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Governors go after large salaries and benefits given to non-profits

There currently are no rules governing executive pay at state-funded charities, but there may be soon

As the economy continues to stagnate, state governors are looking for and finding “gold in them thar hills” of the non-profit sector. A couple months ago, I noted that Gov. Jerry Brown of California and Gov. Peter Shumlin of Vermont each came out strongly against outrageous compensation packages given to executives of their respective tax-supported state universities. They acted using their state authority without giving any attention at all to the IRS, which can’t seem to figure out how much is too much to pay a charity executive.

Since then, with a little help from the New York Times and no help at all from the IRS, New York Gov. Andrew Cuomo used his executive power to go after large salaries and benefits given to state-supported charities. He was inspired to act by a Times article documenting the huge sums paid out to what a whistleblower called the “Medicaid moguls”—charity executives of non-profits that get as much as 95 percent of their revenues from the state to serve Medicaid patients. Cuomo immediately put together a task force that already has sent out letters to hundreds of state non-profits demanding details on executive pay.

The immediate focus was on two brothers, Philip and Joel Levy, who led the Young Adult Institute, a Medicaid-funded non-profit. They each paid themselves close to $1 million yearly, and even were allowed to bill the charity for their children’s college educations. One of them charged the charity $50,400 for his daughter’s living expenses while she was in school. Curiously, they both quit in June after getting inquiries from a reporter. The Times also reported on the head of Bronx-Lebanon Hospital Center who was paid $8.4 million.

The governor’s office acknowledged that there are currently no rules governing executive pay and benefits of charities that receive state support, but you get the distinct feeling there soon will be. His press release noted that the state’s Medicaid inspector general has authority to cut off state funds if he concludes that such payments amount to “fraudulent or abusive practices.” Nowhere in the governor’s statement did he refer to the authority of the IRS over tax-exempt charity salaries and benefits. There was no suggestion he was going to bother with getting the feds involved in his initiative.

Meanwhile, old-fashioned print journalism also is at work in Tennessee where The [Nashville] Tennessean newspaper published an extensive article headlined, “Christian Crusaders Cash In: Sekulow’s Family, Firm Collect Millions.” The story is about Jay Sekulow, who serves as the principal officer of two large, wealthy and related charities: Christian Advocates Serving Evangelism based in San Francisco and the American Center for Law and Justice based in Virginia Beach, Va. Using the charities’ Form 990s, the story reported that Sekulow family members and businesses they own or co-own were paid more than $33 million since 1998. Tax filings reveal that all four board members of Christian Advocates share the last name of Sekulow, and another Sekulow is an officer. Details of the story include payments of $1.6 million to Jay Sekulow’s wife and $2.74 million in private jet lease payments.

Given its history and inclination, it is highly unlikely the IRS will pay any attention to The Tennessean. The question, then, is Gov. Brown of California by chance reading The Tennessean? If San Francisco is strapped for cash (as every American city is), maybe he or the mayor would seek PILOT (payments in lieu of taxes) money from Sekulow’s non-profit there because it obviously has the ability to pay. As Virginia Gov. Bob McDonnell tries to balance next year’s budget, maybe The Tennessean article will prompt an inquiry into the Virginia Beach-based charity. The governors would certainly have free rein—the IRS won’t be getting in their way.

Bruce D. Collins is corporate vice president and general counsel of C-SPAN, based in Washington, D.C. E-mail him at collins@c-span.org.

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Bruce D. Collins

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