October 16, 2003

United Way and Financial Abuse

I had to go to the US Labor Department website to find out who was the invisible Labor Secretary of the Bush administration. I was surprised to find out that the current Labor Secretary was a Chinese-woman, named Elaine L. Chao. Now, I am beginning to understand why so many jobs in the United States are being outsourced to Asia. (Maybe there is a connection here.)

After reading Elaine L. Chao's biography, I learned that among her credentials to become Labor Secretary, she claims that as President and Chief Executive Officer of United Way of America, she restored public trust and confidence after the organization was tarnished by mismanagement and financial abuse, thus preserving the nation's largest institution of private charitable giving.


United Way and "Financial Abuse, Fraud, and Embezzlement."


Elaine L. Chao replaced the former United Way of America President, William Aramony, who was fired in 1992 under accusations of fraud and conspiracy. He and other former members of management were convicted by a federal jury in 1995. Since that time, these men have been serving their sentences in federal prisons.

Financial abuse, fraud, embezzlement, and mismanagement did not taint the United Way only before Ms. Elaine L. Chao's arrival at that organization; there were plenty of financial abuse, fraud, embezzlement, and mismanagement also following her departure from the organization. If she had done such a good job at the United Way during her tenure, then why were there so many financial abuse, fraud, embezzlement, and mismanagement cases since she left the organization? There were other cases of embezzlement, fraud, and major mismanagements in the United Way System, but here I list just a few cases to show what I mean.

On January 22, 2003 the Lansing State Journal published an article by Tim Martin 'Charity puts estimate of money lost at $1.9 million. The amount is double what United Way said in civil suit.' The article also said: "Nearly $1.9 million was stolen from the Capital Area United Way during the past seven years, charity leaders estimated Tuesday. That's twice as much money as charity officials thought when they filed a civil suit last month claiming embezzlement by a former employee. "This is an extremely bitter pill," Capital Area United Way President Bob Berning told his board of directors Tuesday. "It sickens me."

…The East Lansing-based United Way accused former finance chief Jacquelyn Allen-MacGregor of the theft in a civil suit filed in Ingham County Circuit Court. …Last month, charity officials said they were hopeful the incident was confined to 2001 and 2002 - the last two years of Allen-MacGregor's 20-year tenure with the United Way. …But after reviewing records from 10 banks, the charity says it appears Allen-MacGregor was cashing stolen checks made payable to herself at least as early as 1996.

…Some of Allen-MacGregor's assets - including an estimated 60 horses - soon could be for sale. Proceeds would help repay the United Way if the charity wins its civil suit. …The selling of her assets, most related to a business called Celebration Quarter Horses. Some of Allen-MacGregor's horses might be worth more than $10,000 each.

In another case, on August 15, 2003, The Washington Post published an article: 'United Way's Fate,' the article said the following: "THE PILLAGING of this region's United Way organization turns out to have been uglier than even the initial, grotesque discoveries indicated. The sloppy, secretive bookkeeping, lavish salaries and shameful spending sprees first uncovered were revolting enough; but according to an audit recommended by an outside ethics panel that examined past practices of the agency, the longtime, now-retired head of the organization, Oral Suer, received more than $1.5 million in apparently improper or questionable payments from the organization during his 27-year tenure.

As reported by The Post's Jacqueline L. Salmon and Peter Whoriskey, the audit also names five other current or former employees as having spent an additional $69,500 in expenses lacking documentation. The findings point to a betrayal of trust by a handful of officials, and a draining of money meant to help residents in dire need. Federal investigators are looking into the spending, and the all-new leadership at United Way has filed two lawsuits against Mr. Suer alleging that he defrauded the charity. There has been no public comment from Mr. Suer. …The true victims of the United Way scandals, the homeless, hungry and helpless, should not have to suffer another year of privation because of the unseemly greed of those who misused their position and sullied United Way's reputation."

