Monday, November 10, 2008

NY Post Reviews 10 Celebrity Charities and Finds Eyebrow-Raising Business Practices

The New York Post reports that George Clooney, Bono, Wyclef Jean, Petra Nemcova and a half-dozen other celebrities have founded charities that have some eyebrow-raising business practices.

Jean's charity to help Haitians has allegedly failed to file tax returns for eight years. Bono's mega-foundation is reported to have chartered a plane to Africa and bought tickets for a U2 concert.  Poker lover George Clooney allegedly took donations from a dubious online card-games company. And Giant Super Bowl hero Osi Umenyiora is reported to have dropped the ball when it comes to even registering his charity to benefit Africa and research into Alzheimer's disease.

"You need to have people managing the organization that are well versed in the letter of the law," said Bennett Weiner, CEO of the Better Business Bureau's Wise Giving Alliance. "Just because a celebrity is associated with a charity doesn't mean they are doing any of this."

Below are the 10 celebrity charities that raised red flags, according to a Post examination of federal tax forms and other records, and the alleged shorcomings:

1.) Yele Haiti (Wyclef Jean Foundation)

Wyclef Jean's charity aims to address educational, environmental and emergency-relief issues in his native Haiti, but has not filed a US tax form since 2000.  An insider at the charity told The Post that where the money goes in Haiti is a mystery and the Charity President Hugh Locke said, "We are in arrears in our filing." He said that large donations go directly to projects in Haiti, where the organization is registered as a charity and the missing IRS documents would be filed by the end of the year. The forms are required to allow them to receive donations that can be tax deductible and to avoid paying taxes on their donations. The charity also has not completed the required New York state registration, according to Attorney General's Office records. Meanwhile, Jean owes the state of New Jersey $183,172 in personal income tax, a sum Jean's spokesman said last month the singer was in the process of paying.

2.) George Clooney's Not On Our Watch

George Clooney leads the Hollywood outcry against genocide in Darfur and his group also provides humanitarian aid and raises awareness of human-rights issues in Sudan and Burma. But Clooney's charity, which lists Don Cheadle and Matt Damon as founders, has a contractual relationship with an offshore company that conducts poker games on the Internet to raise funds for the charity. The company, Rational Services Limited, is incorporated on the Isle of Man, off the coast of England. Such companies operate in a legal gray area. In registration documents filed last year with the New York attorney general, Not On Our Watch requested its contract with the gaming company "not be subject to public inspection." Although the AG does not require such information, one expert on charities and IRS law said he had never seen a tax-exempt organization list an offshore gambling enterprise as a donor. The charity's executive director, Alex Wagner, would not reveal the nature of the relationship with Rational Services Limited, other than to say it donated $1 million to Not On Our Watch. "They were very generous to us and gave us a donation that has gone on to do a lot of good in Darfur," Wagner said.

3.) Osi Umenyiora's Make Plays for Africa, Strike 4 a Cure

The Giant star defensive end started a foundation called Make Plays for Africa and a sister group, Strike 4 a Cure, to raise money for research into AIDS and Alzheimer's disease two years ago. But their annual celebrity bowling tournaments were financial failures, and it came to light in news reports last summer that the groups did not have tax-exempt status, as they claimed. Umenyiora's brother, Jim, director of Make Plays for Africa, said he would cancel further events and shut down the Web site. Until recently, however, Umenyiora's personal Web site solicited "sponsorship packages" for Strike 4 a Cure, and the charity's Web site still solicits donations. The Make Plays for Africa site has been shut down. Umenyiora's manager did not return calls for comment.

4.) Tyra Banks' TZONE Foundation

The supermodel and talk-show host recently set up this Los Angeles-based organization to help disadvantaged teenage girls - starting with running "self-esteem camps," then shifting focus to funding other groups that empower young women. But in 2006, the group blew more cash on salaries and internal costs ($34,611) than it gave out in grants to community groups ($31,900). Meanwhile, it listed a questionable expense of $4,255 as "benefits paid to or for members" on its tax forms. The charity said that it was in a transition period in 2006 and that the $4,255 benefits expense was misidentified on the form and was actually money for employee benefits.

5.) Bono's DATA (Debt, AIDS, Trade, Africa) Foundation

The U2 frontman lends his megawatt star power to this advocacy group to help bring an end to AIDS and poverty in Africa. The Washington, DC-based group - now known as One - took in an eye-popping $31 million in 2006 but spent just $6 million on its work. Among its outrageous expenses were a $272,700 bill to charter a plane, a $117,838 tab for "transportation and security" and $8,740 for U2 tour tickets. Kathy McKiernan, a spokeswoman for Bono's organization, said the group chartered the 737 to fly journalists and others on a 10-day "learning and awareness-raising trip" to seven African countries in May 2006. DATA was reimbursed for the majority of the costs from the media, she said. "Our policy is to take security and a camera crew to shoot video for use in our advocacy work with us on all Africa trips we do," she added. She said the concert tickets were distributed to DATA's supporters and elected representatives in Washington. McKiernan said the lawmakers were asked to reimburse the charity if the ticket price was more than $50, to comply with congressional ethics rules. Most of the $31 million raised was in grant form and will be paid over several years, with just $8 million coming in 2006, McKiernan said. Bono has never disclosed how much he gives to his own charity, but McKiernan said the rock star covers all of his own travel-related expenses.

6.) Petra Nemcova's Happy Hearts Fund

After surviving the 2004 tsunami in Thailand by clinging to the top of a palm tree, the supermodel wanted to pay it forward by founding a charity to build schools in Latin America and Indonesia. Instead, it seems an outrageous portion of the donations have gone for lavish parties at Cipriani. According to the most recent tax filing, for 2006, the organization spent more than half of its funds on administration and fund raising, including its annual star-studded Heart of Gold ball, and gave nothing in aid. Glen Nordlinger, a director of Happy Hearts Fund, said the group raised $4.5 million in 2007 and spent $2.1 million on programs, including building schools - though the charity has not filed its 2007 paperwork yet. But even those figures raise red flags with charity watchdog groups, which use the almost universal standard that a well-run charity should spend 65 to 75% of its donations helping people. Still, in November, Happy Hearts will host a Masquerade in Venice dinner at Cipriani Wall Street and will honor "His Excellency" Wyclef Jean, according to the invitation.

7.) Larry King Cardiac Foundation

The CNN talk-show host and heart-attack survivor raises funds for heart operations for poor patients. But the charity spent $2.3 million on salaries, supplies, advertising, program expenses and gala dinners in LA and Washington, DC, in 2006, much more than the industry standard of 10% for fund-raising. Meanwhile, King employs his son, Larry King Jr., as the organization's CEO at a $200,000 salary - a hefty raise from the $66,667 he was paid when first appointed in 2004. Junior's current salary blows away the standard 3% of total expenses recommended as the ceiling for a CEO salary. Family members on charity boards are also a red flag. "I'm afraid that this just doesn't pass the smell test," said Sandra Miniutti, vice president of marketing for Charity Navigator, a leading charity watchdog group. King Jr., 46, said that the charity has only three employees and that he wears many hats. "I am not your typical CEO or president," he said. "I do everything, and I agreed to take this on because I really wanted to help my father." The group didn't respond to requests for financial information from the charity division of the Better Business Bureau, which asked for it after receiving calls from potential donors who wanted more details on the organization.

8.) Gary Payton Foundation

The retired Seattle SuperSonics point guard established this Seattle-based charity to give out scholarships to needy children. But the organization gave out only $12,937 - while it spent $101,620 on management and administration in 2006. It spent more than half of its donations on the salary of its executive director - $65,000 - that year. A spokesman for the charity would not comment.

9.) Dyan Cannon's Operation Outlook

The actress is the "international executive spokesperson" of this Everett, Wash.-based group that tries to find runaways and missing children. The charity spends 68% of its $2.4 million budget on its relentless telephone solicitations - but workers have been accused of posing as representatives of a better-known child-finding agency to raise funds. The accusations say phone solicitors misrepresented the group in telephone solicitations as the National Center for Missing and Exploited Children, a highly regarded charity. "One overanxious caller can make statements like that, and we just can't be responsible for everything," said a spokeswoman for Operation Outlook. The charity has also rebuffed repeated requests to provide its financial information to the Better Business Bureau.

10.) Magic Johnson Foundation

The retired basketball legend raises AIDS awareness and helps patients. But the group has spent large amounts on administrative costs ($712,825 in 2006) that are almost equal to the amount it gives to the cause ($714,029). The foundation's president, Towalame Austin, acknowledged the issue and said the group had looked to reorganize. She said new filings should reflect a turnaround in the amount going to the needy.

SS

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Comments

An excellent reason to implement a low flat tax with no deductions and no exemptions.

Posted by: cubanbob | Nov 13, 2008 10:31:43 AM

Question of the Day #1:

How many of these celebrities voted for Obama?

Question of the Day #2:

Given the apparent business practices of these charities, is it any wonder their founders consider Obama's campaign fund-raising shenanigans are "no big deal"?

Posted by: MarkJ | Nov 13, 2008 11:34:55 AM

George Clooney appeared with Obama at a panel on Darfur in 2006 and contributed $2300 to his campaign. Tyra Banks also donated $2300 to Obama's campaign. Wyclef Jean publicly endorsed Obama. Magic Johnson was a Hillary Clinton supporter and campaigned on her behalf. Bono did not endorse any candidates.

Here is a list of celebrity donors and the candidates they chose to donate to: http://www.usatoday.com/news/politics/2008-01-13-CelebDonorSide_N.htm

Here is an article reporting on celebrity responses to Obama's victory: http://www.huffingtonpost.com/2008/11/05/celebrities-react-to-obam_n_141305.html

Posted by: SS | Nov 21, 2008 3:04:37 PM

well, hosnestly, i am shocked.
shock # 1: Does every single celebrity has got his own charity foundation? Don't get me wrong, i like the fact that they want to help other people. I just didn't know that ;)

shock # 2: I cannot believe that there is so much fraud going on, especially in this business where the aim is to help other people. Honestly, you cannot spend 700.000$ for administrative costs when you only have the same amount to spend...

As i already said, i'm shocked...

Sebastian.

Posted by: Sebastian | Jan 14, 2009 3:46:58 AM

That's what the crab mentality of every person under administrative. I like the fact that they look up to help other people, but not spending to much for the administrative cost.

Posted by: Christmas Bands | Sep 25, 2009 4:11:01 PM

hope they really want to help,.not only do charities coz they want their name to be recognize,.!!

Posted by: lea | Nov 2, 2010 3:52:14 PM

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