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Dubious Financial Dealings at NJ Agency Tasked with Protecting Animals

Stripped of its tax-exempt status and plagued with apparent conflicts of interest, the NJSPCA spends far more money on legal fees than on animal care, according to its own tax records

NJSPCA patch

This is the first in a two-part series investigating the NJSPCA, the New Jersey Society for the Prevention of Cruelty to Animals, which has come under scrutiny in recent years for not filing income taxes and for loss of its status as a charitable organization. Follow this link to read the second story.

The New Jersey Society for the Prevention of Cruelty to Animals (NJSPCA), a private organization with a 100-plus-year-old charter from the state, has been the focus of controversy for almost 20 years. Charged with protecting animals, the group’s senior members are given the power of arrest, carry guns, and have little state oversight. Now, the society is in trouble, losing its charity designation after not filing tax returns for three years. Despite this, it accepted public donations without informing donors that their contributions were no longer tax-deductible.

And as NJ Spotlight discovered through an investigation into the organization, it is facing criticism from many corners, particularly due to apparent conflicts of interest. The group regularly purchases services from businesses associated with members of its board, which is a violation of ethics and nonprofit rules. Its longtime attorney is paid large sums annually — nearly $400,000 in one year — yet the society claims it has no copy of a retainer or relationship agreement or copies of his bills. And an employee of its longtime lobbyist, MBI GluckShaw, whose firm has been paid at least $85,000 over the past five years, now sits on the NJSPCA board of trustees. (The NJSPCA says the employee, Matthew Stanton, will no longer be paid $500 a month to serve as its media contact, and he will recuse himself in board matters related to his firm.)

Strong recommendations

NJSPCA jeep

Those and other questionable practices come after two state investigations, one in 2000 and one in 2004, strongly recommended that police, sheriffs’ officers, and animal control officers should be enforcing the state’s animal cruelty laws and not the NJSPCA.

Little action was taken by the Legislature in response to those reports, which critics chalk up to the fact that the NJSPCA’s lobbyist is a well-connected Trenton firm that brings out dozens of volunteers any time there is a hearing involving the agency. MBI GluckShaw was paid $53,500 in 2006, a period in which the Legislature was considering a bill revamping the organization.

Brief history of NJSPCA

The oldest of the SPCAs, the New Jersey society has always been a law enforcement outfit and has never operated a shelter, except for a brief period when it assumed operation of the Camden County SPCA shelter following that society’s collapse. Headquartered in New Brunswick since April 1989, it has statewide jurisdiction to investigate complaints of animal abuse, cruelty, and neglect and has conducted investigations in counties both with and without subordinate county societies. Established by an act of the Legislature in 1868, the society is governed by a 12-member board of directors and has seven law enforcement officers, 15 to 20 agents, and approximately 200 dues-paying members. While officers and agents are entitled to submit timesheets and be compensated for their time, the vast majority do not, donating their time free of charge.

The NJSPCA responds to calls that it receives through a statewide hotline (800-582-5979) and a form on its website. It also receives referrals from municipal, county and state police agencies, animal shelters, veterinarians as well as local animal control officers. It handles about 5,000 complaints annually.

Inside issues

Complaints about the group come not only from hostile observers but also from within the organization. An NJSPCA investigator testified against the board at a recent board meeting by reading an excerpt from the oath agents take when joining the organization. In the oath, agents promise not to discredit themselves or the agency when they become law enforcement officers for the NJSPCA.

“I think the loss of (our tax-exempt status) and then lying about it and deceiving the membership, the board members, the public, the agents and investigators, and officers … not telling anyone about it or waiting and delaying telling anyone about it, that would be considered bringing discredit upon themselves and the organization,” said the investigator, Brian Stone of Lake Hopatcong.

Stone was referring to the NJSPCA’s surprising acknowledgment last fall that it had lost its 501(3)(c) or tax-exempt status, for failing to file its 990 forms for 2013, 2014, and 2015. The agency says it’s because its former accountant had a stroke during a time when they were undergoing a change in leadership. Even if that is the case, critics wonder why it took three years to hire a new one.

The group has since filed all of its 990s with the IRS and annual financial statements with the attorney general’s office and says it is in the process of compiling its 2016 return.

Broadcast news

Still, the issue prompted Toni Ising, an animal rescuer from Flemington, to call in to 101.5 FM’s radio program, “Ask the Governor,” in December to report the agency’s failure to inform people about the tax deductibility of their donations.

