General Ramblings: Skeletal Remains

April 1, 2008       Paul Clolery      

“We take our horrible mutilations seriously around these parts.” Ranger Brad — The Lost Skeleton of Cadavra 1991

It would be easy to pile on poor Eliot Spitzer. But, let’s do it anyway. Let’s throw in Mark Everson, too. Let’s finish up with Dean Zerbe.

In the case of the former governor of New York, Spitzer, and the former IRS commissioner and American Red Cross CEO, Everson, it is amazing how the righteous have fallen. The issue is not their sexual exploits that got them tossed from their respective Ivory Towers. It is how they skewered charities and roasted them over the hot coals of negative media attention.

They were smug, arrogant and held opinions based on very little real meat. Use one headline to grab another, seemed to be the method of bludgeoning the sector into semi-submission. It’s the arrogant intolerance department where Zerbe fits in. His work with the Senate Finance Committee helped to paint charity executives as bad guys. Now he’s cashing in by opening a Washington, D.C., office of Alliant Group, an organization that helps clients work the tax code to their own advantage.

While New York state’s attorney general, Spitzer attempted to force Sarbanes-Oxley type regulations on even the smallest charities. He demanded transparency and wanted expensive opinion letters from accountants on charities with revenue of as little as $40,000. Eventually, he relented and the number went to $100,000. Thankfully, it never passed.

Of course, those who opposed him were subjected to threats and accusations that they had something to hide. Come to think of it, an audit of a charity with revenue of $100,000 in New York would cost between $5,000 and $8,000, basically what Spitzer reportedly paid a young hooker for one night in Washington, D.C. He reportedly spent $80,000 on his personal “youth charities” during the eight months previous to being caught. That’s more than a nonprofit CEO gets paid in organizations with revenue of less than $1 million, according to the latest salary data in the 2008 NPT Salary Survey.

It was Spitzer’s shuffling of money through multiple accounts — an attempt at being opaque — that got the IRS looking at him and brought him down.

We all know Everson’s story. He was fired for having an affair with a chapter executive who is reportedly pregnant as a result. He had spent the better part of the previous several years scolding sector executives about their behaviors and what they did during business hours. When he was tossed to the curb, the organization he was running had a deficit of roughly $200 million, a rounding error that is just $7 million less than the total public support reported during 2007 by the Planned Parenthood Federation.

Zerbe had been Sen. Charles Grassley’s (R-Iowa) personal pitbull. Known for his rambling verbal assaults on the sector and donors who use donor-advised funds, he’s now cashing in on making best use of the laws he helped to craft. It’s not illegal, but it should be. There should be at least a couple of years between writing the laws and helping the well heeled work their way through the system.

The point is that the vitriolic nature of the intercourse between some regulators and the sector was not productive. Often sector executives believed they had to play ball with regulators to prevent broader regulation. It turns out the mighty had clay feet or possibly other motives. There is nothing wrong with regulation. It’s admirable that sector leaders have picked up the challenge of self-regulation and tighter operating standards.

But, the next time regulators ride into town claiming that charity executives are either incompetent boobs or possibly criminals, hand them a copy of the cartoon that accompanies this column.   NPT

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