Nonprofit Head on Trial for Theft from Impoverished Youths

Franshuan Myles currently has the presumption of innocence, and nothing you will read below takes that away from her.  The criminal complaint dated April 26, 2016, alleged that Ms. Myles engaged in wire fraud and mail fraud during 2011 while controlling the now-defunct Divine Praise Inc. (“DPI”).  DPI was an Illinois registered NOT-FOR-PROFIT formed on March 21, 2000. Ms. Myles was the President, Secretary, Director and sole agent for the nonprofit. DPI was involuntarily dissolved on August 9, 2013 by the State of Illinois.

How can someone associated with a “Divine” entity take from the less fortune?

Summary of Criminal Allegations

The FBI Special Agent involved in the investigation stated that Ms. Myles applied for, and received, $60,000 of public funds from a State of Illinois Youth Recreation Corps grant, administered by the state Department of Natural Resources, to employ 20 youths ages 16 to 19 to instruct other kids in summer programs in July 2011. Ms. Myles falsely represented that the funds from the grant had been used solely to pay youth participants in the program.

Ms. Myles signed the Grant Agreement and Certification on July 8, 2011, and acknowledged that the funds were to be used only for the “payment of wages for eligible youths hired pursuant to the grant program” and that the “youth employment under this program is limited to no more than 60 working days and must occur during the months of June, July and August 2011”. Additionally, the Grant Agreement had an expiry date of September 15, 2011, and “the payments for work related to the project had to be initiated and completed during the grant period.” Ms. Myles was expected to pay all of the $60,000 to the youths.

Consistent with normal Grants Agreement practices, Ms. Myles was asked to provide a detailed Grant Report on the use of the funds and the project accomplishments. Ms. Myles reported that she paid the youth $51,000 and $13,000 in taxes. Ms. Myles included check numbers that were used to purportedly pay the youths.  Ms. Myles certified under oath that her Grant Report was accurate.

The FBI Special Agent’s investigation revealed that DPI’s checking account had a negative balance of $184, at the time Ms. Myles deposited the State of Illinois Youth Recreation Corps grant $60,000 check. The bank records indicate that $38,900 was paid to the youths. However, $4,932 made its way to a Chicago Alderman who was not between the ages of 16 to 19 at the time of payment. Ms. Myles withdrew $4,000 in cash a few days after paying the youths. Ms. Myles then used the nonprofit’s debit card to make $4,880 in purchases from “Lucky Brand”, “Buddy Bear Car Wash”, “Portillos Hot Dogs”, “TJ Maxx”, “Marshalls”, “DSW”, “Dooney & Bourke” and other related establishments. Some of the purchases were made after the Grant Agreement expiry date of September 15, 2011. The DPI bank records revealed that Ms. Myles also withdrew $2,800 in cash in September 2011. Further, the FBI Special Agent swore that the IRS has no record of $13,000 that Ms. Myles paid in withholding taxes.

Yesterday, the Chicago Tribune reported that as part of his opening statement Ms. Myles, defense attorney, Michael Petro said “Myles may be guilty of sloppy bookkeeping, but no proof exists she stole any money.”

Nonprofit Grant Compliance

We all know that DA’s can indict anyone. Assuming arguendo that the criminal complaint is true, here a few fundamental breaches of nonprofit grant compliance that occurred.

1.    If we take that Michael Petro at his word, it would appear that Ms. Myles may have made an operational cost error which I described in detail in a recent LinkedIn article. There is a possibility that the $13,000 was part of the administrative and operational cost for managing the youth employment under this program, however Ms. Myles did not clearly list those cost in her Grant Request. As I noted previously, funders generally don’t include funds to cover the cost to execute the program, and it is the grantees responsibility to raise the issue with the funders.

2.    Grant Recipients are required to abide by the terms of Grant Agreements. If the Grant Agreement says you will distribute all the funds, the Grantee has to distribute all the funds in the manner promised, unless waivers made by the Grantor.  There is a possibility that some of the youths did not have appropriate shoes, clothes and were hungry during the program. Maybe Ms. Myles expended funds at DSW, Marshalls, TJ Maxx and Portillos Hot Dogs for the youths in good faith (I can’t proffer anything for Dooney & Bourke). If the Grant Agreement does not permit spending on food and clothing, using the grant for such purposes is a violation.

3.    Bookkeeping is critical. Failure to maintain accurate records is heightened when government funds are involved. It would be interesting to hear how Counsel will shapes the evidence as bookkeeping failures. Even with bookkeeping failures, if a grant has a right of return clause, then the moneys you misused and no longer have, must be returned to the Grantor.

In a few days or weeks, we will hear the outcome of this case.  As I noted earlier, Ms. Myles has the presumption of innocence, and her story may be a wake up call to you, if you are involved in the management or supervision of a nonprofit.

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Theon is a Principal Consultant at EICCIO Advisors, which helps nonprofits and for-profit entities meet their audit, regulatory, and compliance requirements. If you would like to schedule a free, no obligation consultation, click here https://calendly.com/eiccio. If you would like to expand your network, invite Theon, he is friendly.