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Panel Discussion: Nonprofit Organizations

May 1999

Nonprofits Require Special Handling

Bill Kovach, Curator, Nieman Foundation

I wanted to moderate this discussion on nonprofits because I personally have a strong interest in pushing the agenda of covering nonprofit organizations. Most news organizations do not and have not covered nonprofits, but as the power of government devolves, and it’s devolving rapidly, to state and local government and away from all sorts of social programs, those aspects of public life are in many cases being picked up by or left to nonprofit organizations to handle, and in this time of enormous wealth creation over the past decade, an awful lot of money has moved into fewer and fewer hands at the top of the economic structure of our country, and more and more of those people who are collecting more and more personal fortune are choosing to withdraw their support from the federal government by investing their profits in nonprofit organizations targeted to things they are personally interested in.

So as broad-based support for broad-based public programs dissipates, the power of nonprofits again is becoming more and more important to how our society is structured.

To just give you a few examples of why it’s such an important area, over the past two decades, since 1970, nearly three decades now, this area of nonprofit organizations has grown four times faster than the overall economy which itself has grown pretty steadily. For the last two years, the IRS reports that they are granting new tax exemptions to 75 organizations a day. That’s on top of nearly a million-and-a-half nonprofit organizations that have federal exemptions from taxes. In 1997, the federal tax exemptions alone withdrew $21 billion from the national treasury. State and local tax exemptions added another 30-plus billion to that.

So you can see the dimensions of the world of finance and investment in social programs, and otherwise, in political programs. A number of these tax-exempt organizations simply put their money into political campaigns. So we have all sorts of aspects of our social and political activity that take place at the direction of private money through nonprofit organizations, and the journalistic problem attached to that is that these are private organizations and private money, and journalistic access to those precincts is not clearly as clear as it is to government organizations.

First Step, Get IRS Form 990’s

Doug Frantz, National Correspondent for The New York Times.

[Doug Frantz is a national correspondent for The New York Times, where he has worked for five years. He worked previously as a reporter at The Los Angeles Times, Time magazine and The Chicago Tribune. He is the author or co-author of six nonfiction books on subjects ranging from architecture to Clark Clifford. Frantz has received several journalism awards, including the Worth Bingham Prize on two occasions and the Goldsmith Prize for Investigative Reporting. He was a Pulitzer Prize finalist for a series of articles on the Church of Scientology in 1997 and for articles in 1992 about American relations with Iraq before the Gulf War. Frantz is a graduate of DePauw University and the Columbia University Graduate School of Journalism.]

First, I want to start with a practical tip for any journalist who wants to try and get inside a nonprofit. It’s the first step, it has nothing to do with sources, but it will help you understand the organization, and that’s to go get the IRS Form 990’s. If you don’t know about them, they’re the key, they’ll give you a good picture of the finances of the nonprofit organization. They are its tax return, although of course they don’t file taxes. They have to be provided to you on the premises of the nonprofit organization. You go there, they must show those to you.

I once went down to visit David Duke outside New Orleans at his National White People’s Party, and I went in and told him that I wanted to see the 990s, and he said, "Well, we don’t have to show you those," and we got the regional commissioner of the IRS on the telephone in Atlanta and he explained to Mr. Duke that in fact he did have to show those to me.

They do not have to let you copy them, so what you do is when you go see them you take in a blank form so that you can just fill out the form in duplicate. They’re supposed to have at least two years there.

Most places won’t let you copy them, surprisingly. I went to Educational Testing Service out in Princeton, a reputable place, as far away from David Duke as you can get, and they wouldn’t let me copy them. I sat in their library and looked at five years’ worth with a copy machine about 10 feet away and they wouldn’t let me copy them, so I used my own blank forms.

If you can’t, for some reason, get to the organization, if you don’t want the organization to know you’re interested, you can get them from the IRS, or you can also contact an organization called the Foundation Center. It’s on lower Fifth Avenue in New York, and they have a lot of them; they don’t have all of them, but they have a lot of them.

They’re just invaluable, whether as I did in the '96 campaign for The Times, I was looking at Pat Buchanan’s perpetual campaign and looked at the 501(c)(4) organization that he’d used, and to look at the way he and his sister had taken money out of this foundation just constantly and it enabled him to maintain a constant campaign.

I looked at them for the Red Cross, and I looked at them for Scientology. That was the starting point of my inquiry into Scientology. I just recommend that on a practical level, they’re just invaluable and they may be the only look you get inside the finances of one of these organizations. Because these organizations are all about money. Money is where you’ve got to start, whether it’s the Red Cross or Scientology or a political nonprofit.

Let me go on to sources, because, as these are organizations that by and large are closed to the prying eyes of the press, you can’t file a FOIA and get their information. Very rarely are they subjects of lawsuits, and even more rarely do they in fact file them themselves. It’s very difficult to find a public record about these organizations. So sources are invaluable, but you have to treat them the way you do any other source, and more so, for reasons I’m going to get to in a second.

I’ve been an investigative reporter for almost 20 years, and I couldn’t have done my job during those 20 years without sources, without relying on sources, on people who took risks to themselves, who risked going to jail. People on the Scientology story who risked something worse than jail, which is the wrath of Scientology.

But also, I couldn’t have done my job if I had only relied on those sources. It is essential that you use a source, particularly when you’re dealing with a nonprofit, as a point of origin - it’s the beginning place - because they’re most likely to be disgruntled, former true believers, whether they’re ex-members of the Red Cross or former Scientologists.

