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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
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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."

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Matt Isaacs

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