Down Payment Charity Chiefs Benefitted from Millions in Fees
Execs struck gold with interests in for-profit marketing firms hired to promote the charities.
More has come to light about the home-down-payment-granting charities that the IRS recent ruled were not charities when the seller funded the grant. The Wall Street Journal reports (subscription) (also Pittsburgh Post-Gazette with no subscription) that in their days of rapid growth, these charities paid millions to for-profit marketing firms often controlled by the executives of the charities
Our earlier posts about down payment charities:
The main story is that of Don Harris, the minister who founded Nehemiah Corporation of America (EIN 52-2145694 Form 990), who appears to have fallen into the marketing deal somewhat by chance. As the story is written, the founders of AmeriDream (EIN 52-2145694 Form 990) and The Buyers Fund (EIN 87-0635224 Form 990) were more intentional in also founding a for-profit marketing arm.
And it doesn't appear that any of this would have come to light had not Mr. Harris hired Scott Syphax to succeed him as chief executive in January of 2001. Mr. Syphax, a public affairs executive who had originally volunteered for Nehemiah, recognized the problem with the marketing arrangements throughout the industry and contacted both the IRS and HUD about cleaning them up. Mr. Harris left the staff and the board. Nehemiah sued him for return of the funds in 2003 and he has made an undisclosed settlement with the organization.
What could have been done differently? The IRS could have paid closer attention. Yes, they are overworked in the exempt organization area, but when a new class of charities in a financial field goes from zero to hundreds of millions in a short period of time, closer scrutiny surely is called for. The combination of inexperienced start up operations and huge amounts of money flowing through create a high risk of excess benefit transactions.
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