Musician Wyclef Jean's Haiti charity under fire for irregular activities

Organizations collecting contributions for Haiti are popping up everywhere, and as always, so are the scams that misuse those donations. That's why Yele Haiti, a not-for-profit group founded by Haitian musician Wyclef Jean is finding itself under scrutiny.

Yele Haiti has been around for awhile. As Jean pointed out, they were busy cleaning up Haiti long before the earthquake. According to the Web site, the purpose of Yele Haiti is to use "music, sports and the media to reinforce projects that are making a difference in education, health, environment and community development. In practical terms this translates to over 3,000 new jobs, close to 7,000 children being put in school, more than 8,000 people a month receiving food and approximately 2,000 young people a month learning about HIV/AIDS prevention."

The questions surrounding Yele Haiti start with the fact that they failed to file tax returns for fiscal years 2005, 2006, and 2007. Charity Navigator - an independent charity evaluator and donor advocate - says that charitable organizations are often bad at filing timely returns, but this is "beyond late."

The president of Yele Haiti, Hugh Locke, told reporters that the failure to file was a "mistake." Last summer the group hired the national accounting firm of Grant Thornton, LLP, to get them caught up. All three years of tax returns were filed in August 2009.

Once the returns were available for examination, more issues surfaced. Some of the expenses reported on the 2006 and 2007 tax returns include payments that are raising questions about self dealing - defined as when board members take advantage of their positions for their own interests as opposed to the interests of the charity. The Wall Street Journal Online reported that Yele Haiti made various payments to companies owned by the organization's board members, including:

  • More than $60,000 in rent expense and $100,000 to Platinum Sound, a Manhattan recording studio owned by board members Jerry Duplessis and Jean for musical performance by Jean at a benefit concert in Monte Carlo, and
  • $250,000 for production costs and airtime for "outreach efforts" paid to Telemax, S.A., a company in which Duplessis and Jean own a controlling interest.

Tax experts contacted by CNNMoney.com told the media that a charity which pays for legitimate services from businesses owned by the charity's board members does not necessarily break any rules, unless there is a question of overcharging.

When asked by donors whether they should trust Yele Haiti, Charity Navigator responded that they do not track this organization because it does not meet their criteria, in terms of such factors as years in service and filing requirements. However, they did post some comments on their Web site which should be of interest to would-be donors, including:

  • Yele Haiti's FYE 2008 audit noted that the group spent 69 percent of its budget on charitable programs. The most efficient charities, says Charity Navigator, spend a minimum of 75%.
  • Almost all of the program expenses come from grants provided to the group's affiliate organization in Haiti. Charity Navigator notes that this is not in itself a shady practice, but because of this situation, there is no way to know how the group in Haiti spends the money received.

In spite of the controversy, Yele Haiti is expected to get part of the donations from a recent MTV telethon for Haitian earthquake relief, according to WSJ.com. The telethon money will go into a fund administered by the Entertainment Industry Foundation and then be distributed to various charities, including Yele Haiti.

With scrutiny of his organization mounting, Jean appeared on Oprah Winfrey just days ago, and also held a press conference to talk about the work Yele Haiti is doing. He reminded viewers that his group was not created to collect donations after the earthquake. They were working to improve conditions in Haiti before the disaster.

"Have I made mistakes? Yes," Jean said in a recent press conference. "Did I use Yele money for personal gains? Absolutely not. The books are open. We have a clean bill of health from an auditor."

The efforts to clean up Yele Haiti's reputation include hiring Grant Thornton to bring them up to date with tax filing, and employing a PR agency that uses celebrities like Leonardo DiCaprio and John Mayer to help boost their image. After the earthquake, Yele Haiti jumped into action with a text-to-give campaign that raised more than $2 million in two days. Now Yele Haiti has hired a second national accounting firm - RSM McGladrey - to establish a special bank account for Haitian relief funds and administer payments from that fund.

Cling-ons

Just this week ABC News reported that e-mail scammers are capitalizing on Yele Haiti's name to circulate a bogus plea for donations. The message contains an e-mail address that resembles Jean's, and the legitimate URL of Yele Haiti's Web site, and a subject line reading "From Wyclef Jean." Here is a version of one of these messages:

"HELP THE CHILDREN IN HAITI .. DONATE TODAY"

'My name is Wyclef Jean the chief coordinator of Yele Haiti a voluntary organisation i did set up to help the children faced with the disastrous earthquake in my Country."
 

Here is an image of the complete bogus e-mail message.
 

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