N.Y. Charity Scandal Leads to Indictments

Lorraine Hale, the former head of a nationally known Harlem charity for children, was indicted Tuesday along with her husband for allegedly misappropriating more than $700,000 in donations meant to care for the abandoned children of drug-addicted mothers.

The ousted charity leaders, who pleaded not guilty to the charges during a brief court appearance, were also hit with a state lawsuit demanding that they repay $1 million that Hale allegedly used to install a Jacuzzi whirlpool in her home, pay her brother’s legal expenses and fund her husband’s failed off-Broadway musical production about the life of Martin Luther King Jr.

“Money that should have gone to children, to care for children, went instead for personal use,” New York Atty. Gen. Eliot Spitzer said during a Manhattan news conference. “It’s despicable.”

The 72-count indictment, which includes charges of grand larceny and forgery, was the latest revelation about financial improprieties at Hale House--a politically well-connected fund-raising machine that over the years had attracted support and testimonials from celebrities such as John Lennon, Donald Trump, Rosie O’Donnell and Princess Diana.

For years, New York mayors made a pilgrimage to Hale House on Christmas Eve to read to the children and hand out presents. Last Dec. 24, Mayor Rudolph W. Giuliani again visited the children, but after months of stories about fiscal irregularities at the fabled charity, he spoke for many when he said then, “My reaction originally was total disbelief.” He added that “I don’t want to prejudge what happened, I just think it needs very serious investigation.”

Amid press reports that the charity spent little of the $44 million it has raised since 1992 on a handful of children, Spitzer in May removed Hale and her husband, Jesse Devore, from the board of directors. Both have insisted that they are innocent. One of Hale’s attorneys suggested in a TV interview last year that she simply misunderstood the laws governing nonprofit organizations.

Tuesday’s indictment was “as insulting as it was degrading,” charged William Dowling, Hale’s current attorney, noting that the couple had been trying to negotiate a settlement with Spitzer. “Jesse and Lorraine are deeply distressed by the proceedings today,” said Charles Clayman, Devore’s attorney. “We hope that reason will once again enter into our dealings with the attorney general.”

Spitzer, however, said he had tried to reach an agreement with the defendants. Noting that he moved to freeze Hale and Devore’s assets, the attorney general added: “We want to seize these things [assets] so they can go back to Hale House.

Hale, 75, and Devore, 69, were released on bail following the indictment. They could face five to 15 years in prison if convicted. A grand jury began investigating the charity’s finances in November.

The indictment says Hale and Devore stole more than $700,000 from the Hale House Foundation and squirreled away $250,000 in a checking account that was never made public. Hale was separately accused of cashing in a $488,000 life insurance policy that had been taken out on her by the charity.

The scandal at Hale House came to light last year after a series of revelations in the New York Daily News. Initial press reports suggested that Lorraine Hale had illegally rented units to middle-income tenants in two buildings owned by the charity that were intended for homeless women and others who had been released from jail. The once-rundown structures, which had been sold to Hale House by the city for $3, were rehabilitated with $6 million in U.S. Housing and Urban Development funds.

Subsequent reports suggested that Hale House’s children--whose sad faces were used for national fund-raising appeals--were rarely taken outside of the Harlem brownstone and did not receive preschool educations. Some were given away in illegal adoptions, according to accounts in the New York Times.

Hale House officials “diverted well over a million dollars, keeping most of it and distributing the rest to family, friends, trusted employees and ill-fated private ventures,” according to a report on the institution by Kroll Inc., an investigative firm hired by the charity’s new board of directors.

The decline and fall of the once-revered institution would have seemed unthinkable when Clara Hale founded it in 1969 along with her daughter. Known as Mother Hale, she was saluted as an American hero by President Reagan during a State of the Union speech. She was likened to an urban saint for taking in crack-addicted babies and AIDS-infected children whom others did not want.

When Clara Hale died in 1992 and her daughter took over, the humble, pioneering charity went big time, raising millions with an aggressive public relations campaign.

It was about as untouchable as a charity could get, and many New York black community leaders--including the Rev. Al Sharpton and U.S. Rep. Charles B. Rangel--initially rallied to support Hale House last year when it came under scrutiny. On Tuesday, however, there were few such voices.

Spitzer, who replaced Hale and Devore with new board Chairman Zachary Carter, a former U.S. attorney, said the organization is now on the road to recovery, adding: “We think the prospects for Hale House are superb.”

With its new leadership, Spitzer noted, “Hale House has taken a 180-degree turn.”