Monday, March 19, 2007

Shriner's Hospital deal with Coca Cola

Cashing in on Charity's Good Name

Cashing in on Charity's Good Name
Groups gain from marketing deals, but do they sell themselves short?

Chronicle of Philanthropy, July 30, 1998

By Susan Gray and Holly Hall
Reprinted with special permission of the Chronicle of Philanthropy, July 30, 1998.

Last year, Boys & Girls Clubs of America won a $60-million marketing contract with the Coca-Cola Company. Widely believed to be one of the most lucrative marketing deals ever negotiated by a charity, the decade-long agreement paves the way for Coke vending machines to be installed in many of the charity's more than 2,000 clubs. The deal promises the charity not only money, but publicity when Coke uses Boys & Girls Clubs' name in promotional campaigns.

The number of charities that are negotiating big marketing deals with companies has been growing rapidly this decade. Non-profit groups can expect to receive $1.5-billion in marketing fees this year, up from $300-million in 1988, according to IEG, a Chicago company that monitors such deals, which include sponsorship of charity events and licensing a charity's name to use on products.

But some business experts say charities could be making far more money from such deals than they do, and that too many non-profit executives lack the skills to persuade companies to give charities as much as they deserve.

On top of that, charities have struggled with corporate demands that have sapped time and resources of charity staff members and raised awkward ethical questions.

Charities and companies have also faced criticism from consumer-watchdog groups -- and violated laws in some states -- by refusing to state in advertising materials exactly how much money an organization will receive through marketing promotions.

"It's a steep learning curve for the non-profit world," says Harold Levine, a New York consultant who specializes in marketing promotions involving charities. "I still have clients who don't understand marketing at all."

In spite of the problems, many in the charity world say dealing with marketing arrangements, often called "cause-related marketing," is far less difficult than many expected.

In the 1980s, when joint marketing arrangements became popular, critics predicted that donors and lawmakers would be infuriated when they saw their favorite charities entering into unabashedly commercial agreements. However, few charities say they have lost donors because of the deals, and such arrangements have not prompted any major new legal restrictions on the kinds of deals tax-exempt groups can make.

"The debate is over on whether cause-related marketing is a good thing or not," says Kurt Aschermann, senior vice-president for marketing at Boys & Girls Clubs of America. "Those standing back are going to watch the world march right on by."

The deals typically take one of three forms:

* Arrangements in which companies give a portion of proceeds from the sale of a product or service to charity.
* Sponsorships, in which businesses underwrite charity events or programs in exchange for publicity.
* Licensing, in which manufacturers pay to use a charity's name and logo on products like clothing, furniture, and food.

Companies say they are pouring more and more money into such deals because of increasing evidence that charity tie-ins help the bottom line.

For example, when Coca-Cola promised to donate 15 cents to Mothers Against Drunk Driving every time a case of its soft drinks was sold in a six-week period, the company saw sales rise by 490 per cent at 450 Wal-Mart Stores, compared with the same weeks of the previous year. In return, MADD received $500,000.

Charities of all kinds are benefiting from marketing deals. Among them:

* Habitat for Humanity International expects some $12-million this year from marketing arrangements, up from just $100,000 in 1991. Many of the promotions involve letting companies put up banners with their names on sites where houses are being built for needy people.

* Ducks Unlimited anticipates $5-million from 55 licensing deals this year. The charity has seen such revenue increase by at least 10 per cent in each of the past three years. In some cases, companies have used the charity's name to create a new line of products, such as Ducks Unlimited sportswear and furniture.

* Save the Children, which will also earn about $5-million this year from marketing deals, has more than doubled the number of staff members working on promotions in the last two years, from four to nine. The charity gets a percentage from the sale of more than two dozen Save the Children products manufactured by several companies. They include uniforms for medical workers, jewelry, toys, and even a line of "pet furnishings" like beds and food and water dishes.

While those dollars are helping charitable organizations meet their expenses, experts say they suspect that many organizations could demand far more from companies.

