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How to Kill a Nonprofit 

A federal audit reveals the waste and mismanagement that ruined a once-promising minority aid program

Wednesday, Sep 27 2000

Calvin Swinson believes in living his life by the book. He worked as an accountant for many years, but has since retired, and now spends his days traveling or "simply relaxing locally," he says, because that's what retirees do. He still wears round spectacles, held over from his days tabulating long columns of figures to make sure the numbers added up. He keeps his white hair cut short around the perimeter of his bald, black pate. He chooses his words carefully, checking the balance of his sentences as if he were putting his thoughts to paper.

Proud of the comfort he had earned from a life of virtue and hard work, Swinson says he wanted to help the next generation find similar success when he made his fateful decision three years ago to join the board of directors of a nonprofit called the Urban Economic Development Corp.

The organization helped fledgling minority-owned businesses by assisting them in getting loans and offering advice and technical expertise. The program appeared to be an ideal opportunity for Swinson to invest in the young entrepreneurs of his neighborhood in the Western Addition. He saw it as a chance to give something back.

But Swinson's idealism was short-lived. He says he soon discovered that the nonprofit's managers were in some cases inept, in other cases quite devious. Overall the organization failed miserably to assist the community it was intended to serve. After accepting almost $800,000 from the federal government to help minority-owned businesses get a leg up in the local market, the nonprofit squandered the money. Almost a quarter of the grant went into the salaries and benefits of the project director, his girlfriend, and his daughter. Most of the rest went into serving a handful of favored clients, brought over from the project director's consulting business in the East Bay.

Swinson says he was shocked by what he saw and tried to put a stop to it. But after questioning the nonprofit's practices, he soon found himself at odds with the organization's leadership. When he pressed matters, his colleagues shunned him, then concocted a story, according to Swinson, to smear the retired accountant's reputation. But Swinson's concerns were well-founded, and though he was essentially banished from the organization, the federal government would continue his inquiry, initiating what would evolve into a criminal investigation of the Urban Economic Development Corp.

A federal civil audit of the organization, not yet released to the public, tells a story of how a local nonprofit strayed from its mission and, in doing so, cheated the community it was intended to serve. The UEDC's executive director has tried to portray the city's subsequent cutoff in funding as political retribution, when in fact his agency had a history of mismanagement. The organization's derailment also serves as a cautionary tale of how cynicism and complacency have tainted the federal government's efforts to promote minority opportunity programs, making such failures far too common.

Swinson first heard of the Urban Economic Development Corp. through an old acquaintance by the name of Andrew Jeanpierre. When Swinson retired in the late 1970s, he sold his accounting practice to Jeanpierre, "a young man from Louisiana struggling to make ends meet," and the two stayed in touch. Swinson left the city shortly after the sale and didn't come back until 1995. When he returned, he says he was surprised to find Jeanpierre had become a regular man about town. "He had gotten involved in politics and had become very well known," he says. "It was a real rags-to-riches story."

The young man Swinson once knew had taken a post as president of the San Francisco Airport Commission under then-Mayor Frank Jordan. His accounting firm, Jeanpierre & Co., had grown, and had won many lucrative city contracts. Jeanpierre's name often appeared in the newspapers -- though not always for the best reasons. In 1996, the city Controller's Office found that Jeanpierre had submitted an inflated bill for services on a federal grant given to the Municipal Railway. Jeanpierre submitted a new bill without admitting any wrongdoing. A year later, according to newspaper reports, Jeanpierre agreed to pay a $3,000 fine to the California Fair Political Practices Commission after he made illegal cash contributions to Jordan's unsuccessful re-election campaign.

Jeanpierre invited Swinson to join him on the board of directors of the Urban Economic Development Corp. in the spring of 1997. Swinson accepted the offer and quickly earned the respect of his fellow board members. Within a few months he was elected chairman of the board. Swinson says he had the time to throw himself into the job, and there was much to be done. Just six months before, the organization had won a two-year, $818,000 grant from the U.S. Department of Commerce, in addition to the roughly $350,000 it had received from the city's Redevelopment Agency and the Mayor's Office of Economic Development. Swinson believed the nonprofit had an obligation to repay the government's largess with hard work.