And you’ll find no person in the world more zealous than a former Scientologist, believe me. They’re an extraordinary group of people. But you have to take what they say only as a starting point, you cannot rely on a single world of a single sentence without checking it out yourself. These are people who joined an organization like that for very idealistic reasons and became incredibly disillusioned. They’ve had their lives turned upside down, and I think this applies to a lot of nonprofit organizations, not just Scientology.

But let me talk about Scientology and tell a war story.

Three rules quick.

Rule 1 — Don't Socialize With Sources

I worked for five years in Washington, I never went to a party with sources. I’m working on a story now where I’ve seen the value in that, in refusing to be friends with sources on any level, and that is on a project that I’ve been working on for about four months for The Times. I went to a big city and had dinner with a guy I’d known sort of as an acquaintance over the years, and I knew about his involvement in an episode of this story that I’m working on, and so we sat down over dinner one night and he told me on a background basis a lot about how this particular episode went down. He knew it was on background; he knew, I think, that I was going to use his name because I knew his name before I went in.

He’s spent the last week on the phone with colleagues of mine and last night with an editor of mine trying to convince him that because he knew me, I can’t use his name in the story. Well, that is not going to happen. His name is going to go in the story, not what he told me on background, but because of his involvement. He tried to play on what he considered to be friendship. I said we’re not friends.

I think that particularly for the five years I spent in Washington for The Los Angeles Times that it was vital to my independence that I not be on a first-name basis with my sources, that I not go to parties with them. That was important.

Rule 2 — Give Background of Sources

The second rule, and I think this is illustrated very well, I hope, in the Scientology story, is transparency. We have to tell our readers where these sources are coming from. Even if you use their names I think you need to provide some background. One of the key people in the biggest and the longest of the Scientology stories I wrote in March of '97 about Scientology’s battle with the IRS was a private detective named Michael Shomers, and from the outset he was on the record, I could use his name, and he provided me with enormous documents, and I’ll talk about that in just a second, but what I did was about the third or fourth time I sat down with him over a series of several weeks, I said, "Why are you talking to me, because Scientology is known for going after its critics with great vigor?" And he knew this as well as anyone, having been on the attack side of it, and he said, "Well, I don’t trust Scientology anymore, and also I had a financial dispute with my former partner at the private detective agency."

So it was good for me to know that, and also I put that in the newspaper, and I told him I was going to put that in the newspaper, because it’s not enough that I know it, my readers have to know it. They need to be able to evaluate what this source is saying, not just to me, but to them in the newspaper. I think you need that kind of transparency.

Rule 3 — Don’t Give Advice to Sources

The third one is just a silly little thing, and that is that I don’t give advice to sources. People often call up - I’m sure you must have had people call up and ask you, "What do I do now? Should I go talk to the government, should I talk to the prosecutor, should I blow the whistle to the IRS?" I just have a flat rule not to tell them anything.

Summary of Scientology Story

So let me real quickly recap that story, because it was kind of an old story. The first story I did on Scientology, the first in this series of about four or five stories, was about the IRS tax exemption that they were granted in 1993, and by the time I came to it, it was June of 1996, so the story’s almost three years old. There have been front-page pieces in The New York Times, in The Los Angeles Times, and other publications about it, and it seemed like an old dead story, and Scientology certainly would have preferred that it stay that way.

I was having lunch with a friend of mine in New York and he said, "I heard a story about a private investigator who spent a long time looking at the IRS on behalf of Scientology," and he had heard this from another private investigator who was a friend of his. I said, "What’s the guy’s name," and he said, "I think his name is something like Shomers or Schooner or something."

So that was my tip and that was what got the story started. He knew he lived in Maryland. Going through a lot of records in Maryland, I finally tracked Shomers down in another state, and I went down and heard his story, and it was a pretty chilling story about how he had been hired by the Church of Scientology to dog several IRS officials and how he’d done things like steal documents from an IRS conference, used photo surveillance on IRS agents, gone into private financial dealings that IRS officials held outside their government jobs, and it was fascinating stuff.

Fortunately for me, and for the readers of my newspaper, he had maintained copies of almost all of the documents he generated for the Church of Scientology. So here I had the perfect source, it seemed to me, to start this story. I had a guy who was willing to go on the record, who ultimately disclosed what his agenda was, and who had the documents to back up everything that he said. It was a wonderful find and the best possible way to begin that story.

Defectors Incredibly Cynical

The next batch of sources I dealt with really were the Scientology defectors. If any of you have ever written the word Scientology in a story, your E-mail box has been filled with notices from these folks.

Their motives were as suspect to me as those of any source or any official within the Church of Scientology because they clearly had an axe to grind, they had their own agenda. It was vitally important that I hear what they had to say, and then that I be able to go out and corroborate that.

As I said initially, I can’t make the point too strong, that people who have been involved with organizations like the Church of Scientology at one time were true believers and they’re now incredibly cynical and they feel, many of them, that their lives were ruined by the church. I’m not sure that that’s necessarily true, but one of the people I talked to was a woman named Stacy Young, and I was focusing on the her relationship with the Church of Scientology. She had been a high official in the church who defected in 1989 with her husband, Robert Vaughn Young, and they were both outspoken critics of the church, they were very public in their criticism. I spoke with her at great length about an organization she’d managed on behalf of the church. It was a front organization that the church had set up called IRS whistleblowers - I forget the formal name of it - but it had no association outwardly with the Church of Scientology, but she had said to me, "We set this up, this was a front. We recruited former IRS agents and this was part of a war they were waging against the IRS."

