KRIPALU: Not-For-Whose-Profit?

Milking A Sacred Cash Cow.

If you are of the belief (as I am after reviewing the financial shenanigans at WAMC Northeast Public Radio and at The Mount) that one of the easiest ways nowadays to become a millionaire (or at least live like one) is to run a tax-exempt organization, then read on:

The Berkshire Eagle reported Sunday that Kripalu Center for Yoga and Health (officially known as Kripalu Yoga Fellowship) has received its first PILOT "tax" bill -- for $61,222 -- from the town of Stockbridge.

Photo: Kripalu Center for Yoga and Health in Stockbridge, Mass.

The yoga retreat cum resort spa (2006 gross revenues $23.3 million) has its headquarters in Stockbridge and PILOT is meant as a 'payment in lieu of taxes'.

"But", according to The Eagle, "as yet, it is unclear whether the nonprofit organization will be liable for the real estate taxes" because the organization is presently classified as 'tax-exempt' by IRS.

It might be helpful to Stockbridge's case to review whether Kripalu is indeed 'not-for-profit' (and thus deserved of tax-exempt status), or just another money-making enterprise masquerading as a 501c3 for the many local, state and federal benefits such status confers.

Being tax-exempt gives Kripalu a definite edge over its commercial resort spa competitors like Canyon Ranch which, as a for-profit entity, has federal and state tax obligations, and is required, for example, to pay real estate and personal property taxes to the town of Lenox.

Kripalu's CEO, Patton Garrett Sarley, known also by his Sanskrit name, Dinabandhu, which means 'friend of the poor and the helpless', sure ought to be.

Photos:
Patton Garrett Sarley (aka Dinabandhu), Kripalu's CEO;
Mary Sarley (aka Ila), Kripalu's president.

That's because for 2006, Mr. Sarley was paid nearly $232,000, according to the organization's latest available IRS Form 990.
SEE: PDF pgs. 33, 34, & 35.

Mr. Sarley's wife, Mary, is known around the retreat as Ila.

She is president of the organization, the same one for which her husband is CEO.

Kripalu paid her more than $186,000, thus making the couple's total 2006 compensation from the yoga center just over $418,000.

This is nearly eleven times the median household income for Berkshire County (MHI here is $39,047).

Richard Faulds (also known as Shobhan) is chairman of the board of trustees and is Kripalu's legal counsel.

His pay in 2006 surpassed $110,000.

Richard Faulds (aka Shobhan), Kripalu's board chairman and legal counsel.

While Mr. and Mrs. Sarley each averaged 40 hours per week in 2006, Kripalu reported to IRS that Mr. Faulds worked an average of just one hour per week.

It does not appear to be a typo, either.

At that rate, Mr. Faulds was making $2,200 per hour.
SEE: PDF pgs. 33, 34, & 35.

This isn't the first time that Kripalu, and the company's practices have been the object of public scrutiny.

According to The Boston Globe, "Dinabandhu Garrett Sarley and his wife, Ila Sarley, were among the original followers of Kripalu founder Amrit Desai, who left in the wake of a scandal in 1995. Indeed, Dinabandhu Sarley held chief operating officer responsibilities at Kripalu when the ashram's problems emerged. (Desai, who was married, encouraged his followers to practice celibacy. He later was revealed to have had sexual relationships with several of his female adherents and was forced to leave the community. The events nearly destroyed Kripalu, prompting its evolution from a devotion-based ashram to a more secular educational institution.)"

By the way, Kripalu reported zero taxable fringe benefits paid to the above executives in 2006.

Credit for this article goes to "Ombudsman" whose timely suggestion was the impetus for its publication.

Edith Wharton Restoration: Living the 'Gilded' Life While Wallowing in Massive Debt.

The Mount's fiscal woes are not going to be resolved anytime soon, and certainly not until the organization can get a handle on its incredibly profligate spending habits.

It also needs to start complying with basic IRS reporting requirements governing tax-exempts.

