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Q. & A.

When Is a Nonprofit a Flim-Flam?

Q. - As somebody who cut his investigative reporting teeth on organized crime in New Jersey, I have to say I’m shocked by the panel, because I’ve heard involvements in two churches, doctors, and a do-good organization, and my question is, where is the line between deciding this organization may be a scam or a flim-flam affecting its own victims, and the public good?

Frantz - I’m happy to answer in terms of Scientology. For Scientology, the line was when they got that tax exemption, because they’re now subsidized by the federal government, and that was used by the church to promote themselves all around the world. But it was a stamp of approval from the United Sates government, and that not only warranted my interest, but I think necessitated it.

Tharpe - I would answer that with the center, too. I think one of the worst things you can do is take advantage of somebody’s best intentions, and when you lie to people who give you money because they want to improve the world, I don’t think you can get much worse than that.

Kelleher - Actually, you can. [Laughter] If you’re a doctor who takes medical - there’s a guy I just wrote about last year, and he was torturing women after they gave birth. Just basically getting that story on the record was pretty much of a nightmare, but you start looking at someone who’s torturing women, and getting paid for it basically with tax dollars. It’s not just money, I think it’s people; when people are getting hurt it’s the public interest.

Tharpe - One thing that hasn’t been discussed here, Bill touched on it, but how easy it is to become a nonprofit. In '95, it cost $465 to file the federal paperwork to do it, and at that point there were 30,000 new nonprofits, which I think correlates to your figure, Bill. In '95, there are more a million in the country, and there were fewer than 500 IRS agents to patrol that whole growing industry. The curve on that looks like e-trade stock when you look at it. If you look at the number of nonprofits it just goes up like that after the '80s. So it’s a huge part of the economy and nobody looks at it, and you legally can’t look at a lot of it.

Kovach - The California Tax Office reports over 100 filings a day for nonprofits, and they only have one person to monitor the filings.

Barstow - I do think you’re raising a good point, though, because throughout our investigation of the National Baptist Convention, we frequently ran into members of the church group who basically said to us, in essence, "Look, we know this guy’s stealing our money but that’s our business, it’s not your business, leave us alone." I guess I thought about that on two levels; one was I knew that the IRS basically says that it’s illegal for someone who runs a not-for-profit to convert the assets of that entity for their own personal gain, so I felt there was at least that question of whether or not that that, indirectly at least, connected it to some public interest. But more than that, I just simply felt this is a church group that affects hundreds of thousands of people’s lives, it’s a very powerful political entity in this country, and by God, because it’s so big, it absolutely deserves scrutiny, no less than any other major powerful group in this organization, and not to give it scrutiny, I think, would be not giving it the respect that it deserves.

Q. - I must say I’ve only read one of the four series, which was Doug’s; I would like to now read all the others, they’re really stunning stories you’ve told. But I had read Doug’s stories on Scientology and was quite impressed at the time, and I had an immediate question, which was, what happened to you afterwards, because I assume they came after you and you haven’t told that part of it. And secondly, what happened in general? I thought you had the goods on them so completely that how could the IRS have kept this exemption? I had another reason for being interested in the story, which is it became an international story by virtue of the fact that Scientology then was worldwide, treated as a religion, and of course we know the Germans tried to crack down on it and it became a big issue at the State Department briefing and other places, and I had thought you had broken through that whole thing and things were going to change, but I gather they haven’t. Maybe you could tell us.

