Who Benefits From This Charity? Some Say It’s the Founder, Not AIDS Patients

FORT LAUDERDALE, FLA.

Driving to her job at a charity here that provides health care to kids with AIDS, Stormy Schevis says she grew increasingly puzzled every time she passed by the National Foundation for AIDS Relief. Parked in front of the organization’s offices would be a brand-new Porsche sports car with a sign declaring that it was the prize in a raffle to help pay for services for people with AIDS.

“I would see this Porsche and every day I would think, What are these people doing? What is going on?” says Ms. Schevis, manager of community relations at the Children’s Diagnostic & Treatment Center of South Florida.

The Porsches no longer sit in front of 1304 East Broward Boulevard here, but the question of what happens to the revenue from the raffles has continued to fester — especially among AIDS charities and state-government officials.

In the last three years, the National Foundation for AIDS Relief has received almost $3-million by raffling off Porsches, but little of that money seems to be finding its way to people with AIDS. By the charity’s own estimate, about $270,000 — or less than 10 per cent — went toward programs that help people with AIDS. During those same three years, the charity’s founder and chief executive, Russell Hjelte, a former postal worker, took home a salary and benefits worth $560,390.

The amount of compensation received by Mr. Hjelte (pronounced jel-tee) is not the only question raised about the National Foundation for AIDS Relief, which operates only in Connecticut and Florida in spite of its name and the nationwide reach of its raffle advertisements, which have appeared in such publications as Car and Driver magazine.

The non-profit organization has been investigated three times by the Florida Attorney General’s office for possible violations of state charitable-gaming laws, with each investigation leading to settlements in which the charity did not admit any wrongdoing.

Most of the trustees charged with providing oversight of the organization are members of Mr. Hjelte’s family. And a $172,734 loan to Mr. Hjelte from the National Foundation for AIDS Relief has raised questions as to whether he has reaped improper financial gains from tax-exempt dollars.

The questions raised about the National Foundation for AIDS Relief come at a time when all AIDS charities are facing increased scrutiny over whether they are paying too much and providing too little in services. In May, U.S. Rep. Tom A. Coburn, an Oklahoma Republican, gave a speech on the House floor chastising AIDS groups for providing overly generous compensation to their executives, and a spate of news articles have been published on the subject in recent months.

Over the six weeks that The Chronicle attempted to reach Mr. Hjelte for comment on this story, he did not respond to repeated telephone messages, letters, and in-person visits to his home and office.

Robert Jarkow, the accountant for the National Foundation for AIDS Relief, who answered some questions on the charity’s behalf, says that Mr. Hjelte has been on vacation and out of the country visiting the Porsche factory in Stuttgart, Germany.

Elaine Hjelte, Mr. Hjelte’s sister-in-law and executive director of the organization’s Connecticut chapter, declined to answer most questions, saying “Russell’s really the person who should answer questions.”

The information for this story was culled from the charity’s Form 990 federal informational tax returns; documents from a lawsuit filed by the Florida Attorney General’s office; property records in Broward County, which includes Fort Lauderdale; and interviews with charity officials and associates of Mr. Hjelte in Fort Lauderdale and Connecticut.

The National Foundation for AIDS Relief opened eight years ago as the National Foundation for AIDS Research. It started out by saying that its mission was to provide funds for research and education to prevent AIDS, as well as to provide housing for people with the disease. Since then, the charity has said that it provides “vitamin-drip” therapy and psychotherapy sessions for people with AIDS.

For the past several years, the group’s declared purpose has been to provide meals to people with AIDS. Its World-Wide Web site (http://www.nffar.org) says that “we are able to serve anyone in Broward County with AIDS or H.I.V. in need of a home delivered meal with no other reliable means of obtaining their daily meals.”

Since the beginning, the National Foundation for AIDS Relief has generated revenue almost exclusively from the Porsche raffles. In the last two years, it has received just $22,758 in direct charitable contributions.

AIDS patients or charities who turn to the National Foundation for AIDS Relief for help, however, quickly become frustrated.

Callers to the group’s toll-free number reach the Ding-A-Ling Answering Service; those requesting meals are then asked to leave their name and number. A reporter who did so never received a call back. Visitors to the address that the National Foundation for AIDS Relief lists as its headquarters find only a mail drop.

And those seeking out the beachfront property where the charity at one time said it was creating a “comprehensive AIDS/H.I.V. holistic health center” find the Palm Plaza motel, where rooms rent for $39.95 per night — and where Mr. Hjelte is the owner.

Despite what the Web site and other materials put out by the National Foundation for AIDS Relief imply, Mr. Jarkow and Ms. Hjelte say that the organization does not provide any direct services itself but that it makes grants to AIDS groups that provide services.

While the charitable programs of the National Foundation for AIDS Relief are somewhat difficult to discern, the benefits Mr. Hjelte has accrued since starting the non-profit group in 1991 are much more conspicuous.

His salary has steadily spiraled upward, from $8,525 in 1992, to $76,000 in 1995, to $245,000 last year, according to the charity’s tax forms. In addition, he received fringe benefits worth $28,292 in 1996 and $22,000 in 1997.

