Hall of Shame
Updated October 2013
In this feature you'll find the personalities behind
the major charity scandals that
inspire our work and illustrate the importance of a tough charity
watchdog that is unafraid to challenge wrongdoing. The most important
lesson to be learned from the following colorful stories of charity
scoundrels is that regardless of how distinguished, well-connected
and honored a charity leader is, he is only human and may be tempted
to use the power and influence of his position to abuse the public's
trust and thusly become the next member of the CharityWatch Hall
The late Father Bruce Ritter founded
Covenant House (CH) in 1972 to create a safe shelter for
homeless teenagers. The organization had its humble beginnings in
Ritter's shabby New York apartment where he first began providing
housing for homeless youth. CH quickly grew into one of the most
well-regarded charities in the nation. Ritter was called an "unsung
hero" by President Reagan and was applauded by the first President
Bush and Mother Teresa, alike. But underneath all of this public
acclaim, rumors had circulated for years of sexual relations between
Ritter and residents of CH, according to a report commissioned by
Four men stepped forward between 1989
and 1990, according to Time magazine, accusing Ritter of
having sexual relationships with them while they were under his
care. Ritter allegedly diverted up to $25,000 in CH money to finance
one of these affairs, according to Time. Although Ritter
denied these allegations, he stepped down amidst the scandal. CH
then launched its own investigation into the priest. The resulting
report cited 15 cases of reported sexual contacts between Ritter
and people sheltered or working at CH. The report concluded that
evidence "that Father Ritter engaged in sexual activities with certain
residents and made sexual advances towards certain members of the
Faith Community is extensive."
The investigators also found what they
described as minor financial irregularities at CH. According to
the report, Ritter diverted CH funds to the Franciscan Charitable
Trust, an organization he founded, and loaned charity money
to two senior staff members who later resigned. The report also
noted that CH had been structured so that Ritter had complete legal
and operational control over its affairs, giving the board little
authority or oversight powers.
William Aramony served for 22 years as
president and CEO of United Way of America (UWA), the umbrella
group for thousands of local United Way organizations that fund
social and human service projects nationwide. In 1992, Aramony resigned
amidst allegations that he siphoned money from UWA through spin-off
companies he helped to create. Before the scandal broke, Aramony
was widely respected as one of the most influential nonprofit leaders
of his time. He even had a hand in creating many of the rules under
which charities operate today. In 1995, Aramony and two conspirators,
Thomas Merlo and Stephen Paulachak, were convicted of defrauding
UWA. Aramony was convicted on 25 felony counts and sentenced to
seven years in prison for fraudulently diverting $1.2 million of
the charity's money to benefit himself and his friends.
This scandal is especially memorable
given how Aramony chose to use some of the charity's funds. For
instance, he used UWA cash to woo a girl, Lori Villasor, who was
only 17 years old when they began dating; Aramony was 59. He met
Villasor while dating her slightly older sister. Both young women
were added to UWA's payroll. For his notoriously young girlfriend,
Aramony spent $450,000 of the charity's money to purchase and lavishly
furnish a New York condo; $78,000 to chauffeur her around New York
City; and $4,800 to renovate her home in Florida. The couple vacationed
in Egypt, London, Las Vegas, and Atlantic City. The New York
Times reported on the testimony of Aramony's former aide, Rina
Duncan, with whom he also had an affair. Duncan testified to falsifying
Aramony's expense records for seven years so that he could charge
the charity for things like champagne, flowers and plane tickets
Aramony was also known for treating female
employees inappropriately. He offered some women financial benefits
if they had sex with him and would transfer those who declined,
according to the indictment. Aramony's lawyer claimed there were
medical reasons for his client's behavior, arguing Aramony's ability
to control impulses was impaired by brain atrophy.
When Aramony resigned amidst scandal
in 1992, the organization's growth in contributions stalled for
a few years. CharityWatch president, Daniel Borochoff, remarked
in USA Today in 1995 as to how the scandal influenced public
perception of charities, saying, "It created a climate where donors
are more questioning. They want to know more about how an organization
is governed and the ethics of its leaders."
