- Disclaimer: Go to your local Starbucks and get a 20oz.
quad shot Mocha. Or, if you are lucky enough to live near a Dutch Brothers,
get a 5 shot 911. This will help you stay awake during the part about exempt
organization tax return reforms. You have been so warned!
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- Editor's note: This is the most recent installment in
a series of investigative articles looking into financial irregularities
associated with the Shriners. Two weeks ago, Newsvine.com and I received
an award from the Society of Professional Journalists in the "Online
Special Report/Enterprise (Original) category. I received an Honorable
Mention and placed before such media greats as the Seattle P-I and MSNBC.com.
Soon after, I was honored by Newsvine.com by being presented with the "Random
Act of Vineness Award." These awards are to be shared with all those
who have supported my work, especially Jeff Rense. Jeff published my first
few stories and stood by this investigation without question or hesitation.
Thank you all, Sandy
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- It seems that when Shriners get near mortgages, things
start to go kind of crazy.
-
- The Orlando Sentinel reported twenty years ago that Shrine
leaders and employees used charitable contributions for personal mortgages
that were not reported on any of the Shriners Hospitals for Children tax
returns.
-
- A recent analysis of the Hillsborough County, Florida
Clerk's files revealed an unusual pattern involving personal mortgages
being taken out on Shrine leaders' homes, then paying them back in unusually
short periods of time.
-
- For example, former comptroller, John Cawood, took out
a mortgage for $150,000 on his home on March 4, 1987 and paid it off about
90 days later. More recently, Lewis Molnar, former CEO of the Shriners
Hospitals for Children, took out a mortgage for $100,000 on July 8, 2002
and paid it off a year later.
-
- The focus of this story, however, will be on how last
year's Potentate of the Omar Shrine Temple in Mt. Pleasant, South Carolina,
stormed into a meeting of the Dorchester Shrine Club (DSC) last August,
with deputy Sherriff's in tow "to keep the peace if things got rough"
and, without warning, removed the club's officers, suspended the club's
bylaws and took control of the club's finances because:
-
- * The club's leaders had been warned "over and over
about the breeding ground of drugs, excessive drinking, fights and the
language"
-
- * The club's leaders had "totally disregarded Shrine
Law"
-
- * The club's officers had "totally disregarded the
Potentates directives"
-
- * The temple had "received letter after letter and
phone call after phone call after phone call complaining of the immoral
conduct" at the Dorchester Shrine Club
-
- * The club's officers allegedly refinanced the mortgage
numerous times without permission
-
- * The club's officers were allegedly delinquent in their
mortgage payments
-
- As a result, the past Potentate who did all this, Jimmy
James, and the current potentate, Jack Thompson, have made it a top priority
to pay off the DSC mortgage this year, which is in direct conflict with
their stated non profit purpose of holding "fundraising events for
the support of the Shriners Hospitals for crippled and burned children."
According to the Dorchester Shrine Club's financial report for 2006, only
$276 was sent to the Shriners Hospitals for Children, yet over $40,000
of the club's assets went to pay down the mortgage from $70,500 down to
$26,500.
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- HOW THE SHRINERS OPERATE
-
- Before we get into this story, here is a quick explanation
of how the Shriners operate.
-
- The actual food chain of command, linear from the top
down, goes like this:
-
- * Imperial Potentate is the leader of the 501c10 non
profit corporation, is the head of the Imperial Divan and is the ruler
of all Shrinedom
-
- * Temple Potentates, who rule the 191 fraternal mosques
and are accountable to the "Most Worshipful Illustrious" Imperial
Potentate
-
- * Club and unit officers who are under the temple potentate's
command
-
- * Members of the temples, clubs and units, who must not
question what they are told or else they are kicked out, suspended or sued.
-
- The Shriners consist of two exempt organizations, more
commonly known as non profit groups.
