It all started with the cheese balls.
The vendor who supplied
gourmet snack mixes to Phoenix Center’s Marketplace — the
resale boutique meant to be an ongoing fundraiser for the AIDS service
organization — left a phone message for treasurer John Kerstein
asking why his credit-card company had canceled payment. Kerstein returned
the vendor’s call, certain that there had been some simple
misunderstanding. “He was confused because the original shipment
he sent had been charged back to him as fraud on my American Express
card,” Kerstein says. “He said, ‘I have your signature
right here.’ And it just started escalating from that
point.”
The account number in question didn’t match the
one on Kerstein’s American Express card, and he was sure that he
hadn’t bought $760 worth of Wind & Willow cheese-ball mixes
— but he remembered that Phoenix Center’s executive director,
Jack Bishop, had planned to sell cheese-ball mixes at the Marketplace. When
Kerstein asked about the purchase, Bishop admitted that he had opened a new
American Express account in both of their names and signed Kerstein’s
name on charge-card receipts. But that wasn’t all. Over the next few days,
Kerstein discovered that Bishop had run up a $13,000 bill on the new
American Express card. About $8,000 of the bill had been paid with a
Phoenix Center check inked with forged signatures; the remaining $5,000 had
been written off by the credit-card corporation as fraud. And there was more. Over the next few weeks, Kerstein
says, he and other members of Phoenix Center’s board of directors
uncovered a quagmire of questionable purchases, a heap of unpaid and
overdue bills, and a pattern of financial shenanigans that threatened to
bankrupt their beloved charity. The outstanding debt amounted to almost
$100,000, and included a lien against their building, placed by a
heating-and-air-conditioning contractor who had never been paid. Bishop
— while emphatically denying any wrongdoing — quietly resigned.
Normally the departure of a high-ranking official
would be enough to close the book on anything that had even the faintest
aroma of scandal. In the image-conscious, donation-dependent world of
not-for-profit agencies, any alleged improprieties that might or might not
have precipitated such a resignation would be discussed sotto voce behind closed doors
and deliberately forgotten as soon as the accused party vanished. Several
Springfield agencies facing allegations of financial mismanagement have
reacted in this way [see “The money trail,” page 11]. But Phoenix Center’s board of directors
hasn’t followed the tradition. Instead of pretending that their
agency’s money evaporated in some bad dream, they have searched not
only Phoenix Center financial records but also their own souls in an effort
to discover exactly what went wrong. This process, they say, has been
painful but productive. “The board of directors has never been as
involved, or as concerned, as they are right now,” Kerstein says.
“It has unified the board.”
Five years ago, Phoenix Center was little more than a
weekly support group for teenagers struggling with sexual identity. The
organization was established by a handful of kids who identified themselves
as gay, lesbian, bisexual or transgendered, along with their straight
friends, as a place for them to socialize without being taunted by peers — a
“safe harbor,” as board president Phil Giger likes to call it.
The support group remains a primary part of the Phoenix mission, providing
educational activities on everything from STD prevention to how to deal
with homophobia, isolation, substance abuse, and depression. The support
group now draws 50 to 60 kids on a regular basis, Giger says. But the youth group is just a part of what Phoenix
Center does. In 2003, Phoenix Center began hosting a clinic on Thursday
nights offering free testing, counseling, and needle exchange for anyone at
risk for HIV or other sexually transmitted diseases. In 2004, Phoenix
Center opened Billy’s House, a small residential facility designed to
accommodate homeless people with HIV or AIDS. In October, the organization experienced a major
growth spurt when it moved from Laurel Street to Lawrence Avenue, into an
old orphanage most recently known as St. Monica’s Hall. Instead of
having space for only four HIV-positive residents, Billy’s House can
now accommodate 20. Instead of having room for just a few people to be
tested for STDs, Phoenix Center now has space to triple the size of its
clinic. And instead of squeezing into cramped quarters for youth-group
get-togethers, scores of teens take over the Phoenix Center’s
2,000-square-foot basement three nights a week. At the same time the center itself was mushrooming, it
branched out into retail, opening Phoenix Center’s Marketplace in the
old Pan Handler storefront on Chatham Road. The Marketplace sells furniture
that people have donated to Phoenix Center, along with consignment and gift
items — including that fancy Wind & Willow cheese-ball mix. Looking back, Giger figures that all this rapid growth
may have simply overwhelmed Phoenix Center’s young and relatively
inexperienced executive director, Bishop. “We grew, and we grew too fast, and he
didn’t reach out for us to help him,” Giger says, recalling how
Bishop used to call him to sign a check or fix a broken water pipe at the
Laurel location. Kerstein has a similar theory: “Anything I could
say would just be speculation, but the best I can determine is that
somewhere along the road . . . a couple of things happened: One is that
[Phoenix Center] grew beyond his ability to control it, and the other is .