On September 20, 2002 United Way of the National Capital Area, in Washington D.C., appointed Mr. Robert Egger as interim executive vice president to restore public confidence in that United Way. He was hired right after the scandal at the National Capital Area United Way became public knowledge. That particular United Way is considered to be a large organization in terms of individual United Ways; they raised $ 94 million dollars in 2001.

Even though that United Way was of significant size, the first thing that Mr. Egger announced in his effort to regain the public trust, was to insist on a salary that, at $ 85,000 a year, was a third of what his predecessor received. Depending where you live in the United States the average giver to a local United Way is someone who makes from 25 to 40 thousand dollars per year.

On a smaller scale, on August 16, 2003 the Lodi News-Sentinel, CA published an article: 'United Way employee pleads guilty in embezzlement case.' "A United Way employee accused of embezzling more than $200,000 from the San Joaquin County nonprofit organization pleaded guilty Friday to all 23 felony charges against her. Corrine Cervantes, 46, had pleaded innocent in March, but on Friday she pleaded guilty to 19 counts of forgery and four counts of embezzlement, said Deputy District Attorney Scott Fichtner."

Following the footsteps of for-profit companies such as Enron and WorldCom, new information suggest that not-for-profit organizations such as the United Way, also use questionable accounting practices to deceive the public.

On November 19, 2002 The New York Times published an article by Stephanie Strom: "Questions Arise on Accounting at United Way," among other things she said in the article: "Some United Way organizations, trying to appear more successful and more efficient with their donors' money, are counting contributions in ways that make the numbers look more robust - and expenses look smaller.

In a number of cases, including two of the largest United Ways - those in Washington and Chicago - different organizations counted some of the same contributions, thus inflating not only their own numbers but the system's totals, according to United Way executives.

…Each time a case of double counting has arisen, United Way of America executives have said it is limited to a particular United Way. They defend the other practices that have been called into question.

But executives at some local United Ways are less certain. After reading in newspapers about questionable accounting and financial management at the United Way of the National Capital Area in Washington last January, "I felt chilled because I had seen some similar things in other United Ways," said Brian T. Hassett, who served as president of the United Way in Chicago until recently.

Les White, a former county manager in San Jose, Calif., said he saw some of the same things when he was brought in to resuscitate the United Way Silicon Valley. "Some of what I read about in Washington, D.C., sounded so familiar," he said. "It's myopic to insist that these problems are only in one place."

The New York Times article was very long, but the above information gives you the flavor of the problems afflicting the United Way System today. The current president of the United Way of America knows that in the charity business the name of the United Way is becoming associated more and more with financial abuse, mismanagement, fraud, and embezzlement and he is trying very hard to save the United Way from going the way of Enron and WorldCom.

Once again, after reading Elaine L. Chao's biography, for someone who was hired to clear the name of a tarnished organization, as anyone can see by the many scandals that followed after her departure from the United Way, in my opinion, her tenure at the United Way was a major failure. If anything, financial abuse, fraud, embezzlement and mismanagement became a regular occurrence in the United Way organization since that time.

Why Elaine L. Chao has not yet been fired as Labor Secretary, it is a mystery to me. In my opinion, she is doing as poor of a job as Labor Secretary of the United States, as she did as president of the United Way of America. I am not surprised that the Labor Department under Ms. Chao's management is consistently producing data about the unemployment rate in the United States that can be considered nothing more than garbage. The 3.5 million jobs that disappeared from the US economy since January 2001, leaves no doubt that she is an inefficient Labor Secretary, and should be replaced immediately.

George W. Bush and his administration are not losing credibility only at home. The Bush administration has consistently been losing credibility around the world about everything, and they raised the bar regarding government incompetence. I believe that when George W. Bush loses the election in 2004, he will leave such wreckage behind for the next administration, that not even a smart man with the skills of an extraordinary President such as Bill Clinton, would be able to fix the mess.

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skills of an extraordinary President such as Bill Clinton

Oddly, no one can seem to remember what Clinton did except for having an illicit affair with a government employee in a government office, sexually harassing his employees and then lying under oath about it. Even the Sierra Club called him a do-nothing.

