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"The Minimum of Disclosure to the IRS" - Shriners: Part 11

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Sandy Frost Newsvine

"The Minimum of Disclosure to the IRS"

Shriners: Part 11

Tue Dec 12, 2006 3:43 PM EST

us-news, real-estate, disclosure, shriners, tax-returns, 990

Sandy Frost

What would you think of a charity group whose director of accounting told their treasurers to “do the minimum of disclosure to the IRS”?

Here is a quote from page 72 of the winter 2003 Shriners Treasurers Association minutes (1):

“Going to the second page (of the IRS tax exempt return 990), there’s too much work being done, I’m not being over critical, I’m just saying let’s just do the minimum disclosure to the IRS” - Bob Phillips, Director of Temple Accounting

Clearly, there is a difference between “minimum disclosure” and “non disclosure.” An analysis of the returns filed by the Shriners Hospitals for Children, form 990, dating from 1998 to 2005 suggests the following “non disclosed” discrepancies. Due to lack of space, four of eight examples will be presented.

1. Exempt Organization form 990 Part VI, question 80a asks, “Is the organization related through common membership, governing bodies, trustees, officers, etc. to any other exempt or nonexempt organization?”

The Shriners Hospitals for Children answer “yes” on their 990s and indicate affiliation only with the Shriners fraternal, AKA the Imperial Council of the Ancient Arabic Order of the Nobles of the Mystic Shrine for North America. Analysis of the Shriner’s Imperial Divan Officers 2006 – 2007 at http://www.shriners.com/Shrine/Divan/ indicates that Shrine officers are also members of:

The Boards of Directors for both Shriners of North America and Shriners Hospitals for Children

Royal Order of Jesters and the Cabiri Royal Order of Scotland

Red Cross of Constantine

National Sojourners Order of Quetzalcoatl

Order of DeMolay

The Scottish Rite The York Rite

Knights Templar in the York Rite

International Order of Demolay

Documents recorded in the Hillsborough County Clerk’s office list both Shriners and Masons in real estate transactions together. These affiliations are not disclosed on the charity’s tax returns for the years 1998 through 2005.

A quick note of explanation here. The first rank for any of these groups is that of a “Blue Lodge Mason.” From there, the applicant must pass tests and be subjected to sometimes painful rituals as he moves up through three Degrees to become a Master Mason. He can then pursue dues paying membership in the above mentioned organizations. One must be a Master Mason before becoming a Shriner.

2. Schedule A, Part III “Statement about Activities” question 1 on the Shriners 2005 tax return asks, “During the year has the organization attempted to influence national, state, or local legislation, include any attempt to influence public opinion on a legislative matter or referendum?”

According to documents filed with the Clerk of the House of Representatives and Secretary of the Senate, lobbying reports were filed by former VA head Hershel Gober and state that he lobbied on behalf of the Shriners in 2005.

From an unanswered email sent to the Shriners Director of Public Relations on July 11, 2006:

“According to documents available through Congressional lobbying disclosure records, in 2004, the Shriners terminated their lobbying relationship with Campbell-Crane & Associates. Hershel Gober registered as a lobbyist on behalf of the Shriners with the Clerk of the House of Representatives and Secretary of the Senate on 2/9/05 and 7/22/05. Listed as specific lobbying issues on the 2/9/05 registration is ‘Sarbanes-Oxley Bill.’ (2) I called Mr. Gober about a week ago and asked him about lobbying against Sarbanes-Oxley on behalf of the Shriners and he said that ‘the Shriners were concerned that the bill might have an impact on people donating to Shriners’ and that he had just ‘set up a few meetings.’”

The 2005 lobbying question was marked “no.”

3. Part VI, question 77 on the 2000 990 tax return asks, "Were there any changes made in the organizing or governing documents but not reported to the IRS?"

On October 17, 2000, a Resolution was filed with the Clerk of Polk County, Florida, which is due east of Hillsborough County, where both Shriners groups are head quartered. The paraphrased resolution reads:

"Be it resolved that any one of the following officers; the Chairman of the Board of Directors; the President; the First Vice President; the Second Vice President; the Secretary; the Assistant Secretary or the Treasurer, is authorized, on behalf of the Shriners Hospitals for Children:

A) To accept annuities, gifts, bequests for the benefit of the Corporation and/or any individual Shrine Hospital.

B) To demand, recover and receive from any fiduciary or other persons any property of any nature for the benefit of the Corporation and/or any Shrine Hospital by any person or under any will, trust agreement, or other instrument.

C) To execute documents in suits and proceedings in which the Corporation has an interest and settle lawsuits, claims, debts or controversies of whatever nature affecting the Corporation.

