Kansas foster care leader charged $469K to credit cards, hid financial losses

Investigative report tells of lavish hotel stays, cash bribes in El Salvador, warnings about Nebraska deal

By: - December 20, 2020 3:54 am

An investigation by a Kansas City, Kansas, attorney substantiated claims of financial misconduct by Saint Francis Ministries CEO Robert Smith, leading to his departure from the organization in November. (Sherman Smith/Kansas Reflector)

SALINA — As the CEO of Saint Francis Ministries, Robert Smith used company credit cards for lavish hotel stays, first class upgrades on airlines, clothing, cash withdrawals, iTunes purchases and meals at five-star restaurants while hiding increasingly dire financial problems from his board of directors.

Saint Francis Ministries hired Robert Smith, known as Father Bobby, as president and CEO in 2014. He became a canonical resident in the Diocese of Chicago in 2012. (Saint Francis Ministries)

Documents from a Saint Francis investigation show Smith invested $11 million in a friend’s business for software that crashed and destroyed the organization’s financial records. Saint Francis spent hundreds of thousands of dollars in a program led by Smith’s wife to harvest a “miracle” food in El Salvador, where staff asked for and received Visa credit cards for the purpose of getting cash to bribe local officials. Smith repeatedly was warned about the financial perils of entering a contract to provide services in Nebraska, where Saint Francis is projected to lose $27 million in the current fiscal year, before Smith signed the deal.

The Salina-based foster care provider, which employs 1,600 people and serves 10,000 children and families, neared a breaking point in February after Intrust Bank refused to expand a $10 million line of credit. A $10 million loan through the federal Paycheck Protection Program allowed for daily operations to continue.

The Saint Francis board of directors commissioned an investigation into Smith after learning from a newly hired chief financial officer in October about financial misconduct dating to 2018. The investigative report, obtained by Kansas Reflector, substantiated the CFO’s allegations of mismanagement, improper spending and a failure by Smith to report the organization’s true financial position to the board.

The organization severed ties with Smith, general counsel David Schafer and chief operating officer Tom Blythe at the conclusion of the investigation in November. New leadership has charted a course to stabilize finances within the next six months, including a new deal with Nebraska officials to cover losses for services there.

Details of Smith’s spending stunned colleagues who knew the Episcopal priest as Father Bobby.

“I ask a lot of questions, but I was always assured that things were OK,” said Greg Meissen, chairman of the board at Saint Francis. “In hindsight, I can chain together things, but I trusted Father Bobby, and that’s all. It was pretty shocking.”

Smith didn’t respond to attempts by Kansas Reflector to reach him for comment.

 

Greg Meissen, chairman of the Saint Francis Ministries board of directors, said he trusted Father Bobby, as former CEO Robert Smith was known to his colleagues. (Sherman Smith/Kansas Reflector)

‘An absolute stunner’

Lora Winchell immediately noticed financial irregularities after she was hired as chief financial officer in September.

Fearing no one would listen to her concerns, Winchell arranged a meeting with a board member in Kansas City to reveal her findings under the pretense of a non-substantial meet-and-greet. Instead, she presented her report on the severity of financial problems at Saint Francis.

Lora Winchell was hired as chief financial officer in September. She delivered a whistleblower report to a board member the following month. (Saint Francis Ministries)

“I joined Saint Francis because of my belief in the organization’s mission,” Winchell said in a statement for this story. “That work must be supported by strong financial accountability that adheres to all ethical accounting principles. I could only, in good conscience, report the inconsistencies I was seeing.”

The board took immediate action to suspend leadership and hire an attorney to investigate Winchell’s findings.

At the time, the board had no idea that a different whistleblower had raised concerns about Smith’s financial dealings in a November 2019 report to the Kansas Department for Children and Families.

Mike Deines, a spokesman for DCF, said the agency’s standard operating procedure is to work directly with executive leadership. DCF in January hired a Topeka accounting firm to audit finances at Saint Francis, but Smith didn’t disclose the audit to the board.

“Typically in those kind of cases somebody on the board might get a call,” Meissen said. “We never got a call from them. I’m not criticizing their work, but it was an absolute stunner.”

If the organization had known about the report when it was delivered to DCF, Meissen said, it would have made a big difference.

The investigation by Chris McHugh, an attorney in Kansas City, Kansas, discovered Smith made $469,000 in charges to credit cards from 2018 to 2020, rarely providing a receipt. The organization hasn’t determined how much of those charges were for legitimate business expenses, but it is clear that many of the charges violated the organization’s policy signed by Smith prohibiting the use of cards for personal items.