This was a 20-year war that had begun with break-ins at the Justice Department and bugs planted in conference rooms. It was an out-and-out war. She had been not a soldier in this war, but one of the leaders, one of the generals in this war.

She said she set up this organization, and she gave me all the details. She had no paperwork left and so on my own I was able to go out and find three former IRS employees who had been members of that organization, had been the fronts, and two of them didn’t even know it, two of them were completely unaware, but the third one, and the guy who was really the leader of this organization, acknowledged that he knew Stacy Young, that he’d received financing and advice from her and other officials in the church.

So there again, it’s a matter I think of using the source as a beginning point and finding out what you can do to corroborate that information. For me, it was essential on that story. It’s that essential on every story. They don’t all come as smoothly as that one does.

I wrote about a 5,000-word story that ran to two full inside pages in The New York Times, and in those 5,000 words about a very controversial subject I had one unnamed source, and that was a person who was identified as a senior government official who was involved in the decision-making process, and that’s because it was an IRS official who couldn’t, under law, speak about the internal deliberations of the IRS, but I spelled that out in the story, so I think that that provided the transparency that met one of my rules.

It was an amazing story for me because of the way the sources initiated it, and then the way, through their help and through the help of colleagues and editors at the time, we were able to corroborate everything they said. That’s the way it ought to be, and if you work outside Washington, at least, that’s the way it is most of the time I think.

Clarification on Not Advising Sources

Kovach - I want to clarify one thing for the record. You have three very good rules; on the third one though, do not give advice to sources, you first said maybe that’s too pure, then you told the anecdote and you said you can’t be pure enough on that point. I want to make sure which it is.

Frantz - I’ll go with the latter there. What I was saying that you may find that too pure, but what I found out is you can’t adhere strictly enough to that rule.

Kovach - It’s part of what set your work apart, too. I think it’s a good rule, I don’t think you can be too pure on that.

How Fertility Clinic Misuse of Eggs Was Exposed

Susan Kelleher, reporter for The Orange County Register.

[Susan Kelleher joined the staff of the Orange County Register in 1989, starting as a city government reporter and moving to the health care beat a year later. While covering health care, Susan developed a subspecialty in bad doctors and the culture that breeds them. In 1995, she teamed up with Kim Christensen to break the story of a renegade fertility clinic that was stealing eggs from infertility patients and using them to create children for other infertile women. Coverage of the scandal, which spanned more than a year and involved a team of reporters, won a Pulitzer Prize for investigative reporting, a George Polk Award for medical reporting, and a host of other national and state awards. Susan now works on the investigations team, specializing in health care topics. A native of Pearl River, N.Y., she graduated from the University of Colorado-Boulder.]

Let me give you a little bit of background on the [story of the illegal and secret transfer of women’s eggs] just because I wasn’t a doctor before I started it; I’m not now. What this whole story involved was fertility specialist surgeons at the University of California at Irvine, and what they would do is people would come to them with various infertility problems and they would solve them and they had a number of ways to do so.

One way that was very popular and wickedly expensive was that they would pump women full of hormones so that they produced instead of one or two eggs a month, they would produce many, sometimes as many as 25 or more, and then extract those eggs surgically, wash them off, take the husband’s sperm, put them in a little dish, fertilize them so they created embryos, and then they would put the embryos back in.

Sometimes they would take the sperm and the egg and they would put it back in the fallopian tube, which the Pope was thrilled with because then conception took place inside the body. So it was loved by the Pope, loved by the university because they made a lot of money and they were like these golden boys.

What I found out is what they were doing was taking women’s eggs after they had extracted them, and they would take them without telling the women they had taken them, and what they had done was schedule other women who were menopausal, or for other reasons, like chemotherapy, didn’t have their own eggs, and they would give them to those other women. So women who thought they were giving their own eggs for themselves were in fact becoming donors for other women.

What the reporting showed, as well, is that the university tried to cover this up and tried to cut a deal with the doctors to make them go away quietly. Happily, we found them out.

On-the-Record Policy Helpful

My newspaper has a policy that we have to quote everybody on the record; no one’s allowed to be quoted in our paper anonymously. I am enormously grateful for that because it has made me a very hard-working reporter. I think that had I been allowed to use anonymous sources a lot, I probably would have gotten myself into some trouble, especially early on when I was not really wise to the ways of the people who tried to manipulate. Also, I think that the stories were much more solid, they had much more credibility, and I think the people also felt good about their participation in them.

One of the things I really have developed as sort of a personal style is that I have a lot of guilt when people get hurt. One of the reasons why I really like my job is that I stop people from getting hurt. So, for me to sort of contribute to their hurt would really upset me.

So before anybody participates with me in a story - and I say with me, in a sense of a source - I sort of tell them how I work. I tell them they have to go on the record. I tell them I’m going to be asking other people about them, that even though I find them a really nice person, I’m still going to have to check them out.

I ask them what their concerns are, I tell them what my concerns are. I tell them I don’t like to be lied to, and that if I find out that I’m lied to I get really upset. I tell them basically everything they ask me. If they want to know anything about anything, if I have an answer to it, I’ll give it to them.

I basically give them a choice of whether to be a part of the story as opposed to controlling the content, because I say, "Once you agree to talk to me, that’s it, you don’t really have control, but you have control to the degree you want to participate, and once you’re on the record, if there’s something you don’t need me to know, then don’t tell me because it’s going to be on the record and we’re not going to be playing games."