For example, during The Mount's slow season, CEO Stephanie Copeland enjoys full and free use of a furnished luxury studio apartment in a mid-town Manhattan high-rise.

This contributes to the current fiscal drain on the organization at the rate of "about $2,439 per month", according to The Berkshire Eagle.

In summer, when Ms. Copeland spends most of her time in the Berkshires, the unit is sublet.

Photo: Stephanie Copeland, President and CEO , Edith Wharton Restoration, Inc. at The Mount in 2003. -- Credit: Lesley Ann Beck for Berkshires Week.

A source familiar with the organization claims Ms. Copeland is fund-raising in the city and alleges that her efforts there bring in 70% of the organization's donations.

Yet, The Mount subsidizes Ms. Copeland's personal use of this dwelling despite the organization's years of withering cash flow and financial hardship that recently culminated in it missing its February mortgage payment to Berkshire Bank (two separate loans actually, one at an interest rate of 7.0%, the other at a whopping 8.75%, both collateralized by real estate [p.25]).

With The Mount unable to pull in sufficient operating capital for so many years now, it would appear that Ms. Copeland's 'fund-raising' efforts in Manhattan do not warrant keeping the expensive outpost that doubles as her pied-à-terre in the City.

(And with the CEO in New York all the time, just who is reaching out to the hearts and wallets of Boston's arts and social glitterati?)

Further, The Mount sent its CEO and at least one other official on overseas 'tours' last year, all in the name of fund-raising, of course, but at a time when the organization was just months away from insolvency, if not already totally broke.

The first, in late June, a 12-day cruise to the Mediterranean, which according to The Mount's Winter 2007 Annual News & Financial Report [p.13], included accommodations "aboard a luxurious 114-guest yacht to retrace Wharton's 1888 journey through this ancient sea", plying the waves on the Corinthian II and traveling "in elegant style worthy of the Gilded Age."
(Tour itinerary)


The 114-guest luxury yacht, Corinthian II. Stephanie Copeland, CEO of The Mount, cruised aboard while 'fund-raising' for the tax-exempt organization.

(Elegant indeed, it's worthwhile remembering that at the time Edith Wharton took this very same frill-filled, spare-no-expense journey, she was already well-to-do having been born into a wealthy family, and thus had the means to spend money as she desired. She was not taking from a publicly-supported charity to support her lifestyle.)

Ms. Copeland was aboard, of course, supposedly 'fund-raising' whilst visiting "Sicily and the Aegean, including stops in Palermo, Syracuse, Santorini, and Rhodes", and all this co-sponsored with the Alumnae Associations of four Ivy-League colleges.

Back in the Berkshires, with time out during the summer to take in the cool breezes off the back porch at The Mount, and having only just caught her breath from her breathless sea adventure, Ms. Copeland then embarked on her second Edith Wharton excursion of the year.

This one commenced in October and lasted for 13 days.

She was accompanied this time by another official with the organization, and continued her 'fund-raising', this time throughout Morocco on the coast of North Africa.
(Tour itinerary)

The two Edith Wharton Restoration, Inc. executives apparently enjoyed "sumptuous lodging and fine dining", visiting "private homes, gardens, and palaces in the red and white cities of Rabat and Sale, medieval Fes, the Roman ruins of Volubilis, and Marrakech, and much more," according to the Annual Report.

A view of Rabat in Morocco. Stephanie Copeland, CEO of The Mount, accompanied by another organization official, visited the ancient city while 'fund-raising' for the 'not-for-profit'.

This jaunt, sun-bleach included, was "Sponsored by The Mount".

Perhaps the most revealing aspect to these executive vacations (working or not) is the insight they give into the managerial competence of Ms. Copeland, as well as to the individual herself.

She took not one, but two extended overseas jaunts at a time when her organization was metaphorically bleeding-to-death (which problem partly was due to her free-spending decisions as CEO).

Significant too, is that neither vacation was paid for by Ms. Copeland herself in spite of her $97,000 annual salary.

As mentioned above, The Mount co-sponsored the first, and entirely foot the bill for the second.

