By Jeff Gottlieb, Los Angeles Times

February 14, 2012

More than 200 nonprofit groups, from animals rights organizations to political activists, said most of their donated funds appear to have vanished after the organization that watched over the money suddenly ceased operations last month.

The International Humanities Center closed its offices, took down its Web page and informed its clients by email that it has ceased operation. The center served as an umbrella organization for small nonprofit groups, handling their donations and performing administrative duties.

Directors from two of the groups said the executive director of the center told them only $10,000 was left in the accounts his organization held when there should have been $1 million.

A tally of potential losses compiled by directors of 40 of the groups comes to $877,000.

Several of the groups said they can no longer pay their staffs or bills. Some have explained the situation to donors on their websites.

The California attorney general’s office is investigating, and directors of several groups said they had been interviewed by the office or had been asked for information.

“The more time goes on, the more I lose hope we’ll ever see any of that money again,” said Dylan Rose Schneider of Peaceful Uprising, a collective that fights global warming.

The groups were mostly small nonprofits that said they turned to the Humanities Center, as what is known as a fiscal sponsor, because they don’t have the staffing to handle donations and related paperwork. For a small fee, the center’s website had said, it handled such tasks for its clients.

Steve Sugarman, the center’s executive director, said in an email to some of the groups that he was filled with “deep regret” over going out of business and hoped it caused no lasting harm. He assured them in the email that all funds had been properly spent, though it is not clear what he was referring to because a fiscal sponsor is not supposed to spend its clients’ money on its own operations.

A consultant for the center told some of the groups in a letter that their donations were used to pay legal fees and other bills, including $12,000 a month for offices in Pacific Palisades, as well as back taxes and penalties to the IRS.

“Many of us realized that this was a dangerous way to run a business but were repeatedly assured by Steve (in writing) that all misappropriated funds would soon be replaced,” consultant David DelGrosso told directors.

Sugarman did not return emails and his phone was not accepting calls.

Directors for many of the nonprofits, which included such diverse groups as the Campaign to End Israeli Apartheid, Saving Wild Tigers, Champions Against Bullying, the Malibu Realtors Fund, the Southern California Bluebird Club and Shanti House L.A., said they believe their money has vanished.

The Pasadena-based Afghan Women’s Mission, which supports schools, clinics and other programs in the war-battered country, said it had $400,000 banked with the Humanities Center. It has told donors on its Web page that its money is probably gone.

“What we’re seeing is much larger than dumb management and bad mistakes,” said Sharon Simone, who runs Headwater Productions, which she said has had a number of projects with the Humanities Center, including a scholarship fund in her late brother’s name.

Before it was pulled down, the center’s website described its operation as a one-stop organization for groups that had neither the time nor expertise to handle accounting, bills and other administrative tasks. By doing business with the Humanities Center, groups were able to designate donors’ gifts as tax-deductible. In exchange, the center, which started in 2003, took a 5% cut of donations in its first years of operation and more recently raised the fee to 10%.

In most cases, if someone wanted to donate money to one of the groups online with a credit card or through PayPal, the transaction was done through the Humanities Center. The groups also submitted their bills to the center for payment; and when they needed money, they would send in forms explaining what it was for.

Jane Levikow, chairwoman of the National Network of Fiscal Sponsors, said a group like the Humanities Center would never dip into the funds of its clients for its own purposes.

The center’s website had stated that Sugarman has a master’s degree in research psychology, served as executive director of another fiscal sponsor, was involved in well-known environmental causes such as the Bolsa Chica wetlands restoration and was the author of a book called “The Blueprint for Planetary Evolution.”

In a 2009 interview with OpEdNews.com, one of the groups that used the center to handle its money, Sugarman said it had 300 groups under its auspices, with total revenue of more than $6 million.

Marcia Hanscom, who heads three groups that banked money with the Humanities Center, said she has known Sugarman since the early 1990s, when he was fighting to protect the Dana Point Headlands. “He was really committed to doing good work for people and the planet,” she said.

Her groups had $2,000 in donations at the center, which she assumes is gone.

Directors for several of the groups said they grew worried when Sugarman told directors in an email about an IRS audit. The email didn’t mention that the IRS had filed a $69,570 tax lien against the center.

By mid-2011, some of the groups said, the center was not paying their bills and was not responding to their phone calls and emails. Financial statements, they said, arrived sporadically if at all.

In September, the state Franchise Tax Board suspended the center’s corporate status because it had failed to file the nonprofit equivalent of a tax return, according to state records.

Late last year, Sugarman sent an email to some groups’ directors explaining that the center was running “a considerable deficit.”

“The specific causes of this deficit are many, complex, interrelated, and have been escalating over time. Cumulatively they have resulted in a perfect fiscal storm for IHCenter,” he wrote.

He ended the email: “First and foremost, the bleeding has to stop so the patient can heal. I know that this will cause many hardships, and for that I express deep regret for any harm that results; deeper than you can imagine; deeper than words can convey.”

Six days later, Sharon Simone and Deena Metzger, whose groups were under the Humanities Center umbrella, met with Sugarman. They said he blamed the problems on the economic downturn and an anticipated $15.2-million grant that never materialized.

Shortly thereafter, DelGrosso, the center’s consultant, sent his letter blaming Sugarman for the problems. He also said a former Humanities Center official “made a huge mistake by wasting project funds on a deceptive email scam” but had since left the country.

In an interview with The Times, DelGrosso said the Internet scam cost the center more than $200,000. He said he was interviewed by a deputy attorney general last week.

Sugarman sent out a final email Jan. 16 announcing that the center was shutting down.

“Be assured that all funds were used solely to benefit the [clients'] projects and their support, and to maintain IHCenter and its tax exempt status,” he wrote. “All projects were part of this organization and our responsibility has been to the organization as a whole.”

Rob Kall, the editor of OpEdNews, said he wonders whether the Humanities Center got carried away when the donations for the various groups started coming in.

“I think they became grandiose,” he said. “I feel like I was robbed.”

Read the article on the LA Times’ website here.

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