"A lot of non-profits undervalue themselves," says Michael Jensen, president of SponsorVision, a Tacoma, Wash., consulting firm that helps charities negotiate marketing deals. He complains that some groups "would dance for a dollar."

American charities are not the only ones that don't charge companies enough, says Sue Adkins, director of cause-related marketing at Business in the Community, a London charity that promotes corporate social responsibility. Concern that British charities were undervaluing themselves is one reason that her organization last month released new guidelines to help both charities and businesses forge mutually beneficial marketing deals.

One of the biggest stumbling blocks, Ms. Adkins says, "is being clear and proud of the value of the charity. Actually knowing what your worth is a challenge."

Some observers say Reading Is Fundamental, a Washington charity, should have asked for more than the $1-million it received from Visa in a campaign called "Read Me a Story" last year.

The financial institutions that own Visa paid to use the charity's name and logo in a promotion for the credit card. Print and broadcast advertisements throughout the two-month campaign highlighted the importance of reading to children. Numerous news broadcasts and publications made mention of the campaign, increasing its visibility.

Robert Pifke, senior vice-president of marketing services at Visa U.S.A., says that his organization saw a 15-per-cent increase in card use during November and December 1997 compared with the same months in 1996. A survey of credit-card holders following the campaign found that 62 per cent preferred Visa to other cards, the highest rating it has seen, apart from when it sponsored the Olympics in 1996.

Some marketing consultants who were not involved in the campaign say they think such benefits suggest that the financial return to Visa was far more substantial than the amount paid to the literacy charity.

"Did RIF get ripped off?" asks Mr. Levine, the New York consultant. "That's a good question. I don't think RIF was taken advantage of, but could they have asked for more? Probably."

Reading Is Fundamental officials say they are pleased with the $1-million, which was a significant addition to the $5-million they raised in private donations last year. But James Wendorf, the charity's chief operating officer, says, "In the future, we will negotiate in ways that we haven't done up to this point. There will be levels set for cause marketing."

Setting such levels may be hard, however, because there are no agreed-upon standards for setting fees. Most companies base their payments on the size and influence of the charity they wish to enlist in their marketing efforts.

Coca-Cola, for example, has made a very different deal with Shriners Hospitals for Children than it did with Boys & Girls Clubs. In large part that is because the health-care institution runs only 20 hospitals nationwide, compared with the 2,000 Boys & Girls Clubs, which serve nearly three million youngsters.

Instead of offering cash, Coke promised Shriners only that it would put advertising for the hospitals on its trucks and vending machines. And it elicited an agreement from Shriners that its institutions sell only Coca-Cola-brand drinks on its premises.

Shriners' leaders say they have no qualms about getting less than Boys & Girls Clubs and that their chief need is greater visibility as they seek to fill empty beds in their hospitals.

But not all discrepancies in the deals have to do with the potential a charity has to attract customers.

Corporate leaders say many charity fund raisers forget to switch gears when they make a pitch for a marketing arrangement.

Business executives get annoyed when fund raisers stress the non-profit organization's needs, as they would in a request for a philanthropic donation. Instead, corporate officials say they want to hear solid evidence that the charity can help the company's bottom line.

Some charities have tried to increase their business savvy by hiring people with business degrees or corporate resumes to handle marketing work.

The Nature Conservancy hired Amy Longsworth, who has a Harvard M.B.A., to oversee a staff of eight employees who work full time on marketing contracts. In Ms. Longsworth's tenure, the charity's marketing revenue has grown from less than $200,000 in 1990 to nearly $5-million last year.

Ms. Longsworth says she moved quickly to institute new policies, such as refusing to accept any agreement that offers less than $100,000. "I don't want my staff selling anything less than $100,000," says Ms. Longsworth. "There are opportunity costs I can't afford."

Without strong negotiating skills, charities not only have problems in getting as much money from companies as they deserve. They also have trouble persuading companies to spend enough to advertise campaigns designed to benefit charity.

