Friday, March 28, 2008

Nonprofit CEO Gets Six Months Jail and Probation: Nonprofit Ethics Erode Nationwide

According to the Houston Chronicle, Texas state court this week sentenced the former director of the Sickle Cell Association of the Texas Gulf Coast to six months in jail and 10 years probation for his theft of nearly $400,000 from the exempt organization:

Kenneth Garrett Beatty, 42, was placed on 10 years' probation and ordered to serve six months in the Harris County Jail. A jury in state District Judge Susan Brown's court convicted Beatty last week of a lesser offense of third-degree felony theft, rejecting the original charge — theft of more than $200,000 — which could have landed Beatty in prison for life.  A second defendant, Willie Carlean Cruse, 49, of Crosby, who previously served as the agency's financial director, has already pleaded guilty to theft of more than $200,000 and will be sentenced by Brown next month.

We have previously blogged the recent rash of private inurement and excess benefit amongst nonprofits and whether those activities ought to more often be treated as crimes.  Meanwhile, a study by the Ethics Resource Center indicates that ethical standards at nonprofit organizations are declining, according to a report in the Chronicle of Philanthropy.

Rates of observed misconduct at nonprofit organizations are at the highest level since the Ethics Resource Center began measuring in 2000. In 2007, more than half — 55 percent — of nonprofit employees observed one or more acts of misconduct in the previous year. Twenty-four percent of nonprofit employees observed their co-workers putting their own interests above those of the organization. Twenty-one percent observed managers or executives lying to employees. Nearly one in five employees — 19 percent — reported that they had seen abusive behavior or that they had seen co-workers misreporting the number of hours they had worked.

The full report, entitled the National Nonprofit Ethics Survey, is available online (after free registration).  A third report described in separate Chronicle of Philanthropy report indicates that most cases of insider bad behavior could be prevented if nonprofits adopted better internal controls. "Most cases of employee fraud at charities stem from a lack of proper internal controls that deter theft, and those cases are further compounded by lax efforts to recover financial losses when the fraud is discovered, according to a new study."

dkj

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