Saturday, December 8, 2012

Foundation To Help Needy Students Learns a Lesson of its Own the Hard Way

I've served on a number of nonprofit boards through the years. I thought I was a good director, but I didn't know then what I know now. I'm glad to say, however, I was never as irresponsible and complacent as board members of the Woodcock Foundation.

Louisville’s Woodcock Foundation, founded in 1872,  has given scholarship money to needy college students for the past 50 years. Assets once totaled $1.5 million, and the Episcopal church charity gave away nearly $500,000 in the past five years alone to 60 to 70 students a year.

Unfortunately, it also allegedly gave money away to its 10-year chairman and his wife.

The treasury now stands at $8, and students who were awarded scholarships last year never got their money. A federal indictment unsealed Thursday revealed the foundation’s chairman, Charles Muir, and his wife, Diana, allegedly embezzled $1.4 million over five years. The indictment alleged that Charles Muir transferred the foundation’s money into his wife’s business account, disguising the payments as loans, and that they withdrew $262,000 from ATMs at Indiana casinos and took the rest out for her business bank account. The government said at least some of the money was spent on gambling.

"(Foundation lawyer Alex) Campbell said that, as chairman, Muir alone handled the foundation’s finances. The other board members met twice a year solely to award scholarships, and the Episcopal diocese had no role, Campbell said." (http://www.courier-journal.com/article/20121206/NEWS10/312060078/Woodcock-Foundation-ex-chairman-wife-charged-wiping-out-fund?nclick_check=1)

I've followed several nonprofits that got themselves in trouble because of a lack of checks and balances. One person should never have the power Muir had over the books. Regardless, those associated with the foundation expressed surprise that they now oversee a measly $8.

"Pat Hobbs, a foundation trustee who was named interim chairman after Muir was removed early this year, said other board members were shocked when they discovered last winter that the U.S. Secret Service was investigating the alleged misappropriations.... In in interview, Hobbs said, 'We had no clue' about the losses. 'We were totally shocked.'” She admitted she hardly even knew Charles Muir.

The foundation’s tax report says that Muir wrote 454 checks to his wife’s company and made 255 debit card transactions for a combined loss to the foundation of $1.13 million. The report also says Muir lost an undermined amount through risky investments. The foundation's bank first noticed the irregularities and notified federal law enforcement authorities.

"Hoping to recover some of its money, the foundation has sued the Muirs and the foundation’s former accountant, William Ackerman, for malpractice."

Here's the thing that made me laugh until I thought of all those students left high and dry by alleged mismanagement and theft: "Ackerman’s lawyer, Mark Fenzel, said that, as an accountant, he had no duty to seek out fraud or uncover embezzlement."

Oh, Mark! Ackerman ignored all those checks and withdrawals, watching as the cash assets dipped from $1.5 million to $8, and it wasn't his job to mention that little fact? It's not clear if he was the accountant and auditor rolled into one. The bank noticed irregularities and reported them. Why didn't the accountant/auditor?

Woodcock Foundation has no website. It was endowed by the sale of land in downtown Louisville long ago. The board and the accountant should have been more vigilant. No matter how much you trust someone you believe is acting out of the goodness of his or her heart, be sure there are others to oversee detailed finances.

1 comment:

Anonymous said...

The Board was highly irresponsible. ThEey have a fiduciary duty to know what is happening.