Source: Claims of Financial Mismanagement, Fraud, and Harassment at Lutheran Immigration and Refugee Service Spark External Investigation

A source with first-hand knowledge tells Breitbart News that financial mismanagement, fraud, and harassment are so widespread at Lutheran Immigration and Refugee Service (LIRS), one of the country’s largest refugee resettlement agencies, that the board has called for an external investigation of CEO Linda Hartke.

LIRS is one of the nine top voluntary agencies (VOLAGs) in the refugee resettlement industry that collectively receives more than $1 billion each year from the federal government to resettle refugees across the United States.

An internal email obtained by Breitbart News confirms the source’s claim of an external investigation at LIRS.

“I will also likely ask the Board of Directors to table the CEO Review until we have the report of the investigation,” LIRS Board Chairman Michael Rinehart said of CEO Linda Hartke in an email sent on September 13, 2017, to Evelyn Soto, named to the board in 2017 as a representative of the Evangelical Lutheran Church in America [ELCA], and Evan Moilan, the board member who chairs the audit committee.

Rinehart wrote in a follow-up email on September 14, 2017, “The Executive Committee convened and agreed to an investigation. I have spoken to Linda. The investigation team has formed. They will meet next week in St. Louis. I have the names of three law firms with whom to talk. Things are moving fast.”

Rinehart wrote in an email the following day, September 15, 2017:

She knows there’s going to be an independent investigation. A committee. Legal firm help. She knows it concerns Cecilia [Hoyer, the former Chief Human Resources Officer who resigned September 15] and the audit, as well as allegations of a pervasive atmosphere of harassment, bullying, and squelching of those raising the issues.

In a memorandum sent to all LIRS staff in an October 18 email, Chairman of the Board Michael Rinehart stated, “On October 2, 2017, I made known that LIRS would undertake to examine several of LIRS’ processes.”

The memorandum continued:

Our goal through this self-examination is to strengthen the organization and assist the Board in leading LIRS. To oversee this process, LIRS has engaged the services of Kathy Hoskins and Mark Saudek of Baltimore-based Gallagher Evelius & Jones LLP. We expect that, at the appropriate juncture, Kathy and Mark will seek the input of staff members. Our request is simple: please provide Kathy and Mark with your full cooperation and honest and forthright feedback.

Refugee resettlement became a hot topic nationally in the 2016 presidential election and in 2017 due to ongoing concerns about public health, national security, and costs associated with it.

Under President Trump, annual refugee resettlement has dropped from 84,995 in President Obama’s last full year (FY 2016) to slightly over 53,000 in FY 2017 to a presidential determination of a ceiling of 45,000 in the current fiscal year, FY 2018, which began on October 1.

The source for this story claims to be a former high level LIRS employee. Breitbart News believes that claim to be true based on additional evidence the source provided.

The source also provided Breitbart News with detailed information about the internal operations of LIRS that the source says explains the need for an external investigation.

“The issues related to Lutheran Immigration and Refugee Service (LIaRS) are widespread but are rooted in the main areas of financial mismanagement and the incompetence of leadership,” the source who is familiar with the operations of the refugee resettlement industry tells Breitbart News.

[Note: The source and several other critics refer to the Lutheran Immigration and Refugee Service as “LIaRS.” Breitbart News uses the more commonly used shortened form of Lutheran Immigration and Refugee Service, “LIRS.”] 

“LIaRS is essentially a U.S. government contractor whose 2016 record revenue totaled nearly $70 million of which approximately 95 percent came from the government through refugee resettlement and children’s services grants, as well as refugee travel loan collections. The balance of the revenue comes through charitable donations as an IRS authorized 501c3 organization from individuals, corporations and foundations, as well as Lutheran church body support,” the source says.

“The story has many layers including the tens of millions of USG [U.S. federal government] dollars that have been thrown at LIaRS over the past six years, fueling their wasteful spending on headquarters that does nothing more than act as a pass through to the 40-plus independent nonprofits that actually do the resettlement work, the financial mismanagement of those USG funds leading to audit findings and OIG inquiries, and the soap opera drama incompetence of the CEO, who rakes in $293,000/year and is under an investigation by the Board of Directors for a culture of harassment, discrimination, bullying, slander, and even backdating an overdue State of MD tax form,” the source tells Breitbart News.

