The Chimes, a Baltimore nonprofit group strongly criticized by charityexperts for nondisclosure of business deals with board members and millions inexecutive pay, said yesterday that it is asking the Internal Revenue Serviceto examine the organization's records and address points raised by recentarticles in The Sun.
Also yesterday, the Maryland Association of Nonprofit Organizations saidthe articles prompted it to question Chimes' compliance with its ethicalstandards and to consider expelling the Chimes Foundation, which solicitsdonations to support the Chimes group.
"That membership is under review," said Peter V. Berns, the association'sexecutive director. "The articles on their face raised serious issues aboutlegal compliance with requirements of the Internal Revenue Service that applyto charities."
Charities must report, on publicly available IRS forms, executivecompensation and all deals with board members so that donors and regulatorscan sense how much money might be flowing to insiders instead of to anonprofit's mission.
Based on their analysis of Chimes IRS filings, former IRS officials andother nonprofit specialists said the organization appeared to have concealedfrom potential donors $2.44 million in compensation for three top executivesover three years, including $1.07 million for chief executive Terry A. Perl.
Chimes also should have disclosed business deals with at least four boardmembers, including hundreds of thousands of dollars in equipment-leasingbusiness done with a company run by Chimes Inc. Chairman Allan Levine, expertssaid.
Chimes delivers vocational training, set-aside jobs, residential care andother services to the disabled. Its leaders have heatedly denied wrongdoing,but in a memo to employees Perl said the group would ask the Internal RevenueService to review its records.
"We believe that by taking this course of action ... we will put this issueto rest, rather than letting the opinions of a few `experts' or those whoseviews are based on half truths have the last word," Perl's memo said.
Martin Lampner, Chimes' chief financial officer, said yesterday that thegroup "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 thatthey are not doing anything that is illegal, or at least that they didn'tintend to do anything illegal," he said.
Other nonprofit specialists said Chimes might get a visit from the IRSwhether 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 didDaniel L. Kurtz, a former New York charities regulator and attorneyspecializing in nonprofit law.
"Let them invite the IRS in," Kurtz said yesterday. "Obviously, if the IRScomes in, they are going to make findings that are going to be adverse. Itseems to me they are going to have problems."
In his memo to employees, Perl said, "We are confident this review willhave no impact on the ongoing operations of this organization, your job or thepeople you serve."
An IRS spokesman declined to comment on whether the agency had beencontacted by Chimes or whether an investigation was under way, saying federallaw 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 NonprofitOrganizations, Berns said.
The association is recognized as a national leader in improving the ethicalbehavior of charities and other nonprofits.
It asks members to commit to eight "guiding principles," including astandard that instructs nonprofits' directors and staff members to "act in thebest interest of the organization, rather than in furtherance of personalinterests."
The standards also require groups to be "accessible and responsive" topublic inquiries and to implement policies "to prevent actual, potential orperceived conflicts of interest."
Revelations about Chimes "raise questions about whether the organizationdoes share a commitment to abiding by the guiding principles," said Berns.
The association has never expelled a member and would not expel ChimesFoundation lightly, he said.
"We don't like to terminate members," he said. "Generally, our greaterinterest is to try to help organizations to try to improve their performance.We only resort to terminating a member if we really think the organizationdoesn't have a genuine interest in functioning at a high level."
Allegations of impropriety at Chimes center on disclosure of board-memberbusiness deals and executive pay.
The IRS directs nonprofits to report on Form 990, which is similar to a taxreturn even though charities pay no income tax, whether they did business"directly or indirectly" with directors or major contributors.
Chimes entities have done business with consultant Huell E. Connor Jr., whosits on the Chimes Inc. board; Yellow Transportation/Connex President Mark L.Joseph, a Chimes Foundation director; attorney Joel Margolis, a life member ofChimes Inc.'s board; and leasing executive Levine, who is chairman of ChimesInc. and Chimes International, a related management company.
The relationships were not disclosed on Form 990, and Chimes said they werenot required to be disclosed.
The IRS also requires nonprofits to report "aggregate compensation of morethan $100,000 from your organization and all related organizations" paid toexecutives or directors.
Chimes Inc. and its main subsidiaries reported only about a fourth of thetotal pay received over three years by Perl, Lampner and Chief OperatingOfficer Albert Bussone.
The rest was paid and reported through the obscure corporation ChimesDelaware, which gained most of its revenue from the main Chimes group andwhose only employees were the three top Chimes executives and Perl's wife,Martha, who is Chimes' vice president of human resources.
Terry Perl's total pay and benefits for fiscal 2002 came to $542,101, butless than half of that was reported on the IRS filings for Chimes Inc. and itsmain subsidiaries.
Nonprofit specialists said the Chimes Delaware compensation should havebeen reported on IRS filings for the main Chimes group so that donors couldget a full picture of the group's pay practices. Chimes Delaware, Kurtz said,appeared to have been created, "at least in part, to shield from public viewthe very high compensation these ... individuals are receiving."
Chimes leaders said Chimes Delaware is a separate trade association whoseexecutive pay did not need to be listed on reports for the main Chimes group.Copyright © 2015, The Baltimore Sun