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FBI probes disappearance of nonprofits' money

Groups apparently lost about $1 million when the International Humanities Center, which handled their funds, abruptly closed its Woodland Hills office earlier this year.

May 14, 2012|By Jeff Gottlieb, Los Angeles Times
  • Sonali Kolhatkar, director of Afghan Women's Mission in Pasadena, said her group is unable to fund work it pledged to underwrite.
Sonali Kolhatkar, director of Afghan Women's Mission in Pasadena,… (Francine Orr / Los Angeles…)

The FBI is investigating the apparent disappearance of an estimated $1 million in donations that about 200 nonprofits reported losing when the organization that handled their finances abruptly shut down this year, forcing some groups to curtail their charity work.

The head of one nonprofit said two FBI agents specializing in white collar crime interviewed her in April about the International Humanities Center, and the director of another said she has been asked to meet with agents this month.

The state attorney general's office is also probing the Humanities Center's handling of donations.

Some of the nonprofits, including animals rights organizations and political activists, said they have been left unable to pay their bills or continue their work. Gifts, they said, became scarce after they explained the problem to donors.

The Times reported in February that nearly 200 nonprofits groups said their donations vanished after the center shut down.

The center, which closed its Woodland Hills office and took down its Web page in February, served as an umbrella organization for small nonprofits, enabling them to accept tax-deductible gifts. It handled donations, took care of administrative chores, paid bills and acted as a bank, in exchange for 10% of the donations.

The center's founder and executive director, Steve Sugarman, sent a Jan. 16 email to some of the nonprofits telling them the center was closing its doors and that all funds had been properly spent. Sugarman has not responded to emails and his phone is disconnected.

Sharon Simone, whose scholarship fund in her late brother's name lost $4,000, said the FBI interviewed her after she sent a 54-page packet of material to the bureau's Los Angeles office. Earlier efforts to get the Los Angeles County district attorney's office interested in the case were unfruitful, she said.

Deena Metzger, whose group Mandlovu supports indigenous wisdom and medicine, said her group lost $20,000 when the center closed. Metzger said she has an appointment with the FBI later this month.

In an email to Simone last week, Jeffrey Edwards, supervising investigator for the D.A.'s Major Fraud Division, confirmed that the FBI was conducting an investigation. The FBI, as is its custom, would neither confirm nor deny it.

A tally by 49 groups that used the center lists their losses at $928,064, although the figure could go higher when the other organizations are added.

Some nonprofit directors said they suspect that many of their on-line donations went directly to the center and that some funds were never credited to them, leaving them uncertain of their losses.

Center officials, according to their website, were supposed to keep the groups' funds separate from money used to operate the umbrella organization. Several of the nonprofits' leaders told investigators they believe the center used their money to keep the organization afloat when it ran into financial problems.

In the packet sent to the FBI, Simone said that in a December meeting, Sugarman told her and Metzger that only $10,000 was left in the accounts his organization held when there should have been $1 million.

The group that appears hardest hit is the Pasadena-based Afghan Women's Mission, which reported losing $404,000, money that was supposed to be used to support the Revolutionary Assn. of the Women of Afghanistan.

Sonali Kolhatkar, the mission's co-founder, said her group is unable to fund work it pledged to underwrite, including $35,000 for an emergency relief project and funding for a school and for teacher salaries.

The Afghan Women's Mission used to receive $10,000 a month in donations, which are now at a trickle, Kolhatkar said.

"On one hand we lost our nest egg and on the other the rate of donations has fallen," she said. "People are worried."

Peaceful Uprising, which said it lost $88,000, was paying four staffers, but now its office in Salt Lake City is staffed by volunteers. The group, which fights global warming, had received a substantial amount of grant money not long before the International Humanities Center shut down.

"A lot of nonprofits with the International Humanities Center are nervous about applying for grants," said Dylan Rose Schneider of Peaceful Uprising. "How do you explain losing all the money and not being able to get it back?"

Rich Henrich, director of Film 4 Change, which puts on the Albuquerque Film Festival, said his group lost $50,000 and with it his salary. He said he's now living in his car.

"Word hit the street that we're not paying our bills," Henrich said. "It does a lot of damage to your reputation."

There are indications that the center had been having trouble for at least 18 months before it shut down.

Lynnclaire Dennis, whose group Centre for Social Architecture and Reweaving Harmony banked its donations with the center, wrote an email this year to other nonprofit directors that Sugarman, "in a panic," talked with her in mid-2010, seeking her help in lining up "an investor."

Sugarman, she said in her email, indicated he needed $5 million, $1 million of it within 10 days.

He also told her that a partner had "fled the country," taking all but a few thousands dollars of the donations the center was handling, she said in the email, which she has now passed along to the FBI.

Her comments were similar to those in a letter David DelGrosso, a consultant to the center, sent to project directors earlier this year, saying a former Humanities Center official had cost the center $200,000 "on a deceptive email scam" but had since left the country. DelGrosso said he has been interviewed by a deputy attorney general.

jeff.gottlieb@latimes.com

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