In 1989, philanthropist and entrepreneur
John Bennett, Jr. founded the Foundation for New Era Philanthropy
(New Era), an organization which boldly promised to double the investments
of nonprofits. In reality, New Era was nothing more than a Ponzi
scheme that, at the time of its collapse, was considered the biggest
financial scandal in the history of American charities. Victims
lost $135 million to New Era over its five and a half years of operation.
New Era's premise was simple: a nonprofit
would deposit money with New Era for a period of time. At the end
of the holding period, the deposit would be matched by an anonymous
donor and the now doubled funds would be sent back to the nonprofit.
In reality, New Era was paying its original investors with money
from new investors. It covered any shortfalls with loans that eventually
totaled $50 million. In 1995, New Era's loans were called in. Unable
to repay them Bennett was forced to place New Era into bankruptcy
and admit that his anonymous donors never existed.
In 1996, Bennett was charged in an 82
count indictment. Evidence showed that Bennett siphoned approximately
$7 million from New Era for personal expenditures, including transferring
charity funds to his own for-profit businesses. In 1995 he also
used New Era funds to buy a Lexus and to pay himself an average
of $26,785 per week in consulting fees. In 1998, Bennett was sentenced
to twelve years in prison for his crimes.
Bennett was able to cover his tracks
for so long by giving false information to both regulators and investors.
For example, in correspondences with the IRS, Bennett misrepresented
New Era's assets, listed fictitious board members, and submitted
fabricated board meeting minutes. He also used his reputation as
a leading Christian figure to disarm donor suspicions. Bennett was
able to secure donations from prominent donors such as Laurance
Rockefeller, the brother of David Rockefeller, and former Treasury
Secretary William Simon; and investments from major nonprofits like
American Red Cross, World Vision, and Nature Conservancy.
The caliber of those associated with New Era helped attract others.
As quoted by the Associated Press, CharityWatch President
Daniel Borochoff commented that nonprofits "evidently saw New Era
making money for a competitor and just played follow the leader,
gambling away their individual donor contributions for snake oil."
Hale House (HH) was co-founded
in 1969 by Clara Hale, a Depression era widow known for taking needy
children into her home, earning her the affectionate title "Mother
Hale." For decades, HH provided help for children touched by poverty,
drug abuse, and AIDS. Sadly, Clara Hale's daughter and HH co-founder,
Lorraine Hale, tarnished the legacy of her mother and the image
of the venerable charity when she took over after her mother's death
Extravagant spending by Lorraine Hale
and her husband, Jesse DeVore, who was employed as HH's public relations
director, was widely reported in the media. The New York Daily
News exposed that Hale House Foundation (HHF), a separate
fundraising arm of the charity, spent $444,953 on a bronze statue
of Mother Hale in 1995. HHF also amassed an art collection valued
at $440,133, according to the paper, most of which Lorraine Hale
used to adorn her private office. The New York Times reported
that HH employees overheard DeVore refer to the shelter's children
as "cash cows."
In 2002, Hale and DeVore were criminally
indicted by then New York Attorney General Eliot Spitzer for stealing
over $700,000 from their charity. AG Spitzer also filed a civil
suit against the two, seeking the recovery of over $1 million in
charity funds that Hale used to pay her property taxes, install
a jacuzzi in her home, pay her brother's legal expenses, and give
$500,000 to her husband's failed theatrical production. That same
year, Hale and DeVore pled guilty to stealing Hale House funds and
falsifying business records.
Roger Chapin, a self-described "non-profit
entrepreneur," founded more than thirty charities and advocacy
projects over more than forty years. His causes ranged
from curing Alzheimer's disease and cancer, to assisting veterans.