Second Harvest, the Chicago-based national food-bank network, toughened its negotiating stance after two marketing promotions failed. "Many times companies think the charity's reputation alone will bring an increase in sales, so they cut back on advertising," says Kathy Super, director of development. "But they cannot rely on the charity to do the advertising. We simply do not have the revenue or the manpower."

Now, before agreeing to any marketing deal, she says, Second Harvest not only demands that the company sign a contract saying how much the charity will receive, but also requires companies to submit a plan spelling out how they will publicize each promotion and how much they will spend on advertising it.

Other charities say they also set limits on how much time or other resources they will put into a marketing promotion.

One corporation wanted Mothers Against Drunk Driving to work with four different departments in the company and to help it recruit celebrities to endorse a national marketing promotion. In the end, MADD walked away from the deal. "It was too much manpower for too little money," says Doug Kingsriter, executive vice-president for business development. He declined to name the company involved.

Some corporate officials say they think charities take an unrealistic view of how much they should be expected to do to make a marketing arrangement a success.

"It does require intensive efforts over the long haul for both sides," says Scott Jacobson, a spokesman for Coca-Cola. "Coke business doesn't happen from sitting around and watching it happen. It does take staff time and creativity. It's not the kind of thing that Coke can come in and make it happen alone. Nobody should expect that."

For many charities, concerns about time and other resources are less of an issue than corporate demands that go against a charity's values and ethics.

The National Kidney Foundation, which takes in $50-million annually -- mostly from marketing fees -- has a strict policy against naming any particular product in its educational videotapes and pamphlets about kidney disease and treatment, out of fear that doing so would cause patients to lose faith in the group's advice. It does, however, allow pharmaceutical and other companies to advertise in the materials.

But companies sometimes try to cross the line, says Lynn Badura, the foundation's corporate-projects director. She says she was working on a brochure for patients when a company repeatedly tried to get the charity to bend its rules by naming the company's products in the educational text. "This is a constant balancing act," she says.

Many health charities have faced stiff criticism in the past two years because they have endorsed products. The American Cancer Society, for example, was attacked after it sold the exclusive use of its logo to NicoDerm, a smoking-cessation patch. Critics argued that the deal undermined the charity's ability to recommend other products to the public that are just as good, or even superior, in helping people quit smoking. The society has since re-negotiated the NicoDerm contract, dropping the exclusivity provision.

Another corporate demand that often causes anxiety at charities is requests for donor lists. Some charities, including the Audubon Society and the Nation al Kidney Foundation, routinely hand over their membership lists as part of marketing arrangements they work out with credit-card and other companies. But others have decided that sharing donors' names could turn off their supporters.

"A lot of companies come to us and want our donor list, but it's an absolute No for us," says David McKee, assistant national director of ALSAC/St. Jude Children's Research Hospital, in Memphis.

With the rush to win big-dollar marketing contracts, more charity leaders say they need to set boundaries and stick to them. "Now more than ever, we need to study and apply whatever ethical measure we're going to use," says Paul Hogle, vice-president for development at the Baltimore Symphony Orchestra. Mr. Hogle helped form a group of more than 30 orchestras that have banded together to seek marketing deals with companies that want to reach a national audience.

He says the effort was slowed by divisions among the orchestras over whether the group should offer companies certain benefits, such as access to donors' names and addresses. "There are increasingly blurry benchmarks for what's appropriate and what's not," he says. Too often, he says, the weighing of ethical consequences takes place too late. "What's appropriate is a lot harder to decide," he says, "after you've got the money."

© 2000 The Chronicle of Philanthropy.
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Copyright © 2004 Independent Sector. All Rights Reserved.
In Shriner Spending, a Blurry Line of Giving
March 19, 2007

ABILENE, Tex. — John C. Goline is living proof of the good work done by the Shriners. Struck by polio as a child, he can walk today only because of his six years in and out of the Shriners hospital in Shreveport, La., where, like all patients, he received free treatment.

The experience inspired a lasting devotion to the Ancient Arabic Order of the Nobles of the Mystic Shrine, the 135-year-old fraternal organization that founded and controls the Shriners Hospitals for Children. “They did wonders for me,” Mr. Goline said.

