Hackney

PROVIDENCE — The Make-A-Wish Foundation of America is trying to revoke the charter of its Rhode Island chapter, saying the local group failed to disclose the $118,000 salary of its chief executive officer on Internal Revenue Service forms, as required by law.

Also, the Phoenix-based organization says the Rhode Island chapter divulged confidential information about local children with life-threatening medical conditions who had their wishes fulfilled.

The Cranston-based Make-A-Wish Foundation of Rhode Island is fighting the revocation in federal court, saying it followed advice from accountants and from the national organization when it filled out the IRS forms. Also, the local chapter says it disclosed information about the children with approval from their families and the national group had never before objected.

Lawyers for the Rhode Island chapter say it appears the national organization is consolidating chapters and using “weak” or “make-weight” arguments in trying to yank the charter of the local group, which has granted wishes to nearly 1,000 children over 17 years.

The national group says it is not pursuing a consolidation policy and is acting because of “significant violations of the Make-A-Wish Foundation’s governing policies and performance standards — including intentionally failing to report required information about the compensation paid to its president and CEO.”

During a hearing Tuesday, U.S. District Judge William E. Smith suggested the local chapter formally pursue arbitration and notify him if the national group refuses to participate.

The national organization had argued that arbitration was not an option. But on Wednesday, after the local chapter made a formal demand for arbitration, the national group issued a statement saying, “It is our intention to allow the matter to proceed to arbitration, assuming various details can be worked out to the satisfaction of all concerned.”

In court documents, the national organization said it is seeking to revoke the local chapter’s charter “for intentionally submitting inaccurate information to the Internal Revenue Service.”

The Rhode Island chapter’s CEO and president, Diana Hackney, received a salary of $118,000 in 2006, a spokesman for the local chapter said last week.

But the national group said it learned in February that the Rhode Island chapter had filed Form 990s for fiscal years 2005 and 2006 that failed to disclose Hackney’s compensation. And in some instances, those IRS forms “misrepresented the compensation of all Rhode Island chapter officers, directors and key employees as ‘$0’ or ‘None,’ ” wrote David B. Mulvihill, the national group’s vice president and general counsel.

Mulvihill said the national organization takes the matter seriously because “the IRS Form 990 serves as the primary document providing information about a charity’s finances, governance, operations and programs for federal regulators, state charity officials, charity watchdog agencies and the public at large.”

“Aware that donors rely on the accuracy of Form 990s when deciding which charities to support, the IRS also requires that the document be signed ‘under penalties of perjury,’ ” Mulvihill wrote. In this case, the IRS forms were prepared by accountant Frank Melucci, the Rhode Island chapter’s treasurer, and signed by Hackney “under penalties of perjury,” he wrote.

The national group said the chapter admitted it intentionally failed to disclose Hackney’s salary “for the purpose of not having the public, including donors and potential donors, learn of the CEO’s compensation.”

In a March 7 letter to the national chapter performance committee, the Rhode Island chapter said, “The board has met and, in fact, determined that there was an error in judgment as it relates to the 990s forms that were submitted in 2005 and 2006. Amended 990s forms have been filed for those years.”

The letter explained that, “It was brought to the chapter’s attention that during the time period in question that the chapter’s previous president and CEO had been advising several past and potential donors of Dr. Hackney’s salary. As a result, the form was prepared and filed without the salary for the two years in question.”

Lawyers identified the local chapter’s previous CEO as Deborah St. Peter, who went on to became executive director of A Wish Come True Inc., a Warwick-based organization that also grants wishes of ill children.

“The above is not an excuse but an explanation,” the March 7 letter said. “It does not excuse the conduct; however, it does indicate that the conduct was never intended to deceive. We, as a board, apologize and can assure this committee that the error has been corrected and will not be repeated.”

In the letter, the local chapter also acknowledged the national group had a “legitimate concern that wish children were listed as an addendum on the Form 990s.” But the chapter said that practice had been followed since 1992 and had never before been questioned. “The listing of the names was not done with malice and most certainly will be halted immediately,” the letter said.

Todd D. White, a lawyer representing the Rhode Island chapter, said the national group told local officials to look at how other Make-A-Wish chapters had filled out the IRS forms, and “we did what they told us to do.”

White said the IRS forms were not intended to be deceptive. While they did not include Hackney’s salary, the forms did include the total amount spent for all of the local chapter’s employees, he said. “It was full disclosure,” he said. “It just didn’t break it down in a line item.”

White said Hackney’s $118,000 salary is “very low” compared with those of private-sector CEOs and “comparable” to the salaries of CEOs at other Make-A-Wish chapters.

Another lawyer representing the local chapter, Victoria M. Almeida, praised the work done by Hackney, who became CEO in August 2002. White said the chapter has granted 967 wishes since it was founded, in 1991, with about 55 percent of the wishes granted over the past 6½ years.

In court papers, the local chapter said revoking the charter is far too harsh a punishment. “No funds have been embezzled; no donors bilked; no children harmed,” White wrote. “This is a ‘no-harm, no-foul’ situation.”

The Rhode Island chapter was notified on March 14 that the national chapter performance committee had voted to revoke its charter, and on May 15 the national executive committee denied the chapter’s appeal. The national group told the chapter that “this is not a matter that is subject to arbitration.” But on July 17, U.S. Magistrate Judge Lincoln D. Almond recommended that the federal court order arbitration.

Almeida said the national organization’s stance that its decision was final “flies in the face of common sense, due process and opportunity to be heard.” White said the local chapter has been willing to “discuss the real issues” in a conference with the judge and the national group. But Almeida quoted Indira Gandhi, saying, “You can’t shake hands with a clenched first.”

The national organization emphasized that the court has only taken up the arbitration issue and not the merits of the decision to revoke the charter. “Regardless of whether the case proceeds to arbitration, the Make-A-Wish Foundation of America is confident it will ultimately prevail,” Wednesday’s statement said.

The national group detailed its reason for seeking to revoke the charter, saying it “is committed to the highest standards of nonprofit governance, transparency and accountability, and it has a fiduciary duty to ensure all of its chapters conduct their operations in a way that justifies the continued trust of the public, upon whose generosity we depend to carry out our charitable mission.”

Despite the dispute, the local chapter will continue to operate, and all money raised in Rhode Island will be used to grant the wishes of local children, the national group said.

efitzpat@projo.com