Unfortunately, Chapin's track record often showed that he used his
charities to enrich himself and his friends while spending too little
on funding the causes he touted. The U.S. House Committee on Oversight
and Government Reform subpoenaed Chapin in 2007 when he refused
to voluntarily testify at its hearing on rampant financial inefficiency
at many of the nation's veterans charities. Chapin was later compelled
to testify at a second hearing in early 2008.
Congress' investigation confirmed CharityWatch's
previous findings that only about 25% of the $168 million raised
between 2004 and 2006 by Chapin's veterans charities, Help Hospitalized
Veterans (HHV) and Coalition to Salute America's Heroes
(CSAH), went to veterans. During the same period Chapin and his
wife received $1.5 million in compensation, plus $340,000 to cover
restaurant, hotel and other expenses. $446,000 of charity funds
were used to purchase a condo for use by Chapin and his wife, according
to the investigation. Chapin hired his long-time friend and direct
mail expert, Richard Viguerie, to conduct fundraising campaigns
for HHV, paying Viguerie's company $14 million between 2000 and
Chapin was highly skilled at painting
his charities in a favorable light for potential donors, often using
celebrities to promote his nonprofit endeavors, or employing accounting
tricks to inflate his charities' financial efficiencies. For example,
CSAH paid $100,000 to General Tommy Franks in exchange for his endorsement,
the congressional investigation revealed. CharityWatch president,
Daniel Borochoff, who was invited to provide advice and expert testimony
at the hearing, alerted the Committee about unusual or inefficient
financial transactions at Chapin's charities. In 2006 HHV and CSAH
each counted the same donated "phone cards," valued by the charities
at $18.7 million, as a contribution and program expense in their
financial statements. These cards could not be used by soldiers
overseas to call home, but rather to listen to sports scores and
hear advertisements. Combined with $2 million in donated public
service airtime, the cards accounted for 85% of CSAH's reported
program expenses in 2006. This financial reporting made Chapin's
charities appear to be highly efficient even though most of the
charities' cash was not going to veterans.
When Chapin retired from HHV in 2009
he rewarded himself, with approval from his charity's board of directors,
with a generous $1.9 million payout which HHV claimed was for "retirement."
This payment was in addition to the years of annual, multiple six-figure
salary and benefits he received while serving as president of the
organization. Click here to read more
Chapin's extraordinary retirement payout from HHV.
After retiring from HHV, Chapin continued as president of CSAH and a newer
nonprofit he founded, Help Wounded Heroes.
Roger Chapin passed away in August of 2013 just
as he and other directors of HHV had reached a settlement with the California
Attorney General's office requiring them to resign from the charity and to pay
a collective $2.5 million in restitution. Read about the details of the settlement in
Leadership Booted at
Dishonored Veterans Charity.
CharityWatch members are certain to be
familiar with Larry Jones, whose antics as president of F rated
Feed the Children (FC) earned the group the moniker "Most
Outrageous Charity in America" from CharityWatch. Jones is also
famous for appearing in FC's television infomercials that featured
malnourished children in impoverished areas around the world. During
Jones' nearly three decades as president of the charity, FC was
plagued by financial impropriety and mismanagement. For example,
in 1999 an investigation by television station WTVF revealed that
local FC executive staff in Nashville regularly took boxes of donated
goods for themselves from the FC warehouse. That same year The
Daily Oklahoman reported that FC allegedly attempted to pressure
the newspaper into not reporting on Jones' son, Allen, who had filed
for personal bankruptcy and revealed that he owed his father's charity
$950,000. The paper's editor reported that Jones said he would give
the newspaper a story "twice as good" if it did not publish its
story. CharityWatch sounded the alarm bell when it came out that
FC's former chief financial director confessed to forging the signature
of the accounting firm Arthur Andersen on FC's 1997, 1998, and 1999
financial statements. Jones also had a history of making major decisions
without board approval, including awarding a $40 million annual,
no-bid television buying agreement to Affiliated Media Group, a
company that employed Jones' son, Allen.
