Blog maker

State punishes grantmaker who embezzled more than $600,000 from Ford, California endowment and other funds

In the spring of 2016, a San Francisco foundation called ZeroDivide abruptly collapsed, leaving behind unpaid debts, unanswered questions, and a trail of suffering.

The donations he held for other charities disappeared. The foundation, which was supposed to help bridge the technology gap between rich and poor, did not file informative federal tax returns. No explanation was provided by Tessie GuillermoCEO of ZeroDivide, or Carladenise Edwardsa health executive who chaired its board of directors.

It was only last week that answers emerged to questions about ZeroDivide. California Attorney General Rob Bonta filed a civil lawsuit against the foundation, Guillermo, Edwards, other trustees and David Veneziano, the foundation’s former chief financial officer, alleging that ZeroDivide willfully misused approximately $606,000 in donations from the California Endowment, California Wellness Foundation, from the Ford Foundation, the Whitman Institute, the Wyncote Foundation and the Vesper Society.

the the Chronicle announced the news on missing funds at ZeroDivide in 2019.

In a Press releaseBonta said, “Unbeknownst to the donors, ZeroDivide began to dip into restricted funds to pay for a range of expenses, such as staff salaries and benefits and other programs that the donors expressly did not want. finance.

The leaders and trustees knew what they were doing was wrong, the says the complaint“Guillermo and Veneziano intentionally misused donor-restricted donations for particular charitable programs.” They also made false statements to donors and engaged in “unfair, deceptive or fraudulent” fundraising practices. Board members were aware of the issues and failed to act, the complaint states.

Active knowledge of wrongdoing and doing nothing about it — that’s why the case is such an important warning to other nonprofits, legal experts say.

Gene Takagi, a prominent nonprofit lawyer, drew several lessons from the attorney general’s findings.

“This judgment should caution any nonprofit charity considering using restricted funds for other purposes, even if the intent is to replenish and repay the restricted fund from which those funds were borrowed,” did he declare.

Boards, he said, need to keep a close eye on the finances of any nonprofit, and that need is heightened whenever the nonprofit experiences financial difficulty.

Three-year ban on charitable work

The lawsuit was settled immediately. ZeroDivide – which has never been dissolved, although it has not filed informative tax returns since 2014 – and its directors and officers have agreed to pay $326,008 in damages and $138,525 in penalties, late filing and attorney fees.

A spokesperson for the attorney general said the damages and other costs will be paid by an insurance company that provided a policy protecting ZeroDivide’s directors and officers from liability. As part of the rulenone of the defendants admitted “fault or liability”.

However, Guillermo and Veneziano will be prohibited for three years from running a charitable organization in California, from working in a paid or voluntary capacity as a fundraiser and from soliciting, holding or managing funds or assets for charitable purposes in California or with Californians.

Accountability Matters

California nonprofit leaders who have followed the case, including those close to ZeroDivide, say they are happy with the outcome.

John Esterle, co-executive director of the Whitman Institute, said: ‘We are very pleased to see the Attorney General announce this settlement, which has been a long time coming. Most important, he said, is that ZeroDivide executives are held accountable for what he called their “egregious behavior.”

By email, Jon Funabiki, the founder of Renaissance Journalism, a small nonprofit that has been the biggest victim of ZeroDivide’s misdeeds, and Valerie Bush, the organization’s executive director, said: “We consider the results of the six-year survey a major victory. in our efforts to recover our missing grant funds and hold ZeroDivide leaders accountable.

ZeroDivide had served as fiscal sponsor for Renaissance Journalism, which aims to support journalism that advances equity, racial and social justice. As such, ZeroDivide was supposed to provide financial oversight and management for the nonprofit organization. Instead, according to the complaint, about $530,000 in donations intended for Renaissance journalism were misappropriated by Zero Divide.

Jan Masaoka, executive director of the California Association of Nonprofits, said, “Too often we in nonprofits don’t like to admit that there has been wrongdoing on the part of people and organizations. organizations we trust and love. Misdeeds are often harmless. I appreciate the thoroughness with which the Attorney General’s office conducted the investigation and I am glad that there are real consequences for those responsible.

Founded in 1998 to bring the benefits of information technology to the poor, ZeroDivide has raised over $50 million from telecommunications companies, foundations and government grants in its lifetime. As the organization’s unrestricted money dried up in the mid-2010s, Guillermo, Veneziano and the board circulated a presentation that discussed the risks of “dipping more into restricted funds” to pay the expenses, which they weren’t supposed to do, according to the complaint. . The budget documents examined by the administrators “gave them notice of the misuse of earmarked funds”.

High Level Leader

Prior to the ZeroDivide troubles, Guillermo was a high-profile leader of Californian nonprofits.

For 15 years, she was the general manager of the Asian and Pacific Islander Health Forum, an advocacy group that seeks to improve the health of Asian Americans, Pacific Islanders and Hawaiians. She spent a decade on the board of tthe california endowment, including three years as President. President Bill Clinton nominated her for the White House Advisory Commission on Asian Americans and Pacific Islandersshe has speak at the Aspen Ideas Festival, and she has served on other boards, including the Non-profit financing fund and the Lucile Packard Foundation for Children’s Health.

Even after the The Chronicle’By bringing the missing funds back to ZeroDivide, Guillermo retained lucrative board seats. As Chairman of the Board of Directors of CommonSpiritone of the nation’s largest nonprofit hospital chains, it was paid $153,750, the nonprofit latest tax return said. She earned an extra $36,401 as a board member of Marguerite Casey Foundation.

Guillermo remains on the board of CommonSpirit, but is no longer chairman. She left Marguerite Casey’s board of directors. She also sits on the board of the San Francisco Health Commission, a city agency whose members are appointed by the mayor, and the Cal East Bay State Educational Foundation.

Raja Zékaran, a lawyer for Guillermo, said in an emailed statement on Monday that “the defendants maintain their unequivocal denial of the allegations contained in the complaint” and “have collectively agreed to settle the matter rather than incur costs.” and termination of the litigation”.

Attorneys for Edwards and Veneziano did not respond to emails seeking comment.