“They were still putting out there that they were a nonprofit, knowing full well that that was false. That’s just fraud,” Ising told Gov. Chris Christie. “There are good organizations out there for the animals. The NJSPCA is not one of them.”

She then pointed out that while the organization pays out hundreds of thousands of dollars to lobbyists and lawyers, it pays less than $50,000 in cash on what it refers to as “animal care” on its tax returns. (This does not count the estimated cost of volunteer hours devoted to responding to cruelty complaints. That cost is typically pegged at hundreds of thousands of dollars a year.)

Indeed, between 2006 and 2015, the NJSPCA has spent about $1.46 million on legal fees and nearly $150,000 on lobbying, while spending only $173,000 on animal care, according to its tax returns and financial statements.

Steep legal bills

The organization’s high legal bills have come under fire by critics; they were $397,909 in 2014, according to the newly filed tax returns, prompting people both inside and outside of the organization to ask for the invoices the NJSPCA has received from its lawyer, Harry Levin of Toms River. NJ Spotlight filed an Open Records Act request for information regarding these invoices but was denied access by the NJSPCA, which claimed the invoices or bills do not exist. When asked for the group’s retainer agreement with Levin’s firm, Levin & Cyphers, the NJSPCA said that too did not exist. It later said that Levin’s office had a copy and would be providing it. Nearly two months later, the documents have not been furnished to NJ Spotlight.  

After repeated requests, the organization finally produced a list of checks written to Levin from 2012 to 2017, but the yearly tallies were substantially lower than what the NJSPCA listed for legal fees on its 990 tax forms and financial statements filed with the attorney general. In 2014, for instance, when the NJSPCA itemized $397,909 in legal fees on its 990, the list of checks has the organization paying out only $47,000. In 2015, the NJSPCA said on its tax returns that it paid $159,612, and yet the list of checks has it paying out only $55,500.

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NJSPCA President Steve Shatkin said the discrepancy between the legal fees reported in the society’s 990 and the actual checks written to Levin & Cyphers is due to the organization’s accounting method, known as a modified cash basis, which enables the NJSPCA to report what it was billed for legal work on its 990, even though what it actually paid that year may be far lower.

“The fact of the matter is, despite carrying a significant balance, Mr. Levin has and continues to graciously accept what the NJSPCA is able to afford to pay each year while continuing to provide quality legal services,” Shatkin said. He notes that while the NJSPCA has made repeated requests to the New Jersey attorney general’s office to assign a full-time and state-funded deputy attorney general to handle NJSPCA legal matters, so far, the state has declined and so all its legal matters must be covered at its own cost.

An unbalanced ledger

NJSPCA shatkin
NJSPCA president Steve Shatkin

“Despite the unbalanced ledger, throughout Mr. Levin’s history with the NJSPCA, he has never stopped work, never refused to take on a new matter, never threatened to stop providing legal services to the NJSPCA and has been extremely flexible in negotiating legal fees paid by the NJSPCA,” Shatkin said.

Shatkin also said Levin’s firm has been the NJSPCA’s attorney for well over 20 years and that the organization has a retainer agreement with the firm in which it has agreed to pay $3,000 per month to handle routine matters and bills hourly on litigation matters and other matters as they arise.

Stone, an investigator for the NJSPCA, said several others, including board members and animal rights activists, had been trying to obtain Levin’s invoices for quite a while, in order to prove he’s putting in the kind of work and the kind of time he’s being paid for. Stone said no invoices have been provided.

“The excuses are numerous,” Stone said. “(The board) says cases are still in litigation. I’m not asking for the specifics of cases. I’m simply asking to see how (Levin’s) documenting (his) time.”  

Unworkable NJSPCA

NJSPCA David Gaier
David Gaier, the governor’s appointee to the NJSPCA board, attended meetings for 18 months but eventually resigned.

David Gaier, who was the governor’s appointee on the board, attended meetings for 18 months but eventually resigned in December because he says he could not penetrate the opaque nature of its operations, and because of that, he felt he could not fulfill his responsibility as a governor’s appointee to the board.  

He views the very existence of the NJSPCA — a nonprofit law enforcement organization in which essentially private citizens carry weapons and have statewide law enforcement powers — as unworkable. The organization over many years has demonstrated that it is not typically regulated by any authority, and the result is a group mired in lawsuits and controversies, Gaier said. That means that the welfare of innocent animals is a secondary consideration, he said.  