So at a time when fiscal austerity would have been the prudent course of action at Edith Wharton Restoration, Inc., with an overwhelming need for critical attention to be paid to the urgent task at hand of raising from as many as possible emergency sums to keep up with the organization's crushing debtload, Ms. Copeland was off retracing Edith Wharton's wanderlust.

Quite telling also was Ms. Copeland's seeming need to emulate Ms. Wharton's privileged 'life experience' by, of course, traveling first-class in sumptuous Gilded Age style. (Too bad Ms. Copeland didn't see fit also to emulate Ms. Wharton's habit of paying her own way.)

Wouldn't Ms. Copeland's fund-raising expertise and valuable time have been better utilized rustling up donors from amongst her society contacts in New York and Easthampton?

And if help weren't available there, what would've been wrong with casting for life lines amongst the swells on Beacon Hill, Back Bay, Chestnut Hill, Provincetown, Martha's Vineyard and Nantucket (all located, dare one be reminded, in The Mount's home state)?

Failing that, there are the literary-atuned in Philadelphia and Washington, D.C..

Ms. Copeland's time and the organization's dwindling resources would surely have been better spent reaching out within the wealthiest country on Earth, rather than sightseeing in the Mediterranean and in Moroccan shopping bazaars.

To make matters worse, and for reasons as yet unexplained by John Keegan, CPA, the organization's long-time auditor and tax preparer, of the Pittsfield firm, Lombardi, Clairmont & Keegan, The Mount has failed to report its CEO's (and other key employees') various 'perks' anywhere on its annual IRS Form 990 return even though the CEO's use, for example, of the NYC digs appears to meet the IRS definition of a 'taxable fringe benefit' for which Ms. Copeland may be liable for federal income tax (in which case the organization would also be responsible for handing over to IRS the applicable withholding tax).

There is also the small matter of the organization's $130,642 foreign currency transaction loss briefly noted on page 21 of the Fiscal 2007, Form 990.

What is the nature of this transaction, and just how does a literary arts institution/museum in western Massachusetts manage to sustain a foreign currency loss of any amount, let alone one of such magnitude?

Foreign currency transactions and the high risks associated with them are generally the province of billionaires like George Soros, and international goliaths the size of General Electric Company.

Until Edith Wharton Restoration, Inc. stops operating like a rigged Las Vegas slot-machine calibrated to go off only when its CEO puts in her token, there's little reason to believe this organization is going to survive -- and large creditors like publicly-traded Berkshire Bank ought to take heed, and stop the shenanigans.

That or be prepared to write off a whopping loss. <<<<

Related articles:
Edith Wharton to IRS: 'Mount This!' -- Failure to report 'fringe benefits' could leave CEO, Trustees at The Mount liable.
TAX CHEAT! How Alan Chartock conspired with WAMC to avoid paying IRS -- Failure to report CEO's taxable 'perks' could leave trustees liable.

Edith Wharton to IRS: "Mount This!"

Failure to report 'fringe benefits' could leave CEO, Trustees at The Mount liable.

Stephanie Copeland, president and CEO at Edith Wharton Restoration, Inc. (EWRI) has been associated with The Mount for years and years.
She's even had the honor of receiving a Preserve America Presidential Award given her in 2005 by Pres. George W. Bush.
She resides in Stockbridge, and during the long Berkshire winters when business at the Lenox attraction is slow, Ms. Copeland continues her organization's fund-raising efforts 150 miles to the south in mid-town Manhattan, where she stays for extended periods.
Ms. Copeland's annual salary at $97,116 is considered respectable for Berkshire County (median income for a household here is $39,047).
Yet, according to the Manhattan telephone directory, it is not Ms. Copeland but rather EWRI to which a phone at 500 West 56th Street is listed.
Trouble is the 20-story building at that address, The Westport, billed as "One of the Premiere Luxury Rentals in New York City," is a residential apartment complex.
(The Westport's units include studios starting at $2,695 up to 2-bedrooms starting at $5,595 monthly.)