“Already their two largest church body supporters, ELCA and LCMS [Lutheran Church Missouri Synod], have cut back donor support to LIaRS over concerns with Hartke’s leadership. But what about the ill-informed individuals sending in $50 and $100 contributions believing their donations are supporting actual work?” the source asks.

The Breitbart News source alleges seven key areas that the source believes will be investigated by this external firm:

  1. Financial Mismanagement
  2. Failure to Address Financial Irregularities Discovered by Independent Audits
  3. Wasteful Spending
  4. Concealment of Taxable Income
  5. Timesheet Fraud
  6. Budget Grant Fraud
  7. Large Severance and Settlement Payouts to Avoid Public and Board Reporting

In February 2016, senior members of the LIRS staff sent a letter to the Board documenting their complaints over Hartke’s leadership style.

“Over the past 18 months, we have grown deeply concerned about the significant loss of staff at LIRS and what they may indicate about the leadership of the organization,” the letter began:

The sheer volume of departures – 40 out of a staff of 100 – is enough for concern, but whe have also seen a lack of organizational will to attract, value, and retain talented and committed individuals. A substandard recruiting process, inconsistently applied personnel policies, a nonexistent performance evaluation system at all levels, and an unwillingness by leadership to grow and cultivate talented staff–long-time staff no longer feel a reason to stay. Attempts to change the culture or de-silo our work environment consistently fall well short of their stated goals. Most recently, the process of Opportunity Assessments were presented to staff as an inclusive and transparent process, but they have been closely guarded, shrouded in secrecy, and perceived as a sheild against hard management decisions.

By 2017, the complaints escalated to the point where an outside investigation was initiated.

The investigation initiated by LIRS Board Chairman Rinehart on October 2 is “rooted in the incompetence of leadership under CEO Hartke and her #2 COO Gary Gold-Moritz, the drama of the past two years associated with Hartke’s Chief Human Resources Officer Cecilia Hoyer, the recent Board of Directors initiated investigation, and the multiple complaints filed against Hartke, Hoyer, Gold-Moritz, et al., from many staff,” the source tells Breitbart News.

The source added, “In September of this year, after many months and perhaps years of build up, three members of the LIaRS Leadership Team – the VP Programs, the CFO, and the General Counsel (who together hold more than 100 years of professional experience) – held a confidential meeting with the LIaRS Board Chair Mike Rinehart, the Audit Committee Chair Evan Moilan, and Board member Evelyn Soto, who also happens to represent the ELCA which is a large donor to LIaRS. The purpose of this meeting was to come forth under the protection of the LIaRS Board-approved Whistleblower Policy to report on unethical behavior being practiced by the CEO Hartke in the course of her management and oversight of the organization. At the quarterly Board meeting in St. Louis, MO, the following week, the Board announced that an independent investigation was to commence to look into the allegations against Hartke. A subcommittee of the Board was formed, which would hire outside legal counsel to conduct interviews with staff and report back to the Board.”

According to the source, “None of the three LT [Leadership Team] members who approached the Board or the dozens of staff they were representing believe that the Board investigation will result in real change,” continuing, “This is due to the fact that Hartke largely controls the Board through her filtering all Board applicants that the Executive Committee considers for appointment, the separation she maintains from her Leadership Team and the Board by limiting their interactions with the Board, and the fact that complaints have been filed in the past with the Board resulting in nothing. The staff believes that only the removal of Hartke, along with Gold-Moritz, and Hoyer (who was allowed to resign on Sept 15 and naturally paid a big severance payout by Hartke) will allow the organization to survive.”

Hartke, the source says, “knows little to nothing about the rules of managing federal grants and less than that about managing diverse teams of people,” adding, “The organization of less than 100 staff suffered turnover of 40 individuals in the 18 months leading up to a letter to the Board from concerned staff dated Jan 2016 (see attached). With no action from the Board at that time, another 41 staff have left LIaRS over the next 18 months up to August 2017. Clearly, something is wrong.”

