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Under the law for nonprofits, a charitable organization must ensure that any deals with an insider are done at fair-market rates and don't unduly enrich the insider, so Help Ministries must show it treated Debt Free Arizona like any other business when it shipped the money.
In its written statement, the ministry says Golden abstained from "any and all" board discussions about credit counseling while he sat on the ministry board. In addition, the ministry says it conducts surveys to ensure it pays fair value in contracts with for-profit businesses.
"It's an obvious potential for conflict," says Loonin, the lawyer with the National Consumer Law Center in Boston, which has called on the IRS to revoke tax-exempt status from credit counseling agencies that behave like businesses. "Whether it's illegal or not depends on the IRS."
The IRS isn't talking about Debt Free Arizona or Help Ministries, but in his July memo, the IRS chief counsel says credit counseling agencies that ship most of their money to for-profit processing firms could be in trouble even if the recipients aren't insiders.
"Some of these [credit counseling] CEOs have stated that they are paying out a high percentage of their gross receipts for back-room services," Marshall writes. "Such a case is an illustration of private benefit. The second-generation [of credit-counseling] entities appear to be created by promoters for the benefit of the promoters and the back room offices, rather than to serve a public purpose."
The IRS's get-tough stance has put the industry on its heels.
"They're deadly serious," says Jeffrey Tenenbaum, a Washington D.C. attorney who specializes in the credit counseling industry and has clients caught in the IRS's crosshairs. "They have an audit initiative underway that is unlike anything I have ever seen in any sector of the tax-exempt community. To my knowledge, they have not revoked anyone yet, only because the audits have not been concluded yet. My prediction is you will see a number of revocations of tax-exempt status."
The IRS wants to know that tax-exempt credit counseling agencies are truly educating people about personal finances regardless of their ability to pay, not just signing folks up for DMPs that generate money. Another concern is contracts between nonprofits and for-profits controlled by insiders.
"That's a big red flag for the IRS," Tenenbaum says.
Help Ministries makes no apologies for its huge marketing budget, nor for its foray into credit counseling, which it insists is a charitable endeavor, part of being a good Christian. In its tax returns, the ministry says credit counseling is "a wholistic [sic] approach to being a vessel of hope."
It tells the public the same thing on its Web site: "HMI (Help Ministries Incorporated) believes people are best able to lead fulfilling lives and minister to others when they are free of the stresses created by overwhelming debt."
Help Ministries' spending priorities changed as cash rolled in.
Richard Ellison, the ministry's founder and president, has seen his annual salary zoom from less than $40,000 to $130,000. His days of living in a bus are over. The ministry in 2002 paid a quarter-million dollars for a motor home, which it says was used to travel the western U.S. spreading the Gospel.
In its written statement, the ministry says Ellison got a raise because he started working full-time. The motor home was sold this year, the ministry says.
A venture formed in 2002 by Ellison's daughter Judy Ellison-Overrein has shot past Help Ministries' foreign missions to become the ministry's biggest charitable cause.
In 2002, Ellison-Overrein formed a nonprofit called The Sequel Institute, which incorporated one week after she left the ministry board. The ministry gave the institute $233,000 last year, which accounted for virtually all of the institute's income.
Based in Scottsdale, The Sequel Institute isn't aimed at Christians in foreign lands. Indeed, precisely what it does -- and how many people it helps -- is a mystery, judging from tax returns and the institute's Web site, which includes a logo reminiscent of the MasterCard moniker. Ellison-Overrein did not return a phone call from New Times.
Help Ministries doesn't mention the institute on its Web site detailing its charitable causes, but it has told the IRS that the Sequel Institute is a family counseling service. On its Web site, the institute ("A Spiritual Place For Healing The Soul") says its mission is "to provide education, resources and assistance to people who have been disadvantaged in life by adverse experiences."
Ellison-Overrein says she's invented something called the AlphaKardia System, which combines music and other sounds to "promote alpha state relaxation while addressing correlated responses in mind, body and spirit, ultimately mediated through the heart."
CDs that teach the system cost $19.95, not including shipping and handling. The institute also offers weekend AlphaKardia seminars and invites would-be clients to call with no obligation. A free sample on the Web site may explain why the institute hasn't been able to support itself.
Evoking equal parts Mister Rogers and the spoken word section of the Moody Blues' "Nights In White Satin," a woman, presumably Ellison-Overrein, tells the listener to take a moment from his busy day, imagine himself on a secluded beach and breathe in through his nose, then release and relax. Chimes ring in the background.
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