January 10, 2002 | Read Time: 3 minutes
The U.S. Securities and Exchange Commission has accused a charity in Scottsdale, Ariz., of fleecing elderly donors of at least $54-million in gift-annuity payments. Regulators say the total amount lost by donors to the Mid-America Foundation could be as much as $100-million.
In a lawsuit against the charity and its chief executive, Robert R. Dillie, the SEC charged that Mr. Dillie spent the money on such things as gambling in Las Vegas, child-support payments, and first-class travel and that he used more than $2-million to purchase homes in Nevada and a 1,400-acre ranch in South Dakota.
The SEC also accused Mr. Dillie of issuing phony financial statements — including one put out last October, two weeks before Mid-America shut down, showing that it had $19-million in equity when it was actually broke — and falsely claiming that its investments were being managed by Merrill Lynch, Pierce, Fenner & Smith.
In its lawsuit, the SEC said Mr. Dillie was recently arrested in Nevada on felony fraud charges in connection with a number of bogus checks he allegedly wrote to Las Vegas casinos. In September 2000, the MGM Grand Hotel in Las Vegas won a $421,650 judgment against him. Another lawsuit, filed by the Venetian Casino Resort Hotel in Las Vegas, is pending against Mr. Dillie.
Mr. Dillie’s lawyer, Thomas Pitaro, said neither he nor his client would comment on the Securities and Exchange Commission action.
Donors’ Expectations
Donors gave their money to Mid-America on the assurance that it would be put into stocks, bonds, mutual funds, and other traditional investments. Donors expected to be paid an annuity in periodic installments until their deaths, after which the remainder of the gifts was supposed to go to charities of the donors’ choosing. But when Mid-America shut down last October, it notified donors that it had “inadequate assets” to make further annuity payments (The Chronicle, November 1).
Government officials have confirmed that 125 donors had gift annuities from Mid-America, according to W. Mark Sendrow, director of the securities division of the Arizona Corporations Commission, which is working with the SEC to investigate Mid-America and Mr. Dillie. “We also have information suggesting there are about another 300 [donors] out there,” Mr. Sendrow added.
Warning Letter
Most of the charges contained in the SEC complaint against Mr. Dillie were spelled out in a letter sent in November 2000 — nearly a year before Mid-America’s collapse — to federal regulators, Arizona authorities, and business trade groups.
The letter, a copy of which was obtained by The Chronicle, was written by a man identifying himself as a relative and business associate of Mr. Dillie. The writer accused Mr. Dillie of spending money “much faster than it was made” on gambling, concerts, tickets to the Super Bowl and other sporting events, and expensive suites at Las Vegas hotels.
Among the agencies to which the letter was addressed was the Arizona attorney general’s office. A spokeswoman for the attorney general declined to comment on whether the office received the letter or ever began an investigation into Mr. Dillie’s activities.
Mr. Sendrow said his department did not receive a copy of the letter until after it began investigating Mid-America’s collapse last October. Asked where his department obtained it, Mr. Sendrow referred questions to the attorney general’s office. He acknowledged that if an investigation into Mr. Dillie’s activities had begun a year earlier, substantial amounts of donors’ money might have been saved.