. . his ego took over.”
They don’t suggest that Bishop stole Phoenix
funds. In fact, they say, they’ve found no evidence that he bought
anything for himself — although without receipts from his credit-card
purchases, they don’t know for sure. Instead, they say, he simply
mismanaged the agency’s money, leasing laptop computers, buying a
baby grand piano, candles, throw pillows, and massive quantities of deluxe
cheese-ball mix rather than paying the basic bills. “It’s not that there’s been any
misappropriation of funds. There’s no personal gain, as far as we can
tell,” Kerstein says. “But he left us with a tremendous amount
of debt that needs to be cleaned up.”
There aren’t any big names on Phoenix
Center’s board of directors. Unlike the boards of other
not-for-profit agencies, this board has no county judges, no elected
government officials, no perky television personalities. A news-archive
search for Giger, the board president, shows that he has been mentioned by
the local press in regard to just two events: the marriage of his daughter
and the arrest of a high-profile criminal, which he happened to witness
because it occurred in front of his house. But what the board lacks in star power, it recoups in
intellect and personal involvement. Giger has years of experience in retail
management and state government. Jerry Noble, the board’s vice
president, is a special-education teacher. Kerstein, the treasurer, spent
12 years managing big-box retail stores and 15 managing fast-food outlets
(he now has his own glass-design business). Chris Boyster, board secretary,
is a gun-control lobbyist. Board member Phil Kralik owns a hair salon;
board member Carolin Faulkner is a Realtor.
“Although our board is very small, it’s
pretty diverse, and there’s a lot of expertise on the board. Several
of us have businesses of our own . . . so it’s a pretty savvy
group,” Kerstein says. “And I guess our board might be unique
in that everybody is there because they care. This isn’t just
something for somebody to put on their résumé.”
Two other board members recently resigned. One —
the mother of one of the kids who founded Phoenix Center — did not
return phone calls. The other, ASPCA lobbyist Jonathan Lackland, says he
resigned because of his busy work and family travel schedules after the
board began its intense investigation of Phoenix Center finances in May. The discovery that funds had been mismanaged shocked
the board members, because Bishop had been, for all intents, the only
executive director the center ever had, taking over within a few weeks of
its April 2001 opening. Even now, they credit Bishop with making Phoenix
Center a success. In the early days of the investigation, when Giger
believed that Bishop had innocently failed to pay some bills, he sent
Bishop an encouraging e-mail: “Jack, all your work has been
remarkable, and no one can do the magic that you do. You are the driven
angel of this organization.”
“At the time, I was unaware of the huge debt we
were facing,” Giger says now. “His track record had been
wonderful as far as developing the Phoenix to where it is, but it came to a
halt with this.”
Beyond Phoenix Center, the board members had personal
ties to Bishop. Bishop himself describes his relationship with the board as
“like a huge family providing a service that is needed in the
community and addressing the needs of the clients.”