Elaine Hjelte, the only other employee of the National Foundation for AIDS Relief, made $40,000 last year, with benefits of $6,000.

In comparison, the Poverello Center, an AIDS group in nearby Wilton Manors that runs a food bank and thrift shop, and has a budget of $1.8-million, has nine employees whose salaries together total less than $200,000.

Mr. Hjelte owns three properties in Fort Lauderdale: an $80,570 one-story building called Russell Apartments that he offers for rent, a $165,930 residence, and the Palm Plaza motel, valued at $447,010 by the Broward County property appraiser.

The Palm Plaza was purchased by the National Foundation for AIDS Relief in 1996. But a year later, with the help of a $172,734 loan from the charity, Mr. Hjelte bought the property for himself. It is now for sale again.

Because Mr. Hjelte is both the recipient of the loan and the head of the organization making the loan, the transaction raises both ethical and legal questions. Under Florida law, such loans are explicitly prohibited. They are allowed under federal law, but a charity must be able to prove that the loans will be used for purposes that further the group’s mission.

Mr. Jarkow, the accountant for the charity, says that the organization originally purchased the motel with the intention of turning it into a residence for people with AIDS. However, when Mr. Hjelte found out that it would cost at least $500,000 to renovate the building so it could be used for AIDS patients, he decided to take the property off the charity’s hands. Mr. Jarkow says that as soon as the property is sold, Mr. Hjelte will repay the money to the charity.

“He made a mistake,” Mr. Jarkow says. “He had a great big plan to buy the motel and create a facility for people with AIDS, and he fell on his face.”

Regardless of the legality of Mr. Hjelte’s loan, it seems doubtful that the decision to lend him the money received much scrutiny.

The charity’s federal tax return lists only Mr. Hjelte and his sister-in-law as trustees. Its 1998 filing with the Florida Department of State does list five trustees. Even so, potential conflicts of interest are apparent: Four of the trustees have the last name Hjelte, and the fifth, Jeff Zimmerman, has the same address as Mr. Hjelte. None of those people, other than Elaine Hjelte, could be reached.

“That’s not a board to me,” says Joe Gallant, a businessman, who served as a trustee of the National Foundation for AIDS Relief when it started but who quit because he says he was uncomfortable with the way money was being spent. “They don’t provide insight, oversight, or any objectivity, and they don’t bring to the board any kind of social, economic, or political clout.”

The National Foundation for AIDS Relief’s financial practices have not gone unnoticed.

On three different occasions, the economic-crimes division of the Florida Attorney General’s office has investigated Mr. Hjelte and his non-profit group, primarily for potential violations of charitable gaming laws. Under Florida law, charities can request donations for raffle tickets but they cannot require a payment.

Mr. Hjelte twice entered into voluntary agreements with the Attorney General’s office, promising that in the future he would make it clear that no payments were required to obtain a ticket. But the Attorney General’s office was not satisfied that Mr. Hjelte was holding up his end of the bargain, so they took him and the National Foundation for AIDS Relief to court. State officials eventually settled for a third agreement in 1996 after deciding that their case was not strong enough to take to a jury. Mr. Hjelte admitted no wrongdoing in any of the investigations.

Jody E. Collins, assistant attorney general in the economic-crimes division, says that her office did everything in its power under the Florida statute that regulates charities. “We felt that it was not likely that the court would give us 100 per cent of what we asked for,” Ms. Collins say. “Do you want to go through a trial and end up with nothing?”

Former associates of Mr. Hjelte have questioned the charitable purpose of the National Foundation for AIDS Relief.

Richard L. Travis, a psychotherapist who teaches at Florida International University’s Fort Lauderdale campus, agreed to counsel clients of the National Foundation for AIDS Relief in 1995 in exchange for a fee. But Mr. Travis says he quickly became suspicious of the organization because Mr. Hjelte never referred anyone to him for counseling. He says Mr. Hjelte had promised him free rent but then began charging as much as $500 a month for the office, which Mr. Travis used just two days a week.

Mr. Travis says the situation made him so uncomfortable that “I left in the middle of the night — packed up my stuff and headed out of there.”

Leaders of AIDS groups here say the National Foundation for AIDS Relief has been able to avoid answering tough questions about many of its activities because the organization has given enough grants to local charities that many of them are reluctant to speak up and risk losing the money.

The foundation has made annual grants to Broward House and Center One, two of the largest AIDS charities in the area, for example, and set up a $15,000 fund at the Broward Community Foundation from which to make grants.

But in recent months, local AIDS charities have attempted to highlight the practices of Mr. Hjelte and his organization.

In April, the South Florida AIDS Network, a coalition of non-profit groups, government agencies, and others that provide services to people with the disease, sent a letter to Mr. Hjelte outlining its concerns. He never responded. Mr. Jarkow, the accountant, did show up at a meeting of the network, but was not prepared to answer questions about the National Foundation for AIDS Relief, said several people who were in attendance.

Mr. Hjelte has “been in the woodwork all these years, and nobody knows what he’s doing,” says Kenneth M. Fountaine, director of operations at the Poverello Center. “Why is this being kept a deep, dark secret?”