Smith spent $107,000 on hotels, including charges at the University Club of Chicago that ranged from $1,000 to $10,000 for each of 11 trips between January 2018 and March 2020. One of the trips included a $705 charge for Bill Whymark, whose company took over IT services for Saint Francis.

McHugh found charges totaling $60,000 for meals, $47,000 for airline tickets, an additional $14,000 for airline fees and upgrades, $36,000 for entertainment, and $45,000 for expenses at the Salina Country Club, where a membership was included with Smith’s $200,000 salary. There were $20,000 in charges for retail purchases, another $20,000 for Amazon.com purchases, $13,000 for cash withdrawals and advances, plus $4,862.85 for purchases made through Apple iTunes. Smith also spent $3,170 at Morris and Sons, a men’s clothing store that was featured in the luxury lifestyle magazine Robb Report in 2019.

There were $20,000 in charitable gifts, and nearly $4,000 sent to a friend who requested the money for a trip to the Holy Land. Smith then decided he would participate in the trip and used his Saint Francis credit card to pay the travel company more than $10,000 in February 2020.

Smith explained to a staff accountant that the events and trips he charged to the credit cards were “good PR” for Saint Francis because he was attempting to develop relationships with members of the Kennedy family in Chicago in hopes of using their connections in government for future projects.

The strategy didn’t work.

“We’re a nonprofit, and our job is to take care of children and families,” said William Clark, now the interim CEO at Saint Francis. “The funds that we receive from the states are designed to be used for that, so we need to operate within that framework.”

 

William Clark, interim CEO at Saint Francis Ministries, says substantial progress has been made in the past two months to restore the organization’s financial footing. (Sherman Smith/Kansas Reflector)

‘Level of embezzlement’

Smith explained to his board of directors that Saint Francis would recoup its investment in Whymark’s company because the software he produced eventually could be deployed for a profit in other states.

“When that was presented to us, that seemed pretty reasonable,” Meissen said. “The board never understood that it was going to be that much money.”

Saint Francis paid $11 million to Whymark for an IT system that crashed in the fall of 2019, and the loss of financial records complicated attempts to review spending. According to the investigative report, Whymark told the recovery team he wiped the hard drives on the crashed server so they could be reused.

Whymark operates WMK Research and SFW Technologies, both registered to an address in Mount Kisco, New York.

The websites for both companies are identical except for the business name and are filled with sections touting sophisticated-sounding IT jargon — predictive analytics, enterprise cloud, a proprietary data ingestion framework. One section touts the science of “machine learning,” or getting computers to learn and act like humans do “by feeding them data and information in the form of observations and real-world interactions.”

Smith hired an outside agency to provide financial oversight following the retirement of a chief financial officer in 2018. As part of the investigation into Smith’s mismanagement, one of the agency’s accountants said the minimal value and cost of Whymark’s services caused him to question “whether the circumstances rose to the level of embezzlement.”

By reviewing email timestamps, the investigator determined Smith took a few minutes or less to review invoices sent by Whymark. The invoices reflected “an improbable amount of time billed,” the investigator found. In May 2018, for instance, Whymark billed an amount that suggests he worked 10.4 hours per day for 22 days on the Saint Francis contract, while also carrying out other duties as CEO of his company.

The unnamed accountant from the outside agency registered other concerns. He nicknamed Blythe, the COO, “Chicken Little” for his refusal to stand up to Smith. Leadership at Saint Francis was “spending like they were printing money in the back,” the accountant said.

He told the investigator he was disturbed when a project manager in El Salvador asked for a Visa card so he could use cash advances to bribe government officials. The investigator determined Saint Francis sent two Visa cards to El Salvador, but they were used almost entirely for small purchases of fast food and lodging.

Smith’s wife, Angela, led the Holistic, Organic, Prosperous El Salvador operation, known as HOPES. The idea was to harvest a “miracle” food from the moringa tree, whose leaves provide vitamin C, vitamin A, calcium and potassium.

As with the software, Smith justified the hundreds of thousands of dollars spent in El Salvador on the premise the operations there would someday make a profit. Dollars from the sale of the miracle food were supposed to pay for Saint Francis programs serving vulnerable single mothers.

Smith’s wife, according to the investigative report, told the accountant to change financial forecasts for the operation to show a profit in the third year.