Giger, who comes from the same small Illinois town as
Bishop, knows Bishop’s mother and remembers when she was pregnant
with Jack. Kerstein’s late life partner, Terry Miller, was a father
figure for Bishop. Kralik cut Bishop’s hair, and says that everyone
on the board searched for plausible explanations for the financial
problems. “We were looking at the whole thing as friends
looking out for another friend until it got to the point where there was no
way around it,” Kralik says. “Honestly, nobody wanted to see
that it was true. It wasn’t until the overt stuff was staring us in
the face. There’s no good reason to get a credit card in somebody
else’s name without telling them.”
Asked whether this close, almost familial bond had any
effect on their investigation, Kerstein doesn’t mince words.
“Did it make it more difficult? Excruciating? Unbearable? Yes,”
he says, “it did.”
After the phone call from
the cheese-ball
vendor, Kerstein spent two days in Bishop’s
office, digging through paperwork. He called Boyster, the board secretary,
to find out whether Boyster had actually signed a check Bishop had recently
issued, and Boyster said no — he hadn’t signed a check in six
months. Yet his name was scrawled on all of the checks. Bishop had been absent from his office — sick
with stomach problems — during Kerstein’s search, but he agreed
to attend an emergency board meeting the night of May 24. At that meeting,
Bishop admitted opening an American Express account, signing
Kerstein’s name on charge receipts, and forging signatures on Phoenix
Center checks. The board suspended Bishop, with pay, pending the outcome of
an internal audit. Kerstein, Giger, and Boyster — the board’s
finance committee — spent the next three days poring over stacks of
paper on Bishop’s desk, around his desk, and stuffed into a file
cabinet. They found an unsettling number of unpaid bills, some of which had
never even been opened, and a $7,000 lien against Phoenix Center’s
new home. “As we started getting deeper into it, it became
a quest,” Kerstein says. “On a daily basis we would find
something new that would shock us all. It got to the point where we felt
like a bunch of idiots, like a bunch of sheep that he had led by the
nose.”
Most disturbing was the realization that
Bishop’s detailed financial reports, presented to the board of
directors at each meeting, could not have possibly been accurate. “He would provide us with a financial statement
on a monthly basis, and what he provided us with looked great,”
Kerstein says. “But it became evident that there was no way anybody
would ever have been able to determine where we were financially without
doing what we [three board members] did.”
On May 30, the finance committee sent the other board
members an update on the audit, announcing that Bishop had been removed
from the checking account and locked out of his office. The memo also
listed recommendations to gain control of finances, including canceling
cell-phone and advertising contracts, and putting renovations of the new
building on hold. They didn’t advocate firing Bishop; instead they
suggested documenting the details of the investigation in an agreement to
be signed by Giger and Bishop “with a clear statement that a repeat
of any of the behaviors . . . will result in immediate
termination.”
They also sent the memo to Bishop. On May 31, he
resigned.
Jack Bishop’s career with Phoenix Center began
as volunteer office manager, assembling bookcases the day the center
opened, and he replaced the original director a few weeks later. A radio
disc jockey by trade (his last gig was at a country-western station in
Jacksonville), he has had only two three-day seminars on not-for-profit
management to supplement his on-the-job training. He says he spent an
average of 60 hours per week at Phoenix Center and was earning an annual
salary of $42,000 when he left. “I’m proud of the what we have been able
to accomplish in a short period of time,” the 35-year-old Bishop
says. “We grew in leaps and bounds in terms of the number of people
who accessed our services. Just being able to help individuals that may not
have any other place to turn is what I’m most proud of.”
He says he’s now “taking a
breather,” neither working nor applying for any jobs. At an interview, Bishop initially declines to discuss
his departure from Phoenix Center. “I don’t know what’s
been said. All I know is, I resigned, and it was time for me to go,”
he says. “I felt that it was time for me to move on.”
