The wrong way to be a global-south non-profit: Part 2, arrogant ego kills
By: David A. Smith
[Continued from yesterday's Part 1.]
[I've constructed this multi-part post from three principal sources: the Guardian (21 Jan 11, Calibri), Newsweek (3 Apr 11, Georgia), and the New York Times (24 Mar 11, Arial). I sought and failed to obtain a copy of the Global Philanthropy Group (GPG) report mentioned below, which is not a public document – and that in itself a red flag for both Ms. Ciccone's charity and for the GPG itself. We will return to this in Part 3. – Ed.]
Sifting through the wreckage of Madonna (Louise Ciccone)’s unhappy foray into Sub-Saharan African development philanthropy, we saw yesterday that the proposed Malawian girl’s school was announced with the best of intentions and the most of publicity. That was only the beginning of its troubles. Worse still, given the organization’s thoughtlessness and lack of planning, all of them were utterly predictable:
D. Too much money, too little strategy
Any real estate developer who is not bankrupt knows that in structuring a transaction, whether new-build or acquisition, one always starts with the uses of funds – what the money will be used for – and not with the sources.
[Trevor Neilson of Global Philanthropy Group] said that an examination found that $3.8 million had been spent on the school that will now not be built, with much of the money going to architects, design and salaries and, in one case, two cars for employees who had not even been hired yet.
As this is the second message of Mr. Neilson, he deserves a proper introduction.
A written report by the Global Philanthropy Group, a copy of which was provided Thursday by the Kabbalah Centre, was critical of two former officials of the organization: Philippe van den Bossche, who has worked for Madonna since 2004 and was the executive director of Raising Malawi from 2005 until October, and Anjimile Oponyo, who worked at the United Nations Development Program when she was chosen last year to head the Raising Malawi Academy for Girls.
Interestingly, only the New York Times has seen the GPG report; it is not in the public domain and other media’s requests for it have been declined.
Of Mr. Neilson, Newsweek thinks little indeed:
The Berg family and Madonna have recently hired top-level spin doctors to help them manage the Raising Malawi blowback. Madonna hired Trevor Neilson, another Clinton White House veteran whose Global Philanthropy Group specializes in star donors who need a public-relations face-lift; he has represented Angelina Jolie, Ashton Kutcher, and Demi Moore.
Philanthropic advisor to the stars
(Disclosure: Newsweek’s website, The Daily Beast, briefly worked with the Global Philanthropy Group on a philanthropy-oriented website.)
The significant of Mr. Neilson’s arrival will be more fully dealt with in Part 3 below; for now we note only that Ms. Ciccone’s charity simply raised a boatload of money, including from Ms. Ciccone herself, and then flung itself into spending that money, with no apparent plan:
Only $850,000 of the $3.8 million spent on the academy was paid out in Malawi. The lion’s share, almost $3 million, was spent by the Kabbalah Centre’s office in L.A. under the watch of the center’s Michael Berg.
That’s staggering – appalling, and to quote Ms. Ciccone, unacceptable. $3.8 million is gone, an amount that is coincidentally close to the total raised from sources other than Ms. Ciccone herself.
E. Lack of transparency
Via Guidestar, I pulled down Raising Malawi’s 2009 Form 990 (return of organization exempt from income tax), filed November 15, 2010 by Macrum LLP of Los Angeles, and signed by Yael Avnet, Controller, who is an employee of the Kabbalah Center. It shows over $7.4 million in grants received between its formation in 2008 and the end of 2009. Over the same interval, Raising Malawi shows $7.9 million in expenses, mostly in “grants and other assistance to governments, organizations, and individuals outside the US,” (part IX, page 10).
Page 25, Part X liabilities, includes this unexplained statement, “Due to related party, $3,723,246.” A reasonable inference would be that the related party is the Kabbalah Centre.
“We have not seen anything that leads us to be concerned about how money was spent [by the center],” Neilson says flatly. (He refused to provide his Global Philanthropy Group report to Newsweek.)
That’s settled then; I feel all better now. Others do not.
F. Lack of governance/ financial control
More upsetting still is the absence of any semblance of financial control.
“We have yet to determine exactly what happened to all of that $3.8 million,” [said the loquacious Trevor Neilson]. We have not accounted for all the funds that were used.”
Raising Malawi appears to have no employees of its own; the only names one finds are Kabbalah Centre employees or consultants such as Mr. Neilson.
The irregularities pile up. First this:
Also unmentioned is the 2008 IRS filing that lists $1,042,623 in “unspecified operating and construction costs”—a sizable chunk of Raising Malawi’s total expenditures that remains unexplained (and all made before Oponyo was hired). When asked about these costs, Neilson offered no response.
