Exactly how much has gone to Amerix isn't clear. Incredibly, the foundation doesn't list the company in the space where nonprofits are required to list their five highest-paid independent contractors and disclose how much each has received. But the Senate report released in April makes it clear that most of the foundation's money has gone to Amerix.
In fiscal 2001 alone, the foundation took in $84.7 million and paid Amerix more than $70 million for processing services, according to investigators and the foundation's tax returns. Amerix got another $6 million to repay the loan used to acquire the Genus accounts. Investigators concluded that the payments for loans and processing services amounted to paying Amerix twice for the same thing.
Karen Steichen
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Between the college foundation and four other nonprofits that morphed into credit-counseling agencies with Amerix's help, Dancel's company has blossomed. Senate investigators report that Amerix's gross revenue jumped from $43.3 million in 1998 to $95.3 million in 2002. "Even if the amounts . . . had been realized by Amerix through arms-length transactions at fair market value, the absence of any charitable or educational purpose suggests that the Amerix credit-counseling agencies were not operating exclusively for exempt purposes and therefore may be in violation of tax regulations," Senate investigators wrote in the April report.
Craig, who was paid nothing when she worked part time as the foundation's director in 1998, has seen her own financial condition soar. Her beginning salary in 1999 was $100,100. By 2003, her pay had more than doubled to $240,482.
Craig has long been a fixture on the Seattle charity scene, raising money for the Fred Hutchinson Cancer Research Center, the Seattle Seahawks Charitable Foundation, and Big Brothers Big Sisters. She says she didn't know what a credit-counseling agency was when Ku, then chancellor of the Seattle Community College District, asked her to become CEO of the foundation's startup. Ku, who retired two years ago, couldn't be reached for comment. Craig says Ku tapped her because he knew she was smart, flexible, and diligent. "He knew that whatever he asked me to do, I would do it, and I would work hard," she says. Craig says she left the foundation on good terms when she resigned in January, and Jahn confirms that.
New Standards
The foundation and the four other credit-counseling agencies that contract with Amerix for account processing must live up to considerably less stringent standards than agencies certified by the National Foundation for Credit Counseling. Founded in 1951, the NFCC requires that members be accredited by the Council on Accreditation and Family Services, an independent third party that sets standards for more than 1,400 social-service agencies. "If applied throughout the industry, these professional standards could significantly address the abusive standards identified in this report," investigators wrote.
New federal regulations for credit counseling agencies are due to take effect this fall. Under a bankruptcy reform bill signed by the president, credit counseling will be mandatory for any debtor who declares bankruptcy. But debtors won't be allowed to go to just any counseling agency to fulfill the requirement. They will have to work with agencies certified by the Executive Office for United States Trustees (EOUST), a branch of the Department of Justice. EOUST standards and applications for agencies released earlier this month make it clear that credit-counseling agencies will have to spend an average of 90 minutes with each debtor discussing their finances and potential paths to solvency. EOUST is also requiring agencies to post performance bonds and disclose all contractors that process accounts and the terms of those contracts.
While the bankruptcy bill promises a wave of new customers for the foundation and other credit-counseling agencies, the new federal standards will be tough to meet, says Greenberg, who wonders who will pay for counseling sessions if debtors can't afford it. William Binzel, chief counsel for the NFCC, says the NFCC hopes to convince credit-card companies and charities like the United Way to help pay for mandatory counseling.
Greenberg blames outfits like Amerix and the college foundation for heightened scrutiny from regulators and legislation in 10 states aimed at weeding out shady players. "What they've done is caused negative opinions and actions to occur," Greenberg says. "This year has been the busiest year ever for new regulations."
In addition to new state and federal regulations, the IRS has been auditing dozens of credit-counseling agencies to determine whether they should keep their tax-exempt status. Earlier this month, the IRS announced that it revoked charity status in four cases but wouldn't say what agencies had their exemptions yanked. The IRS won't comment on pending audits or investigations. Binzel says no NFCC agency has lost its tax exemption. Jahn says that, to his knowledge, the college foundation isn't in the IRS's crosshairs.
Amerix appears to realize that its days of milking nonprofits may be coming to a close. While state and federal regulators have been tightening up, the company has been lobbying legislatures to allow for-profits into the credit-counseling field. The company's efforts last spring in Maryland were unsuccessful, says Deanne Loonin, an attorney with the National Consumer Law Center in Boston. "It seemed like they didn't want the competition," she says.
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