A former board member for Five Rivers Community Development Corp. got her home financed through the nonprofit agency, another former board member received a personal tax break for selling land to the group and a third former board member is the executive director's son, according to a review of the agency's financial and property records by The Sun News.
Thirty-seven people have served on Five Rivers' board since 1997. Most of them were hand-picked by Beulah White, the agency's executive director.
White's son, Obawole Atu White, was a board member in 1997.
White's daughter, Dayo Smith, is the chief financial officer for Five Rivers. White, Smith and a receptionist are the only employees at Five Rivers.
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"These kinds of conflicts are precisely why the nonprofit world is in such trouble today," said Gary Snyder, a nonprofit watchdog who said he has documented more than $5 billion in financial malfeasance at agencies nationwide.
"Nonprofits can't afford even the smallest appearance of a conflict of interest," said Snyder, who publishes a newsletter about financial abuses at nonprofits. "If you can't trust the board, you certainly can't trust the agency."
White has not returned repeated telephone calls and e-mails from The Sun News and could not be reached for comment this week.
Sam Livingston, Five Rivers' board president, said the agency has a conflict of interest policy and board members are given a copy of that policy.
Livingston said he did not want to comment on potential conflicts that might have occurred before he joined the board in 2005.
Mason Hardy, executive director of the S.C. Association of Nonprofit Organizations, said all boards should have written conflict of interest policies. Hardy said those policies are effective only if board members are vigilant about pointing out potential problems.
"Otherwise, it's kind of like the fox guarding the henhouse if someone really wants to take advantage of a situation," Hardy said.
Some former Five Rivers board members said they rarely went to meetings and had little oversight of White, the agency and other board members.
State Rep. Vida Miller, D-Pawleys Island, said she attended one meeting during her four-year tenure on the Five Rivers board.
"I just didn't have the time to participate," said Miller, who was on the board from 1997 to 2000.
Pat Bradley, one of White's former co-workers, and Pearl Edge, one of White's friends since high school, said they also left the agency's board of directors because they didn't have enough time to devote to Five Rivers.
Snyder said similar problems exist at nonprofit boards nationwide.
"The boards are supposed to have the ultimate authority, but many have abrogated their authority to the executive director," Snyder said. "In a lot of nonprofits, the only person who knows what's really going on is the executive director."
Loan for board member
Pleshette Greggs, a former waitress who is now a chaplain's candidate in the military, was a member of Five Rivers' board of directors in 1997 and 1998.
In March 1999, Greggs became one of the first two people to buy a home in Poplar Place, the affordable housing project Five Rivers built in Pawleys Island starting in the late 1990s.
Five Rivers used a combination of state and federal grants and private foundation money to build Poplar Place, which has eight homes.
Property records show Greggs bought her house from Five Rivers for $75,100.
Five Rivers gave Greggs a $25,000 loan to help her buy the house and pay for closing costs.
Greggs does not have to repay that loan if she lives in the house for at least 10 years, Smith said in an interview earlier this year.
Greggs also received a $51,227 mortgage from Carolina First Bank through a program that offers below-market interest rates for low- to middle-income home buyers. Five Rivers helped arrange that low-interest mortgage.
Greggs said she also saved some of her own money to help pay for the house.
Georgetown County property records show Five Rivers bought the 2.07-acre Poplar Place property, located along Annie Rainey Lane, from Nathan Brown Jr. in 1997. The sale price was $55,000, which White said was below market value.
"[Brown] got a tax write-off for what we didn't pay for the land," White said in an interview earlier this year. White said the below-market sale price "made the [Poplar Place] project affordable."
Greggs said she is Brown's cousin.
White said the Poplar Place homes were offered on a first-come, first-served basis to people who attended Five Rivers' homebuying classes.
All of the residents of Poplar Place received low-interest mortgages and grants of between $24,000 and $25,000 that do not have to be paid back if the buyers stay in their homes for between 10 years and 15 years, depending on their agreement with Five Rivers.
The buyers also received $1,000 federal grants to help pay for closing costs and other fees, Smith said.
Greggs said White and Smith are inspirational leaders who have empowered Georgetown County's low- to middle-income residents.
"With God's wisdom and guidance, [White] has helped impoverished people experience success," Greggs said. "Anyone who says anything to the contrary is a liar, motivated by jealousy."
'Budget was inflated'
Fred Majors, a Georgetown County developer and former Five Rivers board member, sold three acres of land to the agency for $45,000 in August 2003.
Five Rivers had planned to build a retail and training center on the site, but those plans were shelved in August because of funding and other problems.
Majors said he was not on the Five Rivers board when the land sale took place.
"[White] asked me about 30 to 45 days before we closed on the property if I would consider joining the board," Majors said. "I told her I didn't see any reason why not, but let's wait until this business is out of the way so there won't be a potential conflict of interest."
Majors said he joined the Five Rivers board in September 2003.
Five Rivers' annual report filed with the S.C. Secretary of State's office in July 2003 lists Majors as a board member. That report, which was signed by White and Smith, is required each year by the secretary of state's office, which regulates nonprofits and charities.
It is not clear if Majors was on the board in July or if White included Majors on the list of board members based on his verbal commitment but before he had actually joined the agency.
