Saturday, June 17, 2006

Did Shriners retaliate against whistleblower? (part 2)

This is part two of a continuing series investigating alleged financial improprieties of the Shrine, written by investigative reporter Cassandra (Sandy) Frost.

The Burning Taper published Part 1, "Shriners in Hot Water Again?" on May 14, 2006.

Part 1 generated a few posted comments, and a small amount of backchannel chatter, but in general, it was met by the Antient Masonic community with shrugs, denials, and/or heads in the sand.

Part 3 has also now been posted.

Did Shriners Retaliate against Whistleblower? by Sandy Frost, first published June 15, 2006 by

In July, 2003, the Sarbanes-Oxley Act of 2002 was signed into law. It was born of the public’s fury after watching leaders of corporations like Enron rape their workers and customers for private gain and benefit through a new kind of “domestic terrorism.” Enron cooked their books and illegally pursued annual profits rather than maintaining sound business practices.

Maybe Sarbanes-Oxley should have been named “The Ken Lay Act of 2002.”

The law calls for companies to conform to new standards in governance, financial transactions and audit procedures. It calls for the establishment of an independent audit committee, policies that address insider trading and conflicts of interest, spells out the responsibilities of auditors, requires certified financial statements, mandates the disclosure of tax returns in an “easily accessible way,” provides whistle blower protection and addresses document destruction so as to prevent criminal obstruction.

There is talk that the Sarbanes-Oxley act will lead to a similar federal law that will be drawn up for non profits to abide by. For now, there are two provisions of the Sarbanes-Oxley Act that apply to non-profit corporations; whistle blower protection and document destruction.

Whistle blowers are protected if they chose to act like Enron’s s former Vice President Sherron Watkins did when she wrote to then-CEO Ken Lay in August 2001 about accounting irregularities, warning him that Enron “might implode in a wave of accounting scandals.” Today, it is illegal for a corporate entity, both for-profit and nonprofit alike, to punish, intimidate or retaliate against the whistle blower in any manner.

Secondly, the Sarbanes-Oxley act makes it a crime for non profit groups to alter, cover up, falsify, or destroy any document (or persuade someone else to do it) to prevent its use in an official proceeding (e.g., federal investigation or bankruptcy proceedings.).

What does Sarbanes-Oxley mean for non profit whistle blowers like Vernon Hill? The past three years, he has questioned both his temple leadership as well as the top corporate leaders about the Shriners financial accountability. According to Hill, his letters and emails have been ignored.

In January, 2002, Hill claims that he was not reappointed and by inference, was “removed” from his position on the temple’s PR committee. On July 25, 2002, the leader of Hill’s Sudan Temple, Potentate Stewart W. Lewis, did get an answer of sorts, in the form of a letter that states:

“Enclosed please find a letter received from one of your nobles (Vernon Hill). I am forwarding this to you for whatever action you deem appropriate.

Fraternally yours,

Charles G. Cumpstone Jr. Shriners executive vice president”

Two years later, in March, 2004, a frustrated Hill wrote to Cumpstone, asking him 25 financial and management questions including:

“Exactly how much money goes to the Shriners Hospitals of every dollar taken in?”

“Please send me a listing for each Imperial Potentates travel allowance for 1995 through 2004.”

“Explain how the immediately Past Potentate for 2002 – 2003 was allowed a total of $126,000 expenses for his 12 month reign?”

“How can you spend a total of $1.6 million for the 2003 Convention and $1.5 million for travel expenses so the corporate officers and temple leaders can attend? Would you advise if this is allowable under the IRS rules for Shriners? Why do the leaders get paid twice?”

“Can any Officers of the 190 temples move money from the transportation fund without any accountability of why and the purpose of? There was a Secretary in Sudan Shriners who was terminated for asking this question and for informing approximately 35 Road runners of this situation…several of us asked the same questions and the leadership refused to provide the answers, as usual.”

“How can a non profit and tax exempt organization legally let ‘secret groups’ (the Royal Order of Jesters and Order of Quetzalcoatl) be involved with the Shriners? Most Shriners are not aware that this goes on and that you have to “be invited and voted on to participate.” One would think that this contradicts the Masonic Oath and Shriners Creed along with the ruling for non profit and tax exempt groups.” (1)

“With reference to the 1986 series of stories done by the Orlando (FL) Sentinel on the Shriners abuse of the money, if an audit was done to see how much is wasted on Officers benefits and fringes, would you be happy? Do corporate and the 190 temples abide 100% by the guidelines and laws of nonprofit organizations?”

