Feed The Children Sued By Former CEO
April 13, 2017 Mark Hrywna
Feed The Children (FTC) is under fire again, this time by the short-lived CEO who leveled accusations about the board’s oversight in a lawsuit filed this week. Former Congressman J.C. Watts directed his concerns to the Oklahoma Attorney General’s Public Protection Office in October weeks before a joint announcement that he would no longer be chief executive.
The seven-page complaint was filed in District Court of Oklahoma County and seeks a jury trial, $75,000 in damages as well as punitive damages and attorney’s fees. The suit also names six members of the board of directors as defendants.
Watts contends that the board misrepresented the strength of Feed The Children, assuring him that “well-publicized problems of the past” had been corrected. The former Oklahoma football star was recruited to be president and CEO in November 2015, meeting with the board’s search committee, and ultimately accepting the position as of February 2016.
Shortly after joining Feed The Children, Watts said he discovered “many internal management and financial problems,” as well as irregularities and problems in operations. Several times he requested to meet with the board to discuss the issues to not avail, according to the lawsuit, so he detailed his concerns and requested a meeting in a Sept. 27, 2016 letter to the board.
When the board took no action on his concerns, Watts alerted the state Attorney General’s Office on Oct. 18 and informed board member Mike Hogan of his missive on Nov. 3. The next day, Watt was terminated after a special board meeting “in retaliation for making the allegations known to the AG and the FTC Board of Directors.”
An email and voicemail message seeking comment from Feed The Children officials have not been returned. In an email late Wednesday, a spokesperson for the organization said Feed The Children does not comment on pending lawsuits.
Among the concerns Watts alleged are:
- Failure by the board to perform due diligence and uphold fiduciary responsibilities, including improper contracting practices, failure to evaluate return on investment (ROI) and competitive market rates, excessive executive-level salaries, conflict of interests, and failure to properly investigate allegations of wrongdoing.
- Unanimous board approval of more than $1.8 million in upfront investments for Christian artist contracts without evaluation of ROI and payments to artists, including marriage therapists and comedians, who never fulfilled the requirements of contracts or completed performances. Funding was secured through loans and artists were allowed to charge fees to venues as well.
- The Christian artist groups were not registered to legally fundraise on behalf of the organization.
- More than $2 million spent under a contract with a direct marketing firm that did not include cost of postage, ROI evaluation or market competitiveness analysis.
- Chief Operating Officer Travis Arnold’s salary was increased by $6,000 while he served as interim CEO but not reduced after Watt was hired, leaving a salary in excess of $300,000. Arnold has served as interim CEO each time there’s been a CEO vacancy during the last decade and is currently serving in that position until a permanent CEO is appointed. He also is president of FTC Transportation, Inc., a for-profit trucking company that Watt said in his lawsuit poses potential conflicts of interests because the charity’s budget retains some control and has the same registered agents. The board refused to provide any information after he inquired about the relationship, the lawsuit alleges.
The AG’s office has referred the matter to Oklahoma County District Attorney David Prater because recently appointed Attorney General Mike Hunter served as Watts’ chief of staff during his time in Congress. Hunter was appointed in February after Scott Pruitt was confirmed as head of the Environmental Protection Agency (EPA).
Feed The Children has experienced some tumultuous years recently, with the ouster of founder Larry Jones and subsequent lawsuits amid a power struggle at the organization. Jones was terminated before being voted off the board in 2010, ultimately receiving payment of $800,000 as part of a settlement reached in 2011.
During a transition period, former American Heart Association CEO Cass Wheeler served as CEO before Kevin Hagan was hired as the permanent chief executive. Things were relatively quiet during his three-year tenure and Hagan left two years ago to become CEO at American Diabetes Association in Arlington, Va.
Feed The Children reported $468 million in total revenue for the fiscal year ending June 2016, according to the most recent federal Form 990 filed in February. About $413 million, or 88 percent, of the total was reported in noncash contributions, such as food, hygiene supplies, books and publications, and drugs and medical supplies. Hagan received total compensation of $252,780 in the most recent fiscal year, but that was not a full year’s salary. The total included $111,980 in base compensation, $75,000 in bonus and incentive, and $56,796 in other reportable compensation.