THE EROSION OF CONFIDENCE

I start my day by going to 1) Wall Street Journal; 2) The Daily Alert from Israel; 3) Philanthropy blogs. Most mornings, I shutter and look at the computer with one eye open. "Can all this really be happening?" Can sociopaths be so charismatic that they con their friends out of life-long savings? The shocking truth is "YES!"

Therefore, it should not surprise the nonprofit sector to have a 40 page Form 990 to fill out each and every year......the IRS is making strong recommendations for audit committes, conflict of interest statements, and whistleblower policies.

Are these recommendation or legal requirements?

The IRS is making strong recommendations, but these are not legal requirements. However, if your organization is political in nature (not a lobbying entitiy, obviously), or controversial in some way, I highly suggest you put your ducks in a row and follow the recommendations to the letter.

The last thing a nonprofit needs right now is to be side tracked by an IRS audit.

See the article below.

In the coming weeks, Picasso Strategic Solutions, LLC will be initiating a new endeavor to help fledging organizations through this economic turmoil.

Our mission is to make sure worthy causes have the tools to succeed.

Stay tuned for an announcement in the coming weeks.





FROM: PHILANTHROPY TODAY
January 26, 2009


Fireman: Adviser looted $25m
Suit says foundation, firm missing funds
By Beth Healy
Globe Staff / January 24, 2009


Paul Fireman, the former chief executive of Reebok International Ltd., says his longtime investment manager looted more than $25 million from his business and charitable foundation, according to a complaint filed yesterday in a Florida court.

Arnold Mullen, an accountant and investment adviser who worked for Fireman for 20 years, transferred millions of dollars from Fireman's business, PFP Associates, and the Paul & Phyllis Fireman Charitable Foundation to various partnerships and business entities for his own benefit, the complaint alleges.

The lawsuit, filed in Palm Beach County where Fireman's business and foundation are based, accuses Mullen of theft, racketeering, fraud, and other charges. Fireman is seeking unspecified damages, as well as interest and attorney's fees. Mullen could not be reached for comment late yesterday. He has paid some of the money back, according to the lawsuit.

A lawyer for Fireman said law enforcement officials were conducting a criminal investigation of the matter. The lawyer, G. Joseph Curley, said in a statement, "Arnold Mullen was seen as a trusted advisor and friend for almost 25 years while he systematically stole more than $25 million from the Fireman family and their charitable foundation. His brazen theft was a terrible betrayal of the trust Paul Fireman placed in him."

Fireman was not available for comment. The Brockton native sold Reebok for $3.8 billion to Adidas-Salomon AG in 2006. He and his wife, Phyllis, stood to make nearly $800 million for selling the Canton sneaker and apparel company.

According to the complaint, Fireman hired Mullen in 1985 to help manage PFP Associates, a company that oversees Fireman's "investments and business activities." Fireman said in the complaint that he hired Mullen, an experienced accountant and investment manager, on a referral from another wealthy South Florida family.

Over the years, Fireman placed increasing trust in Mullen, and Mullen ultimately advised him on investments, including private equity deals. Fireman paid him $800,000 a year, plus bonuses based on investment performance. However Mullen was not authorized to make any investments without Fireman's approval, the complaint says.

It appears that Mullen set up numerous business entities and partnerships through which he laundered funds wired from Fireman's business or foundation. In one case, Mullen allegedly created a partnership using his name and Fireman's, called Forum Partners. In December 2007, he moved $2.4 million of Fireman's money to the partnership, the complaint says. The next day, Mullen moved the money to an account of his own at Fidelity Investments, the complaint says.
In other instances, Mullen allegedly wired funds of Fireman's from Fidelity to entities controlled by Mullen. Fidelity spokeswoman Anne Crowley, reached late yesterday, said, "We have no knowledge of the matter or the lawsuit."

Fireman's foundation is based in Palm Beach Gardens, Fla., and had $228 million in assets at the end of 2006, according to its latest tax filing. The foundation gave $14 million to charities that year, mostly to Boston-area nonprofits. Grants included $5.5 million to Fidelity Investments' Charitable Gift Fund, $1 million to the Institute of Contemporary Art, and $300,000 to Massachusetts General Hospital.

News of another scandal in Palm Beach comes as that community is still reeling over Bernard L. Madoff's alleged $50 billion Ponzi scheme, which since December has wiped out hundreds of millions of charitable dollars - and billions in personal wealth - from Boston to Palm Beach and beyond.

The alleged fraud involving Fireman's foundation and business appeared to have continued into recent weeks. The Florida Department of State's Division of Corporations has on file an application for "registration of a fictitious name," made on Dec. 31, 2008, for a Waterfall Associates Group. According to the filing, the owner of that name is Paul Fireman. Waterfall is one of the entities to which Mullen allegedly transferred Fireman's money.

It wasn't until Nov. 12, 2008, that Fireman learned he had something to worry about. According to the complaint, a story in the South Florida Daily Business Review detailed a lawsuit filed against Mullen and others alleging a fraudulent land deal in Utah. According to that report, Mullen had defrauded several investors out of millions of dollars, by falsely promising he was raising funds to build a ski resort.

Fireman started an internal audit after that, according to the lawsuit, and began finding the improper money wires. Fireman confronted Mullen about a number of the instances; in some cases, Mullen repaid the money.

Also named in the lawsuit are Geoffrey Mullen, the son of Arnold Mullen; Waterfall Associates, a Florida company owned and controlled by Mullen's family; and another company, Esperanza, which is part-owned by Mullen and was also used in the alleged fraud. The complaint also names Lennard Kligler, a business partner of Arnold Mullen.

None of the named individuals could be reached for comment late yesterday.
Beth Healy can be reached at bhealy@globe.com. Jenn Abelson of