MSNBC CEO Phil Griffin’s Charity Problem

Phil Griffin's MSNBC network had been unrelenting in its coverage and criticisms of President Trump's private foundation.  Trump eventually shuttered his foundation, paid $2 million in fines, and distributed the remainder to eight charities.  In a Vanity Fair article published March 26, 2019, Griffin explains MSNBC corporate philosophy "We're going to keep doing our job, asking the tough questions, especially when it involves holding powerful people accountable...."  

Mr. Griffin serves as a trustee for Operation Hope.  Let's reciprocate by investigating the Hope charity in return -- fair's fair.

Hope's Charity Mission

Operation Hope received its IRS Determination Letter in 1997 as a 501(c)(3) charity to promote investments and to serve the South Central Los Angeles minority community.  Operation Hope is a “public charity” required to serve the general public exclusively.  It must be controlled by an independent and apolitical trustee board that does not seek or gain financial benefits for itself. 

By 2000, the charity rebranded its mission of teaching financial empowerment and economic literacy.  Hope expanded into an enterprise spanning 22 states and 60 countries.

Prestigious Trustee Board

Regional bank CEOs make up the majority of Hope's Trustee Board and provide financial support along with office space for financial literacy workshops. In return, the banks satisfy the Community Reinvestment Act requirement of meeting the credit needs of low- and moderate-income neighborhoods. 

Update: Operation Hope cleaned up their trustee leadership webpage linked above, removing Griffin to hide his involvement. But thanks to the Wayback Machine,  his role cannot be erased.

Phil Griffin augments the board by providing media sponsorship and coverage through MSNBC and CNBC.  But if you assumed that Griffin and the other trustees, who have strong business acumen, provided able oversight and governance, you would be seriously mistaken.

Running Afoul with IRS and State Regulations

Hope isn't a legitimate charity since it violated the IRS Dual Test stipulating a charity must be appropriately organized and operating.  It never amended the Articles of Incorporation nor applied for an IRS ruling before materially changing its mission.  On the state level, Hope failed to either register or let its registration lapse in multiple states, including its adopted home state of Georgia.

Individuals who directly or indirectly receive income or assets of a tax-exempt organization while exercising significant control over the charity engage in a transgression that is known as “inurement.”  The IRS prohibits inurement or personal benefit.  John Hope Bryant, founder, and Hope CEO, exercises strict control over the charity, creating the opportunity for self-benefit.

CEO's Excessive Personal Benefit

Bryant labels himself as a philanthropic entrepreneur who has implausibly built more than 40 organizations.  He has written several books promoting financial literacy. His speeches rely on self-esteem slogans, such as, "if you hang around nine broke people, you will be the tenth."

Bryant controls the for-profit business The Promise Homes Company that owns an extensive portfolio of single-family homes for lease or sale.  Private equity funds sourced by co-owner Michael Arougheti, CEO of Ares Management LLC, fund Promise Homes acquisitions.  Mr. Arougheti chairs the Hope governance committee and is also a Promise Homes director. Two other Hope officers are Promise Homes employees.

Hope's Bylaws specify only trustees are members; however, Promise Homes is a member.  Membership has its privileges. Promise Homes' prospective and current renters receive complimentary access to Hope's financial workshops on credit, money management, and homeownership. Hope's financial counseling reduces Promise Homes' leasing risk and identifies potential home buyers. The 2019 Hope Global Forum promoted for-profit Promise Homes. The strategy raises the issue of cui bono.

Hope Global Forum presenter Dr. David Dalton, Bryant's father-in-law, pitched Univec Inc., an insolvent cannabis penny-stock.  The sub-penny stock price spiked seven-fold, earning substantial profits for Dalton and extended family members. Bryant promoted on social media Dalton and his shell corporations.  This looks like a classic pump and dump scheme that took advantage of the inexperienced and naive.

Mr. Bryant's last reported annual compensation was $535,000.  Bryant's salary is disproportionate to the charity's size. His time is preoccupied with his business development ventures, and social media thought leadership initiatives and leisure travel. Applying the IRS Rule of 'reasonable compensation,' his compensation could be considered excessive.