Much of the information Hill requested should have been listed on the Shriners annual 990 tax returns or included in financial statements, budgets or annual audits. IRS non profit disclosure law states that when a 501c3 non profit group is asked for such information, they have 30 days to provide it. Two years later, Hill’s questions and requests for financial information have yet to be acknowledged, let alone answered.

Instead Hill received a letter dated May 16, 2004 that said:

“A copy of your letter dated March 2, 2004 to Mr. Charles Cumpstone, Jr., executive Vice President of Shriners International in Tampa, Florida was recently shared at a meeting of the Sudan Roadrunners…the membership voted to remove your name from the Associate Membership List. I regret to inform you that you are no longer a Sudan Roadrunner.

Sincerely, Thomas Forrest, Director, Sudan Shrine Roadrunners.”

The Roadrunners is a unit of volunteer Shriners who drive needy children to and from the Shrine Hospitals for their free medical care. Hill had been a Roadrunner for over two years. He drove over 30,000 miles as he transported about 100 sick and needy children to Shriners Hospitals in Greenville, South Carolina and Cincinnati, Ohio. He is passionate about helping the needy children get to the hospitals because he knows the high costs of getting sick.

This is the second Shriner committee that Hill had been “removed” from.

“I was treated for colon cancer five years ago,” he revealed. “I know how scary going to the hospital can be, not only for the kids, but for us adults too. It breaks my heart to think that when we work so hard to raise money for the hospitals, it might not be going to help these sick little kids who really truly need it. How many more sick little children could we help if things were well managed, all the money accounted for and all the financial records were out in the open for everyone to see?”

On September 14, 2005, Hill asked a Shrine officer for some contact information. Instead of trying to help or answer Hill’s questions, the reply states:

“All questions should be routed to the Executive Vice President, Charlie Cumpstone… As an Imperial Officer, I donate my time to this cause – whether it be for the Hospitals or the Fraternity, but we also operate under a chain of command – that you as a Shriner I’m sure respect as well.

Thanks, Mike Severe, Imperial Officer, Shrine of America”

The past year and a half, Hill has been working with tax consultant and former IRS revenue officer Paul Dolnier, who runs the “Charity Watch” website. Dolnier reports that he met with three high ranking officials from the Pennsylvania Charities Special Investigations unit in Fort Lauderdale for six hours while they were in Florida on other business.

Dolnier and Hill have wondered why some of the returns, specifically for Shrine Temples in the State of Pennsylvania, were not clear if the was money raised for fraternal purposes or for charitable purposes or if the temples were keeping money that should have been sent to the hospitals.

A point of clarification here.

The Shriners Hospitals for Children and Shriners Temples are two different groups that have different tax exempt, non profit classifications.

The temples fall under the jurisdiction of the Imperial Council of the Ancient Arabic Order of the Nobles of the Mystic Shrine for North America, which is the temples’ parent 501c10 fraternal group. They are incorporated in Iowa.

The hospitals fall under the jurisdiction of the Shriners Hospitals for Children, which is the hospital’s parent 501c3 non profit charitable group. They are incorporated in Colorado.

Both groups are classified by the IRS as non-profit groups and therefore, must obey the IRS’s disclosure laws.

A board of directors oversees the charitable Shriners Hospitals group and their $9 billion in assets. Four of the Shriners who sit on the hospital’s board currently sit on the Shriners fraternal board.

Each of the hospital’s board of directors has, at one time or another, sat on the Shriners Imperial Divan, the fraternities’ equivalent of the hospital’s board. Additionally, both groups share the Shriners headquarters building in Tampa Florida. This arrangement might draw scrutiny from the IRS and other law enforcement agencies if the “conflict of interest” section of the Sarbanes-Oxley law is applied to non profit groups and strictly enforced.

So, the Shriners Temples are individual fraternal groups that raise money for the Shriners Children’s Hospitals, the charitable group. According to Pennsylvania charity law, 100% of the Shriners Temples net proceeds, after expenses are paid, must go towards the hospitals. Twenty years ago, the Orlando Sentinel ran a series of investigative articles that discovered that the Shriners' circuses had raised over $23 million but only about 2% of the money or $346,251 actually went to the children’s hospitals.