But his faith was shaken when he joined the leadership of the Suez Shriners in San Angelo, one of 191 temples affiliated with the order. He found that much of the money collected to support the hospitals was commingled with money used for liquor, parties and members’ travel to Shrine events. The Shrine’s national auditor largely confirmed his findings, but not before Mr. Goline was forced out of office.

His experience is not unique. An examination by The New York Times of Shrine records and minutes of Shrine meetings and interviews with current and former Shrine officials painted a picture of lax accounting procedures and oversight under which money earmarked for the hospitals instead financed temple activities.

The examination found these things:

¶More than 57 percent of the $32 million the Shriners raised in 2005 through circuses, bingo games, raffles and a variety of sales went to costs of the fraternity, including keeping temple liquor cabinets full and offering expenses-paid trips to Shrine meetings and other events.

¶Only 2 percent of the Shrine hospitals’ operating income comes from money raised by Shrine temples and members’ dues. (The bulk is supplied by the hospitals’ $9 billion endowment.)

¶A top Shrine official told a meeting of temple treasurers that poor accounting for cash coming into the organization was “an increasingly common problem,” and that more than 30 temples had discovered fraud — like theft of money and inventory, altered bank statements, padded payrolls and fake invoices — amounting to as much as $300,000 and involving members of their “divans,” the five-member boards that govern each temple.

Yet whistle-blowers like Mr. Goline are often greeted with hostility, retaliation and official sanctions.

“I was really amazed and shocked when I got into what had been done,” he said, “especially because everyone kept telling me how everything was done by the rules.”

In Texas alone, at least four of the state’s 13 temples have lost money to theft, embezzlement and faulty accounting over the last five years, according to several Shriners there.

In one of the rare cases where the Shrine prosecuted wrongdoing, the Zem Zem temple in Erie, Pa., accused a former top official last year of misappropriating $1.2 million in bingo revenues. The temple settled for an undisclosed amount.

Critics say the line has been blurred between money raised for the hospitals and for members’ entertainment.

“Money raised for the hospitals is being used to pay for parties and liquor and trips, and they know it,” said Johnny L. Edwards, who was a leader of Oasis Shrine in Charlotte, N.C., until he began campaigning for better control over money. “The way I see it, they’re stealing from crippled children.”

Shrine officials dispute that. Bob Phillips, the director of temple accounting at the Imperial Council, the fraternity’s national umbrella organization, said the Shrine had strict rules about identifying when a fund-raising event was being used to underwrite temple activities and when the money was going to the Shrine hospitals.

“It is natural for the public to associate the fez and someone wearing it as raising money for the Shriners Hospitals for Children,” Mr. Phillips said, “but because of that, we make sure every activity is meticulously designated fraternal or charitable.”

Michael Andrews, the executive vice president of the Imperial Council, said that other charities sought the Shrine’s advice about how to ensure accountability and noted that the Internal Revenue Service had found no problems in an 18-month audit of the organization that ended in 1998.

That finding, however, referred only to the Shriner hospitals, which are a separate entity from the Shrine, and it covered only the 1993 tax year.

“I think if you compare us to any other charity in America, you would find we do the best job,” Mr. Andrews said. “I think you need to look at the big picture here: We probably do more for children with special needs than any other entity.”

A $9 Billion Endowment

The Shrine started in 1872 in New York City as a social club for Masons. It uses its own language and structure adopted from ancient Arabia, complete with potentates and secret initiation rituals. In 1919, it started building a children’s hospital whose operations would be supported by a $2 annual assessment on each Shriner and various fund-raising activities.

Today, 22 Shrine hospitals provide free orthopedic and burn care to needy children, and the charity that operates them is one of the country’s wealthiest, controlling $9 billion in assets amassed over 87 years — more than the Carnegie and Rockefeller foundations combined. Revenue from the endowment now covers more than 90 percent of the hospitals’ budgets.

And the endowment is growing. Individual Shriners and their wives make sizable donations to the hospitals directly and through bequests. The hospitals received roughly $235 million that way in 2005.