Five Rivers paid $30,000 to Majors for the property, taking out a mortgage for the land with BB&T bank.
Majors said the remaining $15,000 of the $45,000 sale price was considered a donation from him to Five Rivers, and he used that charitable donation for a personal tax deduction.
The property Five Rivers purchased was part of a larger tract that Majors had bought along S.C. 521 near the intersection of U.S. 17 Alternate, commonly known as Nine Mile Curve.
Majors said he wanted to divide that property into 100-foot-wide parcels and sell individual parcels for $15,000 each.
Five Rivers was among the first buyers of that land, property records show.
Majors said he structured the sale to Five Rivers to establish a precedent price - often called a "comparable" by real estate agents - that he could use as a benchmark for future sales.
"I said, 'Let's do $15,000 a parcel for a gross price of $45,000, and I'll gift $15,000 of that back to Five Rivers and take the tax credits,'" Majors said. "Five Rivers wound up paying only $10,000 a parcel and I established my $15,000 cost."
Majors said he resigned from Five Rivers' board after less than seven months because he questioned White's financial and management decisions.
"I saw some things on their budget and said, 'I just can't live with this,'" Majors said. "I felt real uncomfortable with some of the things that were going on."
Majors said he thought it was improper for the board to provide a Volvo automobile for White's full-time use, and said he questioned why the agency's travel budget was so high. Five Rivers' travel budget averaged $17,734 per year between 2001-04, the most recent data available.
"I'm pretty comfortable financially myself, and I stay in some pretty nice places," Majors said. "But their budget was inflated for supposedly going to conferences for a nonprofit organization. Those were a couple of the red flags I saw."
Majors said he questioned White about the expenses, but she "immediately went on the defensive anytime anyone questioned her."
"I saw a side of Mrs. White that concerned me," Major said. "She wanted people on the board who she could easily manipulate. She wanted people who when she said, 'Jump,' they would say, 'How high?'"
Criminal inquiry planned
White has said in interviews that she recruits many of Five Rivers' board members from the job training and home ownership classes she and her daughter teach for the agency.
Some of those board members, including artist Zenobia Washington and trucking company owner Marjorie Hemingway, have received free technical assistance through Five Rivers to help them start businesses.
Washington and Hemingway could not be reached for comment.
The Internal Revenue Service requires nonprofit agencies to report potential conflicts of interest on their federal tax returns.
Five Rivers did not report any conflicts on returns it filed from 1997 to 2004. The agency has not filed its tax return for 2005.
In August, the S.C. Secretary of State's office ordered Five Rivers to amend its 2004 tax return and include information about a potential conflict of interest involving board member David Hamilton.
Hamilton is a vice president at BB&T bank, where Five Rivers got its mortgage for the land it purchased from Majors.
Hamilton was not on the Five Rivers board when the loan was made. He joined the agency in 2004, according to Five Rivers' filings with the secretary of state's office.
BB&T spokeswoman A.C. McGraw has said the bank does not consider Hamilton to have a conflict of interest in that case because he was not involved in making the decision to give Five Rivers a mortgage.
The secretary of state's office is investigating possible financial wrongdoing at Five Rivers, and a spokesman said the agency might turn information over to the IRS for further review.
Greg Hembree, the 15th circuit solicitor, will conduct a criminal investigation of Five Rivers to determine if public money was misused, and the Five Rivers board said last week it has hired an accountant and lawyer to review the agency's finances and operating procedures.
Those investigations were sparked by a series of reports in The Sun News that showed a pattern of questionable financial and management practices at the agency.
For example, White and Smith regularly wrote checks to each other from Five Rivers' bank account, with no apparent independent oversight. White and Smith also approved each other's expense reimbursements.
The Sun News' investigation also showed nearly half of the agency's expenses between 1996 and 2004 - more than $1.5 million - have been for salaries, fringe benefits, travel, health and automobile insurance for staff members and other costs that benefit White, Smith and other Five Rivers employees.
Five Rivers' board said last week it will reduce the salaries paid to White and Smith by 50 percent pending the outcome of its review and a salary study. Those salaries far exceed the state average, and tax records show White has authorized annual pay raises of as much as 29.5 percent for herself while giving her daughter raises of as much as 40.8 percent per year.
FIVE RIVERS CDC
What it does | Current programs include a seven-day class about starting a business, which is taught four times a year; a four-day class about buying a home, which is taught twice a year; one-day credit counseling sessions offered three times a year; and a $50,000 revolving loan account for small-business owners.
Salaries | Beulah White, who helped found Five Rivers in 1995, received a 91 percent salary increase - to $83,039 from $43,500 - between 2000 and 2004, the most recent data available.
Dayo Smith, White's daughter and the agency's chief financial officer, has had salary increases of 87.5 percent since she joined the agency in 2000 - to $48,755 this year from $26,000.
Five Rivers' board of directors cut those salaries by 50 percent last week pending a review of the agency's finances and operating procedures and the completion of a salary study.
Travel | White, Smith and other Five Rivers employees have spent $102,496 on travel since 1996, including $70,937 in travel-related expenses between 2001 and 2004. For many of those trips, there is no documentation showing how the travel related to the nonprofit's purpose.
To read the Investigating Five Rivers series, visit www.MyrtleBeachOnline.com