He deflects allegations of financial problems by
describing a lax atmosphere in which the board set no limits on his
spending, and he says that Kerstein encouraged him to forge his signature
on his Lowe’s hardware-store credit card during the renovation of
Phoenix Center’s new building. “Did I admit to anything wrong? No. Everything
I’ve ever done for that place has been for the client and for the
betterment of the agency,” Bishop says. “There were no charges
on that credit card that were ever for me personally or for my personal
benefit.”
He presents printouts of supportive e-mails he
received from board members Giger, Noble, and Kralik — all of which
attest to his achievements at Phoenix Center. All three board members,
though, later explain that those messages were written before the depth of
Bishop’s deceptions was discovered. (“That was how I felt May
31,” Noble now says. “It’s OK with me that he’s
gone.”) He offers a copy of Phoenix Center bylaws and points
out that even a “special” board meeting requires five
days’ notice, rather than the two-hour notice he was given of the May
24 emergency meeting. These bylaws don’t specify any cap on the
per-expenditure dollar amount the executive director can use without board
approval, and Bishop insists that the $500 figure quoted by board members
didn’t exist. He complains that the board’s tactic of changing
the locks on his office was improper and not in accordance with
“protocol for human resources.” He also shows a list of
personal items he and his attorney have requested from Phoenix Center,
including some office furniture, a few decorative items, and a pair of
burgundy wingback chairs. “I’m not asking for the sun and the
moon,” he says. “I’m just asking for what is legally
mine.”
But board members have a different perspective on
Bishop’s allegations. The emergency meeting was called unanimously,
the $500 spending cap was well known, and they were under no obligation to
follow “protocol,” given the circumstances, they say. As for
the personal items, Kerstein says, the board will return anything Bishop
can prove that he purchased, but he doesn’t believe that Bishop will
ever produce a receipt for the wingback chairs. “I donated those chairs to the Phoenix
Center,” Kerstein says. “They used to be in my living
room.”
Efforts to get Bishop’s response have been
fruitless. After one lengthy interview, he failed to answer subsequent
phone and e-mail messages.
Bishop has similarly shut off all communications with
board members, leaving them to figure out what happened and why. Kerstein traces the trouble back to at least January,
when he gave Phoenix Center a personal loan of $25,000 to help meet payroll
and pay utilities. In return, he asked to get more information on
expenditures but later discovered that Bishop had found a way around his
request. “It was in January that he told the board
secretary [Boyster] that he didn’t need to be signing checks anymore
because I would take care of that,” Kerstein says. But during the
internal audit, he discovered that instead of having him actually sign the
checks, Bishop apparently resorted to forging Boyster’s name. Board member Phil Kralik — Bishop’s former
hairdresser — blames himself for not picking up clues as far back as
November, when he got calls from clients who had business dealings with
Bishop. One was the banquet manager at a local hotel where Phoenix Center
had held a fundraiser in October. She wanted to know why she hadn’t
been paid. Kralik alerted Bishop, who promised to pay the bill, but the
banquet manager called again the next month, saying that she still had not
been paid. Another Kralik client is an accountant who did bookkeeping for
Phoenix Center. Not only had Bishop stopped paying her, Kralik says, but
she also had serious questions about the way he was handling taxes. “I feel like if I had paid more attention, I
would’ve noticed something — but I had no reason not to trust
him,” Kralik says. “He’s a friend, he’s a client,
and he has done good things in the past. Something switched. It went from
good to really bad really quickly.”