The Dangers of Excess Debt

Hope funds its annual operating deficits by borrowing from banks operated by the trustees.  Hope's debt has tripled to $6 million in the past three years. On January 31, 2020, the new consolidating loan went into technical default.

Hope's cash flow shortfalls have caused its unrestricted net assets to balloon to a deficit balance of $6.5 million. Negative unrestricted net assets is a symptom of misappropriation of donor and grant funds restricted for a specific use. The trustees, especially the bank CEOs, are enablers by tolerating the spendthrift behavior.

Going Concern Issue

Since 2015, Hope has failed to submit timely its governmental grant audits.  Hope has significant deficiencies preventing the timely resolution of accounting issues and the completion of its financial statements. The lack of financial controls creates an environment for the possible diversion of charity assets. In September 2019, Hope rescinded its 2017 audited financial statements, raising red flags about financial solvency and violating Federal grant covenants. Hope concealed its press release on its website while continuing fundraising.

Hope's replacement auditor issued a clean, but questionable, opinion on the 2018 and 2017 financial statements. The 2017 comparable reports did not disclose the restatement.  The maturing 2018 long-term loans were not classified as short-term, creating a favorable impression of Hope's solvency.  Hope has failed to file an amended 2017 and the 2018 tax returns, par for the course. 

Hope is not a 'going concern.' Somewhat ironic since Hope provides credit counseling to the general public while its fiscal condition has been teetering on the brink of insolvency.

Trustees' Personal Liability

The primary duty of the charity board of trustees is to ensure that all financial matters of the organization are conducted legally, ethically, and following proper accounting rules.  Hope's trustees breached their fiduciary liability by failing to provide governance and oversight.

Numerous states and the IRS have the authority to levy corporate taxes should Hope forfeit its tax-exempt status. Should Hope become insolvent, any unpaid liabilities and potential corporate taxes become the burden of the trustees.   

Phil Griffin's lofty standards applied to the Trump Foundation should also extend to Operation Hope -- fair's fair.

Mr. Bishop is a retired CPA.

Phil Griffin's MSNBC network had been unrelenting in its coverage and criticisms of President Trump's private foundation.  Trump eventually shuttered his foundation, paid $2 million in fines, and distributed the remainder to eight charities.  In a Vanity Fair article published March 26, 2019, Griffin explains MSNBC corporate philosophy "We're going to keep doing our job, asking the tough questions, especially when it involves holding powerful people accountable...."  

Mr. Griffin serves as a trustee for Operation Hope.  Let's reciprocate by investigating the Hope charity in return -- fair's fair.

Hope's Charity Mission

Operation Hope received its IRS Determination Letter in 1997 as a 501(c)(3) charity to promote investments and to serve the South Central Los Angeles minority community.  Operation Hope is a “public charity” required to serve the general public exclusively.  It must be controlled by an independent and apolitical trustee board that does not seek or gain financial benefits for itself. 

By 2000, the charity rebranded its mission of teaching financial empowerment and economic literacy.  Hope expanded into an enterprise spanning 22 states and 60 countries.

Prestigious Trustee Board

Regional bank CEOs make up the majority of Hope's Trustee Board and provide financial support along with office space for financial literacy workshops. In return, the banks satisfy the Community Reinvestment Act requirement of meeting the credit needs of low- and moderate-income neighborhoods. 

Update: Operation Hope cleaned up their trustee leadership webpage linked above, removing Griffin to hide his involvement. But thanks to the Wayback Machine,  his role cannot be erased.

Phil Griffin augments the board by providing media sponsorship and coverage through MSNBC and CNBC.  But if you assumed that Griffin and the other trustees, who have strong business acumen, provided able oversight and governance, you would be seriously mistaken.

Running Afoul with IRS and State Regulations

Hope isn't a legitimate charity since it violated the IRS Dual Test stipulating a charity must be appropriately organized and operating.  It never amended the Articles of Incorporation nor applied for an IRS ruling before materially changing its mission.  On the state level, Hope failed to either register or let its registration lapse in multiple states, including its adopted home state of Georgia.