Jeanpierre had played a key role in obtaining the federal grant, according to the federal audit. He had persuaded his fellow board members to allow a man by the name of Jim Payne to use the nonprofit as a sort of clearinghouse to obtain the grant. Payne was a consultant who had built a career out of ruining minority-assistance programs. Payne would write a federal grant application for a program called the Minority Business Development Center, which would help the city's minority business owners network and find contracting opportunities. Payne would also run the program, and in return the UEDC would have access to a generous new revenue stream.

Jeanpierre was clearly eager to make it happen, and the board members bought the idea, perhaps unaware that Payne had made a mess of this exact type of program just a couple of years before. In 1994, after accepting a similar-sized grant for another nonprofit in the San Joaquin Valley, Payne and his deputy director suddenly took several weeks of sick leave, then disappeared, leaving the program in disarray, according to the audit.

Swinson says he was unaware of Payne's past, but he did know the nonprofit had a responsibility to spend its grant money by the book. And that's where he ran into trouble.

Almost since the day Swinson joined the board of the Urban Economic Development Corp., he had been at odds with its executive director, Comer Marshall. A former military man, Marshall is an affable gentleman with a wide network of political connections in San Francisco. At the time, he was serving as president of a mayor-appointed panel of commissioners who oversee the San Francisco Human Rights Commission.

But by many accounts, Marshall was doing a lousy job running the Urban Economic Development Corp. When Swinson joined the board, he says he immediately began questioning many of Marshall's financial decisions -- little things such as whether the organization really needed four private parking spaces, or why Marshall billed the company for a trip to see his relatives. Swinson has a tendency to sermonize, and it's easy to imagine Marshall and others at the organization rolling their eyes when the old gentleman would get on his soapbox.

"I know I was not always appreciated," Swinson says. "They didn't like me asking questions. I'd start talking and everybody would begin looking at their watches."

Swinson says he was especially critical of the new Minority Business Development Center, under the direction of Jim Payne. Though Payne's program operated out of a separate office, its finances were intermingled with the nonprofit's bank accounts, and Swinson says he could never tell where the money was going. Payne and his deputy, Vijaya Rogers, would go on long trips together and come back with outrageous travel expenses without providing all the receipts. Payne was also billing the federal government for long hours he clearly wasn't working, according to the audit. To further taint the appearance of his operation, he had hired his daughter to work for him in a salaried position, raising questions of nepotism.

Swinson was not pleased. Money was flying out the window, and nobody in the nonprofit appeared to have the will to stop it. Within a year, Jeanpierre quietly dropped off the board, leaving Swinson to deal with an organization that was quickly turning against him.

Finally, Swinson laid down the law. For months the Commerce Department had demanded that Payne straighten out his act by providing more documentation on how his program was spending the government's money. Now, with Jeanpierre gone, it was up to Swinson to respond to the agency's mounting concerns. Swinson told the nonprofit's staff that he wouldn't sign any more checks without invoices. And he declared that Payne and Rogers would have to be accompanied by either himself or Marshall on all future business trips.

That's how Swinson ended up going on a trip to Chicago with Marshall, Payne, and Rogers. Swinson says as soon as they arrived, Marshall went one way and Payne and Rogers went another, leaving him to attend the conference alone. He says he didn't see any of them again for the rest of the trip.

But Rogers told a different story. On her return, Rogers told Swinson's colleagues on the board that he had groped her outside a hotel at the conference. The accusation prompted the board to meet behind Swinson's back and vote him out of his position as chairman of the board and to exclude him from future meetings (although he officially remained on the board). Though Swinson denied the allegation and nothing was ever investigated or legally pursued, the damage was done. Swinson was silenced.

With Swinson out of the picture, the management and finances at the nonprofit continued to unravel. In August 1998, the Commerce Department declared the agency's performance "unsatisfactory." When things got too messy, Marshall suddenly fired Payne and the rest of the staff at the Minority Business Development Center. The U.S. Office of Inspector General moved in a month later, initiating a financial audit that focused on the federal grant. Investigators found the office in shambles. Files were missing, the computer hard drives erased.

