The Volokh Conspiracy - Which Non-Profits Are Accountable?

The NYT reports on how two non-profit organizations — ACORN and the Points of Light Foundation — responded to the discovery of embezzlement or other financial irregularities.

Acorn chose to treat the embezzlement of nearly $1 million eight years ago as an internal matter and did not even notify its board. After Points of Light noticed financial irregularities in early June, it took less than a month for management to alert federal prosecutors, although group officials say they have no clear idea yet what the financial impact may be.

A whistle-blower forced Acorn to disclose the embezzlement, which involved the brother of the organization's founder, Wade Rathke.

The brother, Dale Rathke, embezzled nearly $1 million from Acorn and affiliated charitable organizations in 1999 and 2000, Acorn officials said, but a small group of executives decided to keep the information from almost all of the group's board members and not to alert law enforcement.

Dale Rathke remained on Acorn's payroll until a month ago, when disclosure of his theft by foundations and other donors forced the organization to dismiss him. . . .

Wade Rathke stepped down as Acorn's chief organizer on June 2, the same day his brother left, but he remains chief organizer for Acorn International L.L.C.

He said the decision to keep the matter secret was not made to protect his brother but because word of the embezzlement would have put a "weapon" into the hands of enemies of Acorn, a liberal group that is a frequent target of conservatives who object to its often strident advocacy on behalf of low- and moderate-income families and workers.

Wade Rathke is right. It doesn't look so good for ACORN.

By contrast, consider what happened at the Points of Light Foundation:

Officials at Points of Light began looking into complaints about a store the organization operated on eBay and by late June had discovered what its president and chief executive, Michelle Nunn, called "abnormalities" in the business practices of an independent contractor hired to run the store, which did a brisk business auctioning travel packages and items donated to the organization.

The travel auctions were stopped immediately, Ms. Nunn said, and the store was shut down a short time later. Points of Light also posted a statement on its Web site last weekend about the problems and contacted the United States Attorney's Office in Washington, as well as people who had bought the travel packages.

	[Jonathan Adler, July 9, 2008 at 10:42am] Trackbacks Which Non-Profits Are Accountable? The NYT reports on how two non-profit organizations — ACORN and the Points of Light Foundation — responded to the discovery of embezzlement or other financial irregularities. Acorn chose to treat the embezzlement of nearly $1 million eight years ago as an internal matter and did not even notify its board. After Points of Light noticed financial irregularities in early June, it took less than a month for management to alert federal prosecutors, although group officials say they have no clear idea yet what the financial impact may be. A whistle-blower forced Acorn to disclose the embezzlement, which involved the brother of the organization's founder, Wade Rathke. The brother, Dale Rathke, embezzled nearly $1 million from Acorn and affiliated charitable organizations in 1999 and 2000, Acorn officials said, but a small group of executives decided to keep the information from almost all of the group's board members and not to alert law enforcement. Dale Rathke remained on Acorn's payroll until a month ago, when disclosure of his theft by foundations and other donors forced the organization to dismiss him. . . . Wade Rathke stepped down as Acorn's chief organizer on June 2, the same day his brother left, but he remains chief organizer for Acorn International L.L.C. He said the decision to keep the matter secret was not made to protect his brother but because word of the embezzlement would have put a "weapon" into the hands of enemies of Acorn, a liberal group that is a frequent target of conservatives who object to its often strident advocacy on behalf of low- and moderate-income families and workers. Wade Rathke is right. It doesn't look so good for ACORN. By contrast, consider what happened at the Points of Light Foundation: Officials at Points of Light began looking into complaints about a store the organization operated on eBay and by late June had discovered what its president and chief executive, Michelle Nunn, called "abnormalities" in the business practices of an independent contractor hired to run the store, which did a brisk business auctioning travel packages and items donated to the organization. The travel auctions were stopped immediately, Ms. Nunn said, and the store was shut down a short time later. Points of Light also posted a statement on its Web site last weekend about the problems and contacted the United States Attorney's Office in Washington, as well as people who had bought the travel packages.