Individuals who directly or indirectly receive income or assets of a tax-exempt organization while exercising significant control over the charity engage in a transgression that is known as “inurement.”  The IRS prohibits inurement or personal benefit.  John Hope Bryant, founder, and Hope CEO, exercises strict control over the charity, creating the opportunity for self-benefit.

CEO's Excessive Personal Benefit

Bryant labels himself as a philanthropic entrepreneur who has implausibly built more than 40 organizations.  He has written several books promoting financial literacy. His speeches rely on self-esteem slogans, such as, "if you hang around nine broke people, you will be the tenth."

Bryant controls the for-profit business The Promise Homes Company that owns an extensive portfolio of single-family homes for lease or sale.  Private equity funds sourced by co-owner Michael Arougheti, CEO of Ares Management LLC, fund Promise Homes acquisitions.  Mr. Arougheti chairs the Hope governance committee and is also a Promise Homes director. Two other Hope officers are Promise Homes employees.

Hope's Bylaws specify only trustees are members; however, Promise Homes is a member.  Membership has its privileges. Promise Homes' prospective and current renters receive complimentary access to Hope's financial workshops on credit, money management, and homeownership. Hope's financial counseling reduces Promise Homes' leasing risk and identifies potential home buyers. The 2019 Hope Global Forum promoted for-profit Promise Homes. The strategy raises the issue of cui bono.

Hope Global Forum presenter Dr. David Dalton, Bryant's father-in-law, pitched Univec Inc., an insolvent cannabis penny-stock.  The sub-penny stock price spiked seven-fold, earning substantial profits for Dalton and extended family members. Bryant promoted on social media Dalton and his shell corporations.  This looks like a classic pump and dump scheme that took advantage of the inexperienced and naive.

Mr. Bryant's last reported annual compensation was $535,000.  Bryant's salary is disproportionate to the charity's size. His time is preoccupied with his business development ventures, and social media thought leadership initiatives and leisure travel. Applying the IRS Rule of 'reasonable compensation,' his compensation could be considered excessive.

The Dangers of Excess Debt

Hope funds its annual operating deficits by borrowing from banks operated by the trustees.  Hope's debt has tripled to $6 million in the past three years. On January 31, 2020, the new consolidating loan went into technical default.

Hope's cash flow shortfalls have caused its unrestricted net assets to balloon to a deficit balance of $6.5 million. Negative unrestricted net assets is a symptom of misappropriation of donor and grant funds restricted for a specific use. The trustees, especially the bank CEOs, are enablers by tolerating the spendthrift behavior.

Going Concern Issue

Since 2015, Hope has failed to submit timely its governmental grant audits.  Hope has significant deficiencies preventing the timely resolution of accounting issues and the completion of its financial statements. The lack of financial controls creates an environment for the possible diversion of charity assets. In September 2019, Hope rescinded its 2017 audited financial statements, raising red flags about financial solvency and violating Federal grant covenants. Hope concealed its press release on its website while continuing fundraising.

Hope's replacement auditor issued a clean, but questionable, opinion on the 2018 and 2017 financial statements. The 2017 comparable reports did not disclose the restatement.  The maturing 2018 long-term loans were not classified as short-term, creating a favorable impression of Hope's solvency.  Hope has failed to file an amended 2017 and the 2018 tax returns, par for the course. 

Hope is not a 'going concern.' Somewhat ironic since Hope provides credit counseling to the general public while its fiscal condition has been teetering on the brink of insolvency.

Trustees' Personal Liability

The primary duty of the charity board of trustees is to ensure that all financial matters of the organization are conducted legally, ethically, and following proper accounting rules.  Hope's trustees breached their fiduciary liability by failing to provide governance and oversight.

Numerous states and the IRS have the authority to levy corporate taxes should Hope forfeit its tax-exempt status. Should Hope become insolvent, any unpaid liabilities and potential corporate taxes become the burden of the trustees.   

Phil Griffin's lofty standards applied to the Trump Foundation should also extend to Operation Hope -- fair's fair.

Mr. Bishop is a retired CPA.