-
- The Shriners Hospitals for Children is:
-
- * The parent organization that runs 22 hospitals
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- * Classified by the IRS as a 501c3 charity
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- * Known for providing free medical care for crippled
and burned children
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- * Worth about 10 billion dollars
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- The Shriners fraternal is:
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- * Formally known as The Imperial Council of the Ancient
Arabic Order of the Nobles of the Mystic Shrine or the AAONMS
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- * Classified by the IRS as a 501c10 fraternity
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- * Made up of 191 mosques or temples that, in turn, control
the 1,900+ clubs and units under them
-
- * Known for raising money to help the burned and crippled
children receive free medical care
-
- The IRS grants conditional non profit status that is
based on what the exempt organization reports on their tax returns. The
past few years, the IRS and Congress have cracked down on non profit fraud
and corruption. For example, after a Washington Post investigation and
Congressional hearings, The Nature Conservancy has become a model of non
profit transparency, accountability and disclosure. If you go to their
site, you'll find their tax returns, annual reports, bylaws, articles of
incorporation, financial reports, meeting minutes, governance documents
and more.
-
- You will find no such thing on the Shriners site.
-
- CONGRESS AND IRS REFORM EXEMPT ORGANIZATION TAX RETURNS
-
- In fact, the Senate Finance Committee and the IRS issued
press releases yesterday, June 14, 2007, announcing, in the name of increased
non profit transparency, the exempt organization tax return, more commonly
known as the 990, will be revamped for the first time in 25 years.
-
- According to the IRS's announcement:
-
- "Most organizations should not experience a change
in burden," said Lois G. Lerner, director of the IRS's Exempt Organizations
division. "However, those with complicated compensation arrangements,
related entity structures and activities that raise compliance concerns
may have to spend more time providing meaningful information to the public."
-
- In releasing this redesigned form, the IRS said it is
soliciting comments, especially in connection with the goals of increased
transparency of information and use as a compliance tool. The comment period
lasts until Sept. 14, 2007.
-
- The leaders of the Senate Finance Committee, Senators
Max Baucus, committee chairman, and Chuck Grassley, ranking committee member,
stated in a May 29, 2007 letter to the Secretary of the Department of Treasury,
Henry Paulson:
-
- "We are writing to you regarding the issue of charities
and transparencyThe discussion of transparency and openness naturally centers
upon the Form 990 that charities file with the IRS. In addition to the
public benefits of improved openness and transparency, we believe that
an updated and more thorough Form 990 will allow the IRS to better identify
those entities that warrant additional review or further questions."
-
- The new form is designed to make charities accountable
by asking for more information in the areas of:
-
- 1. Executive compensation. "Some charities are as
creative as for-profit entities in providing compensation paying
for housing, first-class travel, spousal travel, deferred compensation,
inventive compensation and bonuses, fringe benefits, loans , dining and
often entire life-styles."
-
- 2. Endowments. "The former Commissioner of the IRS
spoke a few weeks ago, prior to his departure, that charities needed to
provide charitable work commensurate with their resourcesthis is keeping
with the commonsense view of the American taxpayer who subsidizes by billions
of dollars a year the work of charities that the point of giving
is to help the community and those in need and not help a charity build
an even bigger bankroll."
-
- 3. Related Organizations. "As discussed above, there
needs to be a complete understanding of all related organizations
both for-profit and non profit of a charity. It is important that
the public be able to understand the big picture of what is going on a
charity. It is for a similar reason that Congress enacted legislation to
make the Form 990T publicly available."
-
- 4. Joint Ventures "To know the work of the charity
it is critical to understand the joint ventures in which the organization
is engaged."
-
- 5. Governance. "Time and time again, w3e have seen
poor governance at the core of problems at charities. The IRS Commissioner
in his March 2005 letter to the Finance committee made a similar finding.
The Form 990 can serve a useful purpose of bringing a focus on governance
issues both for the board and management of the charity as well as the
public."
-
- 6. Dollars raised v Dollars for Charity. "There
is probably no greater interest of the public then wanting to understand
the answer to this question when they make a donation: How much of the
money is actually going to the charitable activity?"
-
- 7. Hospitals. Many of the issues we've discussed above
have significant applicability to hospitals.