The books were in such disrepair the auditors could not follow where much of the money had gone. All that was clear was that Payne, Rogers, and the program's staff misrepresented their job performance by falsifying supporting documents and fabricating their time sheets, and that somehow the federal grant money had been diverted through the Urban Economic Development Corp.'s bank accounts.

More than 20 of the businesses listed as receiving technical assistance from the program were former clients of Payne's, including Jeanpierre & Co., which was listed as receiving technical assistance at least twice. Over two years, the program helped only 40 legitimate businesses, about 10 percent of its goal.

Investigators recommended that the Urban Economic Development Corp. return the $793,000 it received from the federal government. They also recommended barring Payne and Rogers from ever receiving federal money again.

The audit called the Urban Economic Development Corp. negligent in its oversight of the project, and it recommended that the government label the UEDC a "high-risk" recipient if it applies for federal funds in the future. (Marshall and Payne could not be reached for comment.)

The audit also vindicated Swinson's role with the nonprofit. "[Swinson's] efforts to regain management control of the [Minority Business Development Center] were not supported by the rest of the UEDC board, and he has been effectively excluded from board actions since that time," the audit said.

Meanwhile, as the federal government was quietly wrapping up its investigation in April 1999, Marshall was fighting another battle at the local level. The San Francisco Redevelopment Agency had just completed its own management audit of Marshall's agency and was equally unimpressed, declaring that the nonprofit was not a "healthy organization," possessing neither a "strong sense of direction [n]or drive."

But the audit also pointed to a larger failing -- a grant-giving bureaucracy that rubber-stamped funding to favored organizations year after year with little oversight. The audit noted that most nonprofits thrive in a highly competitive "funding marketplace," requiring organizations to constantly re-evaluate and improve their programs. But the Urban Economic Development Corp., the audit said, does not compete in such an environment. Aside from the large federal award, it had been receiving the same grants from the city for years, and this funding "seems to have been virtually guaranteed," the audit said, encouraging a culture of complacency.

This stagnation is not unique to the UEDC, according to others who work in the nonprofit world. Affirmative action organizations across the country have fallen into a similar malaise.

"These programs can do a good job," says Harold Yee, director of Asian Inc., another economic development nonprofit in the city. "But like so many other projects under the federal government, the system gets prostituted."

Yee has worked on minority equity issues since Lyndon Johnson's "Great Society" program. What began as a bold idea to give a boost to minority businesses, he says, has become ghettoized -- and untouchable. "It's become too political for anyone to kill," he says. "Now the government's attitude is, "We'll feed you, but we won't pay any attention to you.' Thus the programs have become very ineffective, and sometimes corrupt."

Marshall resigned from his post on the Human Rights Commission last year and quickly became an outspoken critic of the agency. "You can't pretend to be a marriage counselor and beat your wife behind closed doors," Marshall once said, describing the Human Rights Commission's management. He also told reporters that he had been interviewed by the FBI regarding possible wrongdoing within the department's minority contracting program.

Then, in an interesting choice of timing, this summer the city yanked all its funding from the Urban Economic Development Corp., forcing the nonprofit to close its doors. Marshall and his nonprofit's board members claim it is a political payback. He might be right. It was hardly a secret that the federal government was scrutinizing Marshall's agency, but the mayor didn't question the management of the nonprofit until Marshall announced he was talking with federal authorities.

The story of the Urban Economic Development Corp., however, transcends the banality of local politics. While the local newspapers have portrayed Marshall as a whistle-blower sticking up for the rights of minority contractors, he was also allowing his own program to go to seed.

"It all makes me a bit queasy," says Swinson, who has decided to stay out of politics and stick with his retirement plans of travel and relaxation. "These guys make these grand speeches at the government conventions, talking about equality. They demand funding to help the poor and downtrodden, but they know the money will be there. Maybe some of it will get stolen, but it's all right as long as nobody gets caught. Then when somebody like me comes along and doesn't go along with the program, everybody starts running for cover."

About The Author

Matt Isaacs


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