January 7, 2009
Chimes asks IRS to review records
Charity's compliance with nonprofit alliance's standards also in question
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."
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