Frantz - No, I don’t think they’ve changed at all. I could have made a career out of writing about Scientology and I chose not to, and my editors, bless them, agreed. What happened to me? Not much happened to me. It was very adversarial. There were private investigators poking around my house and photographingmy wife and children, and other odd coincidences occurred, but it wasn’t anything that I didn’t expect, and it wasn’t anything that hadn’t happened in spades to lots of other people, including IRS officials. I should say though that I had an interview midway through my investigation of the IRS story. I went out to Los Angeles to have an interview with the Scientologists. I didn’t want to wait until the end, I don’t think that’s fair, I hardly ever do that, and also those interviews, if you do them midway you can get new things to investigate. So I went out there expecting to see one church official and their tax lawyer, a woman from Washington named Monique Yingling, and Dean Baquet, the National Editor, who’s a wonderful editor, had a good suggestion, he said, "Take somebody along from the LA bureau just in case you need some friend in there." So I went in with Jim Sterngold and we were met at the door by this nice PR lady, and she took us up to the top floor of one of their buildings on Sunset Boulevard, and we walked in and there were six lawyers, three Scientology officials, a video camera, and a stenographer. The room was very small, very cramped, and the first hour they spent attacking me, personally. They knew a lot of stuff about me that surprised me, and I spent an hour sitting there listening to them and defending myself a little bit, and the next two hours they answered my questions to some extent. It was really the most extraordinary interview I’ve ever had, the most confrontational interview I’ve ever gone through, and I’ve covered the mob in Chicago for a long time and it was nothing like this. It was really tough. But nothing bad happened to me. Nothing untoward happened to Scientology either over this, over their exemption. Part of that blame, I think, rests with Congress, because there’s really nobody there willing to pick up the issue and go with it and ask the necessary questions about this tax exemption, about the circumstances behind it. I had some contact with a staff member on Senate finance, a guy who worked for Bill Roth, and he was really hot to go, and he had one conversation with Roth and the thing was over. Nobody gave a damn.

Q. - I have a question to Susan specifically. Listening to your story, there is one aspect of it that I either don’t fully understand or disagree with. You made a decision to go and notify the families on both sides, both the donors and the recipients of fertilized eggs, to tell them what happened. To me, it goes down to the right not to know. I think the families should have been left with the option to find out if they decided to, if they chose to. You could run the story, everybody involved knew they were involved, and they could either choose to know or not to know, based on their personal judgment. You kind of denied them the right not to know, and unless for the sake of the story and making it even bigger, what was the purpose?

Kelleher - That’s a really excellent point. It’s something we discussed at length with the ethicist and it was like, are the issues here of such public importance that they deserve going into people’s lives and delivering this devastating news. There were several things. One, we found people who lived just several miles apart. In one case we found people, I think it was like four blocks away. The potential for those kids to go to the same school and to meet and to marry, there’s a possibility there. So there’s the genetic time bomb aspects of it. Number two, the people who would really be in the only position of notifying these people, because it wasn’t every single patient but it was many patients, was the university and they had demonstrated amply to us that they had no intention of telling these patients, and in fact were doing everything possible to make sure the records got out of the country with the doctors, or wherever the hell they were going to send them, and they did nothing to notify people. In fact, even after we first published the story, I think we said 35 patients - they came out finally and said there’s 35 patients, so we knew there were many more, but we were contacting them individually. So by the time we had doubled that number, we published another story saying there’s at least twice that many. Then they go, "Okay, we’re going to try to find people." Then you start looking at the efforts that they made. There was nobody there really advocating for the patients to say, "Hey, if you got fertility treatment here, you might want to go check it out." I just don’t think that was an option. I wasn’t pushy; if people did not want to know then that’s it. It’s a good question. But that was our thinking, and I think it was good thinking.

Q. - I have another question to all of you, if I may. All the stories you just told were local stories, but in a way they’re universal. We have all of these organizations and institutions all over and sometimes we break stories like that and nothing happens. So what I want to ask of you is, how discouraging is it to you that nothing happens in the long run, nothing really changes, and how do you understand it? Why don’t we change things, unless it’s one person involved, like the President, and then it’s great to know we can change it, have impeachment, but we don’t change things for real.

Barstow - I know for me, when I was going through the National Baptist Convention story, I actually very early on committed to myself, I don’t care what happens, I don’t care if they don’t do a thing, I don’t care. The only thing I care about is telling this story. I do not have a horse in this race. Making that vow to myself very early on kind of relieved me of any expectation or pressure or anything of the sort, really, and I think it’s also just a clearer way to go about your business as a reporter, not to have a horse in the race.

