Blue Avocado Investigates

The latest nonprofit news and insight from our nation's capitol, by The Nonprofit Quarterly's Rick Cohen.

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How Did This Happen? Part 2 of the Vanguard Foundation Story

In Part 1 of this story on the decline and fall of the Vanguard Public Foundation, we reported on how Vanguard's leadership became involved with apparent conman Samuel "Mouli" Cohen, and how millions of dollars disappeared into a get-rich-quick scheme, resulting in Vanguard's closure. In this concluding article, we explore how it was possible for a respected foundation to have come to such an inglorious end.

In August 2010, in a television-like drama, a limo was pulled over in Los Angeles by unmarked sedans and some 20 federal officers emerged -- some with guns drawn -- and arrested Samuel "Mouli" Cohen. A sealed indictment listed 19 counts of wire fraud, 13 counts of money-laundering, and accusations of defrauding 55 investors of $30 million.

The chief victims of this apparent con game? The Vanguard Public Foundation and its major donors.

Today, the Vanguard Foundation -- once a daring, progressive leader -- is little more than a telephone number, with its donors, leaders, and Cohen involved in multiple federal and state lawsuits.

The courts will eventually determine what Cohen did or didn't do and how much insiders at Vanguard -- including CEO Hari Dillon -- are to blame. What concerns us here are the questions on everyone's minds: What should the . . .

Decline and Fall of the Vanguard Foundation

Once acclaimed as a pioneer in philanthropy and an important force for social justice, the Vanguard Foundation is no more. The full story will take years to emerge, but we report here on some of the clues to its sorry demise:

In San Francisco, the Vanguard Public Foundation is out of business, its nonprofit status suspended by the California Secretary of State, its website down, its assets apparently gone. Federal and state court lawsuits involving donors, investors, staff and trustees question what happened to millions of dollars that flowed through the foundation to progressive causes.

But nonprofits and foundations go out of business all the time, particularly in this nonprofit-devouring recession. What makes the Vanguard Public Foundation worth special inquiries? Is it because of the celebrities associated with Vanguard -- Danny Glover, Harry Belafonte, and United Farm Workers co-founder Dolores Huerta, among others? But the glam factor is not the story.

The Vanguard Public Foundation (not to be confused with the Vanguard Charitable Fund related to the for-profit Vanguard), was lauded in its heyday as a new wave of philanthropy, a generational shift, an exemplar and a model.

The famous people associated with the foundation are neither the story nor the cause of the foundation's demise. Rather the story may be one of organizational hubris, board narcolepsy, and the disease of our time: the siren song of the get rich investment plan which . . .

Updates on Some Sacred Cows

To the mooing of sacred cows, Rick Cohen's column in Blue Avocado has also unleashed furious and exhilarating discussion, gnashing of teeth, and movement in the national debate. Here, Rick updates us on some recent controversial articles on Teach for America, L3C corporations, and attacks on the nonprofit tax exemption.

Raising questions about Teach for America

Is Teach for America (TFA) the coolest thing ever for young idealists, for low-income students, and for foundations? Our article sparked responses from career teachers, a debate on the TFA Alum website, and much more.

For career teachers there are reasons for bruised feelings when un-credentialed TFAers with two months of training get into classrooms. As comments on the Blue Avocado website made clear, in some school districts, Teach for America teachers are being recruited while other teachers are being laid off. In Charlotte-Mecklenburg, the school board voted to lay off 539 teachers and educators on the same day it held a welcoming party for 150 TFA recruits. The Houston Independent School District is forcing out 162 teachers as it recruits new TFA teachers. And one former TFA teacher in Las Vegas, a 6-year veteran, worries about his former sponsors: . . .

Volunteerism Public Policies Can Hurt Nonprofits

Amidst the predictable praise for volunteerism and the Serve America Act, we at Blue Avocado detect the mooing of a sacred cow. Cow hunter and policy analyst Rick Cohen lets us know the four things we should be worried about with public policy and volunteers:

Is your heart warm from last week's combo of National Volunteer Week and the anniversary of Serve America? Eyes wide open:

  • Bounty paper towels announcing the "Make a Clean Difference" volunteer campaign
  • Kohl's department stores supplying employee "volunteers" to youth organizations
  • Pepsi announcing 32 Pepsi Refresh grants
  • Virgin Mobile's program where Lady Gaga fans enter a raffle for tickets in exchange for volunteering at homeless youth shelters
  • Oh, and $1.15 billion in federal funds for Serve America

Yikes! Who wouldn't be inspired?

But we're worried. Not about volunteerism. Not even about . . .

Attack of the Tax-Exemption Killers

If Congress tried to take away the tax exemption from nonprofit 501(c)(3) organizations, our sector would be united and up in arms. But instead we are besieged with hundreds of local attacks on the tax exemption from cities, counties, and states. In this article we'll briefly look at some of the attacks being mounted by financially starved local and state governments trying to get extra nickels and dimes from financially starved 501(c)(3) charities. And we'll conclude with some thoughts on how we inadvertently give ammunition to these attackers.