First Tip Came From Hospital Official

I tried as much as possible to stand in people’s shoes, and when I first got the tip it came from a senior administrator at the hospital who has called me sort of out of the blue to talk about some financial shenanigans that were going on at the hospital, and it was a pain in the neck to report, a lot of things that she was saying weren’t really checking out paperwork-wise.

But I did notice that the university had a really hostile response to my initial inquiries, which was pretty interesting, because it’s a fairly non-controversial beat, health care, and they had been very cooperative. So my alarm bells sort of went off that way.

Then at the end of one meeting, after maybe about a month of checking things out, while I was working on my beat, this woman, Debra Krahel, who has now said it’s okay to talk about her, she says to me, "Would you be interested if there was a case where the woman got the wrong eggs, they were taken?" I was like, "Absolutely."

That wouldn’t necessarily have stood out to me, but I had covered a really ugly surrogate case a couple years earlier where a surrogate mother who had been implanted with another couple’s embryo decided she wanted to keep the baby. It was full employment for a year, so I knew that even if this was an accident, it was going to be a great story.

So what I started doing then was just finding people at the clinic. I would meet at sort of strange times and strange places with people, and again have these same conversations, "This is how I work," and then telling them what I need, like, "I can’t do the story just with people, I’m going to need records."

Unmarked Envelopes, Unlocked Car Trunks

I needed to find a way to get records to me. People would always ask, never fail, "Are you going to have to tell anybody that I gave you these records?" I would say, "Yeah, if we get sued and I base the story on these records, then yeah, I’m going to have to disclose where they came from." I said, "However, if they come to me anonymously in the mail in an unmarked envelope, which I have a habit of throwing away, then it’s up to me to validate them and I will have no idea where they came from because I really don’t know."

My other favorite trick was to tell people where I was having lunch, and I had a really distinct car at the time, it was a blue Toyota Tercel with cow-covered car seats. I’d tell them I had a really bad habit of leaving the trunk open, and that really paid off because I got like a mother lode of documents one time that way. I did have to eat at the Sizzler though. [Laughter]

Basically, I think my first big break came when I found the former manager of the practice, and unbeknownst to me she was pretty freaked out at that time because the university was having its own secret investigation, this is when they were trying to squeeze the doctors out. So she asked me a lot of questions about what I was doing and I really got uncomfortable. It was like, I don’t know if I want to tell this woman the things that I’m looking at.

Without compromising other sources, I did tell her, and over a period of probably about three weeks, she finally just cracked. We would meet at a park by her house where her kids would play soccer and finally one day, I had a single record that somebody had sent me anonymously in the mail, and I said, "Could you tell me what this means, I have no ideas what this means. I know it involves this patient here."

So she said, "I don’t know why you keep pointing to that patient, because there’s a lot of patients on there." I’m like, "What? I can’t even read this thing!" Then she told me that there were hundreds of patients involved.

Support From Top Editors

At that point I told my editor what I was looking into, because I was doing a lot of this on my own time, but sort of working it into my beat. He very wisely told the top editor of the paper who said she thought it was bullshit but if I proved that it was true that I would win a Pulitzer Prize. She was pretty cool that way. She said, "Do whatever you need to do, go ahead."

I teamed up with Kim Christensen, who was a really experienced reporter, he had done a lot of things on prisons and we got really organized that way, just with files, and started doing public information requests to the university to get stuff that would be accessible.

In the meantime, it was sort of really slow trying to find people, and I say slow, it took about five weeks, but trying to find people and going back and getting rejected again and again and again. I hate being rejected, it bugs me, and I hate bothering people at their house, but I would go there and say, "Oh, sorry," and I think after a while they just saw me as this really pathetic person who was just not going to be going away.

I started getting into their homes, and that was really helpful because then what I would always do is I would tape them, I would say, "If you’re so concerned about being misquoted," which many people are, "I’ll tape you and this way I’ll give you a copy of the tape, and you’ll have a record of what you say and I’ll have a record of what you say, and if there’s questions I can call you." What that did is it also gave me another reason to go back. So every time we would tape, even if it was like three words, I would always insist on bringing a copy of that tape back for those three words.

University Files a Lawsuit

It got to the point where we had pretty much confirmed that this had happened, and we decided we were going to keep going until we found all the patients this had had happened to, but the university by this time sort of figured out what we were on to, and they tried to preempt us by filing a lawsuit that made it look like they were doing their job in just trying to ferret out this information and that the doctors were just so uncooperative.

In the lawsuit, on like the 115th page, they made reference to Dr. [Ricardo] Asch, who was one of the doctors, going and trying to get consent from a patient after the fact for egg donation. Well, in Orange County we’re in a dogfight with The LA Times, so we figured, well, they got the lawsuit, too, we’ve got to start moving ahead with what we’ve got.

So we wrote that story and then the next day I figured we would go and contact the patient, and instead I got called into the editor’s office and I saw my partner, Kim Christensen, and by that time Michelle Nicolosi, another reporter who had joined us, and all these editors sitting there, and we were going to call an ethicist and talk about whether we should run the story.

Working in Pairs

I kept thinking, gee, I really wish we had done this before I did all this work, but he was really helpful, and we just set out ground rules. We’re going to always go with two people, we’re going to make sure there’s somebody else at home with the patient, we’re going to find out about the patient as much as possible to see if they have a health condition that might freak them out, because basically what we’re telling them is, "Hi, you have a child." We had the records that showed that some of these illegal transfers or these egg thefts had resulted in children for other women.