Despite the numerous scandals that took
place under Jones' leadership, he remained at the charity for nearly
three decades before FC's board finally took action. The final straw
was Jones' 2009 admission that he had authorized the wiretapping
of FC's offices in order to secretly record his conversations with
his employees. FC's board decided to put an end to his "freewheeling
dominance" over the charity, demanding that Jones take a sabbatical
for an indefinite period of time. Jones did not go away quietly.
He attempted to install a new board who would be loyal to him. When
that failed and he was fired, Jones responded with a wrongful termination
The charity responded with a countersuit
alleging that Jones took kickbacks from vendors, lied to FC's board
about giving himself and his wife unauthorized raises, misused charity
funds, and had a large stash of pornography hidden in his private
area at this Christian charity. In January 2011, Jones and FC announced
a resolution of the legal dispute. Jones is no longer associated
with the charity he founded, which continues to receive an F rating
In the CharityWatch archive, you can
find more articles on the
antics involving Feed the Children and Larry Jones.
John Donald Cody aka "Bobby Thompson"
man who assumed the stolen identity of "Bobby Thompson" disappeared
in June 2010. He's now on the lam with a nationwide warrant for
his arrest for crimes including corruption, theft, and money laundering
associated with his sham charity, The United States Navy Veterans
Association (USNVA). Thompson gained credibility for his organization,
and donors' trust, by claiming that he and other charity officers
were ex-military men, and that USNVA had been in operation since
1927 with dozens of local chapters throughout the U.S. The charity's
website boasted of 66,000 "members," cited substantial contributions
from nonexistent foundations, and featured thank-you notes from
soldiers USNVA purported to have helped. An in-depth investigation
conducted by the St. Petersburg Times exposed USNVA to be
virtually a one-man operation run out of a Florida duplex by an
unidentifiable man with no record of military service. By the time
Thompson's deception was uncovered he had already succeeded in bilking
donors out of nearly $100 million over a seven year period.
Thompson's con extended beyond charity
fraud to influencing legislation. He hired a lobbyist to persuade
Senator Patsy Ticer to sponsor a Virginia state law exempting certain
veterans groups like USNVA from registration that discloses financial
activities and other information for public scrutiny. Senator Ticer
agreed to sponsor the bill, and by the time she became aware of
the serious problems at USNVA it was too late to prevent it from
becoming law. Thompson also contributed $67,500 to Virginia politicians.
After the USNVA scandal broke all of them eventually agreed to donate
those monies to other veterans charities.
Thompson disappeared just as several
states began investigating USNVA, with Ohio's attorney general (AG)
taking the lead. In October 2010, an Ohio grand jury indicted Thompson
and Blanca Contreras-a former citrus processing plant employee who
had signed USNVA registration papers in several states claiming
to hold executive positions at the group. Contreras was arrested
and pled guilty to charges including corruption, theft, and money
laundering. She is currently serving a five-year sentence in Ohio.
According to a press release from the Ohio AG, the state "won a
default judgment for $3.7 million plus attorney fees" from USNVA,
having "proved the organization had falsely claimed to raise money
for US veterans' causes; in reality, very little money ever went
to help veterans."
For more on the USNVA scandal, read Phantom
Charity Takes Flight: Leaves Veterans Stranded.
2013 UPDATE: Bobby Thompson was
captured by U.S. Marshals in Portland, Oregon after being on the run
for close to two years. After his arrest authorities found numerous
fraudulent ID's in his possession, as well as a suitcase with $980,000
worth of cash. Thompson later admitted that his real name is John Donald
Cody. Mr. Cody has been described as a Harvard-educated lawyer and a former
Army intelligence officer. In November 2013 an Ohio court convicted him on
23 counts including stealing, identity theft, money laundering and record
tampering. In an interview with Reuters, CharityWatch President Daniel
Borochoff said "No one has ever made a bigger mockery of veterans,
politicians and charity as Bobby Thompson did with his U.S. Navy Veterans
Mortenson, founder of the Central Asia Institute (CAI) and
author of New York Times best selling books Three Cups
of Tea and Stones into Schools, was the darling of philanthropic
and literary communities until CharityWatch began investigating
his charity in 2009. CharityWatch uncovered a serious lack of segregation
between CAI's finances and Greg Mortenson's personal business interests.
