April 17, 2008
Two NY City Council-Persons Indicted for Nonprofit Scam
Two N.Y. City council person aides were indicted yesterday for their fraudulent involvement with nonprofit organizations in the big apple, according to a report in today's N.Y. Times. At a press conference yesterday, the Assistant U.S. attorney indicated that a lack of nonprofit transparency contributed to the fraud and that phony nonprofits seemed to be a common modus operandi of city council people in New York:
“Without transparency and accountability in a budget process, discretionary items are ripe for abuse,” Mr. Garcia said. “Taxpayer money allocated to fake non-profit entities–organizations that do not even exist–is even more difficult to trace and more easily diverted for personal gain. This investigation will continue to take a hard look at this process, scrutinizing those allocations most vulnerable to abuse by those in position of public trust.”
Ms. Gill Hearn said a new unit set up by her office to examine nonprofits receiving city funds now has over thirty active cases.
She said the cases, “demonstrated corruption vulnerabilities that were thriving because of obscure processes and lax and non existent oversight.” She added, “Along with our colleagues at the U.S. Attorney’s Office, last year we decided to do a proactive comprehensive look at the award, allocation and tracking of council discretionary funding. In short order we discovered that our concerns were well founded. We found the council’s use of fictitious organization as a place to park millions of dollars worth of discretionary funding creating obscurity with respect to the origin, destination, purpose and benefactors of that funding.”
The charges come just days after disclosures that the office of the City Council speaker, Christine C. Quinn, had appropriated millions of dollars to nonexistent organizations, instead of routing the money to organizations favored by individual council members. The accounting sleight-of-hand allowed Council members to later tap the funds for projects without getting approval from the mayor, but no allegations have yet been brought forward that it was used to misappropriate funds. Mr. Garcia would not answer questions about whether allocation the money to fictitious organizations was a crime. Neither would he say whether Ms. Quinn was a target of the ongoing inquiry.
The indictment is available here: Download NYnonprofitindictment.pdf. At least when the nonprofit is operated to support the truly poor and needy, as in this case, there ought to be some serious sentence enhancements.
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