United Way’s Books Reveal Lavish Spending by Top Officials : Charity: Preliminary audit finds business and pleasure expenses mixed. Former president took limousine rides, Concorde flights, Vegas trips.
Outside investigators have found a “haphazard pattern of expenditures” by top officials of the United Way of America that permitted them to mix personal pleasure and business and to charge both to the charitable organization, according to a report released Friday.
Former United Way President William Aramony charged United Way for at least 29 trips to Las Vegas in 1988, 1989 and 1990, investigators said. They were unable to determine which of those trips were business-related.
Similarly, Aramony spent $40,762 on Concorde flights to Europe during the three years and $92,265 for limousine services.
On a two-day trip to Los Angeles in April, 1990, the United Way president charged $1,117.78 for the use of a limousine. A two-day trip to San Diego in January, 1991, resulted in a $603 charge for limousine service.
The preliminary audit “reveals a story of excess and of values lost,” the report said. “Judging from the records of his expenses paid by UWA, (Aramony) appears to have developed a taste--if not a habit--for a lavish lifestyle and all its trappings. The world of Mr. Aramony became one of limousines, first-class travel and expensive restaurants.”
The report was released Friday by former Undersecretary of State Kenneth W. Dam, who replaced Aramony last month as the president of UWA.
“These conclusions are disturbing. They’ll certainly outrage people who have given their hard-earned money week by week to help the United Way help those in need. They will and should feel betrayed,” Dam said. “We will take every legal step to obtain reimbursement of all monies owed to the United Way of America.”
The revelations of Aramony’s high living and $463,000 annual salary have shaken United Way charities across the nation.
The 2,100 local United Way chapters operate as independent organizations with their own boards of directors. They collect charitable money for distribution to local groups. In addition, however, the local organizations pay 1% of their contributions to United Way of America, which is based in Alexandria, Va.
In 1990, the United Way system raised $3.1 billion in the United States. The national office in Alexandria had a budget of $29.9 million.
But payments to the national office have dropped precipitously since news reports highlighted extravagant spending, said UWA spokesman Tony De Cristofaro.
“In a normal month, we receive about $2 million. In March, we received $400,000,” he said.
The UWA is not a national headquarters nor a policy-making body for the charitable groups, he noted. “I would refer to this as a national training and service center, not a headquarters,” he said.
For 22 years, Aramony headed UWA and built it from a small organization into a multimillion-dollar, corporate-style enterprise. In the process, he turned it into a personal fiefdom, the investigators said.
“It is apparent that, to those individuals and entities with whom he dealt, William Aramony was the United Way of America, vested with the power and authority which is so often accorded to those principally responsible for the successes of an organization,” the report said.
Aramony took his wife and friends along on round-the-world trips, hired and fired top officials and set up offshoot companies in which his sons were made top officials. He also gave his top aides freedom to spend UWA funds lavishly. For example, Thomas Merlo, the chief financial officer, was permitted to travel regularly to Boca Raton, Fla., where he had a condominium. It was understood, however, that “these trips would not be more frequent than once a month.”
When news stories highlighted problems at the UWA, the board chose a Washington law firm and an investigating group to examine the books. Aramony announced his resignation on Feb. 27 and was taken off the payroll March 17.
In a written response to the report, Aramony accused the board of “convening a modern-day Salem witch trial by press release.” He categorically denied “any suggestion of misappropriation or breach of trust during my tenure at United Way of America.”
Based on the report, the UWA board said it was going to hire outside auditors to determine how much money should be repaid by Aramony and his aides.
The report noted that Aramony charged items to UWA without any suggestion that they involved official business. For example, the investigators found $19,700 in charges for items such as clothes, flowers, golf equipment and mail-order catalogue merchandise.
The investigators also suggested that the former president may have violated criminal laws by using UWA funds to set up spinoff corporations that operate for profit. One group, created last year, is headed by Aramony’s son.
Officials of the national office hope that the investigators’ report, combined with a follow-up audit, will take the first step toward restoring public confidence in the charity.
“We have pledged all along to be thorough and to get the facts out as soon as we knew them,” De Cristofaro said.
But the report also noted that the task will not be easy.
“Trust and confidence are fragile commodities,” it said. “Once tarnished, they are difficult to restore.”