Kansas foster care leader charged $469K to credit playing cards, hid economical losses
10 min read
As the CEO of Saint Francis Ministries, Robert Smith utilised corporation credit playing cards for lavish resort stays, initial course updates on airways, apparel, income withdrawals, iTunes purchases and meals at 5-star dining establishments although hiding increasingly dire monetary difficulties from his board of directors.
Files from a Saint Francis investigation present Smith invested $11 million in a friend’s business for software that crashed and ruined the organization’s money data. Saint Francis invested hundreds of countless numbers of bucks in a software led by Smith’s spouse to harvest a “miracle” food in El Salvador, wherever staff members questioned for and received Visa credit cards for the intent of obtaining hard cash to bribe regional officials. Smith regularly was warned about the economical perils of entering a contract to provide expert services in Nebraska, in which Saint Francis is projected to drop $27 million in the latest fiscal year, ahead of Smith signed the deal.
The Salina-based foster care provider, which employs 1,600 individuals and serves 10,000 little ones and people, neared a breaking place in February right after Intrust Bank refused to expand a $10 million line of credit history. A $10 million loan by way of the federal Paycheck Safety Program allowed for daily operations to carry on.
The Saint Francis board of directors commissioned an investigation into Smith just after discovering from a freshly hired chief money officer in Oct about economic misconduct courting to 2018. The investigative report, attained by Kansas Reflector, substantiated the CFO’s allegations of mismanagement, incorrect spending and a failure by Smith to report the organization’s true monetary position to the board.
The organization severed ties with Smith, general counsel David Schafer and chief functioning officer Tom Blythe at the summary of the investigation in November. New management has charted a study course to stabilize funds inside of the up coming 6 months, including a new offer with Nebraska officials to go over losses for expert services there.
Particulars of Smith’s investing shocked colleagues who realized the Episcopal priest as “Father Bobby.”
“I ask a great deal of questions, but I was always certain that items have been Alright,” mentioned Greg Meissen, chairman of the board at Saint Francis. “In hindsight, I can chain collectively things, but I trustworthy Father Bobby, and which is all. It was rather surprising.”
Smith did not reply to makes an attempt by Kansas Reflector to attain him for comment.
‘An absolute stunner’
Lora Winchell quickly discovered financial irregularities just after she was employed as main money officer in September.
Fearing no just one would hear to her issues, Winchell organized a assembly with a board member in Kansas Town to expose her conclusions below the pretense of a non-sizeable satisfy-and-greet. As an alternative, she presented her report on the severity of financial difficulties at Saint Francis.
“I joined Saint Francis for the reason that of my perception in the organization’s mission,” Winchell mentioned in a statement for this story. “That function must be supported by strong monetary accountability that adheres to all ethical accounting concepts. I could only, in very good conscience, report the inconsistencies I was observing.”
The board took fast motion to suspend management and seek the services of an lawyer to look into Winchell’s conclusions.
At the time, the board had no plan that a unique whistleblower had raised fears about Smith’s fiscal dealings in a November 2019 report to the Kansas Office for Small children and Family members.
Mike Deines, a spokesman for DCF, mentioned the agency’s common functioning method is to work instantly with government leadership. DCF in January hired a Topeka accounting business to audit finances at Saint Francis, but Smith did not disclose the audit to the board.
“Typically in those people variety of conditions someone on the board may get a phone,” Meissen claimed. “We under no circumstances obtained a call from them. I’m not criticizing their perform, but it was an absolute stunner.”
If the group experienced regarded about the report when it was shipped to DCF, Meissen explained, it would have built a massive variation.
The investigation by Chris McHugh, an legal professional in Kansas City, Kan., found Smith made $469,000 in prices to credit cards from 2018 to 2020, seldom giving a receipt. The corporation has not decided how significantly of those rates ended up for reputable business enterprise bills, but it is distinct that numerous of the rates violated the organization’s plan signed by Smith prohibiting the use of playing cards for personalized things.
Smith used $107,000 on accommodations, like prices at the University Club of Chicago that ranged from $1,000 to $10,000 for each individual of 11 excursions between January 2018 and March 2020. 1 of the visits provided a $705 cost for Monthly bill Whymark, whose firm took in excess of IT providers for Saint Francis.