The [Kabbalah] center told Newsweek that its Malawi fundraising efforts had brought in $12.5 million in donations and it had spent $10.6 million to “fund Malawi activities” since 2006. These numbers cannot be verified, and the center’s attorney declined to provide any specifics about how these millions were spent.
These days, it’s just so hard to keep track of where money goes – despite being tracked in banking records, somehow ten million just floats away.
Then this, which I found from a Hollywood Reporter posting from March, 2010:
In February 2008 Madonna got Gucci to help her stage a massive star-studded fundraiser in New York for Raising Malawi. Because the organization had not yet registered as a charity, Gucci had to start its own foundation to collect the $3 million that came in around that time.
This kind of slipshod accounting and financial compliance is unacceptable in any business, much less a public charity.
[The] star-studded event in 2008 [was] co-hosted by Gucci in a 42,000-square-foot transparent tent on the north lawn of United Nations headquarters. “I want credibility as a philanthropic organization,” Madonna told the $2,500-a-plate crowd.
Doing things right would have helped.
G. Commingling of funds
More troubling still is the apparent commingling of funds between the Kabbalah Center, Ms. Ciccone’s personal religion, and the public philanthropy:
When Newsweek asked the center’s tax attorney Shane Hamilton how the Kabbalah Centre and Raising Malawi divided the money that was raised for Malawi, he replied: “I don’t know if they have a structure.”
Anyone who did this with an affordable housing property’s money would be prosecuted, possibly jailed.
This fluid “intercompany debt,” as one Neilson aide described it, –
A ready man with a euphemism! Where I come from, that’s called “dipping in a little.”
And you can play the float with it
– reinforces the charges made by critics that the center used Malawi as a fundraising tool, and that there is no way to independently determine what was really done in the name of its orphans.
This is a serious charge, as it would amount to outright fraud.
(Readers, do note that Ms. Ciccone could be entirely ignorant of this hanky-panky – commingling of inflows and outflows is a preferred method for filching cash without anybody noticing.)
Neilson will now say only that it was unfortunate that Raising Malawi was “linked to any religious organization” from the beginning because it limited the foundation’s “ability to generate broad public support.”
That, sir, is a non-answer, a massive avoidance of accountability.
H. Flash-flood funding with Joan Collins School of Management
Back in the heyday of trash night-time soap opera, Dynasty featured the most laughably luscious misportrayal of business ever attempted, with Joan Collins as Alexis Carrington, tycoon of Colbyco.
This is how a Hollywood CEO dresses
Perhaps because it was soap opera, or perhaps because the scriptwriters had no conception of business, the Alexis-in-boardroom scenes were beyond hilarious – clothes, champagne, fast cars, and lavish trips. Fortunately, none of that happens in real life … except when Hollywood people are involved:
These included what auditors described as outlandish expenditures on salaries, cars, office space and a golf course membership, free housing and a car and driver for the school’s director.
Moreover, the US has among the world’s highest rates of pay – which is a good thing indeed, unless you’re a US-based charity seeking to make impact elsewhere in the world. In that case, you should do everything you can to have work done in-country.
More recently, Fabiani and Neilson have successfully diverted attention from Madonna and the center by announcing that Neilson’s group has completed a report pinning much of the blame on Raising Malawi academy director Anjimile Oponyo, the sister of Malawi’s first female vice president. The report accused her of “outlandish expenditures,” including a high salary, a car, housing, and a golf-club membership.
That sound you hear is Mr. Neilson throwing Ms. Oponyo under a bus:
Sorry, Anjimile, somebody has to
A bus she cannot dodge:
Ms. Oponyo said that she was barred [By a pre-employment confidentiality agreement – Ed.] from talking about her association with the foundation, and that she could not comment on the allegations in the report of mismanagement — including whether she benefited from an extravagant compensation package that included that car and driver and golf club membership.
While Ms. Oponyo cannot comment, Newsweek can, and makes no secret of where its sympathies lie:
Putting aside the fact that these items were included in her contract by Madonna aides, the actual expenditures seem trivial in the face of the $3.8 million lost on the school project. The golf membership cost a mere $461.27 a year and was offered as an aid to networking with government officials and potential donors.
Do remember that the organization now criticized Ms. Oponyu’s $500 expenditure paid more than $100,000 to stage two photo-op’s:
Worth every penny though, wasn’t it?
The car that was bought for her was a reconditioned 1996 Toyota. Her salary, $96,000, was actually a pay cut from previous positions she had held at the World Bank and the United Nations.
Especially in light of her required relocation:
Oponyo, who was interviewed by Madonna herself, agreed to move to the impoverished country with four of her six children. (If she had been posted in Malawi by the U.S. State Department, she would have received cost-of-living and hardship allowances, and educational and living-quarters benefits that would have added $150,000 to her salary.)
When you work for a Hollywood star and things go wrong, it will not be her image that is blackened, but yours.
[Concluded tomorrow in Part 3.]