Fund Raiser Gains Business Opportunities as Consultant to Charity Run by His Mother

When the American Breast Cancer Foundation began its search for a new fund-raising consultant in 2002 to handle its direct mail, it didn’t have far to look.

The contract went to Non Profit Promotions, a newly created company in Annapolis, Md., founded and owned by Joseph A. Wolf Jr., the son of the charity’s president, Phyllis Wolf. Mr. Wolf, in fact, had helped his mother start the breast-cancer charity five years earlier and had worked on its staff as a fund raiser before leaving to start his own fund-raising company.

In the five years from April 2002 to March 2007, federal tax forms show the breast-cancer charity paid Non Profit Promotions a total of $14.7-million to conduct fund-raising solicitations, including nearly $3.1-million in the final 12 months of that period. Mr. Wolf says postage expenses alone can be as much as 50 percent or more of the fees charged to the organizations that hire his company.

The payments — the most to any of the charity’s fund-raising companies over those five years — were more than four times the $3.5-million that the group spent on mammograms for poor women and grants for medical research. (In all, the charity raised $54.4-million during this time period.)

Ms. Wolf of the American Breast Cancer Foundation says that the organization’s board approved the contract with her son’s company “because of his past success, experience, and expertise.”

In an e-mail message, she said the relationship between herself and her son was “fully disclosed” to the board and that the board followed a conflict-of-interest policy and “explored comparables” before approving the arrangement.

“The board independently found that the best interest of the organization was to enter into a direct-mail agreement with Non Profit Promotions,” she said. (Attempts by The Chronicle to reach several board members for comment were unsuccessful.)

Mr. Wolf says his company’s fees “were well below the typical fair market value” of the fees of other consultants.

Special Review

Such financial transactions involving charity assets and family members may prove a smart business decision, nonprofit-management experts say, providing better value for a group than that of other providers. But the arrangements also create potential for conflicts, say charity regulators and legal experts, and warrant special review.

A nonprofit group’s administrators and directors should prove that the potential conflict inherent in hiring family members as employees or contractors is a necessary one and is good for the charity, says Jack Siegel, a nonprofit legal consultant and author of the book A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good.

“It’s a relationship that should be scrutinized,” he says. “There are a number of things that might make you feel uncomfortable. But that doesn’t necessarily mean you can’t have them.

‘Touched Our Lives’

The American Breast Cancer Foundation was created in 1997 by Phyllis Wolf, her son, Joseph, and her longtime friends Richard and Katherine Burnham.

Phyllis Wolf has been the charity’s president since its inception. Her son served as the charity’s initial vice president, with a salary of $14,000 the first year.

In a letter on the group’s Web site, Ms. Wolf said that she, her son, and the Burnhams “believed everyone deserved a fighting chance against breast cancer, and we knew that there were people like us who cared enough to help.”

“I cannot begin to tell you the stories of all the women and men we have helped and how they have touched our lives,” she wrote in a newsletter that is posted on the charity’s Web site.

The American Breast Cancer Foundation says on its most-recent IRS filings that it has reached “hundreds of thousands of people by telephone, educational messages, and newsletters” and provided information on the disease.

In the group’s 2007 fiscal year, for example, the charity spent $6.5-million on such education efforts, in addition to the $375,256 it spent on medical-research grants and mammograms.

In addition, the group says it has provided money for mammograms for women who could not otherwise afford them, as well as paid for research and support services.

The charity reported its total revenue for the 12 months ending March 31, 2007, as $15.3-million; it paid about $11.6-million in professional fund-raising fees and another $860,001 in employee wages and compensation.

Mr. Wolf says he developed an expertise in fund raising as an employee of the American Breast Cancer Foundation that put him “in the best position to supply consulting services to ABCF and be able to offer services to other causes that I cared about and have an affinity for.”

The training has also proven financially beneficial for Mr. Wolf.

In late 1998, the year after the cancer charity was incorporated, Mr. Wolf filed for bankruptcy in the northern division of Maryland, according to federal bankruptcy records. His biggest single debt: more than $113,000 owed to his grandmother.