Though the charity is a separate operation, the Shrine organization continues to control it. The Shrine’s contributions to the hospitals, however, have become a negligible part of annual hospital budgets.

Only 2 percent of the hospitals’ operating expenses — $11.3 million a year, on average, from 2002 to 2005 — comes from money raised by Shrine temples and dues paid by their 411,000 members worldwide, according to the Shrine’s financial accounts.

And that number has been declining as membership falls. In 2005, the contribution to the hospitals from fund-raising by the temples was $9 million. The temples also set aside $4.7 million to cover the costs of transporting children in their districts to the hospitals.

That means that of the $32 million the Shriners raised in 2005 through fund-raisers like circuses and raffles, more than 57 percent went to Shriners’ activities and temple expenses. Mr. Phillips, the director of temple accounting, said any financial control problems were small, given the size and complexity of the organization.

“We have 191 temples from Montreal to Mexico City and Boston to Honolulu, with over 3,000 Shrine clubs and 2,500 units,” said Mr. Phillips, who like Mr. Goline benefited from the care of the Shrine hospitals. “Considering our international structure, cash control is not a big problem.”

Asked about the quality of temple record-keeping, James L. McConnell, the Imperial auditor, chuckled. “Let me tell you, it’s gradually getting better,” he said. “Every temple is different. Some have a staff of people, some have just one person in the office, which gives that person too much control over records and finances.”

Mr. McConnell said the Imperial Council had been working to teach temple treasurers standards of accountability. “Whether they have the ability to go home and do things right, that’s another question,” he said. “The Shrine is a volunteer organization.”

Mr. McConnell made it clear that he was not an auditor in the traditional sense, but rather someone who tried to determine the facts in local disputes at the request of the Imperial Potentate. “I don’t get a lot of calls,” he said. “Some years I don’t do any visits.”

Each temple is required to hire an independent auditor to review its accounts annually, and Mr. Phillips said he monitored a variety of temple financial records and was in daily contact with temple financial officers.

Those procedures have not prevented problems, however. Last summer, Charles G. Cumpstone, Mr. Andrews’s predecessor as executive council vice president, told a meeting of top Imperial officials, “We’re still having theft, both by temple employees and by temple officers” at temples with poor cash controls, according to minutes of the meeting. Mr. Cumpstone added that the Shrine “will not tolerate this type of conduct.”

But some Shriners say the opposite is true, contending that whistle-blowers are often forced out of office or subjected to internal disciplinary proceedings.

“The leaders of this organization think it is better to persecute the innocent than to prosecute the guilty,” said Clairence Ballard, a member of Cahaba Shriners in Huntsville, Ala., who found that charitable money raised through bingo was being used to cover fraternal, and perhaps personal, expenses and faced an internal inquiry.

Reached at his home in Palm Harbor, Fla., Mr. Cumpstone declined to respond to Mr. Ballard’s comments, other than to say, “I worked for the Shrine for 40 years, and I’m proud of my record.”

Mr. Ballard, Mr. Goline and two dozen other Shriners provided in-depth looks at questionable financial activities in two temples, the Suez and Cahaba Shrines, that they say are typical of the problems some temples have had.

An Envelope of Cash

Shortly after becoming Cahaba’s potentate in 2003, Mr. Ballard drove to Decatur, Ala., to oversee the installation of new officers at one of the temple’s affiliated clubs, the Decatur Shrine Club, which was known for a high-grossing bingo game every Tuesday night.

As Mr. Ballard was leaving, a club member handed him an envelope, which he tucked into his blazer pocket, assuming it was a check.

Instead, Mr. Ballard said, “It was $1,000 in cash.”

It is customary for a temple’s affiliated clubs to contribute to the potentate to help defray his costs during his year in office. What concerned Mr. Ballard was that the gift was made to him directly, not through the temple, and in cash.

“It scared me to death because I could have gone out and bought myself a new set of tires with that money and no one would have ever known,” he said.

