As San Diego Pride continues to suffer from a scandal that broke Tuesday regarding an alleged misuse of the nonprofit’s funds, it’s becoming clearer that the ramifications of the controversy may be far reaching.
Since the story first broke the California Franchise Tax Board has received 11 complaints regarding San Diego Pride and will likely open an investigation, a source confirmed to SDGLN.
"But the Internal Revenue Service (IRS) would handle the bulk of the case, with our cooperation,” he added.
Though stating he couldn’t reveal details regarding pending or ongoing cases, he indicated that the complaints have not been taken lightly.
“American tax law very clearly differentiates between taxable and tax-exempt contributions, and the ways in which they can be used," he continued. "Using finances intended as a tax-exempt contribution for other purposes outside the general scope of business operations is oftentimes illegal. And in many cases it could even be considered a form of money laundering.”
In a telephone interview today with former Pride Executive Director Ron deHarte, deHarte indicated he does not believe any laws were broken.
“Though I disagreed with the [$5k gift to Board Chair Phillip Princetta], I met with Pride's CPA after learning of it to make sure a 1099 would be issued," said deHarte. "I felt it was documented from an accounting standpoint, and the appropriate taxes would be paid on it; therefore I didn’t feel our nonprofit status would be in jeopardy.”
Not only is San Diego Pride reeling with the effects of ramifications spawning from decisions made by its Board, but other LGBT nonprofit organizations may suffer collateral damage as well.
Travis Cleveland, Secretary for the Empowering Spirits Foundation (ESF), a San Diego based LGBT nonprofit corporation, says his organization has “received numerous inquiries from concerned members over the San Diego Pride issue.”
“Because the mission of ESF and that of SD Pride are very different we’ve never had a reason to collaborate or work together. But since the Pride scandal broke we’ve received calls and emails from concerned donors wanting to know how this may affect us,” said Cleveland. “Our concern is that all LGBT nonprofits could suffer if the donor base feels slighted and begin to question other nonprofits. It’s always prudent to review the fiscal policies of any nonprofit before donating, but the seemingly greedy actions of a few individuals, who have nothing to do with our organization, may now negatively impact us.”
Dolores A. Jacobs, CEO of the San Diego LGBT Community Center also expressed concern over the matter as she’s received “numerous phone calls and emails from individuals, particularly non-LGBT individuals, thinking The Center and Pride are interrelated.”
In a commentary to the LGBT community printed in the Gay & Lesbian Times, Jacobs wrote:
“While the San Diego LGBT Community Center cares deeply about the well-being of the Pride organization, and we have appreciated its efforts and support over the years, we do not manage or oversee the operations of San Diego LGBT Pride. San Diego LGBT Pride is its own 501(c) 3 organization, with its own mission, staff and board of directors.”
Ken St. Pierre, who resigned in protest as San Diego Pride’s Director of Development, has expressed interest in returning to the organization should the remaining three board members resign; though he stated “it would be very difficult to do his job.”
“Pride is going to move forward, but under suspicion. My job was to raise funds for the organization- trying to do that now, even if the full Board were to resign, would be like trying to sell a food known to cause cancer. The effects of this will drag on.”