Sex Scandal Clean-Up Continues At American Red Cross

November 29, 2007       Paul Clolery      

The American Red Cross (ARC) is undertaking a forensic audit of money spent by deposed Chief Executive Officer Mark Everson to determine if any of the charity’s money was used inappropriately as he romanced a married female subordinate who is now reportedly pregnant.

Everson, whose salary was $500,000, will receive nothing from the organization in terms of termination pay, said Carrie Martin, an ARC spokeswoman. “There is no severance package. The board has offered Mr. Everson a contribution (under $10K) to assist with medical insurance costs,” Martin responded via email to questions from The NonProfit Times.

The organization just started the review, according to sources. “The board members are livid,” said one ARC staffer with direct knowledge of the situation. “If he spent a dime, or bought a dinner, they are going to want it back.”

According to Martin, “As a matter of due diligence, the Red Cross has been reviewing sources that may potentially unearth evidence of financial or other impropriety. No evidence to suggest this has been found. … Therefore, we cannot speculate as to what actions the organization would take if any were found.”

Everson, 53, married with two adopted children, resigned Nov. 27 during a conference call with the ARC board. He had been on the job just six months. A senior staff member brought the situation to the board nine days earlier. The investigation was not initiated because of a complaint from the female subordinate.

And although the board was given notice of the relationship just nine days earlier, sources inside the organization told The NonProfit Times that the relationship was not a well-kept secret. In fact, according to a staff member with direct knowledge of the situation, Everson’s inner circle had unofficially warned him he was in dangerous territory with the relationship.

The subordinate is a chapter executive in Mississippi. In an editorial decision, The NonProfit Times will not identify her in print.

Everson has not returned messages left on his cell phone. In a statement released by ARC, Everson said, “I am resigning my position for personal and family reasons, and deeply regret it is impossible for me to continue in a job so recently undertaken. I leave with extraordinary admiration for the Red Cross.”

The female subordinate will remain with the organization, said Suzy DeFrancis, ARC’s chief public affairs officer. The board has asked three members of Everson’s team whom he brought from the Internal Revenue Service (IRS) to stay with the organization and they agreed, she said. “Although this is difficult and disappointing news for the Red Cross community, the organization remains strong and the life-saving mission and work of the American Red Cross will go forward,” said ARC Chairman Bonnie McElveen-Hunter, in a statement.

Meanwhile, the nonprofit sector’s elite chief executives are reeling from the disclosure and forced resignation. Everson, the former commissioner of the IRS, had been an outspoken leader for governance, accountability and management transparency.

“I think this is very sad for ARC and for the entire sector. Based on their history it could take a year to name a successor,” said M. Cass Wheeler, chief executive officer of the American Heart Association in Dallas and co-convener of The Panel on the Nonprofit Sector. The panel was a multi-year initiative by Independent Sector in Washington, D.C., to provide a blueprint for accountability. “The Panel establishes high ethical standards and this behavior is not condoned,” said Wheeler.

Everson was the ARC’s eighth CEO or interim CEO in 12 years.

In terms of accountability, the ARC board got it right, executives said. “This is a good-news, bad-news story. The good news is the Red Cross board acted deliberately and transparently to address a governance problem. The bad news is that, once again, the Red Cross is in the spotlight with a negative story, which will continue to erode the public’s trust in major philanthropic organizations,” said John Graham IV, CAE, president & CEO, ASAE, in Washington, D.C.

According to Gary Bass, executive director of OMB Watch in Washington, D.C., “I think everyone has the same reaction, which is: This is shocking.”

Added Bass, “Of course this is bad for Red Cross. It’s bad for any organization; it’s bad for our sector; it’s bad for management/employee relations. So he should know better.”

H. Art Taylor, president and CEO of the BBB Wise Giving Alliance in Arlington, Va., said that this is a setback because, “The Red Cross was making many positive steps to improve the negative perception that the public has of the organization. … The team in place around Mark Everson was very strong, and a big reason why the organization was moving forward.”

Linda Crompton, president and CEO at BoardSource in Washington, D.C., called the situation “extraordinarily bad luck” for the Red Cross. “How do you prevent a kind of thing like this from happening? You do what you can do. You have a whistleblower policy in place, you do your due diligence when you’re hiring these people, and you do the reference checking, and you try to prevent this kind of thing from happening,” she said.

“What the board should be commended on is that they’ve taken swift action. Especially when you’re in the kind of situation that the Red Cross is in, the worst thing to do is to prevaricate and to delay taking any action. Because you know it’s going to be kind of devastating to you,” said Crompton. *** Senior Editor Mark Hrywna and Staff Writer Marla E. Nobles contributed to this story.

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