CEO's pay at Chimes more than reported

Nonprofit officials say they misunderstood accounting

By Jay Hancock | Sun Reporter

July 4, 2004

The Chimes, a large Baltimore charity serving the mentally disabled, pays chief executive Terry Allen Perl far more than it disclosed last fall when it came under fire for oversight and compensation practices, newly released documents show.

Perl's compensation in fiscal 2002 was $686,506, not $542,101 as Chimes said last year and not $257,625 as Chimes originally told the Internal Revenue Service. Perl made $714,592 in fiscal 2003. The amounts include base pay, bonuses, benefits, retirement plans and deferred severance.

Chimes blames the lapse on a misunderstanding of accounting rules.

"I'm clearly aware that my personal credibility ... is on the line here," Perl said in an interview Friday. "I believed when I met with [a Sun reporter last fall], based on the input that we got from our then-advisers, that the information I gave you was complete and accurate and appropriate."

The new documents also reveal the size of insider business deals at the Chimes that were disclosed last year in The Sun.

In two cases, companies run by Chimes board members each received close to $1 million for providing leasing and vehicle services to the charity in fiscal 2003. Another board member got $129,422 in consulting fees.

Last month, the IRS pledged to examine hundreds of charities to see if they are complying with tax laws, and Sen. Charles E. Grassley, an Iowa Republican and chairman of the Senate Finance Committee, said he would introduce bills to strengthen governance and disclosure at nonprofit groups.

"The apparent lack of transparency at Chimes makes sense now that we see what they might want to hide," Grassley said of the new disclosures. "These findings are troubling. Charity executives and board members are supposed to govern, not profit."

Chimes receives hundreds of thousands of dollars in charitable donations and tens of millions in government contracts to serve the disabled. A $43.9 million, three-year job to have disabled people do janitorial work at Baltimore-Washington International Airport is up for approval before the state Board of Public Works on Wednesday.

The group denies any impropriety, saying that its business deals with board members provide good value for disabled clients, that Perl's pay is in the range of what other big-nonprofit executives make, and that disclosure lapses were based on misconceptions, not a desire to hide anything.

Chimes has revamped its policies in the wake of the articles in The Sun last year and amid a wider, national examination of the pay and ethics of the caretakers of charitable resources and nonprofit capital.

Last year's articles, in which experts described disclosure lapses, insider business deals and millions in executive pay, "served as a fulcrum for the Chimes to implement effective improvements in its organizational financial reporting and its corporate governance structure," Chimes lawyer Theodore A. Offit said in a letter to the newspaper.

For example, Chimes board members who do business with the group can no longer help set the pay of Perl and other executives. A new code of ethics enjoins board members "to take no actions that could benefit them personally at the expense of Chimes." There is greater oversight by outside directors of contracts and auditing.

And the group's latest IRS filings, which are public documents, show unprecedented levels of financial detail, apparently correcting numerous lapses identified by experts last year. Chimes has revised its 2002 filings and is working on revising 2001, officials said, in addition to recently submitting its returns for last year.

But the nature of those disclosures raises unsettling new questions, said nonprofit governance specialists.

For charitable groups, "the IRS is really focused on highly compensated executives. And this is certainly high," Daniel L. Kurtz, a lawyer in New York, former charity regulator and author of Managing Conflicts of Interest: A Guide for Nonprofit Boards, said of Perl's pay. "The other thing that looks troubling is the conflicting interests of board members - at a healthy level."

Kurtz examined Chimes' IRS filings last year at the request of The Sun. Recently, he has been in discussions with Chimes about working for the group as a governance consultant, both sides said.

Federal law bans executives and directors from profiting from charities they work for and requires disclosure of financial relationships between a charity and insiders so donors can spot potential abuse and see where their money is going. Chimes says its executive pay is legitimate compensation for work, not a banned "excess benefit."

At least four Chimes executives make more than $200,000 a year, the new filings show. Chief Operating Officer Albert Bussone had 2003 compensation of $373,749. Martha Perl, the human resources manager and Terry Perl's wife, made $188,830.

Last year at Chimes, the new filings show, at least five board members owned or worked for companies that did business with the group. Several of the relationships were substantial: