What A Sham! 61 Counts of Embezzlement and Conspiracy

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Just Because Its a Non-Profit – Don’t Use the Trust Model

The CEO of Chicana Service Action Center along with two other top executives were charged with 61 counts of embezzlement and conspiracy. All three executives are suspected of operating the non-profit with a sham Board of Directors spending taxpayer dollars.

Prosecutors stated that it appeared that the executives participated in a “billing scam” that defrauded the company of more than $8.5M over the last 11 years. Investigators are seizing as many assets as they can to pay back the public. All 12 locations that are affiliated with the non-profit including its headquarters have been shut down.

Investigators discovered that the former CEO was using public funds to accommodate her lavish life style that included the purchase of season tickets to the Dodgers and Clippers, expensive automobiles, vacation rentals and also chartering a yacht.

The non-profit provided services to the county’s most disadvantaged residents. After a review was conducted by the Department of Community and Senior Services it was reported that there appeared to be billing irregularities relating to invoices which sparked an investigation days later. It is alleged that the three executives created fraudulent files to support the invoicing as well as creating fraudulent Board of Director minutes to help boost the compensation of fellow executives.

Read the full story here.

Just Because Its a Non-Profit – Don’t Use the Trust Model

Establish an Audit Committee. Have the audit committee meet with auditors on an annual basis without management in the room. This helps to ensure that the necessary controls and independence are in place to catch any surprises.

Have Board only sessions. Its important for the Board of Directors to meet, confer and operate without the CEO. This will allow for more direct discussions such as CEO performance and executive compensations. It can also lead to sharing observations about suspicious behavior.

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