Nonprofits reap generous perks

Children in private group homes may be shortchanged in care, but the owners can profit handsomely

April 11, 2005|By JOHN B. O'DONNELL AND JONATHAN D. ROCKOFF

At home, Joseph K. Skariah has driven a $41,280 Acura SUV. On vacation, he has taken cruises in the Caribbean. He has often feasted on shrimp and salmon, made to order extra spicy, at his favorite restaurants. All of it has been expensed to the state-funded group homes he runs in Baltimore County. Taking in foster children has been very profitable for Skariah and others connected to his company, Evershine Residential Serivces Inc., which the state paid $3.8 million in the year ended June 30, 2003, according to an audit the firm submitted to the state.

His $135,275 executive director's salary at Evershine, according to the company's IRS report, far exceeded state guidelines. His wife received another $74,813 for what current and former employees called a light-duty job. And the couple collected $32,400 a year renting two houses to the firm.

In addition, Skariah acknowledges using $24,000 in group home funds in 2002 to settle a sexual harassment claim by a former secretary.

Others connected to Evershine and a second Skariah company have also done very well financially. Mathew V. Chacko, whose wife served on the board of the second corporation, has been co-leasing as many as three group homes to the firms, company officials said. He also set up a business that Evershine paid $303,445 from 2001 to 2003 for repairs and maintenance, reports to the IRS show.

An investigation by The Sun found that group home operators can boost their incomes with double-digit raises, buy houses that they then rent to their own corporations, put relatives on the payroll and give friends contracts.

None of it is illegal.

Maryland spends about $157 million annually for 2,700 children, but officials don't generally check how the money is spent or set ceilings on compensation. Good operators who provide high-quality care can be paid less than others who appear to be in the business mostly for the money. And with funding rates reaching as high as $200,000 a year per child, taking care of the abused, neglected, disabled and delinquent can be highly lucrative.

"If you have an opportunity to see how much they are paid per child, you'll understand why so many people are going into this business," said Calvin Street, a retired deputy director of programs at the Department of Human Resources, which licenses most group homes.

Entrepreneurs around the state have found ways to profit handsomely:

Lee L. Sullivan, the $105,179-a-year executive director at Bethany House on the Eastern Shore, had the company pay his $2,200-a-month personal credit card bill, buy a Lincoln Navigator SUV for personal use and pay for a $900 computer for his son, a former bookkeeper testified in court. Bethany's lawyer and the board president disputed the bookkeeper's testimony.

The state shut down Bethany after one resident sodomized a younger one, in what was the latest in a long series of incidents of neglect and abuse, according to an administrative law judge's decision in 2002 approving the closing.

Shilda M. Frost; her husband, Joseph F. Labule; and her sister, Marion G. Hailey, who run Second Family Inc., in Prince George's County, made $316,154 in salaries in 2003 and $108,000 more in rents last year, according to the firm's latest report to the IRS and interviews. Frost did not dispute the figures.

Everlene G. Cunningham, the majority owner of Starflight Enterprises Inc. in Elkridge, and other stockholders lent the company $214,500 at 18 percent to 22 percent interest rates in 2002 and 2003, collected $43,009 in rent over the two years and referred youths to an outpatient mental health clinic that she co-owns, paying it $113,922 in 2003, according to the latest company audit filed with the state. Cunningham declined to comment.

Maryland's inability to hold homes accountable for spending reflects a larger failure of its regulatory system. Licensing and inspection procedures don't keep out bad operators. Hiring and training standards are minimal and loosely enforced.

The state doesn't know whether children with serious needs, including medical disabilities and violent tendencies, receive the services and supervision they require. And in the absence of stricter oversight, children can suffer abuse, neglect and even death without state intervention.

The state has not moved to bar excessive salaries, nepotism and self-dealing at group homes such as Evershine. Policymakers have issued salary guidelines, not rules; officials do not review compensation.

Skariah acknowledges paying the salaries and perks, and expensing costs such as sexual harassment claims -- he says his accountant told him it was OK. He says, however, "We take very good care of the kids."

But some former staff and residents describe shortcomings in care, including lack of medical attention, food shortages and assaults by staff.

"To me, Evershine is just a poor place to live," said Antoine Simms, now 18, who lived in an Evershine home in Woodlawn when he was 13 to 15 years old.

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