We did go to this one woman’s house, her name is Barbara Moore, and just told her that there would be no article unless she told us whether she had consented or not to this transfer, because it could very well have been that she told the doctors in some private room, "Yeah, go ahead, take my eggs and give them to somebody," but we wanted to be as respectful of her as possible. We realized that these were her documents, that it was upsetting we had her medical records, we knew that, but that we hoped that this would be information that would be helpful to her.

We basically outlined everything and they just freaked out. We knew that they didn’t consent, but we couldn’t write a story at that point, and we met with them about two days later and they told us that in fact they did not consent to the donation.

So we had a big story in that and they had written a letter to the child basically saying, "We love you even though we’ve never met you." It was just incredibly heartbreaking.

'Spookiest Thing I’ve Ever Done’

Our next step then was to go to the recipients’ house, to the people who were raising the child, and to this day this remains the spookiest thing I’ve ever done, because the people were very nice people. They lived a couple miles away, maybe about 10 miles away, and as I’m interviewing the father there’s this little three-year-old boy playing in the background who looked exactly like the woman I had just interviewed yesterday.

They didn’t believe it and they banished me from the house; they said these people were out to get money from the doctors and I was very respectful of that and left. I was surprised because nobody really picked up the story and we thought it was an incredible story, and the silence around the country was deafening.

Real Story Was Not Theft, but of Families

What happened is it wasn’t a story about the egg theft at all; this really was a story about a family, and until we had somebody on the record, with a face, that story was not going to take off, so the families really became the hardest sources to deal with because after a while you just started to get fatigued. You would call people up and their emotional reactions to things - it was just sort of like time and time again you would talk to 20, 25, 30 people and tell them this happened, explain the records, and then hear their stories about family and what this meant to them, that these weren’t some little eggs in a dish, that these in fact were their hopes and dreams for the future.

There was one family I remember in particular, a University of Nebraska football player who had been paralyzed while playing, and he had his testes unraveled to have his sperm extracted and his wife underwent this horrific surgery and they had taken their eggs.

We found people who brought a rabbi into the operating room to make sure there was no mix-up, because it’s against their religion, and found out in fact that those people’s eggs had gone to four or five different couples.

We found anonymously in the mail this one list of patients, and it was every patient-to-patient transfer that occurred at the clinic, and contacting those patients - it’s also a list, it said laparoscopy, and what I found is that those women had gone in for diagnostic surgery and they had pumped them full of drugs and taken their eggs, and these women did not even know that eggs were removed. They thought Asch was going to remove a single egg and look at it, "Oh, yeah, it looks dark, that’s why you’re not getting pregnant," when of course no such thing exists.

It was really telling their stories. I looked at them as sources as well, and yeah, I did get too close to those people. I got very angry at the doctors. By that time it had been clear to me, especially after the laparoscopy patients, where it wasn’t just a mix-up in the lab and it wasn’t his staff. Asch did it. Later on, there was some outtake of video that came up which actually showed him on tape doing it. That really got me mad and I really did get attached to those people.

'Hush Money’ Headline a Problem

I also felt a little too close to the whistleblowers, the initial people. There were three of them, and they had settled a lawsuit for about a half-million dollars because they were fired for they said blowing the whistle on it before we had even written about it. We referred to that a lot in the paper as hush money - it was like an editor’s term - and I preferred the longer term, I preferred saying that after being fired they signed a settlement with a confidentiality agreement, as opposed to saying they were paid hush money, because every time the words hush money would appear, Krahel would freak out.

She would call me screaming because she had said, "My god, I’m the reason that this had come out," and she was absolutely right, that she was initially the tip. It was our work as well that resulted in that coming out, but I really felt for her and I did feel bad because I think it did mischaracterize.

So I would have lengthy arguments with my editor, still feeling that I wished the whole situation didn’t exist, but I did feel the need to argue that we should have the longer explanation as opposed to the more sexy "hush money."

Lawyer Also Complicates Matters

Things got sort of weird when the attorneys got involved. It’s sort of like the hostage situation in Washington; I really related to some of the Washington reporters, only on this portion of the story, because you have somebody basically at that point - there was one attorney who had amassed so many patients, she had 25 patients, that she controls a very significant part of the story now. She’s filing lawsuits for custody of these children, she’s filing lawsuits and doing discovery, so she’s got documents, and it got to the point with a lot to the lawyers, they all wanted to be quoted in the paper, and then you would have an article and then another patient who would read about it or see it on the news or whatever, they’d call you and ask you, "Who’s the lawyer," and I would always say, "Go to the web site," or whatever, "Call our library, get copies of the articles because I’m not giving you a single lawyer’s name." The last thing in the world I wanted to do was start giving out the names of lawyers, and to this point I still won’t give out, even if it’s a single lawyer in a story, I’ll say, "Go look at the story."

I was glad about the way I handled a lot of the stuff, especially the informed consent, because testimony later when a lot of people we had talked to were deposed for a lot of these lawsuits – there were like over 10 lawsuits -they talked about it, they wanted to know how we contacted them, and so all of my encounters with all of my sources were coming out in these depositions. I think a lot of lawyers said, wow, they were really impressed by the way we had handled things. I guess they had this impression of reporters of just trying to trick everybody all the time and just being real slick, and it was just the opposite of that.