“That was an attractive concept where there was misinformation or lack of understanding,” Meissen said. “We thought that this would actually break even in two or three years and possibly make some money. We didn’t see it as a big money losing thing.”

‘God will provide’

Smith and Blythe knew their proposed agreement to provide foster care services in the Omaha, Nebraska, region would be a money loser.

Smith’s response: “God will provide.”

The unexpected decision last year by Nebraska’s Department of Health and Human Services to move the state’s only privatized foster care contract from PromiseShip to Saint Francis prompted immediate and ongoing criticism from Nebraska lawmakers. Saint Francis provided a bid of $197 million for the five-year deal, undercutting the $341 million offer from PromiseShip.

The actual cost of services threatened the financial stability of Saint Francis, which has failed to meet its obligations to children in Nebraska. Saint Francis lost $7.4 million on the Nebraska deal in the first six months of 2020. Projections for the current fiscal year indicate a $27 million loss.

Clark said Nebraska officials have “agreed to cover” the projected losses moving forward and to reimburse Saint Francis for earlier losses.

“We have worked with the state of Nebraska on how we move forward with that because obviously that would be a large cash drain on the organization,” Clark said.

Nebraska state Sen. Sara Howard, a Democrat who represents an Omaha district and served as chairwoman on a foster care oversight panel, said everyone outside of HHS and Saint Francis knew the bid was too low to be realistic.

“People knew that they were walking into a situation where it was either going to be an enormous loss to Saint Francis, or we were going to see them take on the contract and then either ask for more money or eventually get out,” Howard said.

Smith didn’t reveal to the board the real costs of the Nebraska contract, removing information about the projected losses from PowerPoint slides that were prepared for a board meeting in September of this year.

“I had no idea of the severity,” Meissen said. “We knew there were things to work through, but we had no idea, and when I read that part, that was really troubling that information was withheld from us.”

 

Current leadership at Saint Francis Ministries says the dedication of employees to providing services for foster children and families has never wavered. (Sherman Smith/Kansas Reflector)

‘A significant challenge’

The reckoning that followed Winchell’s disclosure of financial problems has placed Saint Francis in position to be cash neutral by July 2021, Clark said.

That includes divesting from Whymark’s company and the elimination of international programs.

“There has been a significant challenge, as you know about, but there’s been even more significant effort to stabilize the organization, move it forward, be truthful and transparent with partners, and we think we’ve done that,” Clark said.

That includes the creation of a new compliance office at Saint Francis designed to handle concerns about misconduct. Those concerns will go directly to the CEO or, if they involve the CEO, directly to the board. Meissen said the board is looking to implement its own accountability measures to prevent another financial scandal.

GuideStar, which gathers documentation about nonprofits, shows the Saint Francis board of directors did not provide a written assessment of Smith or require senior staff to review conflict of interest policies.

The nonprofit’s most recent 990 tax filing, which reflects the 12-month period that ended in the middle of 2018, shows Smith’s total compensation exceeded $323,000. Blythe received $197,000 in total compensation.

Before he was hired at Saint Francis in 2014, Smith worked as a vice president for the Illinois Valley Community Hospital, where he oversaw an annual operations budget of $125 million. He became a canonical resident in the Diocese of Chicago in 2012.

Rebecca Wilson, partner at a PR firm that handles inquiries for the Diocese of Chicago, said the bishop there was unaware of allegations of financial misconduct against Smith. She said such matters are handled under a disciplinary process outlined in canons of the Episcopal Church.

Among unsettled business with Smith and Blythe are loans they received from Saint Francis to buy their homes in Salina. Smith received $59,000, and Blythe received $50,000. Clark said those loans have not been paid back and are still owed to Saint Francis.

Clark said any decision to bring criminal charges against Smith would be outside of his purview.

“The state has to make those type of decisions,” he said.

Meissen said the organization would cooperate with an investigation by authorities.

“We would be thrilled if we could figure out a way to recoup some of those dollars,” Meissen said.

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Sherman Smith
Sherman Smith

Sherman Smith is the Kansas Press Association’s journalist of the year. He has written award-winning news stories about the instability of the Kansas foster care system, misconduct by government officials, sexual abuse, technology, education, and the Legislature. He previously spent 16 years at the Topeka Capital-Journal. A lifelong Kansan, he graduated from Emporia State University in 2004 as a Shepherd Scholar with a degree in English.

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