-
- DORCHESTER SHRINE CLUB MAKES HEADLINES
-
- The public was first made aware of problems at the Dorchester
Shrine Club last year after the Charleston Post and Courier published "Shriners
Lament Takeover of Club: Members of Dorchester Group Say New Leaders Will
Harm Mission" on Sunday, December 31, 2006.
-
- "It felt like a raid," the article described
what some called a "Gestapo-like takeover."It continued by describing
how the potentate of the Omar Shrine Temple swept into a DSC meeting last
August with police at his side, and announced he was taking over.
-
- One Shriner of 20 years, Dick Pollard, "asked the
potentate about the reasons for the changes in authority." Pollard
is quoted as saying "His answer to me was 'Dick, I am the potentate.
I can do it.'"
-
- According to the article, the Dorchester Shrine Club
raised $1,800 for Shrine hospitals in 2006, yet financial documents indicate
that only $276.05 was actually sent to the charity. The same document shows
that the club somehow came up with over $44,000 that went towards paying
off their mortgage. A second article followed five days later and quoted
potentate Jimmy James as saying he was forced to replace the officers because
of complaints that they violated club bylaws and failed to obey his orders.
The former officers were, according to James, "abusing their privileges
and demonstrating conduct unbecoming of a Shriner."
-
- There was no further follow-up by the Post Courier, so
here we are, picking up where they left off.
-
- On August 17, 2006, potentate Jimmy James issued a statement
that explained that:"the bylaws of the DSC were suspended and the
club "is now under his control. He then wrote that :
-
- "ALL officers, Board of Directors, Board of Trustees
and Appointees are removed from office and that all funds including check
books, cash advances to the club and cash on hand will be turned over to
the temple treasurer IMMEDIATEY and that the potentate shall appoint"
all officers and committee chairmen."
-
- "Nobles," James wrote, "We are distressed
that the morals of some have caused these orders" and that "you
have been forewarned over and over about the breeding grounds of drugs,
excessive drinking, fights and the language" and that "the Club
officers have totally disregarded Shrine Law."
-
- "The temple has received letter after letter and
phone call after phone call complaining about the immoral conduct that
exists. THIS WILL STOP OR ELSE OTHER MEASURES WILL BE IMPLEMENTED. (Article
37, 337.3) (1986 Proceedings) The Potentate having control over a
Shrine Club may, during his term in office, terminate its existence, and
he may authorize the formation of a new Shrine club. (Article 30, 330.1)
'A Noble is subject to discipline by the Temple of which he is a member,
or by the temple within jurisdiction he resides, for conduct unbecoming
a Noble of the Mystic Shrine or for violation of Shrine Law.'"
-
- James apparently thought it convenient to rely on county
sheriff's for his protection when he removed the DSC officers, yet embraced
Shrine law, instead of the law of the land, by failing to prosecute these
alleged crimes. In the matters of the drugs, drinking and fighting reported
by James, the Dorchester County Sheriff's Department stated that "No
one has made any written reports as to what Mr. James is claiming."
-
- According to a statement from the past president who
was thrown out, Gordon Brown:
-
- "This was done abruptly, without even the human
decency of a fair and reasonable notice and with the additional insult
and attempted intimidation of an array of several law enforcement officers
accompanying them."
-
- "As reasoning for the removal," he continued
"the Potentate cited that an alleged stack of 'complaints' against
the President and club were piling up at a rate of about 16 a week. When
we were removed from office we were given no chance to be informed of the
nature and cause of the accusations. "
-
- Then, there is the question of who Okayed the potential
suspension of Dorchester Shrine Club whistleblower, Dick Pollard. He claims
he was threatened with suspension at a meeting called by appointed club
president, Bill Ackerman because "he talked too much." Pollard
claims he was told that the threat of suspension came down from the potentate.
According to current potentate Jack Thompson, he had no idea that Pollard
was threatened with suspension and that "Bill Ackerman had acted on
his own."