Q. - My question is to Susan, and I want to ask the same question that this lady asked you, but from a different angle, not from the point of view of whether the people knew or not knew. I would like to find out what has happened to those third parties, the families that were beneficiaries of this crooked business that you exposed? What were their moral feelings? Did you ever know? From the beginning they knew the child that would be born into their family has no relation either to mother or to father, and if they finally knew that, what was the moral impact on them of your exposure?

Kelleher - I think if there was a major failure in our series it was that, because we managed to I think tell every part of our story except for that. There were two people I knew who moved to another country. They were so afraid the parents were going to come and take their kid that they didn’t even want to risk that. Other people didn’t want to talk about it, they didn’t even want to acknowledge that it happened. So I think being able to represent their point of view, it was sort of minimal. We would tell it just in a denial way. There was one couple who managed to meet with each other. I think in fact the meeting has already occurred, I think last year, that the mother was going to meet with the child, and it was going to be as a friend of the family but she was going to get to see the kid and there was going to be some exchange. Other people have exchanged letters and pictures, but they really didn’t want it to be a public thing, they wanted it to be something private. These people knew they were getting donor eggs, but there are these legitimate donor programs, they pay a lot of college kids. In fact, I just saw an article in one of the magazines where they’re paying 50 grand for Harvard eggs.

Kovach - At least advertising.

Kelleher - At least advertising that, exactly. I think because of that, they thought these were legitimate donors. In many cases, these were very influential people who could do favors for Dr. Asch and he would say, "Don’t worry about it, I’ll take care of it," and then he would charge them $10-15 thousand for donor fees. So they thought everything was on the up and up and they didn’t know Dr. Asch was putting the money in his pocket and taking somebody else’s eggs.

Q. -Is the 990 the full extent of what the public has a right to know about nonprofit organizations? Also, is there any other recourse besides these beleaguered IRS agents to put their feet to the fire when these nonprofits don’t want to cooperate with you?

Frantz - The 990 is just about it, but you often find state attorneys general who are active in this area. That’s another source I forgot to mention. You can find 990’s filed in those offices sometimes. In some states, charities have to fill out additional forms that are on file there, and in a few states, like Florida, it’s a pretty good attorney general’s office and they’re active in going after charities, and Illinois is a pretty good one. So that’s another avenue, from my experience.

Tharpe - Let me add to that, that one of the best sources, and it’s not one we had here, but these things all have boards of directors. Under the law, they have to have a board, and I think they have to have a minimum of seven or eight board members. The best charities, I think, have very big, diverse boards and a lot of charities have that. The NAACP and United Way do, and they’ve gotten in trouble, and one of the reasons you’ve heard about scandals within those organizations is because of the diversity on those boards, somebody has caught problems with it and reported it to the media. You run into an organization like the Law Center. They have the minimum number of people possible on the board and they’re all friends of people at the center. Morris’s personal doctor’s on there. It’s basically friends of the family, it’s a very closely held private corporation in one way. But with a legitimate charity, or maybe even an illegitimate charity, a board is another source of information. But 990’s are sort of it. Like you said, sometimes the AG can expand on that, but usually not very much.

Q. - What about when nonprofits are receiving federal or state grants? Doesn’t that open up access to another layer of information or simply their administration of that block of money?

Barstow - I don’t know from my experience, I don’t know if it does or not.

Tharpe - I don’t know if I know the answer to that either. I know the center had stayed away from anything that would make any of their records more accessible than they were under the nonprofit statutes, but I don’t know the answer to that.

Frantz - It does, it sometimes does. Even to the extent that if you can argue that a not-for-profit has been brought in to perform a function that traditionally is performed by government and that the government ceded to this not-for-profit agency and is essentially standing in the shoes of the government, then you can sometimes make that argument. You’ll have to go to court, but you can make that argument in court, and we’ve made that and sometimes have been successful, and then forcing them to turn over the records that were related to that particular government function that they are performing.

Kovach - Anyone who’s interested in details like that just get in touch with me. We had some information like that in last year’s Watchdog Conference, so I have some details on it. One thing, any journalist who’s going to get into coverage of or looking at nonprofits, you should look at the board of directors of your news organization. I doubt there’s a new organization in this country that doesn’t have at least one or more nonprofit directors on the board of a news organization.