The former second-in-command of a local nonprofit HIV group is raising questions about paying commissions to the agency’s head for landing big donations, claiming that the payment of such “finder’s fees” would be improper and threatens the organization’s tax exempt status.
Kimberly Hood sent an email to the nonprofit's governing board members and employees last month saying she resigned because of what she regarded as a “compliance breach” on the part of her boss, Timothy Young, the decades-long CEO of Open Health Care Clinic and the HIV/AIDS Alliance for Region Two, Inc., more commonly referred to as HAART.
The Advocate recently obtained a copy of the email and verified its authenticity.
Hood, who was the agency’s chief operations and compliance officer, told board members that Young was threatening the nonprofit’s tax-exempt status by asking for a “finder’s fee” for large gifts to the organization that included donations, gifts, bequests, endowments and more.
Young’s compensation package lists a scale that said he was eligible starting last year “for an incentive payment for major gifts to the agency.” Charity and fundraising experts who The Advocate reached out to for this story called the practice a red flag.
The Advocate has reviewed numerous documents related to Young’s compensation package, which the board approved. An incentive scale dated Feb. 2017 says that Young would earn $2,500, for example, if someone donated $50,000 to $100,000. It says Young could earn $200,000 with a donation for $7 million to $10 million.
A document titled “CEO’s compensation change request” from 2017 reads: “Major donations or gifts usually don’t ‘just happen’ but take years of effort and relationship building to pay off. I have been engaging in major gift recruitment for more than a decade with approximately five potential sources. Those kinds of gifts are based on many years of evidenced competence and consistency of mission.”
The document continues: “I would like to discuss an initial bonus plan based on the receipt of major gifts of a minimum of $50-$100,000 up to $5 —$10 million. If the agency gets nothing, neither do I. If the agency gets a windfall based on relationship building over many years, I would hope to get fair consideration.”
Young responded to The Advocate's interview requests by saying that he had not seen the allegations and added, “The board and I have met all requirements and have acted ethically and prudently with our funding, as our audits reflect.” He noted that the board “unanimously voted on all aspects of compensation in January 2016.”
The organization's board of directors held a lengthy board meeting Wednesday where allegations Hood and other employees made against Young were discussed.
Hood's email to board members in April said it was her duty to inform them of their potential risk for agreeing to the payment structure for Young.
Daniel Borochoff, the president and founder of CharityWatch — which rates and evaluates charities nationwide for donors — reviewed the documents The Advocate received and said the payment structure for Young is problematic, partially because it could chase away future donors.
“One thing that really bothers me with this setup is, if he’s the CEO, it’s part of his job,” Borochoff said. “And the organization is a team, it’s not an individual. You could have staffers or board members or volunteers cultivate donors, and then he’s going to claim he deserves this percentage because he’s brought in at some point in the process?”
The national Association of Fundraising Professionals, which advocates “ethical and effective fundraising worldwide,” prohibits finder’s fees in a Code of Ethics that has been used as a national standard since 1963.
Michael Nilsen, the vice president for public affairs at the Association of Fundraising Professionals, said finder's fees are uncommon in nonprofit fundraising because of ethical concerns. Both he and Borochoff said they are more common in the for-profit sector.
“A gift ought to be between a donor and an organization,” Nilsen said. “Getting somebody else involved introduces an element of self-gain ... The important relationship is between the donor and the organization, not the donor and the fundraiser. The building of the relationship is in service to the organization.”
Borochoff said “another thing that’s crazy about this arrangement is that he could decide to spend all his time raising money and neglect the operations of the clinic.”
The board that oversees Open Health recently retained attorney Greg Frost to “look at the issues” that surround Young’s compensation contract, Frost said Wednesday. Frost said he would meet with the board Wednesday afternoon about the allegations, but had not specifically looked into them yet.
However, Frost said that he has yet to hear an allegation that “appears to be civilly or criminally actionable.”
“If it was done inadvertently, people make mistakes all the time, that doesn’t make it anything other than a mistake,” Frost said. “That’s how these processes work, people identify them, they fix them.”
Open Health Board Chairman Chris Oetjens did not respond to requests for comment Wednesday morning.
In her email to board members, Hood specifically referenced a donation made to HAART and its clinic from Baton Rouge philanthropist Angelina Wilson, who died in 2016 and who left money for the organization in her will.
Wilson’s will, which was filed in the 19th Judicial District and which The Advocate reviewed, specified that HAART and its clinic were to receive 10 percent apiece of her remaining estate after she bequeathed money and assets to family members and other organizations. It’s unclear how much cash the request amounted to.
Hood wrote that Young tried to “take a cut” of the money, though she did not say whether his attempt was successful or whether Young has been able to earn money based on donations since the incentive structure was developed.
“He is not entitled to — and cannot ethically or legally receive — a kickback on a donation,” Hood wrote to board members. “By trying to take the money as a [percent] of net assets, he was attempting to hide the fact that he was taking a portion of the donation — intended for our clients and patients — from the donor’s family.”
Hood wrote that Young's payment setup raised issues with the IRS tax code and said it could threaten the nonprofit's tax-exempt status. Reached by phone, Hood said that her legal obligations to the board continue despite her resignation, and that those obligations prevent her from discussing matters related to her employment.
“The allegation appears to be that what Mr. Young was trying to do is private inurement,” Frost said. “It may or may not be, I haven’t formed an opinion on it.”
Frost also said he has not seen any evidence that Young has received any money thus far through the incentive setup. Frost said it is not his role to determine the ethics of the practice, as it’s up to the board to determine what is “tolerable and not tolerable.”
Open Health and HAART receive a large share of public money in addition to donations. A 2016 audit from Daigrepont & Brian listed more than $20 million in governmental grants to the organization under revenues.
The organization is a major recipient of federal Ryan White funds, which go toward HIV services are approved by City Hall. The East Baton Rouge Metro Council agreed last month to award HAART more than $450,000 in federal funding for its HIV work over the next year.
In a statement issued through a spokesperson, Mayor-President Sharon Weston Broome said HAART has historically been an excellent partner in addressing HIV in our city.
"However, we plan to closely examine the situation regarding allegations made by Kimberly Hood against CEO Tim Young," Broome said. "The City-Parish has requested a detailed summary from HAART’s Board of Directors outlining the review process."
In her email, Hood also questioned Young’s compensation, saying the CEO “took home” $189,000 last year. She called the sum “very difficult if not impossible to justify."
The documents The Advocate reviewed show that Young was able to remove limits on the amount of paid time off he accumulated starting in 2016. His pay was also adjusted to $165,000 starting in 2017.
Young’s salary as listed on HAART’s 990 tax form from 2016 was $121,694, and the agency’s audit from that year listed his total compensation at $136,285.