-
- SARBANES OXLEY ACT PROHIBITS RETALIATION AGAINST WHISTLEBLOWERS
-
- The removal off the officers and Pollard's threat of
suspension may fit the definition of retaliation, which, according to the
Sarbanes Oxley Act of 2002 is illegal. It was passed by Congress after
the details of corporate fraud and white collar crime led to jail time
for former executives of ENRON, WORLDCOM and TYCO International. It was
discovered last year that the Shriners hired a consultant in 2005 to lobby
Congress against the Sarbanes Oxley Act and failed to report this on their
tax returns.
-
- According to Independent Sector and BoardSource, two
non profit policy groups:
-
- "The Sarbanes Oxley Act provides protections for
whistleblowers and imposes criminal penalties for actions taken in retaliation
against those who report suspected illegal activities in an organization.
It is illegal for any entity for-profit and non profit alike
to punish the whistleblowers in any manner."
-
- The act was designed to prevent corporate white collar
crime and corruption but also, according to the article "Sarbanes
Oxley and Social Clubs and Other Tax-Exempt Organizations" by James
J. Reilly that was published March, 2005 in the CPA Journal Online, a publication
of the New York State Society of CPAs:
-
- "Because SOA is central to the management of publicly
traded companies, it is reasonable for such officers and directors to consider
its application to social clubs."
-
- Reilly suggests that social clubs and other tax exempt
organizations modify their corporate governance to include audit committees,
internal controls designed to disclose material information to the groups
officers, directors and key employees, conflict of interest policies, prohibition
of loans, audit partner rotation, separate audit and consulting providers,
whistleblower protection and record retention.
-
- POTENTATES GONE WILD?
-
- So, is all of this the doing of two potentates gone wild
or did they, in 2006 and 2007, get permission from the food chain of command
to remove the clubs' officers, suspend the club's bylaws, seize control
of the club's assets, and then turn around and spend over $44,000, raised
by the DSC, on the club's mortgage instead of sending the money to the
hospitals?
-
- According to the current potentate, Jack Thompson, the
reason that the officers were removed and why the DSC mortgage needs to
be paid off goes something like this.
-
- Thompson claimed that the DSC mortgage had been refinanced
2 times without anyone's knowledge or permission and that the mortgage
payments had always been paid late. Other club and temple officers reported
that the mortgage had been refinanced up to 5 or 6 times but that the mortgage
was always paid on time. Past officers have said that the mortgage had
never been refinanced and that the payments were always made on time.
-
- Additionally, there is no evidence that the mortgage
was refinanced. According to officials at the Dorchester County Recorder's
office, refinance documents are the same as mortgage documents and all
mortgage documents must be filed and recorded with them. Only one set of
mortgage documents is on file, dating back to May 31, 1994, and details
a transaction for $250,000 between the Dorchester Shrine Club Holding Corp.
and the First National Bank of South Carolina.
-
- Current club members feel that they are being driven
out, especially after a lake front camp ground was closed down at the same
time the officers were thrown out. Now, with the potentate of the Omar
Temple, Jack Thompson, calling the shots, the members claim that their
voting rights have been suspended. Earlier this year, a motion was made,
seconded and approved at a meeting of the Dorchester Shrine Club to give
$1,000 to the Hospitals for Children. This action was overturned by Thompson
who ignored the vote and said that the $1,000 would go to pay off the DSC
mortgage.
-
- SHRINER HQ REFUSES TO ANSWER QUESTIONS
-
- Current potentate Jack Thompson and Omar Temple recorder,
Verle Bohrn, claim that they have spoken with Shrine attorney Ted Corsones
and the corporate legal department on numerous times, taking their directions
from such higher-ups to "shut the club down."
-
- Numerous phone messages and emails left for and sent
to corporate director of public relations for Shriners Hospitals for Children
and the Shriners of North America, Alicia Argiz-Lyons, and attorney Ted
Corsones remain unanswered.
-
- So why are the DSC members being treated like mushrooms
by the past and current potentates?
-
- Some advance the possible theory that this may have festered
after a three year old vote by Dorchester Shrine Club against the Shrine
Director's staff building a large garage-type structure on their property.