2009 financials showed that the charity funded Mortenson's book
promotion and speaking events, yet it received no revenue from book
sales or advertising and little to none of the $25,000 to $30,000
per-event speaking fees Mortenson charged at speaking engagements.
After seeing CharityWatch's articles
on the charity, 60 Minutes contacted us for insight into CAI's finances.
CharityWatch president, Daniel Borochoff, was later interviewed
by 60 Minutes correspondent Steve Kroft for a story that revealed
the problems at CAI went well beyond financial mismanagement. 60
Minutes surveyed about thirty schools that CAI claimed to have built,
finding that roughly half of them were empty, built by someone else,
or not receiving funding from CAI. 60 Minutes also interviewed author
and former donor to CAI, Jon Krakauer, who argued that many claims
made in Mortenson's inaugural book were fictitious. Mortenson later
admitted that events in his books were compressed, but insisted
any literary license taken did not amount to lying.
CAI's board confirmed to 60 Minutes that
CAI spent only 41% of its expenses on building or supporting schools
in 2009, but argued that the funds it spent on speaking events at
which Mortenson promoted his books should also be counted as a charitable
program. That year CAI spent $1.7 million on book-related costs
that included "Advertising, events, film and professional fees,
publications (books & freight), and some travel," according to its
audit. One attorney who examined CAI's financial activities advised
Mortenson and the charity's board that "CAI's outlays for book advertising
and travel expenses for Mortenson's speaking engagements appear
to be in violation" of IRS rules, and that Mortenson could owe $7.2
million or more for "excessive benefits received during 2007, 2008,
The charity's 2010 tax form revealed
it continued to spend more on "awareness," including Mortenson's
books, than funding schools that year. CharityWatch called for Mortenson's
resignation earlier this year, arguing that CAI will be unable to
recover from its tarnished reputation with him at the helm. The
charity is also under inquiry by the Montana attorney general.
For more about Greg Mortenson and CAI,
these CharityWatch articles and check
out the 60 Minutes coverage.
Joe Wingo, his wife Linda Wingo, and their son Andy were the subjects of a 49-count federal indictment for the theft, fraud, kickbacks, and cover-ups that plagued their charity, Angel Food Ministries (AFM), a Georgia-based nonprofit.
Joe Wingo, who also served as a pastor at a church he founded, started AFM in 1994, a few years after he served a one-year prison sentence for extortion. The organization's stated purpose was to sell affordable food to the needy by purchasing food in bulk and distributing it through a network of volunteers and churches. It was partially funded by the USDA through an almost $7 million low interest loan issued in 2005.
In September 2011, the Wingos shut their charity down. Two months later federal investigators concluded a four-year investigation of AFM with an indictment that listed numerous alleged illegal activities. These included the use of charitable funds for extravagant personal spending (including cars, sporting goods, electronics, and a down payment on a jet aircraft which the Wingos then leased back to the charity), issuing millions of dollars in "bonus wages" to family members, who then paid the charity back the money in a scheme to cover up the Wingos' debts to the charity, setting up a complex system requiring vendors to pay kickbacks to the charity as a condition of doing business, using charity funds to support political campaigns, and attempting to hide and destroy evidence being sought by federal investigators.
According to the Middle District of Georgia U.S. Attorney's Office's release of August 2013, Joe Wingo had admitted to prosecutors that he used his position at AFM to make personal purchases with charity funds and then tried to hide these expenditures. Joe and Andy have each been sentenced to seven years in federal prison after pleading guilty to conspiracy to commit money laundering. Joe and Andy must forfeit about $1.5 million and $2.4 million, respectively, and Joe must pay a $15,000 fine. Linda has been sentenced to five years of probation and must pay a $25,000 fine after pleading guilty to misprision of a felony (having knowledge of a crime and concealing its commission).