The incident raised his suspicions, and he began looking into the bingo game. He discovered that three longtime club members held the deed to the clubhouse, contrary to Shrine rules requiring club assets to be held in the name of temples. He also found that the money the club raised selling snacks during bingo games was held in an account controlled solely by the Shriner who managed the kitchen, Lewis Tapscott.

And Mr. Ballard thought the bingo games, which were billed as raising money for the hospitals, were producing more money than the club was handing over to the temple.

Mr. Tapscott said he handled the snack proceeds properly. “I was the one who started that account, and I thought I kept good records and everything matched up,” he said in a telephone interview. He said the deed was in his and other Shriners’ names, rather than the club’s, “so it could be recorded at the courthouse.”

He said bingo money was disbursed to the temple according to a Decatur ordinance that allowed organizations that held bingo games to use 49 percent of the proceeds to cover expenses related to the games and for “internal” charitable purposes.

Mr. Ballard read the ordinance differently. He did not consider a new sign for the clubhouse or repaving the parking lot to be expenses related to bingo games or an “internal charity.”

He thought all the bingo receipts, other than what was needed to cover the costs of electricity, bingo cards and so forth, should go to the Shriners hospitals. (In fact, Shrine rules insist that temples transfer 100 percent of any bingo receipts to the hospitals.)

In June 2003, Mr. Ballard called Mr. Cumpstone for advice about how to establish greater accountability over the club’s finances. “He told me that if I did not have my divan behind me, there was nothing I could do,” Mr. Ballard said. “He said otherwise, even if I set things straight, it would all go back to the way it was once I left office at the end of the year.”

It was prescient advice.

The next month, Mr. Ballard ordered the club to put its property in its name and demanded that it get its financial affairs in order. But in September, the club reported a $2,500 loss on bingo, and Mr. Ballard decided to take over the games. He put together a committee to run the games, and installed cash registers in the snack stand.

On Nov. 25, the first night the new committee ran the game, gross revenues rose 41 percent from the average for the year; net proceeds more than tripled to $2,509. Yet the number of players rose only 14 percent.

That pattern continued over Mr. Ballard’s six remaining weeks as potentate. And the snack bar, which Mr. Tapscott had called a barely break-even operation, began pulling in profits of $100 to $200 a week.

While on site, Mr. Ballard stumbled across more evidence that money from the bingo games was missing — five years’ worth of deposit receipts that show the club had been depositing only checks, not the cash it received in payment for bingo cards.

“Our findings are basic internal controls are not in place,” wrote Terry Yancy, Tom Collins and Pat Volonino, the bingo committee members. They figured the club probably raised about $80,000 more than the $34,385 it had reported so far that year.

The games raised $17,124 in the six weeks after Mr. Ballard took over the operation. Nonetheless, John T. Craigmile, Mr. Ballard’s successor, removed the cash registers from the snack bar and dismantled many of the financial control mechanisms Mr. Ballard had put in place, just as Mr. Cumpstone had predicted.

“At any given time, there could be dozens of customers at the food windows, and to ask these mostly elderly volunteers to log in each purchase by description became unmanageable and extremely frustrating,” Mr. Craigmile wrote in answer to a question about why he removed the cash registers.

Mr. McConnell, the Imperial auditor, confirmed many of the bingo committee’s 2003 findings when he was dispatched to Huntsville after The New York Times began making inquiries.

But Mr. McConnell said he found no evidence of embezzlement or stealing. “They had the opportunity to do that, but there was no way to see evidence that happened,” he said in an interview. “If people are sticking $10 bills in their pockets, unless you’re standing right there, you wouldn’t know it.”

In November 2006, Nick Thomas, then the Imperial Potentate, ordered Robert Utley, Cahaba’s 2006 potentate, to come up with $119,000 to cover the money raised from bingo that the club had improperly retained in 2004, 2005 and 2006. Mr. Utley seized the club’s property and threatened to sell it to help raise the money needed under Mr. Thomas’s order.