So some good things have happened; the doctors did flee the country, but they’ve been indicted. Both still practice infertility medicine. One’s in Chile and the other is in Mexico. There are new laws against the theft of genetic material.

I still think the whole state of cash-based medicine is a really ripe area for coverage. The nurses are a great help. People in medicine, you just come in from a really great point of view because most of them are there because they do want to help.

There’s plenty of stories out there if anyone wants to cover them.

Knocking on Doors, Getting Around the Spin

David Barstow, reporter for The New York Times.

[Until April, David Barstow worked as a reporter for The St. Petersburg Times, where he was a finalist for four Pulitzer Prizes, including one last year for investigative reporting about the Rev. Henry J. Lyons, the recently convicted president of the National Baptist Convention USA. He now is a reporter for The New York Times. Barstow, 36, grew up in Concord, MA and graduated from Northwestern University journalism schoo1 in 1986. A few years later he got his first experience investigating not-for-profit organizations at the Rochester Times-Union in New York, where he wrote about spending excesses at the local United Way, He and his wife, a teacher, have two children.]

David Barstow - I wanted to start by circling back to where you began this morning, which was talking about the relationship between reporter and source and how that power dynamic has changed and shifted in a way that perhaps sometimes causes us to suffer in our reporting of the news, and apply that a little bit to my experience covering the National Baptist Convention, because I think in all cases we’re talking about the same thing, which is penetrating closed entities through the use of sources, which immediately threatens to put the source who has access to that closed entity in the driver’s seat.

What I wanted to talk about is some ways of kind of leveling the playing field when we deal with these sources so that we’re not constantly the supplicants to them and therefore susceptible to spin, to their agendas, and so forth.

Very quickly, the situation that I confronted in 1997, it began in a rather spectacular fashion when the wife of Reverend Henry Lyons one night set fire to a $700,000 mansion he owned a few miles away from their own home with another woman. She had found out he had bought this house with another woman and had gone over on a rampage through this house.

Church Officials Were a Closed Group

This raised a few questions in our minds, and I was brought in to help figure out where did the money come from to buy this $700,000 house, and what is this group, and how does money work, and so forth. It actually is, I think, the perfect kind of scenario for learning important lessons about dealing with sources in these sorts of stories, because it is such a closed entity. We don’t even have access to 990 forms with the religious group; they don’t have to file anything; we don’t have any right there. It’s just as closed as can be, and this is not only a closed group, but it’s a group that has been basically off the periscope for the mainstream media for a century that it has existed.

These are guys who have been meeting with one another three or four times a year for 40 or 50 years running and here we come along, us white agnostics, who don’t know anything about the black church and have no access to their books, trying to figure out how does this guy buy a $700,000 mansion, and oh, by the way, a $135,000 Mercedes Benz and a time-share in Lake Tahoe, and a bunch of other things, and is there anything wrong with this?

What we attempted to do is to penetrate this story through the use of sources, but to do so in a way that wouldn’t make us beholden to those sources or susceptible to their kind of spin. What we did, essentially, is an all-out assault on every single person that we could possibly find that was connected to this entity, and it involved a hell of a lot of knocking on doors and calling people cold, and just getting on the ground, finding the ex-secretaries, finding the ex-deacons, finding the guy who ran for president of the organization and lost a couple of years ago, understanding the politics of this organization, exploiting the political differences within the organization, gathering at every step as many stupid documents as we could possibly find - old agendas, old budgets, anything and everything under the sun - so that we in the course of gathering the information in this story we wouldn’t become the dumb reporters scrapping for the most basic information, but actually we would become an authority, become so knowledgeable about the inner workings of this entity and the political jockeying among the various players who were trying to wrestle control of this organization away from the president, that we could come with our questions from a position of strength, not from a position of weakness with these folks.

This was what I think everyone has talked about here so far today - basically doing a complete end run around the organizational superstructure and just trying to get to the ground as quickly as you can. This is an organization whose public relations director’s main purpose was to try to have us arrested at every turn and not give us any information whatsoever.

'I’m Not on Your Side. I’m Not on Anybody’s Side’

By going to the ground, I want to talk about a few of the perils that we encountered. I remember vividly one morning, one of the preachers who was very helpful in talking to us about the inner workings of the convention calling me and saying, "Good morning, this is your black editor calling you." I laughed and then I spanked him as hard as I could and said, "You are not my black editor. I am not on your side. I am not on anybody’s side. My agenda is purely to find out what happened to the money of this convention, and that’s it."

Sometimes we would call different members of the convention and they would begin to ask our advice. "Do you think we should have a press conference? Do you think we should mount a protest of some sort? Should we have a petition campaign of some sort to get rid of this guy?" I would reply, "I don’t care what you do, I just want to know, are you doing something."

You have to be so clear, constantly, every day about what your agenda is and make absolutely crystal clear to these people that your agenda has nothing to do with their agenda. If interests overlap, great, so be it. But never, ever, ever - I think you’re exactly right - you don’t give anybody a name of a lawyer, you don’t give them advice, you don’t tell them what your next story’s going to be; you’ve just to play it completely by the book, so that you’re never in a position of feeling compromised, even to the point, I think, where you have to be willing to be beat on a story if it means that not getting beat on the story is going to require you to make a decision with a source that could compromise that power relationship with them, or in other words put you in debt to them in some way that is going to affect your subsequent coverage, and it’s a painful thing to do. I did it a few times in this story but I’m glad I did it, I think I slept better for it.