“The lack of oversight clearly extends to the organization’s administration, and in this case, scandalously losing its charitable status because the organization’s leaders failed to file mandatory paperwork with the IRS for three years running, then delayed informing the board for months, and finally made absurd excuses for its failure,” Gaier said. “The best thing that can happen would be for the state to dissolve the organization as it currently exists, and allow legitimate local and state law enforcement agencies to enforce animal welfare and abuse statutes, which they already have the authority to do.”  

If the organization were to remain, it would have to be highly regulated, with proper state oversight of its day-to-day activities, and accountability to the people of New Jersey, he said. 

Conflicts of interest

The lack of financial accountability apparently extends to conflicts of interest. The NJSPCA has purchased goods and services from companies owned by its own board members and trustees. Under the Internal Revenue Code, nonprofit organizations must follow strict rules against “inurement.” The inurement prohibition forbids the use of the income or assets of a tax-exempt organization to directly or indirectly unduly benefit an individual or other person who has a close relationship with the organization or is able to exercise significant control over the organization, explains Jeramie J. Fortenberry, an attorney based in Austin, TX, who specializes in nonprofit tax law.

Between 2012 and 2015, for instance, the NJSPCA paid $45,056 for promotional materials to a company called Premiums and Promotions, which is owned by the organization’s treasurer, Francis Rizzo, according to the NJSPCA’s recently filed tax returns. It paid $24,552 for bookkeeping services to a company called JMMI, which is owned by Joseph Biermann, a lieutenant in the NJSPCA’s Law Enforcement Division and a former board vice president and secretary. It also paid $39,692 in vehicle repairs and maintenance to a company called MidLand Auto, owned by NJSPCA trustee Kevin Rudolph.

That’s not all. According to accounts payable records shown to NJ Spotlight, the organization also paid about $17,000 in 2012 to a company called Ubiquity Promotions, which was owned by the wife of then-NJSPCA President Richard Yocum. In 2015, it paid more than $20,000 to the same company. The organization did not list the relationship it had to Ubiquity Promotions on its tax returns, but Yocum listed it on a financial disclosure form he had to file as president of Jefferson Township’s town council. Yocum has since left the organization and is now executive director of the Humane Society of Manatee County, FL.  

In a note on its tax returns for 2013, 2014, and 2015, the organization did indicate that it conducts business with related parties, which are disclosed in each return.

“A committee of the board reviews samples of these transactions to determine if they are conducted at arm’s length. The committee deemed all related-party transactions to be conducted on terms equivalent to arm’s length in accordance with FASB ASC 850-10-50-5,” the organization’s accountant wrote.

Raising funds, saving money

NJSPCA president Shatkin, says the organization has been enforcing New Jersey’s animal cruelty statutes since 1868, at no cost to taxpayers, but because it receives no state funding, it must raise funds to support its operations. And it does this by spending money on promotional items to raise revenue, on mechanics to maintain the NJSPCA fleet of vehicles, and on bookkeeping services, to assist with bookkeeping and respond to the growing number of OPRA filings.

“Thankfully we have individuals active in this organization that are able to provide these necessary services at low costs,” Shatkin said. “As indicated in our tax filings, and stated clearly by our accountant in our audited financials, all related party transactions were deemed to be conducted on terms equivalent to arm's length in accordance with FASB ASC 850-10-50-5.”

As for Stanton, who joined NJSPCA’s board in December 2016, Shatkin said the organization’s $500 per month media relations contract with MBI GluckShaw was terminated, and Stanton agreed to serve on the board and continue as the NJSPCA’s spokesperson at no cost to the organization. But MBI GluckShaw will continue to serve as its registered government affairs agent. Consistent with the advice of its attorney, when the board of trustees discusses the NJSPCA's relationship with MBI GluckShaw, Stanton will be required to recuse himself from that discussion and leave the room, Shatkin said.

Shatkin says all the required tax returns have now been filed with the Internal Revenue Service and State of New Jersey and that the NJSPCA has appointed a new compliance officer to prevent this from ever happening again. Shatkin also said the organization is now up to date on the charity-related paperwork it was supposed to have filed annually with the AG’s Division of Consumer Affairs, namely, its CRI-300 filings. Its tax-exempt status has not yet been reinstated, and the state does not yet view it compliant with regard to its charity registration, but its website now advises donors that donations made from October 2016 through today are not tax deductible.

This investigative series will conclude tomorrow with a look at why what is essentially an organization of private citizens is allowed to carry weapons, drive police-style vehicles, and wield statewide law enforcement powers.

Caren Chesler is a freelance writer, based in Ocean Grove, whose work has appeared in various general-interest and business publications, including The New York Times. She also served as State House reporter for the Asbury Park Press.

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