“The main illness over the past two years was identified as the hiring by CEO Hartke and COO Moritz of Cecilia Hoyer as Chief Human Resources Officer in October 2015,” continues the source, elaborating [emphasis added], “Hoyer was brought in as a member of the Leadership Team with recent salary of $137,000 plus full benefits, despite not having a college degree.”

The source went on to state that “the problems began immediately and over the course of the next two years, Hoyer fueled a culture of harassment, bullying, discrimination, defamation, and slander. This began with her leading the ouster of 25 year senior staff member Annie Wilson in 2016 and then followed with she and Moritz pushing longtime CFO Jane Anthon out later that same year. Again, both were given large severance payments in exchange for their silence and signatures on agreements. CEO Hartke seemed not only to permit Hoyer’s behavior but also support it. What Hoyer was best at was fostering a culture of harassment through gossip and deceit.”

The resume Hoyer submitted as part of her application for the Chief Human Resources Officer position at LIRS stated that she “anticipated receiving a B.A. in Psychology from Howard University in May 2015.”

Howard University would neither confirm nor deny that Hoyer had an undergraduate degree from the school. Breitbart News asked both Hoyer and LIRS to confirm or deny the source’s claim that she did not have a college degree but did not receive a response from either.

The source cites seven specific problem areas under the current management at LIRS:

(1) The source cites financial mismanagement at LIRS, due, in part to “inappropriately charging an Indirect Cost Recovery rate to entire Federal grants, most of which are passed through in sub-awards to other organizations.” The source adds:

Over the six year period from 2011 through 2016, LIaRS revenue from the U.S. government grew from $30 million to almost $65 million. During that time, under CEO Hartke’s oversight, the headquarter’s spending exploded from $8.8 million to $13.5 million with a staff of less than 100. Hartke’s salary also jumped from $182,270 to more than $293,000 last year (note this does not include her 9 percemt employer retirement plan contribution, 100% employer paid health care, and paid time off).

Given that USG revenue accounts for almost 95 cents of every LIaRS dollar, the only way Hartke could continue to spend on herself and the headquarters is through charging the USG an indirect cost recovery rate on the entire amount of their grants, even though 90 percent of the funds were simply passed through to subawards to the dozens of independent affiliates that actually do the refugee resettlement work (i.e. Lutheran Family Services Rocky Mountains, RefugeeOne of Chicago, Mohawk Valley Resource Center for Refugees, etc.).

This is direct contradiction to the Code of Federal Regulations which only allows the ICR to be charged on the first $25,000 of each subaward. LIaRS charges it on all the money, thereby giving them millions of dollars per year to fund their headquarters for doing nothing. As an example, in 2016 of the $64 million in government funds received by LIaRS, more than $55 million was sent out in subawards to the independent affiliates to do the actual resettlement work … but LIaRS managed to charge the government the ICR rate of over 10 percent on that $55 million which brings over $5 million to be kept in Baltimore for Hartke and her office.

(2) “In the past three years alone, LIaRS has had significant audit findings in their required A-133 annual audits,” but the organization has failed to address the financial irregularities discovered by these independent audits,” the source alleges:

In 2014 then auditors Grant Thornton found a significant deficiency in internal controls over Federal award management.

In 2015 Grant Thornton again found a significant deficiency in internal controls over Federal award management.

So in 2016 LIaRS switched audit firms from Grant Thornton to Tait Weller and still audit findings were reported but this time as a significant deficiency in internal controls on financial statements.

This most recent finding resulted in an inquiry dated June 30th from the Office of the Inspector General to the LIaRS Board of Directors seeking a corrective action plan . Given that the root cause of this audit finding was related to the Chief Human Resources Officer Cecilia Hoyer and her control over the payroll process, and numerous complaints directed at her, Hartke made efforts to thwart the Finance department from rectifying the absence of internal control. The CFO had responded to the OIG inquiry and agreed to implementing a corrective action plan by September 30, 2017, and reported as such to both the Audit Committee and full LIaRS Board.

