attacked. Muslims didn't destroy the World Trade Center. Radical Al Kaida people did that. If it had been Christians who hijacked those three planes, would we ban Presbyterians from New York City?

Miners Diet, But Are Kept in the Dark

"'You're nothing but skin and bones!' said the witch, locking Hansel into a cage. 'I shall fatten you up and eat you!'

"'You can do the housework," she told Gretel grimly, "then I'll make a meal of you too!'" (http://ivyjoy.com/fables/hansel.html)

Thirty-three miners are trapped in a Chilean copper mine. An escape tunnel being drilled to rescue them will only be 35 inches in diameter. Only the thin will be rescued in a timely way -- December is timely by some estimates. The average waistline in the U.S. is 39.7 inches for men, according to the Centers for Disease Control. That sounds low to me, given my observations at Taco Bell.

"The notion of being trapped underground for up to four months, as has been suggested by some Chilean officials, is what the families of the miners say worries them the most about the men staying optimistic. Interior Minister Rodrigo Hinzpeter said that it would be detrimental to tell the miners in detail how long it might take to dig them out - although he said they are aware it will take some time." (http://hosted.ap.org/dynamic/stories/L/LT_CHILE_MINE_COLLAPSE?SITE=CAMAR&SECTION=HOME&TEMPLATE=DEFAULT)

So here's the question: Do you tell your employees bad news or do you keep secret that rescue may take four months? I feel strongly that delivering bad news, no matter how bad, is better than keeping employees in the dark -- figuratively and literally in this case.

Have you ever been on a trip and not known when you will arrive? It might be an hour or it might be all day. I think an hour will feel like all day if you don't know an approximate time of arrival. The analogy holds true for trapped miners, employees anticipating layoffs, or in a pending merger. I would much rather know I'm going to be trapped for four months than believe I will be rescued tomorrow. If you've ever been stuck on a plane on the tarmac, you probably would agree.

Employees and other stakeholders should be kept informed.

Don't Put All Your Tainted Eggs In One Basket

After a week of vacation and nearly two weeks of illness, I'm glad to be able to blog again. Since I was offline, we've seen a workplace shooting, a school bus accident, and Rod Blagojevich, to name just a few crises. At last, I'm back in the land of the living and ready to visit a state of crisis.

First up is the gigantic egg recall. Wright County Egg of Iowa increased its recall yesterday to 380 million eggs. Almost 2,000 illnesses from the strain of salmonella linked to the eggs were reported between May and July, about 1,300 more than usual, said Dr. Christopher Braden, an epidemiologist with the federal Centers for Disease Control. (http://www.kcrg.com/news/local/Illnesses-Linked-To-Iowa-Egg-Farm-Likely-To-Grow-101157099.html)

Sherri McGarry of the FDA's Center for Food Safety and Applied Nutrition, claims the outbreak could have been prevented if new rules to ensure egg safety had been in place a few months earlier.

"The rules, which require producers to do more testing for salmonella and take other precautions, went into effect in July. They had languished for more than a decade after President Bill Clinton first proposed that egg standards be toughened. The FDA said in July that the new safeguards could reduce the number of salmonella cases by nearly 60 percent. 'There are preventive measures that would have been in place that could have prevented this,' (McGarry) said.

That observation leaves me scratching my head. If a company could make changes that would reduce the incidence of salmonella by 60%, why does it have to wait 10 years for a law to implement safety improvements? Here's a fine example of a smoldering crisis: Do only what is required by law, nothing more.

I can't find a website for Wright County Egg, but the company has released information through the Egg Safety Center. (http://www.eggsafety.org/mediacenter/press-releases/83-voluntary-egg-recall-expanded-voluntary-egg-recall-expanded-less-than-one-percent-of-eggs-affected) The latest release claims the recall affects less than 1% of the nation's egg consumption. Although thoroughly cooking eggs kills salmonella, the CDC encourages those with possible tainted eggs in the refrigerator to return them to the store for a refund.

While following the egg recall, I learned an interesting fact. Mankind has always wondered which came first: the salmonella or the egg. (That's a paraphrase.) The answer is that the salmonella came first. "Salmonella enteritidis silently infects the ovaries of healthy appearing hens and contaminates the eggs before the shells are formed." (http://www.cdc.gov/ncidod/dbmd/diseaseinfo/salment_g.htm#How Eggs Become Contaminated)

I think I'll stick to healthier foods for breakfast, like bacon and sausage.