Police in New York have arrested Zvi Shor, 64, the founder of the National Children’s Leukemia Foundation (NCLF). He is accused of a truly despicable fraud. The New York Attorney General’s office alleges that roughly 83 percent of the nearly $10 million that the NCLF raised from 2009 to 2013 was paid to professional fundraisers and less than one percent— $57,541— went to direct assistance for leukemia patients. Shor, whose son died of leukemia, has previously been accused of fraud. He was convicted of felony bank fraud in the Eastern District of New York in 1999.
Shor reportedly ran the charity out of his basement and ran a construction and plumbing business. He gave himself more than $1.3 million in pay, plus deferred compensation and perks — a significant share of the donations collected.
NCLF bills itself as a leader “in the battle against leukemia and cancer in children and adults,” including the “Make a Dream Come True” program as a way to fulfill “the wishes of young cancer patients, arranging family trips, tours, introductions to celebrities and other requests.”
Shor is accused of using the NCLF to enrich himself and his family and friends. He was paid nearly $600,000 in salary plus $612,844 in deferred compensation awards and more than $100,000 in pension. The NCLF is also accused of transferring $655,000 to a shell organization— run by Shor’s sister— allegedly for research purposes.
The complaint details a shocking level of alleged fraud and misrepresentation as it raised almost $10 million from donors thinking that they were helping in the fight against leukemia. This includes allegedly lying about having a bone marrow registry, an umbilical cord blood banking program, and its own cancer research center. It also is accused of lying to donors about filing a patent application for a new lifesaving treatment for leukemia. It is also accused of lying to donors in assuring them that their donations would be used to “fulfill wishes of terminally sick children,” including sending these children to Disney World. It is accused of making false official filings, including annual financial filings submitted to the Attorney General’s Office, including falsely reporting a large portion of fundraising expenses and filing false audit reports. Of the $9.7 million raised, $8.9 million was solicited by professional fundraisers hired by Shor. Those fundraisers were then given approximately $7.5 million – or 83% – of the money raised.
It reportedly didn’t stop there. After Shor’s earlier conviction for bank fraud in 2010, he “resigned” and handed over the control of the organization to NCLF’s president, Yehuda Gutwein, 58. However, prosecutors say that it was an alleged sham and that Gutwein, a certified public accountant, was a stooge for Shor. Shor’s son, Shlomo Shor, 43, became a director and vice president and is also accused of being a mere shield for his father in signing checks and forms.
Shor was president of the foundation until his resignation in 2010 following revelations that he had been convicted of bank fraud in 1999. The foundation’s accountant, Yehuda Gutwein, took over as president, though Shor continued to run things, according to the court filings.
What I fail to understand is how a non-for-profit could be headed with a felon, particularly one convicted of fraud, without anyone noticing or objecting for years. It is astonishing that someone convicted of fraud could be the head of a charity. Moreover, as I have long objected, there is no reason by non-for-profits should be allowed to pay their presidents exorbitant salaries (and I have previously criticized college and university presidents for such windfall deals). As with the long-standing controversy over the NFL leadership (which recently announced that it would drop the non-for-profit status — and its reporting obligations), these non-for-profits can become sham devices to avoid taxes while enriching top officials.
What is even more shocking is that New York does not have a specific crime for charity fraud. This would seem a very specific type of crime and a particularly heinous impact on society. It not only steals money that is supposed to go to dying and suffering people but it creates uncertainty in people who might want to support charities in the future. It is quite a legacy for Zvi Shor and his family.