Last month, Cahaba held a “trial” to consider charges by Decatur club members that Mr. Ballard had falsely accused them of stealing. At that proceeding, just after a club member testified that no theft had taken place, Mr. Ballard’s lawyer played a 2003 tape of the member telling Mr. Ballard, “We knew we took some, but I don’t know that it was a million.”

The Shriner presiding over the trial quickly ended it and brokered a deal to cover Mr. Ballard’s $4,000 in legal expenses in exchange for his agreement not to speak with the news media any more.

A Reform Effort

John Goline joined Suez Shriners in San Angelo in the late 1990s. In 2001, he was elected to the divan and took Richard A. Baumbach’s place as Oriental guide, the bottom rung of a ladder that leads to becoming potentate. Mentions of Baumbach in San Angelo include only funerals of friends and relatives.

He soon joined forces with Mr. Baumbach, a retired Army officer, who had raised questions about financial accountability and concerns that the Suez Shriners were more interested in having a good time than raising money for the hospitals. “We were spending too much money on parties and travel and not enough on the kids, which is why I joined the organization,” Mr. Baumbach said in an interview.

As he rose and gained greater access to temple financial records, Mr. Baumbach concluded that Suez was using charitable money to cover deficits incurred on fraternal activities like trips, parties and alcohol.

In fact, all money raised by temple members went into a single account at Merrill Lynch that was used to cover all expenses, whether fraternal or charitable, in violation of Shrine rules.

Mr. Baumbach also found that bills were being paid with checks bearing only one signature, another violation, and that the temple had no control over accounts held by its affiliated clubs and thus no control over the money they raised.

He became potentate in 2003 and immediately received a personal reminder of flaws in the temple’s financial controls: The $10,000 he had raised the year before to offset expenses he expected as potentate was gone, tapped by his predecessor to cover temple deficits. “He told me that was the way the system worked,” Mr. Baumbach said.

He set about changing that system. He limited the amount a temple official could spend annually on travel to $750, and refused to reimburse expenses that were not supported by receipts or lacked appropriate approval. He insisted that every check have at least two signatures and that the temple’s name be added to accounts held by its affiliated clubs.

“He wouldn’t pay for them to go to the Imperial and other Shrine events because the temple didn’t have the money,” Mr. Goline said, adding that was what turned members against him and Mr. Baumbach.

Mr. Baumbach asked Mr. Goline to dig into the temple’s records to document the abuses he was trying to address. They gained an unexpected ally, Patti Ellsworth, the temple’s secretary, who was troubled by some things she was asked to do, like changing the dates on donation records so they would qualify for a $15,000 matching grant. But when Mr. Baumbach refused to reimburse the temple’s band $3,700 for an unapproved trip to a Texas Shrine Association meeting, the leader of the band called for his resignation.

Then Wayne E. Ulrich, the temple’s treasurer, filed a formal complaint against Mr. Baumbach and Mr. Goline, contending that they had engaged in “false and deceitful conduct” in saying that the tax code required Suez to be a signatory on club accounts when it did not; that Mr. Baumbach had created “a secret bank account” for the temple circus; and that he had treated the band leader, Edwin F. Watson, with “contempt” and “disrespect.”

In a telephone interview, Mr. Ulrich noted that Mr. McConnell, the national auditor, spent three days reviewing the charges. “The matter is closed because the allegations of missing funds were false charges,” Mr. Ulrich said. “They were unprovable.”

But Mr. McConnell did find deficiencies. “Evidence does show monies were commingled, transportation funds were transferred to cover a temporary shortfall in the operating fund, invoices were not turned in for patient airline tickets and a rather cumbersome set of records was maintained,” he wrote.

Reminded of Mr. McConnell’s findings, Mr. Ulrich, who resigned as treasurer in January, said the commingling of money resulted from a “coding error” by the temple’s outside accountants that had been corrected. He said checks with only one signature came from an affiliated club and thus were not a temple problem. “I have no jurisdiction over the finances of that subsidiary organization,” he said.

In December 2004, Mr. Goline was poised to succeed Mr. Baumbach as potentate. But a past potentate announced he wanted the job again and would run against Mr. Goline, a departure from the normal progression of the line.

