Charity Accountability

By Stephens, Joe | Investigative Reporters and Editors, Inc. The IRE Journal, July/August 2004 | Go to article overview

Charity Accountability


Stephens, Joe, Investigative Reporters and Editors, Inc. The IRE Journal


Scrutiny shows leading environmental group cut insider deals, drilled for oil in sensitive area

The Nature Conservancy, the world's biggest environmental organization, is dedicated to preserving open space. So it came as no surprise a few years ago when the nonprofit organization bought a gorgeous oceanside plot on New York's Shelter Island, located near the exclusive Hamptons and a short drive from Midtown Manhattan. Cost to the Conservancy: $2.1 million.

What came seven weeks later was less expected. The Conservancy resold the 10-acre tract, with some development restrictions, to the former chairman of the organization's regional chapter and his wife, a local Conservancy trustee. Cost to the new buyers: $500,000.

Such land deals were only one surprise that surfaced as David Ottaway, a staff writer at The Washington Post, and I spent more than a year looking behind the scenes at the Conservancy - a charity with assets totaling $3.3 billion - and the wider environmental movement. The result was a series of stories published throughout 2003 that we called "Big Green."

Our articles told how the Conservancy:

* Had its governing board and advisory council include senior officials from corporations that had paid millions in environmental fines.

* Engaged in deals worth millions of dollars with those corporate insiders and their companies.

* Paid millions of dollars to another well-known charity to settle claims of theft.

* Under-reported its president's compensation and extended low-interest loans to its executives.

* Drilled for oil under the last breeding ground for highly endangered birds as many of those birds died.

The articles also included an in-depth examination of the Conservancy's land sales to corporate insiders. Time and again, we found, the Conservancy had bought raw land and resold it for a lesser amount to one of the charity's trustees, supporters or employees. The sales were part of a program to limit intrusive development, but generally allowed the buyers to construct homes and conduct other limited development on the environmentally sensitive sites.

The buyers, in turn, covered the Conservancy's costs by giving the charity cash gifts in amounts roughly equal to the organization's loss on the sale - $1.6 million in the Shelter Island deal. The donations benefited the buyers, allowing them to take significant tax deductions-just as if they had given money to their local charity.

Surprises surface

The reporting project began simply enough. Ottaway, who has long been interested in the growing influence of nonprofit corporations, noticed that the Conservancy's assets were startlingly large. So the Post set out to sketch a portrait of the local charity, whose worldwide office is located in Northern Virginia, just a few miles from The Washington Post. We found that the charity had grown to include 1 million members and had become the eighth largest nonprofit of any type in the country. The Conservancy also had grown into one of the nation's most esteemed institutions.

But surprises quickly began surfacing. Information on the Conservancy's annual tax report - IRS Form 990 - was perplexing and at times wrong. Simple questions regarding things like executive compensation drew conflicting responses from Conservancy executives. Land records revealed the land sales to insiders.

We filed a series of Freedom of Information Act requests with federal agencies that did business with the Conservancy. Executives at the charity found out about the requests within days, and asked us to drop the requests. We politely declined.

Senior Conservancy executives then issued memos directing their employees not to speak with us. That drove us to look deeper. Investigative Editor Jeff Leen and Marilyn Thompson, assistant managing editor for investigations, directed the reporting and kept the project on track. [Leen has since assumed the title of AME/Investigative at The Post. …

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