Our Executive Director is Embezzling
It's the phone call no board member wants or ever expects to get: word that the organization's executive director is being investigated by the police for embezzlement. In this First Person Nonprofit article, Vernon Waldren, board member of the Nonprofit Association of the Midlands in Omaha, Nebraska, talks candidly about how the story unfolded:
We got a call from someone at a different nonprofit letting us know that our executive director was probably going to be arrested for embezzlement at their organization, where he was on the board. Our [board] president got that call on a Monday morning, and she called a meeting of the executive committee at 5:00 that evening.
What we learned was that this other organization was working with the police to determine whether there was enough evidence for an arrest, and that there probably would be an arrest. My first reaction was disbelief. I didn't know if he was guilty or innocent, but still you're surprised, you think, "okay," and then you're disappointed, and then you think, "If it's true, why would somebody do that?"
We had a three-hour meeting that night, and we knew we needed to do something appropriate for the membership and for the donors. We went through all the scenarios. Whether or not there was an arrest, there was enough corroboration that we needed to do something.
One thing that made a big difference was that we had great people on the board. We had a good mix of backgrounds, and every person had a connection to at least one other nonprofit, so we knew what we were about. The board chair was an executive director of a nonprofit for kids; the board treasurer was a banker; we had a nonprofit computer expert on the board, an assistant university dean, etc. At the time I was the president-elect; now I'm the president.
Before the meeting there had been some follow-up confirming the information we had gotten in the first call. During the meeting we talked with an attorney that one of us knew, who had done a lot of pro bono work with nonprofits, and later we reached out to a public relations firm that had also done a lot of pro bono work.
We decided -- we took a vote -- that evening to suspend the executive director with pay. He had not been arrested, but we had enough credible reports to cause us concern. We did not want to impugn his reputation. He was still an employee until we knew for sure all the facts of the matter. We didn't think there was any malfeasance related to his work at NAM, but we didn't want to take any chances. Our concern was to safeguard our organization and its reputation.
The first thing the next morning we secured the bank accounts. The treasurer was on the signature card so he called the bank and told them not to let anything through without two signatures, including one from a board member. He also put a stop on the credit card.
The board president and the treasurer got to the office early and were there when the executive director arrived. They told him what had been decided, and he was very professional, didn't argue, gave them his keys, and thanked them for their support.
When the other staff came in, they were told that the board had closed the office for the day, and they should go home, and that they would get paid for the day, and would be informed later what would happen next. Meanwhile the computer person on our board went in and secured the computer; we wanted to be sure that we had all financial records intact in case we needed to look more closely at them.
That same day, we on the Executive Committee called each of the board members to announce a special meeting of the full board, and also advising them not to speculate, don't answer questions from anyone, refer questions to the board president.
Two days later
Two days later our ED was arrested, and he resigned. By the time it got to the press he was therefore NAM's "former executive director." As a result we were just a minor part of the news story.
We called all the donors and funders, and every one of the members. I remember calling eBay Foundation, telling them that our ED was under investigation at a different entity, that we had suspended him, and that there was no indication of malfeasance at our organization; she was glad I had filled her in so quickly. Imagine the difference if our members, donors and others had first learned of the leadership change by reading it in the paper!
What are you proud of?
Before this happened he [the executive director] had strong positive support from the board. Several of the board members were good friends with him. But that didn't change their being completely professional about how to handle the situation. We handled it professionally. We didn't get into the issue of guilt or not guilt. We focused on what we needed to do for the organization. We didn't go beyond what we should have done, but we did what we needed to do.
A few years before when our ED had been in the hospital, we adopted an emergency succession plan. So we knew what to do. The board president became the main contact for the organization, and the board would appoint an interim executive director. As it turns out, one of our board members was just leaving her job; we knew her capabilities and she stepped into the ED job.
Why are we telling our story? One of the philosophies of the board is that we want to exemplify good practices, and we think we handled this correctly, and we wanted to let other people see how one nonprofit effectively handled a crisis situation.
We emerged stronger and better in terms of community relations, financial management, and board leadership. We lost no members or donors.
The executive director pled guilty to taking more than $100,000 from the other organization. He's paying restitution and is on probation. The board member who became the interim director eventually became the permanent CEO -- Anne Hindery Camp -- and she's doing a terrific job.
Vernon Waldren is board president of Nonprofit Association of the Midlands, an Omaha-based organization supporting nonprofits through workshops, joint purchasing, public policy work, a jobs board, and other services. Vernon is also Extension Educator at the University of Nebraska at Lincoln. As part of his job he works with 4H, where as a youngster he was an active participant both in the livestock program ("hogs and all that") and in their leadership development program. He wants you to know that 4H is the largest youth organization in the world, and that it teaches life skills through many more programs than its traditional farm programs.
- Sample Emergency Succession Plan from CompassPoint Nonprofit Services
- Succession Planning for Organizations of All Sizes
- Embezzlement: More Common and More Preventable Than You Think
- Five Internal Controls for the Very Small Organization
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