N.Y. Shuts Sham Leukemia Charity

December 22, 2015       Mark Hrywna      

A sham leukemia charity run out of the basement of a Brooklyn, N.Y., home will shut down and its founders barred from ever running another United States-based nonprofit. Other officers will be barred from running or soliciting for any New York charities under a settlement agreement with the New York Attorney General’s Office. The settlement is subject to court approval.

Attorney General Eric Schneiderman announced the settlement with the National Children’s Leukemia Foundation (NCLF) recently after last summer filing a nine-count petition against the charity in Kings County Supreme Court. The Charities Bureau canceled its registration on March 26.

Schneiderman originally sought to recover $9.7 million through alleged fraudulent representations by the NCLF, its founder, its president, its vice president, who’s the founder’s son, and its auditor. Of the $9.7 million raised by the so-called charity between 2009 and 2013, $8.9 million was solicited by professional fundraisers that were paid $7.5 million – 83 percent of the funds raised.

NCLF was created in 1991 and Zvi “Steve” Shor served as until 2010 when he resigned in response to disclosure of a 1999 felony conviction for bank fraud. Yehunda Gutwein, a certified public accountant (CPA), was appointed president after that. Schor’s son, Shlomo Shor, 43, became a director and vice president but authorities said he did nothing more than sign checks and forms as ordered by his father. Auditor Shlomo Donn must report the identities of any nonprofit clients to the attorney general’s Charities Bureau for the next three years.

Gutwein, 58, admitted that he had little or no knowledge of the organization’s programs and had never visited its offices the three years he was president, according to the agreement. NCFL pretended that it had a functioning board of directors, falsely listing board members on its tax forms.

Despite having the title of vice president, Shlomo Shor was unaware of the organization’s programs or finances while Donn’s reports did not meet basic auditing standards. Neither Gutwein nor Shor had direct knowledge of or ever communicated with a compensation committee despite the 2010 Form 990 stating that salaries were determined and voted on by such a committee.

The attorney general’s office will recover $380,000, most of which will be directed to charities helping children with leukemia. The 64-year-old founder forfeited claims to an additional $612,844 in back pay, in addition to a claim to a lifetime pension and other benefits.

After stepping down in 2011, Shor presented Gutwein with an Employment and Compensation Agreement, which spelled out that Shor would serve as “founder and senior advisor” for 10 years with an annual salary of $134,804, plus a guaranteed 4 percent increase. Upon retirement, or in the event he was fired even for cause, Shor would receive a lifetime pension, payable each year at a rate of either 79 percent or 85 percent of his salary in the final two years of employment, medical insurance for life and $612,844 allegedly owed for back pay, according to court documents.

Fundraising solicitations by NCLF claimed that it had medical expertise to provide services to sick and terminally ill children, operating a cancer research center, bone marrow registry and umbilical cord blood bank. It also promoted a “Make a Dream” program for terminally ill children but in several years did little more than donate one laptop computer to a child and sent another to Disney World, according to authorities.

The Charities Bureau said the investigation into NCLF was developed through its annual “Pennies for Charities” report, which looks at charitable donations obtained by professional fundraisers that are largely spent on fundraising and administrative expenses.

NCLF gets a 1-star rating from Charity Navigator. Total revenue peaked in 2010 at $4.3 million, with assets eclipsing $1 million, and has declined each year since, falling to $468,645 last year with net assets of $300,833.

Southfield, Mich.-based Associated Community Services (ACS) was paid $1.3 million by NCLF last year for “solicitation” while the charity received $260,443, according to its tax forms. Champlain, N.Y.-based Insight Fundraising was paid $799,005 and Atlanta-based Jak Productions was paid $176,889 for the same.