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A Precursor to the Penn State Debacle

The 1994 Christian Children’s Fund Scandal

by THOMAS H. NAYLOR

Former Penn State President Graham Spanier’s connection to the university’s football related sex scandal was not his first brush with scandal involving a major organization under his watch.  In 1994, while he was Chancellor of the University of Nebraska, Spanier was also Chairman of the Board of the Christian Children’s Fund, the largest child sponsorship organization in the world, located in Richmond, Virginia.  After serving on the CCF board myself for two years, in March, 1994, I was kicked off the board for whistle blowing.  Subsequently, I went public with my charges of corruption against the $112 million organization, which claimed to support 400,000 children in 40 countries, whose board Spanier chaired.

Not unlike hundreds of thousands of other Americans, I too had been seduced by emotionally charged television advertisements extolling the virtues of sending a monthly check to a private child sponsorship organization such as Childreach or World Vision.  Long before I joined the board of CCF, I had been a sponsor of a child in Bangladesh through Save the Children.  The possibility of sponsoring one’s own child in an impoverished third-world country has enormous appeal.  It is neat, clean, tax-deductible, and hassle-free.  You do not have to travel anywhere; you need not see or touch any smelly, filthy children; and you avoid the risk of disease and sickness.  Even though you are completely detached from your child, writing a check makes you feel good.

During my first year on the CCF board I sat on the audit committee, where I was exposed to a series of quarterly horror stories describing incidents of fraud, theft, and mismanagement in CCF projects in places such as Brazil, Haiti, India, Thailand, Ethiopia, Oklahoma, and North Dakota.  After awhile I realized that none of these problems were ever reported to have been resolved.  Then one day a new board member, upon hearing the stories of the internal auditor, proclaimed, “This is scary stuff.”  And he was right.  I decided to dig deeper into the matter.

The bedrock on which child sponsorship organizations based their fund raising appeals was the so-called 80-20 rule.  CCF was no exception to the rule.  For every dollar received from sponsors, CCF claimed that 80 cents went to support children and that the remaining 20 cents was used for management and fund raising.  There was only one catch.  It was not true.

One of CCF’s accountants led me by the hand through the organization’s sophisticated accounting system and convinced me that no one really knew how much of each contribution dollar actually reached the children.  As a result of creative accounting and an inadequate financial information and control system, the percentage of each sponsorship dollar spent on children could be as low as 50 percent.  This got my attention.

I began turning up the heat on the board to look into this egregious matter.  The board members were unamused.  Their response was a combination of denial and an attempt to discredit me.  My fate was sealed at the January, 1994 board meeting when I suggested that the CCF board was little more than a cheerleading team for the organization’s CEO.  One board member became so enraged that he threatened to throw me out of the window of a five-story building.

Shortly after being removed form the CCF board I wrote a 10-page report summarizing my grievances with CCF’s management and sent it to Ed Briggs, the religion writer for the Richmond Times-Dispatch.  Briggs courageously decided to run with the story even though CCF was perceived to be a virtually untouchable sacred cow protected by a board controlled by well-connected, high-profile Richmonders.  Since I was living in Vermont by then, Briggs was in a much better position to dig more deeply into the story than I could, and he did.

On May 23, 1994, the first of 14 front-page articles by Briggs and his colleagues ran in the Times-Dispatch.  My original 10-page report was only the tip of the iceberg compared to what they uncovered and reported.  They flushed out the details of lavish office furnishings and expensive travel budgets for CCF executives and board members alike.  They also interviewed former CCF executives who opted to let it all hang out.

CCF refused to reveal the cost of a frivolous 1993 trip to Warsaw, Poland for a 35-person CCF delegation of which I was a member.  We stayed in the most posh hotel in Warsaw.  Although little or nothing was accomplished, it was considered chic in the child sponsorship business back in those days to have a presence in Eastern Europe.  Spanier made frequent trips on behalf of CCF including at least one to China.

The CCF scandal was picked up nationally by The Washington Post, The Chronicle of Philanthropy, The Chicago Tribune, Christianity Today, and NBC News.

In August 1994 CCF’s CEO Paul F. McCleary announced his plans to retire and Spanier followed suit a month or so later.  Both denied that their decision to step down had been influenced by the media attention received by CCF.  Both McCleary and Spanier consistently denied any wrongdoing on the part of CCF and tried desperately to ridicule me for my role in exposing the malfeasance at CCF.

In 2009 the Christian Children’s Fund changed its name to Child Fund International.  Somehow this seemed appropriate, since CCF had never had any connection whatsoever to Christianity, and it showed.

When all is said and done, in addition to denial and cover-up, what the CCF and Penn State scandals share in common is the fact that both institutions were too big to manage by Graham Spanier or anyone else.  And Spanier was not paying attention to what was going on.

Thomas H. Naylor is Founder of the Second Vermont Republic and Professor Emeritus of Economics at Duke University; co-author of AffluenzaDownsizing the U.S.A., and The Search for Meaning.