As of September 2017, LIaRS remained out of compliance on all these past three years of audit finding.

(3.) “Wasteful spending. There is a recent history of huge losses being taken on IT systems spending at LIaRS including in 2016 a write off of $149,172 from a one-year-old purchase of a Luminate software program,” the source alleges.

(4. ) “LIaRS built and manages a database of refugees being resettled in the U.S. called IRIS and quietly ‘licenses’ this out to at least four other agencies (IRC, HIAS, CWS, and EMM) on a fee for service basis. The revenue to LIaRS from this arrangement brings in an estimated $500,000 which is NOT reported to the IRS as Unrelated Business Income as required,” the source alleges, calling this concealment of taxable income.

(5.) “Timesheet fraud – this is a big one, as it is criminal to fraudulently submit timesheets to the USG as a grant recipient,” the source alleges:

The first is for an employee named [REDACTED] who was charging time against the refugee grant R&P17 even though she was out on extended medical leave. The timesheets for May – Jun 2017 show that she was charging sick and vacation time of which she had not accrued or was entitle to against the R&P17 award number 323. These timesheets were NOT submitted by the employee (who was out of the office on leave) but by Hoyer in HR and approved for overdrawing sick leave. This was done to maximize the personnel expenses against the USG grant since the awards are paid on a cost reimbursement basis – you have to spend the money to get paid the grant money.

The second … is from employee [ALSO REDACTED] who was found in June 2017 to be improperly using the credit background check system on the travel loans unit to run personal checks on friends and family. This behavior along with other performance issues resulted in [REDACTED] immediate termination; however, Hoyer continued to submit timesheets on [ALSO REDACTED’s] behalf through July 15, 2017. Hoyer forced her HR staff … to submit the timesheet so that she could approve it including holiday pay for the 4th. [One staffer] resigned abruptly in disgust in August over what he said were “unethical practices” by his supervisor Hoyer and is believed to be pursuing legal action against LIaRS.

(6.) “Grant budget fraud – LIaRS regularly submits expenses against USG approved budgets for headquarters’ expenses that are not approved,” the source alleges:

Most recently, Hoyer in HR hired an employee/friend to work remotely from New York and charge her time to several USG grants. The employee was permitted to travel monthly to visit LIaRS headquarters, staying at the Royal Sonesta Hotel for a week at a time and charging everything from dry cleaning, pistachio nuts, and room service to Federal grants (est. $1,500/mo). None of this travel was included in the approved budgets, and when this was pointed out to CEO Hartke and Hoyer, they dismissed the reports. The VP Programs even wrote that the monthly travel was not required for the employee … to do her job and requested that she stop the visits. As of last month, the unapproved travel continued, along with the expenses being fraudulently charged to the USG grants.

(7.) “Large severance and settlement payouts to avoid public and Board reporting” are another problem, the source alleges:

LIaRS spends hundreds of thousands per years paying out settlements and severance to departing staff members in exchange for their signatures on release of claims and non-disclosure agreements. In 2016, LIaRS paid in excess of $86,000 to former staff member Annie Wilson (see 2016 Form 990 Schedule J Part III) and more than $120,000 to longtime CFO Jane Anthon who was forced out. More frequently, LIaRS pays out smaller settlements to employees that complain, leave, and eventually lawyer up as evidenced in the attached recent $12,137 settlement approved by Hartke and paid to [NAME REDACTED], who complained about harassment from Hoyer. Keep in mind that this is a small organization with less than 100 employees!

Whether the allegations this source made are borne out by the internal LIRS investigation and whether any criminal or civil actions will result remain to be seen.

Breitbart News has asked LIRS Board Chairman Michael Rinehart, LIRS Board members Evelyn Soto and Evan Moilan, LIRS spokesperson Danielle Bernard, former LIRS Chief Human Resources Officer Cecilia Hoyer, and LIRS CEO Linda Hartke for comment about the claims this source made.

None of these individuals have responded.


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