11/25/2009 10:22:00 AM Order calls for charity to be closed
The "Boxcar Bingo" hall in Olive Branch is run by the Ridgeland-based Fine Arts Institute of Mississippi.
By STEVEN G. WATSON Associate Editor
A Ridgeland charity should be closed because of alleged fraud related to its DeSoto County bingo operation, the Secretary of State has ruled.
The Secretary of State on Monday released a summary cease and desist order against the organization, which follows a state Gaming Commission ruling earlier this month revoking the charity's bingo license.
The Secretary of State will hold a hearing on Jan. 22 to determine if the charity, The Fine Arts Institute of Mississippi, committed acts of fraud when officials provided false information during an audit by the Secretary of State's office.
The charges against FAIM in the order dated Sept. 18 include: failure to maintain proper books and records, fraud, misrepresentation, using charitable funds for non-charitable purposes, and excessive compensation for Bill Murphy, the charity's executive director.
Earlier this month, the Secretary of State would neither confirm nor deny a FAIM investigation.
The Sept. 18 order appeared Monday on the Secretary of State's web site.
For his role, Murphy could face penalties of up to $25,000 for each offense.
Murphy earlier this month would not comment and said he did not want the Madison County Journal calling him again.
The charity was also reprimanded for hiring District 3 Supervisor Tim Johnson as a lobbyist.
FAIM is based in Ridgeland and operates the Boxcar Bingo hall in Olive Branch.
The Gaming Commission cites several of the same offenses listed in the cease and desist order.
That ruling is currently under appeal.
Secretary of State Delbert Hosemann said an investigation was spurred when FAIM did not provide the details of an asset sharing agreement the institute had with another charity during an audit.
The agreement provided 70 percent of FAIM's assets be shared with Mississippi Youth Activities and Recreation Team, Inc. or MYART, a company formed by Johnson's wife Lynn.
"The fact that they weren't forthcoming to us with this information was very disconcerting," Hosemann said. "It's very important that we have complete disclosure when we go in to audit a charity."
"FAIM provided untruthful and false information to the (Charities) Division regarding the amount of money being spent on program services," the order reads. "FAIM's misrepresentations and omissions to the Division and Gaming were part of a deceptive act or scheme to defraud, and did so operate as a fraud upon the State of Mississippi."
Hosemann also pointed to Murphy's excessive compensation, explaining that any time a charity is spending more on administrative costs than actual charity there's a problem.
"It's a red flag whenever you see in excess of 35 percent of the receipts going to managers," Hosemann said. "We ask that a minimum of 65 percent of the receipts go to their charitable purpose."
According to the cease and desist order, from August 2006 to Aug. 2008 FAIM was paying out less than five percent to charity.
In 2006, Murphy receive $28,000 in compensation, while $1,000 went to charity.
In 2007, he received $98,000, while $66,796 went to charity.
And from January to August of 2008, Murphy received $155,000, while only $19,796 went to charity.
The report also notes that of the $66,769 that went to charity in 2007, $26,500 was paid to Murphy for recording several musical performances.
In addition to his salary, FAIM provided Murphy with a cell phone, car, automobile expenses and a retirement fund.
Also, there was at least one instance where Murphy withdrew $17,000 from FAIM's bank account without any explanation or documentation.
The order also cited FAIM for paying Johnson $24,500 to lobby the state Legislature for bingo reform.
Johnson, a former state senator from Madison, was lobbying for the reduction of the percentage of money that bingo operations must remit to their respective charities, something they said was contrary to FAIM's own interest.
The Fine Arts Institute of Mississippi, Inc. was founded in 2001, but did not start its bingo operation until 2006.
The charity's web site quotes the its goal "to help improve Mississippi's arts education and arts awareness, especially in the area of music, most specifically in the areas of jazz education and performance."