Yeah, we need more great presidents like Clinton and Nixon.

Monday, 15 January, 2001, 12:47 GMT

Bill Clinton's economic legacy


By BBC News Online's Steve Schifferes

President Bill Clinton will leave office with the longest boom in US history still intact.

But the rapidly slowing economy will leave questions for his successor about how to manage the downturn.

Mr Clinton also leaves the legacy of a huge and growing budget surplus, the product of years of bitter battles between Republicans and Democrats.

Clinton's achievements

Longest boom in US history$4,000bn budget surplusTrade deals with China, NAFTA

But the very size of the surplus has provoked an even bigger debate, with a fierce controversy over how much of it should be used to cut taxes, how much for spending increases or reductions in the national debt.

Clinton's failures

Collapse of Seattle trade talksGrowing inequalityNo long-term reform of social security or Medicare

Mr Clinton's most enduring legacy is likely to be the economic boom which began shortly before he took office in 1992.

Fed boss Alan Greenspan: During the eight years of the presidency, the economy expanded by 50% in real terms, and by the end of his tenure the US had a gross national product of $10,000bn - one quarter of the entire world economic output.
The booming US economy has brought economic benefits right across the income spectrum.

The unemployment rate has dropped by half, to 4%, a 40-year-low, while the economy has created some 23 million jobs.
The stock market grew even faster - by more than three times - creating thousands of millionaires among middle class stockholders, and employees of fast-growing companies like Microsoft - before the high tech index, the Nasdaq, fell back sharply this year.

It was only in the last few years of the boom that economic growth percolated down, as average wages began to rise and unemployment fell among minority communities.

Some of the policies he embraced, such as the expansion of the earned income tax credit, were designed to redistribute money to working families.

The booming economy and strict controls over government spending has meant that Mr Clinton also leaves office with the public finances in their strongest shape for decades.

The Office of Management and Budget is projecting a surplus of $5,000bn over the next 10 years, enough to pay off the entire Federal debt and fund Social Security, the state pension scheme, for several more decades.

But that position has been reached after a long political struggle.
Mr Clinton decided early in his term of office that debt reduction, rather than tax cuts, was the best way to preserve economic growth.

That policy, backed by Mr Greenspan, contributed to the close working relationship that developed between the Fed and the US Treasury - but left little scope for redistribution.

It also set the scene for a confrontation between Mr Clinton and Congressional Republicans over what spending to cut in order to reach a balanced budget.

After two government shutdowns when agreement could not be reached on the budget, one that lasted nearly six weeks, Mr Clinton appeared to win the battle - and the 1996 election.

Saving Social Security

Mr Clinton did manage to preserve spending on certain key programmes, most notably the huge and popular entitlement programmes for the elderly, Social Security and Medicare.
"Save social security first" was the motto coined by President Clinton in the midst of the budget struggle, and he has succeeded in ensuring that at least part of the government surplus will be reserved to fund the future deficits of these programmes.

The Fed's interest rate cuts in 1998 also helped stabilise the world financial system and prevent the Asian crisis spilling over into a global catastrophe - at the cost of increasing imports to the US even further.

Many observers credit Alan Greenspan, the Fed chief, rather than President Clinton, with the careful management of the economy.
However, it was the effective alliance between the US Treasury and central bank which cemented the boom.
Mr Clinton's populist instincts were effectively reined in by the tyranny of the bond markets - and low interest rates helped cut the deficit as well as boost spending.
But on trade, Mr Clinton never succeeded in overcoming the reluctance of his own party to endorse his "New Democrat" free trade position, leaving trade policy more polarised than ever.

Yes, Alan Greenspan did some good things. Clinton's budgets were largely DOA when he sent them to the Republican-controlled Congress. Congress is in charge of revenues and spending so they did do a good job of balancing the budget.

But what did Clinton actually DO? Besides play happy with a government intern and sell the White House to corporate interests via coffee meetings and international junkets. And give China our nuclear secrets in exchange for campaign contributions.