12 Home Loans at Conservancy - Nonprofit Says All but 2 Have Been
Repaid; 5 Came Interest-Free
In one transaction, the Conservancy's California director, Graham Chisholm, received a no-interest $500,000 mortgage that requires no payments until 2011, property records and an IRS filing show. The Conservancy will share in any rise or fall in his home's value.
Another loan, this one to a North Carolina employee, remains outstanding nearly eight months after its maturity date, said Conservancy spokesman Jim Petterson.
Each loan was made to retain or recruit a worker who was relocating, he said, and all but Chisholm's and the North Carolina employee's loans have been repaid. Although incentive loans to executives are not uncommon in the business world, some charity specialists questioned whether nonprofits should offer such loans, especially interest-free.
"It's legal, but it's not ethical," said Peter Dobkin Hall of Harvard University's Hauser Center, which researches charities. "It's very bad practice and not the sort of thing that will make donors happy."
The Conservancy's board is set to meet today at its Arlington headquarters to review the executive loans and other financial practices described last month in The Washington Post. Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and Sen. Max Baucus (Mont.), the committee's ranking Democrat, have said they plan to ask the nonprofit environmental group to account for activities that Grassley has described as "very questionable."
The Post reported that the Conservancy had used nonprofit funds to extend Steven J. McCormick, the organization's president and a member of its governing board, $1.5 million toward the purchase of a McLean home. Although Conservancy executives reported the loan was made at an interest rate of 7 percent, property records showed that the actual rate was 4.59 percent.
The Conservancy suspended new loans to executives after the disclosure, and McCormick recently repaid his debt. In a 16-page response to the Post series delivered this month to each member of Congress, McCormick wrote that "we regret the error."
Petterson said this week, in response to questions, that the Conservancy has extended a dozen housing loans to employees since 1993. All were home mortgages, except for $4,000 extended to help an employee rent housing in Indonesia, he said.
Interest rates ranged from zero to 6.02 percent, according to Conservancy records. Ten loans required no monthly payments. Of those, five were interest-free.
Chisholm, former head of the Conservancy's Nevada chapter, was named to the organization's senior California post in January 2001. Six months later, the Conservancy extended Chisholm $500,000 toward the purchase of a $925,000 house in Berkeley, according to property records and the Conservancy's IRS tax filing. The interest-free loan enabled Chisholm to buy a California house comparable to his home in Nevada, where property is cheaper, Petterson said.
No repayment is required until July 2011 if Chisholm does not move or switch jobs. On the 10th anniversary of the loan, the Conservancy will receive the principal plus a share of any appreciation in the property. If the house's value falls, the Conservancy will share the loss. Chisholm did not respond to phone calls seeking comment.
Chisholm's "shared appreciation loan" is uncommon, according to mortgage specialist Keith Gumbinger, vice president of HSH Associates. He calculated that, over 10 years, a standard mortgage with 5.125 percent interest would earn the Conservancy $235,000.
Last year, the Conservancy extended to Terry Severson, who manages land preserves in North Carolina, a $30,000 loan with 2.88 percent interest for the purchase of a new home. The IRS filing lists a maturity date of Oct. 15, 2002, but Petterson said the balance remains outstanding. Severson explained that he could not immediately repay the loan because a home he owns in Wisconsin remains unsold. Severson said he is leaving the Conservancy for family reasons on June 18 and has agreed to fully repay the loan in July.
The filing shows that the Conservancy last year extended to one of its lead scientists, John A. Wiens, and his wife a loan of $375,000 for six months with 5 percent interest. A commercial lender extended Wiens a second mortgage at 6.1 percent.
Wiens, who did not respond to requests through the Conservancy for comment, used the loans to buy a $1 million home in Vienna, Va. He later sold a Colorado home and used the proceeds to repay the Conservancy, interviews and records show.
The IRS filing states that the Conservancy loan was secured by Wiens's home in Virginia, an assertion not supported by property records. Petterson said this week that the filing was in error and that Wiens used his Colorado home as security.
Researcher Alice Crites contributed to this report.
In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]