Photo: President George W. Bush and Laura Bush present the 2005 Preserve America Presidential Award to members of the Edith Wharton Restoration in the Oval Office Monday, May 2, 2005. They are, from left, Barbara de Marneffe, Co-Chairman, Board of Trustees of Cambridge, Massachusetts, and Stephanie Copeland, President and CEO, of Stockbridge, Massachusetts. (White House photo by Eric Draper)

When a call was made today to The Westport, the fellow answering in the leasing department confirmed that the building is zoned residential, and that it is not an office building nor is it supposed to lease to commercial tenants.
Dialing EWRI's Manhattan number generates a series of different rings and ultimately forwards the caller to what sounds like a distant fax machine or computer.
First off, why is a not-for-profit organization maintaining an expensive NYC branch office when it's millions of dollars in the hole, and for years has had severe cash flow problems?
Next, since EWRI allegedly maintains this outpost for purposes of fund-raising, why are its offices in a residential building?
Finally, even were there a legitimate business rationale for The Mount to maintain an expensive perch so far from its Plunkett Street base, should the organization be subsidizing a space that doubles as overnight lodging (or longer-term accommodations) for a favored few?

Photo: Stephanie Copeland in front of The Mount, Lenox, Mass. -- Credit: Nathaniel Brooks for The New York Times.


Under regulations governing tax-exempts, accommodations bought and paid for by charity organizations aren't free for the personal use of organization officials.
They're considered a taxable fringe benefit.
Those getting use of them owe extra federal income tax, and all information relevant to those transactions is supposed to be reported to IRS.
If EWRI is not reporting such transactions, or is reporting them inaccurately, then EWRI is running afoul of IRS regulations (in addition to its other current woes).
In looking at EWRI's most recent annual Form 990 filings, for fiscal 2007, 2006, and 2005, EWRI has reported to IRS that it paid zero dollars towards 'expense account and other allowances' going to EWRI's "Current officers, directors, trustees and key employees".
IRS defines 'expense account' as including any taxable fringe benefit or perquisite paid to the recipient.
Organization-provided lodging has a value and it's supposed to be calculated using what it would cost to obtain similar lodging at fair-market prices in an arm's-length transaction.
Using The Westport's published rental figures above as an arm's-length, fair-market guide, that would mean the benefit recipient owes federal income taxes on the value of a month's stay as if that recipient were getting paid by EWRI an extra $2,700 to $5,600 monthly.
Like I said, all this data is supposed to be -- is required to be -- reported annually to IRS on EWRI's Form 990, Part V-A.
Likewise, it is supposed to be duly noted in another section of Form 990, specifically in 'Schedule A, Part III' where the preparer is asked whether the organization furnished 'goods, services, or facilities' to 'trustees,' 'officers' or 'key employees'?
EWRI has annually reported 'No'.


The Westport at 500 West 56th Street offers luxury residential apartments in Mid-town Manhattan.

In addition to the issue of providing faulty information to IRS (which is concerned with the obvious possibility of tax evasion by those whose perks are not being reported), there is also the matter of 'self-dealing', the furnishing of services to a foundation trustee or manager without charge or at a price below fair market value.
In cases where IRS determines that self-dealing has occurred, the agency can level on the offender an additional five percent excise tax on each act of self-dealing.
As additional punishment for allowing it to happen, the agency can level an excess benefits excise tax on an organization's entire board.
It is quite clear that EWRI's board of trustees, its CEO, and its auditor need to explain what exactly is going on with EWRI's mid-town pied-à-terre. <<<<<

(Editor's Note: The author's familiarity with IRS regulations as they apply to tax-exempt organizations came about as the result of an extensive investigative report written in 2006 about the failure of another Berkshire 'not-for-profit', WAMC Northeast Public Radio, to report to IRS the taxable fringe benefits and perks paid to its CEO over the course of twenty-plus years. See: "TAX CHEAT! How Alan Chartock conspired with WAMC to avoid paying IRS".)