According to some of the Pennsylvania tax returns posted on the Charity Watch site, it appears that the hospitals may not be getting their fair share and some Pennsylvania investigators, auditors and attorneys may be interested. The website reads:

“Attorney General's Office of Charitable Registration for the State of PA is looking at this group as a ‘matter of great interest’ concerning past and current charity fundraising policies and procedures throughout the entire State of PA which includes ALL Shrine Temples and Groups and Clubs located within the State of PA. We discussed in great detail the way the fundraising works, the breakdown percentages and where the money goes after it leads the State of PA”

Hill kept on trying to get answers. He wanted someone to review and respond to the Shriners tax returns posted on the “Charity Watch” website, so he contacted the Shriners managing attorney, Jay Fleisher.

On May 10, 2006, Hill wrote:

“Noble Fleisher,

Please visit and look at the page for Pennsylvania. I would suggest that you make contact with the person that does this page as he had three (3) officials from the State of Pennsylvania Attorney General to visit him in Ft. Lauderdale recently.

Fraternally yours, Vernon Hill”

According to Hill, an email reply from Fleisher stated that he had called Mark Pacella, Chief Deputy Attorney General of the Pennsylvania Attorney General's office and that Pacella told him that the Pennsylvania Attorney General was not investigating the Pennsylvania Shriners.

According to Hill, Fleisher wrote to him that a member of the Board of Governors of at least one Shriners Hospital for Children received an e-mail which stated that:

"The State of Pennsylvania Attorney General is looking into 'The Money Trail of The Pennsylvania Shriners' and how the Millions of Dollars raised annually have been used and to see whether or not the Shriners Hospitals have gotten their money...."

“After over three years of asking questions, this was the first reply I’ve received,” Hill said. “Fleisher asked me to provide him with the name, title and telephone number of an official within the Pennsylvania Attorney General's office who could confirm there was an investigation. I initially told Fleisher to go to the website so he could look at the tax returns and read what Paul had written about conferring with the Pennsylvania authorities. A few hours later, I got another email from Fleisher that described how I had written that ‘the Attorney General of the State of Pennsylvania is investigating the Pennsylvania Shriners.’ He wrote that I’d not informed him of any official representatives who could back up that statement and that he had, at the same time, been directly advised by a named, high official in the Attorney General’s office that no investigation of Pennsylvania Shriners Temples is being made by the Attorney General.”

“He respectfully requested that I stop alleging any such investigation and that I was supposed to retract my statement to everyone I sent it to,” Hill explained. “I thought that it was most unusual that someone high ranking like Pacella would tell Fleisher that there was no investigation when everyone else is told that they can’t confirm or deny an investigation.”

The standard answer to “Is there an investigation?” is, according to Leslie Amoros of the State of Pennsylvania’s Press Office of Secretary of State, is “We cannot confirm or deny there is an investigation.”

So what did Pacella really tell Fleisher?

According to Barbara Petito, Deputy Press Secretary for the Pennsylvania Office of Attorney General, “Mr. Pacella told Mr. Fleisher that he’d too heard this erroneous information and that Mr. Fleisher was told to call the Department of State to ask them if they were investigating Pennsylvania Shriners.”

“I don’t understand how anyone could get ‘we are not investigating’ from ‘call the department of state and ask them’,” Hill concluded. “Mostly, I just can’t understand why no one will answer my questions or provide me with the financial documentation like they are supposed to. Instead, I get kicked off committees when all I want is to help the poor little kids. I know of hundreds of cases where a Shriner will ask financial questions and either be kicked off committees or be kicked out of the Shriners entirely. I just wonder what they are trying to hide; I wonder why they keep begging for money when their assets are valued over $9 billion dollars.”

(1) One must first be a Master Mason to become a Shriner. For example, all of the board members for both the Shriners hospitals (charity) and Shriners (fraternity) are Masons.

All copies of material reprinted or duplicated from “by Sandy Frost” must include the following credit line:

From Copyright © 2006 by Sandy Frost. Used by permission. For more information, contact

Part 1: Shriners in hot water again?
Part 2: Did Shriners retaliate against whistleblower?
Part 3: Conflicts of interest among the Shriners?

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