D) To transfer, convert into other securities, endorse, sell, exchange, assign, and deliver any shares of stock, bonds, notes, options, and evidences of indebtedness or other securities owned by said Corporation and to execute and deliver all written instruments of transfer.

E) To endorse notes, checks, drafts, bills of exchange or other collection items which may require the endorsement of said Corporation for deposit as cash or collections.

F) To make and execute such agreements and documents as may be necessary concerning the tangible personal properties of the Corporation and to execute documents necessary to comply with any legal requirements of the Corporation with governmental authorities.

G) To transfer any property, real or personal, to any fiduciary with which the Corporation has a contract for investment management.

H) To accept gifts and devises of real property, mineral estates and water rights, for the benefit of the Corporation and/or any individual Shrine Hospital."

The next section conveys broader powers of buying and selling to various combinations of two of the above mentioned officers and directors. The third section gives similar individual powers of buying and selling to the General Counsel, the Managing Attorney and the Second Vice President. This resolution offers no accounting, GAAP review or other oversight provisions.

The answer to question 77 is marked "no." The Shriners did not report this change in governing documents or provide a copy of the resolution to the IRS.

4. Part III, question 2 on the 990 tax return asks, "During the year, has the organization, either directly or indirectly, engaged in any of the following acts with trustees, directors, officers, creators, key employees or members of their families or with any taxable organization for which any such person is affiliated as an officer, director, trustee?”

Part a. asks, “Sale, exchange or leasing of property?"

Documents filed with the clerk of Hillsborough County, Florida, record the mortgages and satisfactions between the Shriners Hospitals for Children and the following:

Lewis Molnar, CEO, Shriners Hospitals for Children, 10/11/79.

Charles Cumpstone, Executive Vice President, Shriners fraternal, 7/25/79, 10/05/79, 2/16/84.

Mary Katherine Achorn, employee, 6/28/79.

Henry Gorman, employee, 8/27/80. Satisfied 2/19/93.

Celia Fan, employee, 9/14/79. Satisfied 5/18/94.

Paul Ibach, employee, 8/15/79. Satisfied 5/6/96.

Paul Barber, employee, 2/29/80. The mortgage was satisfied on 2/9/98 but was not reported on the 990 tax return for that same year.

John Cawood, Comptroller, 6/3/80, 6/12/81. The first mortgage was satisfied on 1/26/01 but was not reported on the 990 tax return for that same year.

Ronald Ziska, employee, 4/3/79. The mortgage was satisfied on 5/18/02 but was not reported on the 990 tax return for that same year.

Donald Peirce, employee, 7/3/79. The mortgage was satisfied on 9/23/03 but was not reported on the 990 tax return for that same year.

When asked on Monday, July 31, 2006 about the undisclosed real estate transactions between Shriners Hospitals for Children and Lewis Molnar (recently retired hospital CEO), Donald Peirce (IT employee who recently died) and Charles Cumpstone (recently retired executive vice president), Alicia Argiz-Lyons, the Shriners Corporate Director of Public Relations answered “One is dead and the two others are not here any more. And besides, they happened when the Shriners moved their headquarters.”

For the years 1998 to 2005, the real estate question is marked “no.” Additionally, information regarding conflicts of interest, compensation and expense accounts as well as excess benefit transactions was not disclosed on the Shriners’ tax returns.

In conclusion, both the Shriner's charitable and Shriner's fraternal corporations enjoy the collective benefits of tax exempt status by not paying millions in federal, state and local taxes as their $9 billion endowment grows. Instead of embracing the best practices of non profit disclosure, transparency and accountability, both groups refuse to answer financial questions by punishing, censoring and suing those who do. Additionally, both groups fail to voluntarily disclose their 990s, annual reports, audits and board minutes online and, to date, have failed to provide tax returns as required by law.

The question that must be asked is “Why?”

(1)The minutes are online at http://www.shrinetreasurers.org/minutes.htm

(2) According to wikipedia.com, “The Sarbanes Oxley Act is also known as the Public Company Accounting Reform and Investor Protection Act of 2002. Passed on July 30, 2002, it is a United States federal law passed in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, and WorldCom (recently MCI and currently now part of Verizon Businesses). The legislation is wide ranging and establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms.”

All copies of material reprinted or duplicated from by Sandy Frost must include the following credit line: From http://sandyfrost.newsvine.com/ Copyright © 2006 by Sandy Frost. Used by permission.

Further Reading:

The Royal Order of Jesters - The Shriners Secret Society Secret Society - 'Mirth is King'

The Shriners - The 'Krafty' Klowns