Another theory points to problems starting in October,
when Bishop created the Marketplace. The resale shop seemed like a
brilliant idea: Acquisition of the new building had brought in more donated
furniture than the organization could use, and the fire inspector said that
the surplus pieces could not remain stashed in the basement. Bishop leased space for a “thrift” shop
(despite bylaws specifying that only the board president can sign a lease),
but only half of the items were donated or consigned; the rest were
purchased from auctions, wholesalers, or even other retailers, such as
Hobby Lobby. Bishop told the board that the rent was $750 per month, but
Kerstein later discovered that the rate went up to $1,500 after the first
three months. Once advertising costs were factored in (they didn’t
appear on board reports), the store’s profit margin was desperately
slim. Finally there’s the piano hypothesis. A
beautiful Bauer baby grand, covered with a beaded black velvet throw and an
assortment of pillar candles (all purchased at Hobby Lobby with that
fraudulent American Express card), dominates Phoenix Center’s
boardroom. Directors say Bishop told them the piano was a gift. In the
audit, however, they discovered a hefty bill of sale that had been
finalized in October, with the contract to buy the instrument signed way
back in August. “That’s what pissed me off the
most,” Giger sputters. “We have a lien on the building just for
basic HVAC. This guy came in and worked his butt off, did overtime so we
could get people moved in upstairs, then we don’t pay his bill
— and Jack goes out and buys a piano instead of sending that man a
check.”
Bishop claims that he told the board that the piano
was a “partial” donation, but the board president has lost
patience with his former executive director. “We can go on and on
forever exchanging tits for tats,” Giger says, “but the bottom
line is all on paper in black and white, tainted with some red.”
The board members have learned several lessons from
the experience. Instead of looking for another executive director, they
plan to name a director of operations and keep control of finances
themselves. Instead of meeting monthly, they plan to continue meeting every
week and communicating by phone or e-mail on a daily basis. Even Noble, who
lives in Jacksonville, feels totally within the loop. “Nothing
separates us,” he says. There’s more pain ahead. The board plans to
pursue criminal charges against Bishop — another decision that sets
them apart from other scandal-plagued boards — just to ensure that he
can’t wreak havoc again elsewhere. But ironically, as agonizing as the purge has been,
the Phoenix Center board believes that it has benefited from the process. “It’s been a long road to get here —
and, even as unfortunate as it’s been, it has been a rebirth for
us,” Giger says. “It’s a new beginning.”
The money trail
Several local not-for-profit groups hurt by insiders
Like Phoenix Center, other Springfield area
not-for-profit organizations have been victims of financial scandals.
Unlike Phoenix Center, most have delegated the unpleasant task of
determining what went wrong to outside investigators.
Child Advocacy Center
In October, executive director Jonna Cooley was placed
on administrative leave pending an investigation by the Sangamon County
Sheriff’s Office into allegations that she had submitted bogus
travel vouchers and possibly misused the agency’s credit card. She
resigned a month later. No charges have been filed, and CAC officials have
been told that the investigation still continues. CAC’s board of
directors includes numerous law-enforcement officers and lawyers; Sangamon
County State’s Attorney John Schmidt chairs the board. Three months ago, Cooley accepted the job of grant
writer at Phoenix Center, where she was hired on the basis of her track
record of obtaining grants at CAC. Though she recently added the duties of
program director, she has no access to Phoenix funds. “She
didn’t even want a petty-cash drawer,” says Phoenix board
president Phil Giger.
Illinois Symphony Orchestra
In August 2005, ISO hired an attorney to investigate
financial problems in its organization. Two employees resigned, and retired
Judge John Freese — then president of ISO’s governing board
— told the State Journal-Register that the resignations “relate to some financial
issues.” The results of the investigation, which Freese said he hoped
would conclude within weeks, have never been publicly announced.
Land of Lincoln Goodwill Industries
In October, executive director Larry Hupp and
assistant Debra Neece resigned after signing a deal with federal
prosecutors in which they admitted instructing employees to falsify
documents to obtain $38,000 in Medicaid monies. An Illinois Times investigation
revealed that Goodwill’s star-studded board of directors —
including two judges and Sheriff Neil Williamson — failed to
recognize the scandal [see Bruce Rushton, “Ill will,” April
27].
United Way
In April, a former Horace Mann executive assistant
named Gerri E. Ripka pleaded guilty to stealing thousands from employee
fundraising events designed to benefit the United Way. Sentencing is
scheduled for Aug. 14.
This article appears in Jul 6-12, 2006.