McHugh located charges totaling $60,000 for foods, $47,000 for airline tickets, an extra $14,000 for airline charges and updates, $36,000 for amusement, and $45,000 for bills at the Salina State Club, the place a membership was incorporated with Smith’s $200,000 income. There have been $20,000 in prices for retail buys, yet another $20,000 for Amazon.com purchases, $13,000 for hard cash withdrawals and improvements, as well as $4,862.85 for buys built by Apple iTunes. Smith also expended $3,170 at Morris and Sons, a men’s clothes store that was featured in the luxurious way of living journal Robb Report in 2019.
There had been $20,000 in charitable items, and just about $4,000 sent to a pal who requested the revenue for a trip to the Holy Land. Smith then determined he would participate in the vacation and utilized his Saint Francis credit rating card to pay out the vacation enterprise more than $10,000 in February 2020.
Smith spelled out to a employees accountant that the events and outings he billed to the credit score cards have been “good PR” for Saint Francis for the reason that he was making an attempt to produce associations with associates of the Kennedy spouse and children in Chicago in hopes of utilizing their connections in govt for long term jobs.
The technique didn’t work.
“We’re a nonprofit, and our task is to just take care of small children and people,” explained William Clark, now the interim CEO at Saint Francis. “The funds that we get from the states are created to be applied for that, so we want to run in just that framework.”
‘Level of embezzlement’
Smith spelled out to his board of administrators that Saint Francis would recoup its investment in Whymark’s corporation mainly because the application he produced finally could be deployed for a revenue in other states.
“When that was presented to us, that seemed really fair,” Meissen reported. “The board never ever comprehended that it was going to be that a lot money.”
Saint Francis compensated $11 million to Whymark for an IT technique that crashed in the slide of 2019, and the reduction of money information sophisticated attempts to assessment paying out. In accordance to the investigative report, Whymark told the recovery team he wiped the tough drives on the crashed server so they could be reused.
Whymark operates WMK Research and SFW Systems, both equally registered to an deal with in Mount Kisco, N.Y.
The web sites for both of those firms are similar besides for the enterprise name and are loaded with sections touting innovative-sounding IT jargon — predictive analytics, organization cloud, a proprietary details ingestion framework. 1 area touts the science of “machine studying,” or receiving pcs to understand and act like people do “by feeding them information and information in the kind of observations and authentic-planet interactions.”
Smith hired an outside company to offer economic oversight pursuing the retirement of a main money officer in 2018. As aspect of the investigation into Smith’s mismanagement, a person of the agency’s accountants stated the nominal value and price tag of Whymark’s companies induced him to dilemma “whether the instances rose to the level of embezzlement.”
By examining email timestamps, the investigator identified Smith took a couple of minutes or much less to evaluate invoices sent by Whymark. The invoices reflected “an unbelievable volume of time billed,” the investigator observed. In May well 2018, for occasion, Whymark billed an total that indicates he labored 10.4 several hours for every working day for 22 days on the Saint Francis agreement, though also carrying out other responsibilities as CEO of his business.
The unnamed accountant from the outside agency registered other worries. He nicknamed Blythe, the COO, “Chicken Little” for his refusal to stand up to Smith. Management at Saint Francis was “spending like they have been printing money in the back,” the accountant explained.
He told the investigator he was disturbed when a venture supervisor in El Salvador requested for a Visa card so he could use cash advances to bribe authorities officials. The investigator identified Saint Francis sent two Visa playing cards to El Salvador, but they were utilized practically solely for tiny buys of quickly meals and lodging.
Smith’s spouse, Angela, led the Holistic, Natural and organic, Prosperous El Salvador operation, acknowledged as HOPES. The thought was to harvest a “miracle” foodstuff from the moringa tree, whose leaves give vitamin C, vitamin A, calcium and potassium.
As with the software, Smith justified the hundreds of 1000’s of bucks expended in El Salvador on the premise the operations there would sometime make a income. Dollars from the sale of the miracle food ended up supposed to shell out for Saint Francis applications serving vulnerable one mothers.
Smith’s spouse, in accordance to the investigative report, advised the accountant to change monetary forecasts for the procedure to present a revenue in the 3rd yr.
