Nonprofits For Sale -- Scandal Envelops City Council

How many fraudulent nonprofits can be spun on the point of a needle? The answer these days in New York City is, as many you want.

Miguel Martinez, who resigned as councilman on Tuesday, pleaded guilty on Thursday to three federal charges involving kick-backs and stealing $40,000 from a now shuttered nonprofit, the Upper Manhattan Council Assisting Neighbors, with the unfortunate acronym U-CAN. What "neighbors" were "assisted" isn't clear. What we do know is that Martinez helped funnel over $800,000 in city funds into the organization since 2006.

Martinez was a charismatic, populist neighborhood politician with a bright future. But earlier this year, U-CAN, run by Martinez's sister, was investigated. Eventually Martinez was charged with siphoning money from that organization and another Washington Heights nonprofit, as well as submitting phony invoices to the New York City Council to the tune of $51,000.

Martinez is not alone. As reported in The New York Times and the Daily News, the creation or manipulation of nonprofit organizations for illicit personal gain is an epidemic of sorts among New York City Councilmen. In what has been dubbed the slush-fund scandal, in the past nine months, two Council aides pleaded guilty to charges of embezzling city money that was supposed to go to a nonprofit, other nonprofits closely linked to Councilwoman Maria del Carmen Arroyo are under investigation, as are the leases of nonprofit group offices linked to Councilman Larry B. Seabrook.

Former Councilman Guillermo Linares, who this week quit his job as commissioner of immigrant affairs in Mayor Bloomberg's administration to run for Martinez's vacant seat on the City Council (which Linares once held), has also become associated, indirectly, to the growing slush fund mire. The Daily News reports that the respected nonprofit, Community Association of Progressive Dominicans, which Linares helped found to aid Dominican immigrants, provided a no-show job to an associate of Bronx state Senator Efrain Gonzalez, while Linares' daughter, Mayra was on the nonprofit's board of directors (Linares has contested this chronology). Gonzalez and the associate, Miguel Castanos, pleaded guilty this spring to fraud.

What's going on?

I called up my Council representative from the Upper West Side, Councilwoman Gale A.Brewer, to find out. Brewer was in a cab heading home after a long day and had not yet read the latest news about Martinez's guilty plea. "I don't think there's anything wrong with having your sister on the board [of a nonprofit], but you have to declare it," she said. Upon further reflection, she added that Martinez (whom she is fond of), had clearly acted illegally in siphoning off funds. There are plenty of rules and regulations governing Councilmen's ethical parameters, she told me, and they are well understood. "It's easy to obey the law," she said. "You always have to declare [what you're getting and giving]."

Recently enacted Council ethical guidelines regulate even the small gifts given by neighborhood groups and lobbyists. "If I'm given cookies or flowers, I donate them to my constituents," she said. Flying to Puerto Rico, as Arroyo is alleged to have done on undeclared government funds, was definitely a no-no.

Despite all the flak over the slush fund money, Brewer didn't think the Council needed more oversight or regulation. The nonprofit imbroglio seemed to mystify her. Why were people creating nonprofit organizations and filching from them when there were so many worthy nonprofits groups that deserved support and funding? "I have 2,500 nonprofits in my district. We need to try to improve these nonprofits that are helping the disadvantaged, the kids and the seniors," she said. It was tougher, she admitted, in the poorer districts where money for nonprofits was harder to come by. But, she concluded, "Elected officials should not be organizing or starting [new] nonprofits, particularly while they are in office."

That sounded like a sensible proposition to me. Perhaps it should be made a law.