A Lakewood charity, indicted in March on theft charges involving hundreds of thousands of tax dollars, raised millions of dollars from the public while failing to follow the state law that governs fundraising efforts.
The charity, Services for Hidden Intelligence, which is the nonprofit fundraising arm of the embattled special-education School for Children with Hidden Intelligence in Lakewood, failed to comply with a state law that requires all charities to register and file detailed disclosure information before soliciting contributions.
Services for Hidden Intelligence has not been registered with the state since before 2010, state records show. Yet it raised $4.6 million from the public from July 2010 through June 2015, federal and state tax documents show.
The state Division of Consumer Affairs said it began looking into the charity’s activities after the Press pointed out that Services for Hidden Intelligence was raising money despite not being listed as a registered charity in the state.
Consumer Affairs spokesman John Schoonejongen said the agency would “address the years” in which Services for Hidden Intelligence allegedly collected money without complying with state law. Since the review is not completed, Schoonejongen declined to say what actions the agency might take against the nonprofit.
Any violations of the charity registration law “may result in civil penalties, which can start at up to $10,000 for the first violation and up to $20,000 for each subsequent violation,” Schoonejongen said. In the past couple of years, Consumer Affairs has settled with various nonprofits for improper activities and distributed several hundred thousand dollars to other charities in the state, according to its website.
In one major case, Consumer Affairs in 2014 shut down an organization called Hurricane Sandy Relief Fund and distributed more than $325,000 it collected to other charities after a investigation brought to light that the Sandy group raised money without complying with the state registration law.
That law was put in place in 1994 after the Press exposed chronic charity fraud in the state.
Questions about the Services for Hidden Intelligence’s fundraising activities add to the controversy surrounding the School for Children with Hidden Intelligence.
Last month, the school’s founder and director, Osher Eisemann, was charged with multiple counts including theft and money laundering involving more than $630,000 in public money from public school districts. He has pleaded not guilty to the charges.
Eisemann also runs Services for Hidden Intelligence, the charity, which was indicted on the same charges as Eisemann. Attorneys for the organization have pleaded not guilty on its behalf. Watch the video at the top of the story for more on the charges.
Jeff Ifrah, the attorney representing the school, known as SCHI (pronounced “shy”), did not respond to multiple messages over two days seeking comment.
According to public IRS tax records, Services for Hidden Intelligence collected the nearly $5 million in contributions from July 2010 through June 2015. No tax records, called 990s, are publicly available for the charity after June 2015, the Press found.
New Jersey has around 30,000 public charities that raised more than $43.3 billion in 2014, the most recent year available, according to the Urban Institute’s National Center for Charitable Statistics.
“It’s important for nonprofits to register so their donors can have the confidence that they’re complying with state law and that they’re a real charity,” said Rick Cohen, spokesman for the National Council of Nonprofits, a charity advocacy group.
Chuck McLean, a senior research fellow at Guidestar, an information hub on nonprofit organizations, said the state registration law “gives a level of transparency. There’s no excuse for them not to know they needed to register.”
From July 2012 through June 2015, the Services for Hidden Intelligence nonprofit gave $1.5 million to the school, SCHI, and another nonprofit, SCHI Disability Services. It gave $1.2 million to SCHI and $225,000 to SCHI Disability Services. In the tax forms from 2010 and 2011, it’s unclear how much, if any, the charity gave to the school.
From July 2010 through June 2015, the Services for Hidden Intelligence foundation paid $627,223 to contractors to make houses for people with disabilities handicap-accessible, the tax forms show.
In those years, the organization gave about 50 percent of its contributions to charitable causes, according to tax documents. Fundraising efforts cost them about 16 percent of their expenses.
The organization reported that it spent $600,000 on fundraising efforts in the 2013 and 2014 tax years, according to IRS records.
If the foundation had registered with the state, it would have to provide details about its fundraising costs, including the name of any professional fundraising company it hired.
Services for Hidden Intelligence’s expenses exceeded its revenue in each of the years from July 2010 through June 2015. It also reported that it spent several hundred thousand dollars in interest payments over the years on loans from unspecified sources.
At the end of the 2014 tax year, it stated it had $699,710 in loans “or other payables” from current or former ranking members of Services for Hidden Intelligence, it reported to the IRS. The group also stated that it had a $3 million loan from an “unrelated third party.”
Following the March 29 indictment, the New Jersey attorney general stated that it found that Services was actually getting money from SCHI. The state claims that Eisemann “used accounts of the foundation to fund a number of enterprises with which he was associated that had no relationship to the school.”
The school, SCHI, is a highly regarded special-needs school that also receives $23 million a year in tax dollars to care for and educate handicapped children. It remains under the direction of Eisemann.
