Chimes asks IRS to review records

Charity's compliance with nonprofit alliance's standards also in question

Accusations of nondisclosure

October 31, 2003|By Jay Hancock | Jay Hancock,SUN STAFF

The Chimes, a Baltimore nonprofit group strongly criticized by charity experts for nondisclosure of business deals with board members and millions in executive pay, said yesterday that it is asking the Internal Revenue Service to examine the organization's records and address points raised by recent articles in The Sun.

Also yesterday, the Maryland Association of Nonprofit Organizations said the articles prompted it to question Chimes' compliance with its ethical standards and to consider expelling the Chimes Foundation, which solicits donations to support the Chimes group.

"That membership is under review," said Peter V. Berns, the association's executive director. "The articles on their face raised serious issues about legal compliance with requirements of the Internal Revenue Service that apply to charities."

Charities must report, on publicly available IRS forms, executive compensation and all deals with board members so that donors and regulators can sense how much money might be flowing to insiders instead of to a nonprofit's mission.

Based on their analysis of Chimes IRS filings, former IRS officials and other nonprofit specialists said the organization appeared to have concealed from potential donors $2.44 million in compensation for three top executives over three years, including $1.07 million for chief executive Terry A. Perl.

Chimes also should have disclosed business deals with at least four board members, including hundreds of thousands of dollars in equipment-leasing business done with a company run by Chimes Inc. Chairman Allan Levine, experts said.

Chimes delivers vocational training, set-aside jobs, residential care and other services to the disabled. Its leaders have heatedly denied wrongdoing, but in a memo to employees Perl said the group would ask the Internal Revenue Service to review its records.

"We believe that by taking this course of action ... we will put this issue to rest, rather than letting the opinions of a few `experts' or those whose views are based on half truths have the last word," Perl's memo said.

Martin Lampner, Chimes' chief financial officer, said yesterday that the group "has initiated contact with the IRS." He declined to comment further, saying the employee memo "speaks for itself."

Chimes' invitation to the IRS is an encouraging sign, Berns said.

"[It is] a positive step that they are taking to try to demonstrate that they are not doing anything that is illegal, or at least that they didn't intend to do anything illegal," he said.

Other nonprofit specialists said Chimes might get a visit from the IRS whether it wants one or not.

"They go in when they want to, not when they're asked," said Peter Swords, former executive director of the Nonprofit Coordinating Committee of New York. "Your newspaper stories may force them to go in."

Swords examined Chimes' IRS filings at the request of The Sun, as did Daniel L. Kurtz, a former New York charities regulator and attorney specializing in nonprofit law.

"Let them invite the IRS in," Kurtz said yesterday. "Obviously, if the IRS comes in, they are going to make findings that are going to be adverse. It seems to me they are going to have problems."

In his memo to employees, Perl said, "We are confident this review will have no impact on the ongoing operations of this organization, your job or the people you serve."

An IRS spokesman declined to comment on whether the agency had been contacted by Chimes or whether an investigation was under way, saying federal law prohibits disclosure of such information.

Chimes operates through about 10 corporations in several states. One, Chimes Foundation, is a member of the Maryland Association of Nonprofit Organizations, Berns said.

The association is recognized as a national leader in improving the ethical behavior of charities and other nonprofits.

It asks members to commit to eight "guiding principles," including a standard that instructs nonprofits' directors and staff members to "act in the best interest of the organization, rather than in furtherance of personal interests."

The standards also require groups to be "accessible and responsive" to public inquiries and to implement policies "to prevent actual, potential or perceived conflicts of interest."

Revelations about Chimes "raise questions about whether the organization does share a commitment to abiding by the guiding principles," said Berns.

The association has never expelled a member and would not expel Chimes Foundation lightly, he said.

"We don't like to terminate members," he said. "Generally, our greater interest is to try to help organizations to try to improve their performance. We only resort to terminating a member if we really think the organization doesn't have a genuine interest in functioning at a high level."

Allegations of impropriety at Chimes center on disclosure of board-member business deals and executive pay.

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