Manhattan D.A.’s Office a Similar Problems

I think that covering not-for-profit agencies, for me, is going to shape a lot of my future coverage down the road at The New York Times. The first thing they’ve had me do is go cover the Manhattan District Attorney’s office, and I walked in and the Manhattan District Attorney has this very nice press aide who handed me a list the first week and said, "Here are the cases you’re going to want to know about this week," and it was a list of 10 cases that were coming up, and I thought this is completely wrong, this is no way to cover this agency.

The way it’s set up in New York City is there’s a press room in the courthouse and the Manhattan District Attorney’s press person comes down, hands the reporters the list of that week’s cases that are coming up, and off they go for the week. I said to her, "Is there a public access computer someplace where I can keep track of different cases?" "Oh, I’m sorry, we don’t have that."

I feel like, okay, you know what? I’m just back to covering the National Baptist Convention here, it’s just the District Attorney’s Office, that’s all, and I intend to attack it in the same way that I attacked the National Baptist Convention.

Attacking a Home-Town Icon

Jim Tharpe, Deputy Metro Editor, The Atlanta Constitution.

[Jim Tharpe, 45, has worked at newspapers in Florida, South Carolina, Alabama and Georgia. As an editor in Montgomery, Alabama, he led a small afternoon newspaper, The Alabama Journal, to its first Pulitzer Prize in 1989 for the paper's reporting on the state's infant mortality problem.

While he managing editor of The Montgomery Advertiser, that newspaper won numerous state, regional and national awards, including two national Headliner Awards in one year. The newspaper was a finalist for a 1995 Pulitzer Prize for its reporting on the Southern Poverty Law Center.

Tharpe was a Nieman Fellow in 1989-90 and has served on numerous awards panels, including two stints as a Pulitzer juror. He currently is a deputy metro editor for the Atlanta Constitution.]

I was talking to Doug earlier and he said one of the organizations he reported on accused him of attacking God, one of the nonprofits he’d done some work on. We were accused of attacking essentially the Mother Teresa of Montgomery, being Morris Dees in the Southern Poverty Law Center.

For many years after I first got to The Montgomery Advertiser, probably three or four, we were essentially boosters for the center. We parroted their press releases; when they dedicated the civil rights memorial we published a series called "Alabama’s Real Heroes," about the martyrs who died in the movement; we were friends with people at the center. My newspaper was at 200 Washington Avenue, the center was at 400 Washington Avenue; a parking lot literally separates us.

I always saw the center as a pyramid. At the very top are the five people who make all the money. In the middle are the young idealists, they’re the same sorts of folks who would have volunteered for the Peace Corps after John Kennedy made his plea in the '60s. These are people, many of them from the Northeast and the West Coast, who come down to Montgomery for their Southern experience and they want to change the world. They work very long hours for very little money.

Breaking a Collegial Relationship

They were friends with people at the paper; we hung out with them. There aren’t a lot of young liberals in Montgomery, as you might imagine, and those are the people we associated with. We went to their parties, they went to our parties, they dated people on our staff; occasionally people on our staff would go work for the center. I think we may have had one person from the center actually come work for us. We’d share information back and forth. It was a very collegial relationship.

At the same time, there were some indications that things were amiss, The Progressive had published an article, "How Morris Dees Got Rich Fighting the Klan." A former associate of Mr. Dees, Millard Farmer, who is a very well-known anti-death penalty lawyer and the study for the lawyer in "Dead Man Walking," had parted ways with Mr. Dees over a fight over the way they were pursuing anti-death penalty fundraising, and had referred to Mr. Dees as running the Jim and Tammy Bakker Show of the civil rights movement down in Montgomery.

So you were getting little inklings all along that there was something that wasn’t quite right there. Many of the staffers in the mid-level of the pyramid who were our friends would come, they would stay a year or two, by design - those jobs were generally meant to last a year or two - and they would leave, and on several occasions they would come to me or come to somebody else at the paper and say, "You guys really ought to look at this place, something’s just not right there. I came here thinking this place was one thing and I’m leaving thinking it’s another."

So getting to the source question, those were our initial sources, those people who we were friends with. This went on for two or three years after I got there, and as 1991 approached the center was approaching its 20th anniversary, so we decided to look beyond the sound bite of the reporting that had been done on the center, to put it under a magnifying glass and see what we came up with.

I’d never done any reporting on nonprofits, I thought they were all good guys, they were mom-and-pop, bake-sale, raise-money-for-the-local-fire-department type operations. I had no idea how sophisticated they were, how much money they raised, and how little access you have to them as a reporter, some of which has already been covered here.

Summary of Findings

Our series was published in 1995 after three years of very brutal research under the threat of lawsuit the entire time.

Our findings were essentially these:

The center was building up a huge surplus. It was 50-something million at that time; it’s now approaching 100 million, but they’ve never spent more than 31 percent of the money they were bringing in on programs, and sometimes they spent as little as 18 percent. Most nonprofits spend about 75 percent on programs.

A sampling of their donors showed that they had no idea of the center’s wealth. The charity watchdog groups, the few that are in existence, had consistently criticized the center, even though nobody had reported that.

There was a problem with black employees at what was the nation’s richest civil rights organization; there were no blacks in the top management positions. Twelve out of the 13 black current and former employees we contacted cited racism at the center, which was a shocker to me. As of 1995, the center had hired only two black attorneys in its entire history.