“That was an beautiful notion exactly where there was misinformation or deficiency of comprehending,” Meissen reported. “We considered that this would in fact crack even in two or 3 many years and maybe make some funds. We did not see it as a huge cash dropping point.”
‘God will provide’
Smith and Blythe understood their proposed settlement to offer foster treatment companies in the Omaha, Neb., location would be a cash loser.
Smith’s response: “God will present.”
The sudden choice very last calendar year by Nebraska’s Section of Overall health and Human Products and services to go the state’s only privatized foster care contract from PromiseShip to Saint Francis prompted speedy and ongoing criticism from Nebraska lawmakers. Saint Francis presented a bid of $197 million for the 5-12 months deal, undercutting the $341 million present from PromiseShip.
The precise expense of expert services threatened the money security of Saint Francis, which has failed to satisfy its obligations to small children in Nebraska. Saint Francis shed $7.4 million on the Nebraska deal in the initially six months of 2020. Projections for the current fiscal yr suggest a $27 million loss.
Clark mentioned Nebraska officers have “agreed to cover” the projected losses going forward and to reimburse Saint Francis for previously losses.
“We have labored with the state of Nebraska on how we go ahead with that mainly because naturally that would be a massive money drain on the firm,” Clark mentioned.
Nebraska state Sen. Sara Howard, a Democrat who represents an Omaha district and served as chairwoman on a foster care oversight panel, mentioned every person exterior of HHS and Saint Francis understood the bid was way too small to be practical.
“People knew that they ended up going for walks into a problem where it was either going to be an huge reduction to Saint Francis, or we have been heading to see them consider on the agreement and then possibly check with for extra income or inevitably get out,” Howard explained.
Smith did not reveal to the board the actual expenditures of the Nebraska contract, taking away data about the projected losses from PowerPoint slides that were being organized for a board conference in September of this 12 months.
“I had no idea of the severity,” Meissen reported. “We understood there were being factors to do the job through, but we experienced no notion, and when I read that portion, that was actually troubling that data was withheld from us.”
‘A major challenge’
The reckoning that adopted Winchell’s disclosure of money complications has positioned Saint Francis in place to be dollars neutral by July 2021, Clark stated.
That involves divesting from Whymark’s enterprise and the elimination of intercontinental systems.
“There has been a major problem, as you know about, but there is been even additional substantial effort and hard work to stabilize the organization, move it ahead, be truthful and transparent with associates, and we feel we have performed that,” Clark said.
That incorporates the generation of a new compliance office at Saint Francis developed to deal with considerations about misconduct. Those people considerations will go right to the CEO or, if they involve the CEO, right to the board. Meissen explained the board is searching to put into action its personal accountability actions to reduce a different economical scandal.
GuideStar, which gathers documentation about nonprofits, demonstrates the Saint Francis board of directors did not deliver a written evaluation of Smith or demand senior employees to assessment conflict of curiosity insurance policies.
The nonprofit’s most new 990 tax submitting, which displays the 12-thirty day period interval that finished in the middle of 2018, shows Smith’s whole compensation exceeded $323,000. Blythe been given $197,000 in total compensation.
Before he was employed at Saint Francis in 2014, Smith worked as a vice president for the Illinois Valley Neighborhood Hospital, wherever he oversaw an once-a-year operations finances of $125 million. He grew to become a canonical resident in the Diocese of Chicago in 2012.
Rebecca Wilson, lover at a PR organization that handles inquiries for the Diocese of Chicago, explained the bishop there was unaware of allegations of money misconduct against Smith. She reported these types of issues are handled under a disciplinary approach outlined in canons of the Episcopal Church.
Among unsettled small business with Smith and Blythe are loans they acquired from Saint Francis to buy their properties in Salina. Smith acquired $59,000, and Blythe obtained $50,000. Clark said individuals financial loans have not been paid out back again and are continue to owed to Saint Francis.
Clark reported any selection to provide prison fees in opposition to Smith would be exterior of his purview.
“The point out has to make those people form of conclusions,” he mentioned.
Meissen explained the business would cooperate with an investigation by authorities.
“We would be thrilled if we could determine out a way to recoup some of these bucks,” Meissen reported.