He listed his combined salary for 1997 and 1998 at $21,000.

But with the help of the new breast-cancer group, his fortunes began to improve. In the 12 months from April 1999 through March 2000, Joseph Wolf received $63,134 as vice president of operations at the foundation. Two years later, his annual salary had jumped to $81,673.

The charity’s income also grew during that time, from $2.4-million to $3.4-million in 2000. In addition to Mr. Wolf’s fund-raising efforts, the charity hired an outside fund-raising company, Newport Creative Communications, in Duxbury, Mass.

2002 Start

Mr. Wolf incorporated Non Profit Promotions on March 7, 2002, as a for-profit company, according to state records. Shortly after, Mr. Wolf’s company began raising money for the American Breast Cancer Foundation.

From April 1, 2002, to March 31, 2003, the American Breast Cancer Foundation paid Non Profit Promotions just under $1.3-million to cover fees and expenses related to raising money for the group, according to the charity’s Form 990, which it filed with the Internal Revenue Service.

That figure jumped in the next 12 months to almost $2.8-million, making Mr. Wolf’s company the charity’s highest-paid fund-raising consultant that year. The next year, payments dipped slightly — to about $2.4-million.

In the 12 months ending in March 2006, Phyllis Wolf’s charity paid her son’s fund-raising company about $5.2-million.

The charity’s most recent Form 990 — for the 12 months ending on March 31, 2007 — shows that Non Profit Promotions was paid just under $3.1-million. (Another fund-raising company, Community Support, in Brookfield, Ill., received $4.5-million that same year.)

The start-up of his own company coincided with a change in fortunes for Joseph Wolf.

Seven years out of bankruptcy, he bought two condominium units in a high-rise complex in Fort Lauderdale, Fla., for a combined price of $767,000. (The condo purchases were in early 2006, according to Broward County, Fla., records.) Four months later, he spent another $504,000 on a two-story commercial building in Parkville, Md., which became the new office for his company.

In an e-mail response to questions from The Chronicle, Mr. Wolf said the real-estate purchases have “nothing to do with profits from ABCF.” The investments, he said, came from “small, leveraged investments, sold and reinvested, and my original home’s refinancing.”

He added that his earlier bankruptcy was directly related to the amount of time he spent helping to start the breast-cancer organization.

“The insinuation of any impropriety in the formation of NPP and its work for ABCF has no basis, and is clearly unsupported by the facts,” he said.

When asked about his company’s current clients, Mr. Wolf said he represents “a handful of other groups,” nonprofit and commercial, in addition to the American Breast Cancer Foundation. He declined to name them.

Watchdog Ratings

Over much of its 10-year history, the American Breast Cancer Foundation has not received high ratings from many of the organizations that monitor nonprofit groups.

The American Institute of Philanthropy, in Chicago, in recent years has given the charity a failing F grade, largely because it said the group spent too much on fund raising.

Charity Navigator awarded the American Breast Cancer Foundation two stars out of a possible four, pointing to the percentage of its budget — 36.7 percent — that the charity reported spending on raising money. The watchdog group considers fund-raising costs that exceed 25 percent of a group’s budget to be “very poor.”

The Better Business Bureau Wise Giving Alliance says on its Web site that it cannot decide whether the organization meets its standards because the group has declined to provide information about its operations.

But the low marks have not seemed to discourage support for the charity.

Its cash contributions for the 12 months ending on March 31, 2007, totaled more than $15-million, roughly double the charity’s contributions from just three years earlier.

The charity also has picked up sponsorships from a variety of corporations, including the Dollar General Corporation, the parent company of Dollar General stores. Dollar General raised $900,000 for the charity, in part through the sale of pink-ribbon magnets and pink bracelets.

Joseph Wolf says his company’s relationship with the charity has helped “tens of thousands of people.” He adds, “I’ve heard many of their stories, and there is no doubt that ABCF is saving lives, one person at a time.”

In addition to paying for mammograms, biopsies, post-surgical kits, and other assistance for women, the telemarketing and direct-mail campaigns have helped educate “millions of women on the importance of regular self exams and the importance of mammograms,” he says.