Questionable Fundraising

We also found some questionable fundraising tactics. One of the most celebrated cases the center handled was the case of a young black man, Michael Donald, who was killed by Klansmen in Mobile, Alabama, and his body suspended from a tree, a very grotesque killing. The state tried the people responsible for the murder and several of them ended up on death row, a couple ended up getting life in prison.

The center, after that part of the case took place, sued the Klan organization to which they belonged and won a $7 million verdict. It was a very celebrated verdict in this country. The problem was the people who killed this kid didn’t have any money. What they really got out of it was a $51,000 building that went to the mother of Michael Donald. What the C enter got and what we reported was they raised $9 million in two years using the Donald case, including a mailing with the body of Michael Donald as part of it.

The top center officials, I think the top three, got $350,000 in salaries during that time, and Morris got a movie out of it, a TV movie of the week. I think it was called, "The Morris Dees Story."

As I said, being the editor on this series really raised my eyebrows. I never knew anything about nonprofits before this. I thought we would have complete access to their financial records; we didn’t. We had access to 990’s, which Doug mentioned earlier, which tell you very little, but they are a good starting point.

Organizations Monitor Nonprofits

I also learned that there are organizations out there that monitor nonprofits. A couple of these that might be worth your time are the National Charities Information Bureau, the American Institute of Philanthropy, and the Charities Division of the Better Business Bureau. They have rather loose guidelines, I think, for the way nonprofits operated, and even with those guidelines, they had blasted the center repeatedly for spending too little on programs, for the number of minorities in management positions, just very basic stuff that they’d been criticized for but nobody had reported.

The relationship with sources on this story was pretty interesting, because like I said, most of these people were our friends, and as somebody mentioned earlier, these were the disillusioned faithful. They were people who didn’t resign. As I said, most of their jobs simply ran out, but they left the center very disillusioned and very willing to talk about it, although most of them wanted to talk off the record.

That presented a number of problems for us. We did not publish anything in the series unless it was attributed to somebody, but we went beyond that. I think if we had stuck with that tack as the only thing we did in the series, we would have ended up with people at the center could have easily dismissed as disgruntled employees.

By looking at 990’s, what few financial records we did have available, we were able to corroborate much of that information, many of the allegations they had made, the fact that the center didn’t spend very much of its money that it took in on programs, the fact that some of the top people at the center were paid very high salaries, the fact that there weren’t minorities in management positions at the center.

If I had advice for anybody looking into a nonprofit it would be this: It’s the most tenacious story. You have to be more tenacious in your pursuit of these things than anything else I’ve ever been a part of. These guys threatened us with a lawsuit from the moment we asked to look at their financial records.

They were very friendly and cooperative, up until the point where we said, "We want to see the checks you write," and they turned over their 990’s and said, "Come look at these." We said, "We don’t want to see those, we know what those are and we’ve seen them. We actually want to see the checks you write," and they said, "Well, there’s 23,000 checks we’ve written over two years, you don’t possibly have time to look through all those," and we said, "Yes, we do, and we’ll hire an auditor to do it."

First Threats, Eventually No Response to Questions

At that point, they hired an independent attorney. They’re all lawyers, you’ve got to understand. They hired an attorney who began first by threatening me, then my editor, and then the publisher. "And you better be careful of the questions you ask and the stories you come up with," and they would cite the libel law to us. So we were under threat of lawsuit for two years, basically, during the research phase of the series.

They initially would answer our questions in person, as long as they could tape-record it. After we asked about finances, they wanted the questions written down and sent to them in advance, and then finally they said, "We’re tired of you guys, we’re not answering anything else," and they completely cut us off.

We published the series over eight days in 1994, and it had very little effect, actually. I think the center now raises more money than it ever has. [Laughter]

The story really didn’t get out of Montgomery and that’s a real problem. The center’s donors are not in Montgomery; the center’s donors are in the Northeast and on the West Coast. So the story pretty much was contained in Montgomery where it got a shrug-of-the-shoulders reaction. We really didn’t get much reaction at all, I’m sad to say.

One of our editorial writers had an interesting comment on it. I think he stole it from somebody else, but his comment was this: "They came to do good and they’ve done quite well for themselves, and they’ve done even better since the series was published." I’m not sure what the lesson in that is, but don’t assume because a nonprofit has a sterling reputation it’s not worth looking into, and don’t assume when you start looking into it that it’s going to be easy to get the information, because it’s not.

Lawyers Offering Their Services

Kovach - Let me add two addenda to this in terms of reporting on nonprofits. I don’t know if it was your experience or the experience of one of you guys, but one of the results of the increasing journalistic interest in nonprofits is that lawyers have talked about this kind of reporting at bar association meetings and there are now law firms that specialize in calling news organizations that are investigating nonprofits and offering their services.

We invited to the conference last year a reporter working on a major series about the Save The Children organization. He could not come because the lawyers had already put the newspaper on notice that they were going to sue them and were sending lawyers out to follow the journalists and go behind them and question the people the journalists talked to, file complaints back to the office about the way they talked to the people out in the field around the world, and had the newspaper so tense and so tied up they were ordered not to speak about it.

The other point is, when this was nominated for a Pulitzer, Morris Dees, who is one of the great fundraisers for a lot of political figures in the country, mobilized some of the best-known and probably most liberal politicians in the country for whom he had raised money and they lobbied the Pulitzer Board against this series, the first lobbying that I know of of that kind, and without knowing anything about the Southern Poverty Law Center’s activities they were lobbying the Pulitzer Board not to recognize this work.

For Q. & A, go to Page Two

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