The causes and effects of organizational corruption have been widely examined in literature, including malfeasance that is specific to nonprofits organizations. This post draws a distinction between outright illegal and soft corruption, the latter referring to the continued and deliberate misuse of donated funds to benefit officers of the nonprofit, with little – in some instances less than 5% – going to the nonprofit’s supposed cause.
Ultimately it has been shown that either the existence of an independent voting board or the conduct of an independent audit are the most important means of preventing soft corruption; far more important than state or federally mandated reporting requirements.
Thankfully, the vast majority of charities and nonprofits do a lot of good and they are largely unknown, never making it to the top of Google search. There are a lot of charities out there. According to the National Center for Charitable Statistics, there are upwards of 1.5 million nonprofits in the U.S. alone. Most of these are tiny, a fundraising organization for one Marine who has lost his legs, for instance, or an organization established by a wealthy family to provide scholarships to local youth. While news of scams will occasionally rise from these obscure ranks, most quietly go about doing good in their communities.
Here are five of the ugliest scandals involving charities.
1) The Clinton Foundation
Due to Hillary Clinton’s White House bid, her bitter back-and-forth with Donald Trump’s campaign, and her penchant for stirring up distrust toward herself, it was inevitable that Clinton’s nonprofit would be dragged under the microscope.
On the books, according to its financials on nonprofit watchdog site Charity Navigator, the Clinton Foundation is clean as a whistle. They brought in a ton of money in 2014, over $319 million, via donations, fundraisers, and grants. Nearly 87% of that went to the programs and services the charity offers. But it’s not the financials that have attracted the suspicion and scorn of the American public.
Earlier this year, it was revealed by the Daily Beast that, during Clinton’s tenure as Secretary of State, a suspicious number of donors to a State Department fund to restore parts of the White House also donated to the Clinton Foundation. But no wrongdoing could be connected to the findings.
Then in late summer 2016, as Clinton’s State Department emails began to come to light, it was revealed that an inordinate number of foundation donors were granted special access to Clinton, President Obama, and other important leaders via the State Department. Grumblings began to surface of Clinton using the foundation as a front for a pay-to-play scheme, where she sold access to movers and shakers in return for lucrative donations.
As the presidential race reached its climax, more revelations came to life, uncovering numerous instances where the Clinton’s received hefty sums of money from foreign leaders. In 2010, the foundation accepted $500,000 from the Algerian government, but they never disclosed the donation to State Department as they should have. Clinton had also received a $12-million donation from the King of Morocco, which was also not reported. Most recently, it’s been revealed that Clinton received a $1-million gift — a birthday gift to Bill Clinton — from the government of Qatar.
Helped along by other email revelations, all of this has cascaded into a likely indictment against Clinton and the foundation, and right on the doorstep of the 2016 election. It might be enough to end her White House bid.
2) 3. Wounded Warrior Project
In terms of charities for veterans, few have become as well known as the Wounded Warrior Project, which focused on helping wounded and disabled vets recover, mentally, physically, and financially. It was a worthy cause, to be sure. Sadly, this charity’s marketing got ahead of their actual charitable activities.
In February, the charity’s leaders were shown to be blowing shocking amounts of money on hobbies and parties. Employees flew in business class, stayed in $500-a-night hotels, and threw expensive parties. Their executive director was reported to rappel down buildings and ride a Segway to events. Events that cost as much as $3 million apiece. One employee called it, “extremely extravagant. Dinners and alcohol. Just total excess.”
CBS News reported: “Compared to other veterans’ organizations, Wounded Warrior is giving less to the people it serves. Disabled American Veterans Charitable Service Trust spends 96 percent of its budget on vets. Fisher House devotes 91 percent. But, the Wounded Warrior Project spends only 60 percent on vets.”
The silver lining here is that, since the expose and a Senate investigation , the Wounded Warrior Project has ousted its former leadership and is now focusing its efforts on financial responsibility and better serving veterans.
3) Moore Charitable Foundation
Not all charity scandals are the result of internal greed or irresponsibility. Like any other business or individual, they can, in an effort to get more for their buck, be duped into scams. That’s what happened to the Moore Charitable Foundation, which funds social welfare and environmental causes.
Wall Street hustler Andrew W.W. Caspersen was found to have scammed the Moore Charitable Foundation out of $25 million as part of a fraudulent investment scheme. Perhaps most shocking was how little due diligence the charity put into the investment before giving Caspersen the money. Luckily, when Caspersen came asking for another $20 million, the charity wised up and decided to do their homework before handing anymore over.
Unfortunately, fraud is not uncommon for charities, but the size of this scam was large enough to put it in the headlines.
4) Sugar Research Foundation
You ever wonder how one commercial can promote the health benefits of a product, only to be followed by another that says the opposite? This year, an old scandal finally saw the light of day that illustrates the forces that cause consumers to receive mixed messages about the food they eat.
A research paper was published in the scientific journal JAMA Internal Medicine that revealed a 1967 study on sugar as a fraud. According to the paper’s author, the Sugar Research Foundation paid a trio of Harvard scientists $50,000 to debunk claims that sugar was causing a host of health problems in the American public, including heart disease.
Sadly, the scientists went ahead with the deception, writing up a paper and having it published in the prestigious New England Journal of Medicine. As a result, consumers and health professionals remained uninformed and confused about the true dangers of sugar for decades.
The biggest twist of all of this is that one of the scientists, Dr. Mark Hegsted, went on to become the head of nutrition at the Department of Agriculture and one of the creators of the federal government’s first dietary guidelines in 1977.
Unfortunately, this illustrates how so-called charities are often used by businesses and powerful individuals to achieve decidedly un-charitable ends.
5) Leonardo DiCaprio Foundation
Leonardo DiCaprio. If you’ve followed the star’s career, you know that he has had an interest in climate change issues since Al Gore was a presidential candidate. So it makes sense that he’s set up a charity to bring attention and funding to environmental issues. According to its site, his foundation is “dedicated to the long-term health and well-being of all Earth’s inhabitants.”
In July, the U.S. Justice Department filed a complaint alleging that DiCaprio’s charity was part of the mounting three-billion Malaysian embezzlement scandal that was still fresh in the headlines. Because the foundation was set up as a donor-advised fund, it didn’t have to disclose its financials or much of anything about their internal workings to anyone.
The foundation claimed to have only six staff members, none paid, none of whom could be located or communicated with for questioning, but they regularly raised eye-popping figures at their lavish, star-studded events.
One gala was reported to have raked in $25 million, another $6 million in ticket revenue alone. At the time of the complaint, DiCaprio claimed to have raised $45 million total. But where exactly that money is coming from and where it’s going, no one knows. And DiCaprio’s not saying.
What is known is that DiCaprio is a friend of Jho Low, a central figure in the Malaysian money scheme, and that the two have a habit of taking lavish trips together. The Justice Department complaint alleges that the money to produce DiCaprio’s Wolf of Wall Street was actually siphoned from the Malaysian scheme. Low is even thanked in the film’s closing credits.