Friday, October 06, 2006

City Finds Widespread Fraud at a Bronx Charity

The New York Times
The City
In the Region
N.Y./Region Opinions

City Finds Widespread Fraud at a Bronx Charity

Published: October 6, 2006
Top employees of a city-financed Bronx charity diverted hundreds of thousands of dollars for personal expenses like home renovations, furniture and the purchase of a Volvo and a BMW, a city investigation has found.

The widespread fraud in recent years at the charity, the Gloria Wise Boys and Girls Club, which received $9 million a year in city financing to help children and the elderly, also included off-the-books bank accounts — created under the guise of supporting youth athletic programs — that were used to pay bonuses to the executive director and four other officials, according to the city’s Department of Investigation.

Investigators said the breadth of the fraud suggested an “absence of oversight” within nonprofit contractors. They said it resembled several patterns of fraud and abuse in other cases from recent years, like interest-free loans to executives that are never repaid; use of organizational bank accounts and credit and debit cards for personal expenses; and double pay for salaried employees also listed as consultants.

The commissioner of investigation, Rose Gill Hearn, called the Gloria Wise case the worst instance of wrongdoing by a nonprofit contractor she had seen since taking office in 2002.

Yesterday, Charles Rosen, 63, the executive director of Gloria Wise from 1993 to 2005, and Jeffrey Aulenbach, 46, the former deputy director for operations at the charity, pleaded guilty in State Supreme Court in the Bronx to grand larceny and obstruction of government administration.

Mr. Rosen, a well-known figure in Co-op City, the giant housing complex, and a former chairman of the company that manages it, also pleaded guilty to forgery. He admitted that he falsified reimbursement documents submitted to the city’s Department of Youth and Community Development and the state’s Office of Children and Family Services and that he falsified business records submitted to city investigators who were examining an $875,000 loan by the charity to Air America Radio.

Mr. Aulenbach admitted that he falsified documents submitted to the city’s youth department and to the United States Department of Housing and Urban Development and that he used the charity’s money for personal expenses and to give an employee a bonus.

In a scathing 36-page report, the investigation depicted a charity beset by wrongdoing. Its business records, “rather than reflecting actual events, were made to say whatever suited the executives’ purposes,” according to the report, while “fraud, whenever expedient, was an accepted way of doing business.”

Although the board of directors met monthly, the report found, its members were “apparently oblivious” to the fraud, and its top three officers “were unprepared to govern an organization of Gloria Wise’s size and complexity or to ensure that its dominant executive director — their longtime neighbor and friend — was managing it responsibly.”

The investigation also questioned the adequacy of city oversight, stating, “City agencies that fund not-for-profits are ill-equipped to stand in for their ineffective boards and external accountants.”

The investigation into Gloria Wise, which began with an anonymous tip in 2004, revealed last year that the charity had improperly lent the $875,000 to Air America, a network known for liberal programming and for hosts like Al Franken.

The city promptly cut off payments to Gloria Wise.

Evan Montvel Cohen, a fund-raiser for the charity from May 2002 to May 2004, was instrumental in securing four loans to Air America from October 2003 to March 2004, according to the investigation, which found that he also received $46,000 in improper payments. He did not respond yesterday to messages left with relatives.

Piquant L.L.C., which has owned Air America since May 2004, said Mr. Cohen has no role at the network. In September 2005, the network put $875,000 into an escrow account at the request of city investigators. Under a settlement announced last week, $625,000 will be repaid to the city and $250,000 will be returned to Gloria Wise.

In addition to the $875,000 in loans, the investigation found that five executives “stole or improperly obtained” $244,616 from the charity.

Mr. Rosen took $69,216 from 2001 to 2004, investigators said. (He was paid $249,611 in wages and bonuses in 2004.) Some of the money went for home furnishings, renovation of a beach apartment in the Rockaways and the purchase of a Volvo convertible. One $3,200 invoice for the renovation was billed to the city as payment for a “gang prevention workshop.” Mr. Rosen’s lawyer, Frederick H. Cohn, did not respond to a request for comment.

Mr. Aulenbach improperly received $87,371 from 2000 to 2004, investigators found. (He was paid $185,218 in 2004.) The money paid for renovations of his apartment in Jackson Heights, Queens; a personal car, insurance and residential parking; and tennis expenses. Mr. Aulenbach’s lawyer, Richard S. Goldberg, said his client had no comment.

Mr. Rosen and Mr. Aulenbach agreed to make restitution of $38,575 and $32,363, respectively, and to pay a $5,000 fine each, according to the state attorney general’s office, which prosecuted the case. The plea agreement, entered before Justice John N. Byrne, bars them from working at a nonprofit group for three years.

Three other officials were implicated in the investigation, though they were not charged.

Lorraine R. Corva, who until last year worked at Goose Bay, a charter school that is part of Gloria Wise, improperly received $60,802 from 2000 to 2004, the investigation found. (She was paid $189,783 in 2004.) Some of the money paid for her two BMW’s, one of which was leased.

Sinohe Terrero, who left the charity in 2003 to join Air America, received $13,407 improperly, and Ibis Ozoria, who resigned from the charity last year, received $13,820 through a phony youth training contract with a clothing store he operated, according to investigators. Mr. Ozoria did not respond to a message left with a relative yesterday.

Ms. Corva and Mr. Terrero could not be reached yesterday. An Air America spokeswoman said Mr. Terrero left the network last year.

Among other improprieties, according to the investigation, Mr. Rosen used the charity’s money to open six off-the-books accounts — each under the name of a fictitious athletic club — and fabricated documents to claim that the phony clubs were subcontractors of the charity. Five Gloria Wise executives received improper payments from four of those accounts.

The investigation also found that administrators and teachers at Goose Bay falsified student medical records submitted under annual audits by the city’s Department of Health and Mental Hygiene. Ms. Corva told investigators that she and other employees falsely certified that the children had received required exams and vaccinations.

The charity dates to 1977, when Mr. Rosen recruited Gloria E. Wise, a respected social work administrator, to lead an after-school program that became known as the Youth Activities Committee. It was incorporated in 1985 and renamed in 1996 for Ms. Wise, who died in 1993.

The charity has reconstituted its board and hired a new director. Under a settlement with the state, the group agreed to tighten oversight and fiscal controls, train the new directors, ban loans to employees and restrict the hiring of consultants. It also agreed to be overseen by the attorney general’s office for five years.

The charity was stripped of its membership in the Boys and Girls Clubs of America last year and now calls itself the Gloria Wise Community Center.

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