How many ways can you balance a governmental budget on the backs -- or finances -- of nonprofits? Nearly every week, all across the country, different levels of government devise strategies -- sometimes ingenious,occasionally pernicious -- to get tax revenue from already-strapped nonprofits. These include taking away property tax exemptions, adding employee headcount taxes, charging nonprofits "streetlight fees," and more.

Creating or hiking fees: Because governments have much greater flexibility in applying "fees" as opposed to "taxes," localities are finding ways to charge nonprofits for streetlights and anything else they can think of. In Yakima, Washington, the Yakima Health District ended the exemption of nonprofit-sponsored food booths at community fairs and church bazaars; this will yield the Health District all of $10,000 per year. And in two . . .

Census: Battleground for Money and Justice

This year, the fight for our communities means fighting to get them counted in the high-stakes battleground of the Census. Rick Cohen's timely analysis shows us why the 2010 Census is so important and what nonprofits can do now to make sure everyone is counted.

Suppose the U.S. Census had forgotten to include Chicago? In 2000, the U.S. Census missed three million people, the approximate population of Chicago. If we had missed three million people at random, maybe it wouldn't have made a big difference. But most of those we missed are poor people, people of color and children. In other words: the Census missed much of the nonprofit sector's communities.

The importance of the Census (conducted every ten years) cannot be understated, especially to nonprofits on the front lines of serving communities. And it's not just the numbers: it's getting race properly identified.

In addition to your organization's . . .

Teach for America: Icon with Feet of Clay?

Why does Teach for America (TFA) attract so much adulatory praise, so much vitriolic criticism, so much government and foundation money, and so much jealousy/resentment from other nonprofits? And did we mention so much money? Held up as the exemplar of social innovation and civic engagement, the TFA model merits closer attention as to what it really means for public education, to the nonprofit sector, and to society at large. TFA's positive press is so well known that this article focuses on the less-heard concerns and questions about the model:

It's hard to imagine a nonprofit entity that encapsulates the emerging definition of social innovation more than the Teach for America juggernaut. Founded in 1990 by young Princeton graduate Wendy Kopp, TFA now needs no introduction; it has nearly the same brand recognition enjoyed by nonprofits like the United Way and American Red Cross. But as the nation moves toward defining social innovation and handing over the federal Social Innovation Program to private foundations, it cannot hurt to recognize TFA and other vaunted models for what they are:

Three Nonprofit Sneezes in Health Care Reform

Unexpectedly, there are three large and distinct ways that the nonprofit sector is involved with the health care reform debates. First, nonprofits are employers, and, like all employers, have a stake in employer incentives for providing health insurance for their employees. Second, the role of nonprofit hospitals is being questioned in the debate, with some asking: "If nearly everyone will be insured, will hospitals need to provide charity care, and if not, why would they be nonprofit?" And third, what in the world is meant by the much-mentioned" nonprofit cooperatives as alternatives to the public option"?

Rick Cohen explores and answers these compelling questions, noting that according to the old saying, "One sneeze a wish, two sneezes a kiss, three sneezes a disappointment."

The next time you see people lined up at a free clinic, ask yourself: how many of them tried and failed to get "charity care" at a nonprofit hospital? How many of them are nonprofit employees? How many of them can't . . .

L3C: Pot of Gold or Space Invader?

For-profit companies continue to seek ways to obtain two benefits that are usually reserved for nonprofits: foundation grants and government tax exemptions. These efforts are led by both well-meaning individuals as well as those that simply want funding without community accountability. Regardless, they offer risks and challenges to the nonprofit sector as we know and celebrate it. Rick Cohen tells us of one such effort that appears -- in the absence of opposition -- to be headed for adoption.

The hot topic in foundation circles is the L3C: the low profit limited liability corporation, the latest development in social enterprise. Several states are legalizing L3Cs and accompanying tax and philanthropic benefits, and its backers are pitching them for federal approval.

L3Cs are profit-making corporations, but their owners don't identify profit as their primary purpose. The mission of an L3C is a social benefit, doing socially productive and useful things, and only then earning a profit.

At the national level, the Council on Foundations has been actively promoting L3Cs, on Capitol Hill for the past two years. Already in four states and two tribes, individuals can form L3Cs and attract various types of investors, and, because of their charitable missions, tap into foundation loans and . . .

Faith-Based Funds: Presto Chango

Whether you're hoping to get faith-based federal funds or are just curious about what happened to the high profile initiative launched by President Bush and revamped by President Obama, Rick Cohen has the lowdown and shares it with Blue Avocado readers:

In a nutshell, like Bush's program, Obama's faith-based program welcomes congregations and religious organizations in discussions and promotion of the social policies of his administration.

But unlike the Bush program, Obama's initiative does not direct money to faith-based groups. Rather than a grantmaking program for faith-based organizations, federal moneys with a faith-based "flavor" are hidden in pockets throughout the Obama budget -- but you have to know where to look for them.

Bush's faith-based money

At face value, President Bush believed that faith-based groups -- particularly small . . .


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