Children of Synanon

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Fixing blame follows predictably on the heels of most controversies, but fixing blame hardly describes the conclusions drawn by Mullen and his colleagues. The ex-Synanonites' version of Amity's bookkeeping has far less to do with the facts revealed in the audits and investigations than it does with the well-learned techniques of the Synanon game.

"There is something really, really wrong with Jon Young, Michelle and Frizzell," Mullen says. "There's some kind of allegiance there," he adds, providing nothing to support the claim. Unlike the game, Young, Quintenilla and Frizzell are not included in the circle to challenge Mullen's unproven accusations.

Once the feds discovered the overspending, Amity was placed on severe restrictions that eventually forced it to transfer all of its federal grants to other nonprofit agencies. The federal government soon sent auditors to Amity to comb through its books and review past audits. It was the beginning of the end for most of Amity's programs.

In the months after the September 1994 discovery that Amity owed the government more than a half-million dollars, Mullen says Frizzell wrote a harsh audit report that shifted blame for missing the accounting mistake from itself to Amity management.

"The scheme from that point on was to hang it on me and Naya and exonerate themselves," Mullen says, painting himself and Naya as victims and invoking yet another tactic favored by Synanon in the 1970s.

"One of the ways Synanon traditionally built up support was to portray itself as the victim of discrimination," says newspaperman Mitchell.

The accusations against Quintenilla, Young, Gisi and Frizzell all have a ring of truth to them. After all, Quintenilla failed to adjust the accounting and Young and Gisi recommended she should be hired. Frizzell also missed the accounting error for more than two years.

While the accounting method used by Amity in its reports to the federal government appears to have been wrong and should have been discovered by the auditors, the error is essentially a technical problem, says Susumu Uyeda, a retired federal financial manager whom Mullen hired to review Amity's books.

But to blame Amity's financial collapse on an accounting error is ridiculous, Uyeda says.

"It is totally wrong to lay it on the auditors," he says.
Basically, the accounting mistake was an error in reporting when the federal money was spent, not how it was spent.

And it was how Amity spent its federal grants that really got it into hot water with the federal government.

Amity, under Mullen's direction, improperly relied on federal grants to pay bills not associated with federal programs, records and interviews show.

Federal regulations prohibited such expenditures, says Gary Fleming, chief of grants management at the National Institute on Drug Abuse.

"Basically, it seems that money that should have been spent strictly on activities involving the federal grants was spent in a method of Peter to pay Paul," Fleming says.

Over a period of several years, Fleming says Amity relied more and more on the federal grants to cover nonfederal program expenses.

Amity's former chief financial officer, William Tisch, confirms that Amity frequently paid bills not related to federal grants with federal dollars and that this was part of Amity's "long-employed liquidity strategy." When money came into Amity from state grants or other sources, then that money would be used to cover federal programs, he says.

"If we had incurred an expense, then we had the right to draw those funds," Tisch explains. "Whether we actually paid that invoice or not was between us and the vendors."

One vendor that frequently went unpaid for many months at a time was the University of Arizona. Amity contracted with the university to conduct research at one of its programs. The contract called for UofA to be paid out of the proceeds from a federal grant.

In early 1993, Amity's east Tucson properties were flooded, causing severe damage. Amity experienced extreme cash-flow difficulties, and records indicate the agency began relying on federal funds targeted for UofA to cover immediate expenses.

"Amity developed a pattern of paying the university beyond the normal 60 to 90 day turn-around," Mullen stated in a letter to federal officials.

In January 1994, UofA suddenly demanded full payment from Amity for its services--a whopping $500,000.

Amity didn't have the money, and UofA immediately complained to the federal government.

"They called us up and said, 'Come on, we're not getting paid. What can you do to help us?'" Fleming says.

The call alerted federal-grant monitors like Fleming that all was not financially well at Amity.

"We had some little warning bells, but that was the biggest bell," Fleming says.

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John Dougherty
Contact: John Dougherty