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Former CFF Employee To Be Sentenced In Wire Fraud Case

A former employee of the Cystic Fibrosis Foundation (CFF) faces up to 20 years in prison when he is sentenced next month for wire fraud in connection with a 2014 murder-suicide.

Lowell Meredith Sherman, 49, of Rockville, Md., pleaded guilty to wire fraud conspiracy in a scheme to defraud the Bethesda, Md.-based nonprofit. The guilty plea was announced last December by U.S. Attorney for the District of Maryland Rod Rosenstein; Montgomery County Police Chief J. Thomas Manger, and Postal Inspector in Charge David Bowers of the Washington Division of the U.S. Postal Inspection Service.

Sentencing was postponed from February and then October but is tentatively scheduled for Dec. 6, according to a spokesperson from the U.S. District Attorney’s Office for Maryland. It’s possible that it could be postponed again.

Sherman was employed at “a nonprofit in Montgomery County Maryland” from 2005 through January 2010 and again from June 2013 through October 2014, according to the plea agreement. The U.S. District Attorney’s Office does not identify crime victims. Between April 2011 and August 2014, Sherman and a co-conspirator – believed to be Andrew Racca – purchased unneeded electronic devices, including hard drives and memory tapes, without authorization. The two later sold them online, using email to communicate with potential buyers and used online payment companies to accept payment and distribute the payments among themselves.

Sherman was director of enterprise applications and Racca was a senior systems engineer and director of network operations at Cystic Fibrosis Foundation. Racca was suspected of murdering the wife of a CFF executive who confronted him about the theft before killing himself in October 2014.

According to a press release from the U.S. Attorney’s Office, the total loss as a result of Sherman’s conduct was estimated to be $292,593.75. Sherman admitted the amount of loss “reasonably foreseeable” to him was at least $120,000. The exact amount of loss will be determined at sentencing and as part of his plea agreement, Sherman agreed to a restitution order in that amount.

Through a spokesperson, CFF said it’s continuing to cooperate with the U.S. Attorney’s Office in Greenbelt, Md., in support of prosecution of any individuals who broke the law, and directed questions to the United States Postal Inspection Service. The foundation recovered $1.1 million of the misappropriated funds through its insurance company, she added.

Cystic Fibrosis Foundation reported a “significant division of assets” on its IRS Form 990 for the Fiscal Year Ending 2014: “During the year, the organization’s internal controls detected misappropriations of foundation assets, which amounted to approximately $1.47 million. The misappropriations were carried out from 2010 to September 2014, with approximately $1.233 million of the losses incurred between January and September 2014. That fiscal year, the foundation reported revenue of $3.3 billion, much of it the result of selling future royalty rights through one of its affiliates. A more typical revenue level in the past was closer to $300 million.

Misappropriations involved IT equipment stolen by two employees and fraudulent invoicing by a vendor and employee, according to the Form 990. “Upon discovery, the foundation immediately notified the audit committee of the board of trustees who engaged an independent law firm to investigate the schemes. The individuals involved are no longer employed by the foundation and the foundation has terminated its business relationship with the vendor involved in the fraudulent invoicing. The foundation is cooperating with law enforcement officials in support of prosecution of any individuals who have violated the law. The foundation has filed claims with its insurance company and corrective actions have been instituted.”

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