At the same time, photos of Mr. Goline with Ms. Ellsworth began circulating along with a rumor that they were having an affair — though the pictures simply showed the two standing about an arm’s length apart outside Mr. Goline’s apartment building. They are now married, though both deny being a couple at the time of the rumors.

On the night of the election, busloads of Shriners began pulling into the temple parking lot. “There were people there that night that I never saw before and have never seen since,” Mr. Goline said.

After he lost the election, he placed his fez on his chair and walked out of the temple. Mr. Goline is now a member of another Shrine temple and toys with joining its leadership.

“I was hurt after I lost,” he said. “But I’ve looked back, and almost two years later, I would not do anything different. What I tried to do there was the right thing.”


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Tuesday, March 6, 2007

Super Sealing of SOME records

Lawyers Protest Unsealing Dockets
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By BILL KACZOR Associated Press Writer

Published: Mar 6, 2007


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TALLAHASSEE - The Florida Supreme Court heard a wide range of objections Monday to proposed rule changes designed to stop the improper sealing of court records and dockets.

The proposal was in response to last year's discovery that hundreds of civil and criminal cases involving television personalities, judges, police, elected officials and other prominent people had been sealed as part of secret dockets in some courts, mainly in South Florida.

The news media, prosecutors, public defenders, court clerks, plaintiffs' lawyers and a judge opposed all or parts of the proposal made by a Florida Bar committee. The justices will act at a later date.

The oral argument included an exchange between Chief Justice R. Fred Lewis and Circuit Judge Judith L. Kreeger, chairwoman of a Supreme Court committee conducting a broader study of public access to court records.

Kreeger called the proposal "premature" and urged a delay until her panel presents an interim report in June or a final one a year from then.

"Why should we leave a misunderstanding in place?" Lewis asked her.

Kreeger said the problem resulted mostly from failure to follow existing rules. She noted Lewis has asked chief judges in all circuits to issue administrative orders to prevent "super sealing" of dockets.

"I think the quick fix that is needed has been done," Kreeger said.

Lewis, though, said the orders differ from one circuit to another.

The statewide rules proposed by a Florida Bar committee would require public notice when records are closed. The public, including the news media, then would have an opportunity to ask for a hearing to open the records.

Media lawyer Carol Jean LoCicero argued such challenges should come before, not after, a record is sealed. She also objected to a provision that would put the burden of proof on challengers rather than parties that sought the sealing.

"That means that it's harder for us to get access to our own government," LoCicero said after the hearing.

Scott Dimond, chairman of the Judicial Administration Rules Committee, which proposed the rule changes, disagreed.

"That order would be cloaked in the same concept of reliability as any other judicial order," Dimond told the justices.

LoCicero afterward said it may be better for the justices to do nothing if they fail to make the modifications she proposed.

"Maybe that process discourages inappropriate behavior, but maybe it also covers inappropriate behavior because it all appears to be correct under the rule," she said.

LoCicero said one element of the proposal, though, should help by clarifying to court clerks that they should not seal an entire file just because a judge orders that certain documents be sealed.

Carol Touhy, a lawyer for Volusia County Court Clerk Diane Matousek, said the proposal would put an undue burden on clerks because they would have to remove records sought to be sealed from public files before judges rule. She said confidentiality should be determined before documents are filed.

W. Hampton Keen, member of a West Palm Beach law firm that files product liability lawsuits, argued the proposal would give corporate defendants a mechanism to delay litigation by seeking orders to seal alleged trade secrets. Keen urged the justices to exempt trade secrets.

The high court also was considering whether rule changes are needed to address another disclosure that prosecutors in Miami-Dade County falsified court records to hide the identities of confidential informants charged with crimes.

Assistant State Attorney Penny Brill told the justices there's no need for that because her office has changed its procedure. Records now are temporarily kept confidential - not falsified - and made public when an informant is sentenced, she said.

John Eddy Morrison, an assistant public defender from Miami, urged the Supreme Court to send the issue back to the Criminal Rules Procedure Committee because it never met with public defenders.

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