Stella Tulli recounts the events of her sister’s murder by a CEC escapee, and her own painful, frustrating and hear-breaking experiences in this Blue Jersey diary.
Following Monday’s Assembly Law and Public Safety Committee’s aggressive questioning, particularly of CEC, we learned more about this secretive private organization and the calamitous disarray at its halfway houses. However, Blue Jersey research into CEC’s non-profit arm – Education & Health Centers of America (EHCA) – reveals disturbing new details. EHCA was created to circumvent the law that requires only non-profits can receive halfway house contracts from the Department of Corrections (DOC). We have learned that EHCA reduces transparency, adds unnecessary costs to the halfway house operation, allows selected individuals to receive dual compensation, lets CEC retain profits in EHCA which are nontaxable, offers no firewall between the two firms, and donates to organizations from which it seeks favors for CEC.
EHCA’s most recent non-profit 990 tax filing provides a wealth of information. In the fiscal year ending June 30, 2011, EHCA received $71,049,271 in revenue from NJ State & local governments. It passed on only $69,038,017 to CEC as a “support service fee,” to run the halfway houses. EHCA kept $2,011,254 (2.8% of EHCA revenue). With EHCA, CEC gained a second entity to divert NJ government funds away from direct CEC services and into separate coffers controlled by CEC.
What did EHCA do with its $2,011,254? First of all, $664,435, which could have been spent on inmate services, was treated as EHCA retained earnings and added to its fund balance. As an entity designed theoretically as a “pass through” organization to get funds to CEC for program purposes, it became a repository to divert funds and allow John Clancy as Chair of both CEC and EHCA to do as he wished. These retained earnings held by the non-profit EHCA are nontaxable, whereas, if they were retained as profit by the for-profit CEC they would be subject to tax. In effect, EHCA reduces CEC’s taxes.
Here are some additional uses for the $2,011,254 pocketed by EHCA. John Clancy paid himself $350,000 as Chair of EHCA, claiming to work 30 hours per week for EHCA – an entity which represents only a fraction of CEC’s total activities in 15 states. This salary excludes whatever he received from CEC as its Founder and CEO to which he likely dedicates the majority of his time. In the process he is using a NJ non-profit organization receiving our government funds to pay for work most likely performed on ventures in other states. The total compensation costs of this “pass through” agency for its officers, directors, trustees and key employees was $581,863. Other salaries were $262,292, and employee benefits and payroll tax were $84,855. A lot of costs just to pass government funds to CEC.
Other expenses included legal: $112,332 and accounting: $31,500. With no real difference between the two entities, EHCA added occupancy costs: $60,019, office expenses: $22,073 and other costs for insurance and depreciation.
During Assembly testimony Dr. Robert Mackey, CEC Senior Vice President, testified about the required “firewall” erected between CEC and EHCA. Nonetheless, Dr. Mackey stated he received part of his salary from EHCA and that his responsibilities span many states. Assemblyman Joe Cryan (D-20) rightly scoffed at the notion of a “firewall” as Mackey and Clancy work for both organizations. Not mentioned by Dr. Mackey was that Maria Carnevale, as an employee of EHCA with compensation there of $102,600, is also listed in the CEC website as part of the “CEC Management Team” as Assistant to John Clancy, presumably with an additional salary.
Beyond the fold: more about the fake firewall, donations, the impact of EHCA, and the need for change.