Today, 25 of the Director's staff are joining the Dorchester Shrine Club
and will soon control the majority vote, allowing them to approve the project.
The Shrine director's staff currently works out of the 5 acre site that
the Omar temple sits on.
-
- Another possible theory is that, somehow, the attorney
for both the temple and club, who is also a big time developer who has
built residential communities around the Dorchester Shrine Club, is waiting
in the wings for the chance to grab 35 of the club's 75 acres after their
mortgage is paid off.
-
-
- Others theorize that the Omar temple, who bought their
5 acre site for $2.5 million, may sell it for the appraised value of $11
million and, with the vote stacked in their favor, move the temple to the
Dorchester Shrine Club without opposition. If the property is, indeed,
sold and a profit of nearly $9 million is realized, the Omar Temple could
then move to the Dorchester Shrine Club without paying for a new site.
If the Omar temple was sold, would the potential $9 million profit go directly
to the hospitals or would it go elsewhere?
-
- WHERE DOES THE SHADOW OF DOUBT LIE?
-
- It comes down, again, to tax returns. Apparently, if
it's ok for headquarters to leave things off their tax returns, it's ok
for everyone else to do the same.
-
- If the leaders of the Omar temple are doing the right
thing, will the current potentate report to the IRS the compensations he's
receiving from the free advertisements for his truck business that run
at the top of every page of the temple's newsletter, the Infomar ? And
why do the temple's 2004 tax returns (most recent available at www.guidestar.com)
fail to report things like:
-
- * The potentate's travel allowance, reported by Jack
Thompson to be $12,000 a year
-
- * The recorder's salary, reported by temple recorder
Verle Borhn to be $100 a month
-
- * The financial reports from the clubs on their "group:"
return
-
- * Related organizations
-
- Related organizations? Remember, this is the third item
on the list of reforms established by Congress for the revamped 990s. This
is something that is not reported on either Shrine charitable and fraternal
tax returns, from the top all the way down. Generally, the hospitals list
that they are related to the fraternal side and vice versa. But that is
it.
-
- For example, to become a Shriner, one must be a master
Mason. The question on the current tax return asks:
-
- "Is the organization related through common membership,
governing bodies, trustees, officers, etc, to any other exempt or nonexempt
organization?"
-
- Clearly, one group that should be listed here is the
Masons. Masons can become members of the Scottish Rite, Knights Templar,
Shriners, etc. These groups and others are often listed in the online biographies
of the Imperial Divan. Shrine leaders can join, by invitation only, another
affiliated group that is not listed, the Jesters. This is a group where
the leaders can allegedly party like rock stars, Motley Crue style.
-
- For example, Charley Miller is listed as an appointed
member of the Dorchester Shrine Club's advisory board and, according to
the Royal Order of Jester's Court 113 tax returns, keeps their books. The
returns also describe the Jester's exempt purpose as "helping crippled
children." Neither the Shriners' nor the Omar Temple's tax returns
list the Jesters or any other related groups.
-
- Are all the unreported groups, mortgages and compensations
intentionally omitted from the Shriners' tax returns to keep them secret?
-
- Do these omissions constitute:
-
- Failure to file or supply information or pay tax?
-
- Aiding or assisting false or fraudulent documents?
-
- Fraud and false statements?
-
- Removing or concealing with intent to defraud?
-
- Providing fraudulent returns and statements?
-
- Providing false, fictitious or fraudulent claims?
-
- Conspiracy to commit offense or to defraud the U.S.?
-
- Only investigators from the South Carolina Secretary
of State's office, the IRS and other three letter agencies can know for
sure.
-
- _____
-
- All copies of material reprinted or duplicated from by
Sandy Frost must include the following credit line: From http://sandyfrost.newsvine.com/
Copyright © 2007 by Sandy Frost. Used by permission.
-
- Visit Sandy at:
-
- http://sandyfrost.newsvine.com/
-
- http://thecassandrafrostcollection.blogspot.com/
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