A.G. Schneiderman Joins City Council Speaker And Community Leaders In Announcing New Leadership And $1.1 M In Debt Relief And Payments For The National Puerto Rican Day Parade
Governance Reforms To Be Adopted; Prominent Puerto Rican Leaders Are Newly Appointed Directors; Parade Board President, Treasurer, General Coordinator Stepping Down
For-Profit Parade Fundraiser Carlos Velasquez Required To Forgive Organization’s $1 Million Debt And Repay $100,000; Is Permanently Barred From Any Association With The Parade
Schneiderman: Settlement Offers This Remarkable NY Event A New Beginning
NEW YORK – Attorney General Eric T. Schneiderman today joined New York City Council Speaker Melissa Mark-Viverito and other community leaders in announcing new leadership and a comprehensive settlement his office has reached with the National Puerto Rican Day Parade, Inc. (NPRDP) and its long-time exclusive marketing agent and professional fundraiser, G.A.L.O.S. Corporation, Inc. (GALOS). The agreement resolves the office’s investigation into the misappropriation of NPRDP’s charitable assets and the conduct of its board of directors. Under the settlement, GALOS is required to forgive approximately $1 million in debt that NPRDP owed to GALOS and to pay NPRDP an additional $100,000. In addition, the fundraising and marketing agreement between GALOS and NPRDP is rescinded and GALOS and its president, Carlos Velasquez, are permanently barred from any future business role on behalf of the NPRDP or in connection with the Puerto Rican Day Parade.
As part of the settlment, ten new directors are being added to the NPRDP board; three of the board’s six current directors -- President Madelyn Lugo, her husband, General Coordinator Luis Rivera, and Treasurer Shirley Cox -- and its two honorary directors have stepped down; and the organization is required to adopt governance reforms and strengthen its internal controls.
"The National Puerto Rican Day Parade is a key cultural institution for New York City and for the Puerto Rican community worldwide,” Attorney General Schneiderman said. “As the parade organizer, this nonprofit has a responsibility to the Puerto Rican community, and to its donors, to ensure that the parade is a source of pride for all New Yorkers. With the reforms we are announcing, the new board can now take responsibility for putting the NPRDP on firm footing, so that the parade can be a success both this year and well into the future.”
City Council Speaker Mark-Viveritosaid, “The Puerto Rican Day Parade has been recognized as an iconic cultural event that celebrates the contributions that Puerto Ricans have made, not only in New York City, but also across the nation. I thank the Attorney General for his leadership and look forward to many more years of the Puerto Rican Day parade.”
NPRDP is the not-for-profit corporation that organizes New York City’s annual Puerto Rican Day Parade and other related cultural events. The parade, held on the second Sunday in June, is the nation’s leading event celebrating the heritage and culture of the Puerto Rican community. For more than three decades, Carlos Velasquez’s company GALOS, a for-profit fundraising and marketing firm, has served as the exclusive fundraiser and marketing agent for the parade. Under its contract with NPRDP, GALOS was authorized to retain 27 to 35 percent of the funds it raised on NPRDP’s behalf, and to charge for specific expenses.
The Attorney General’s investigation found that, over the past six years, GALOS and Mr. Velasquez consistently underreported to the NPRDP the revenues they raised from sponsors of the parade. From 2008 on, the total amount of revenue that GALOS and Mr. Velasquez failed to report was approximately $1.4 million. Net of the commissions that GALOS would have received on these revenues, the result was that GALOS effectively misappropriated for its own and for Mr. Velasquez’s benefit approximately $1 million of NPRDP’s money.
In addition, GALOS and Mr. Velasquez used for their own purposes a significant number of travel vouchers that had been provided to NPRDP as a form of in-kind payment by two airline carrier sponsors of the parade. GALOS’ false reporting, the investigation found, was not limited to the information it provided to its client NPRDP, but carried over as well to the false forms GALOS filed with the Attorney General’s Charities Bureau, which were signed by Mr. Velasquez.
The investigation did not find evidence that the members of NPRDP’s all-volunteer board engaged in any improper conflict-of-interest transaction. NPRDP and its board, moreover, fully cooperated in the Attorney General’s investigation. The investigation determined, however, that under the leadership of long-time President Madelyn Lugo, NPRDP’s board had failed to implement basic financial controls or exercise adequate supervision over GALOS’ conduct.
Among other things, the board failed to require any substantiation from Mr. Velasquez for the figures in the extremely cursory revenue reports provided by GALOS; failed to adopt annual budgets; and failed, in contravention of its own by-laws, to establish a functioning finance or audit committee. The lack of financial controls and the excessive delegation to Mr. Velasquez of financial decision-making, the investigation found, led NPRDP to spend far beyond its means, eventually accumulating a nearly $1 million debt to GALOS on account of expenses that GALOS incurred on the parade’s behalf. Further, GALOS’ contract was renewed for a new 10-year term in 2010, when the organization already was hundreds of thousands of dollars in debt to GALOS, and without the board obtaining any competitive bids from other marketing agents or fundraisers.
The Attorney General’s investigation also found that the Diversity Foundation, Inc., a New York not-for-profit corporation run out of GALOS’ offices whose directors all had close ties to Mr. Velasquez, improperly allowed itself to be used to advance GALOS’ commercial interests ahead of the foundation’s charitable mission of providing scholarships for college students of Puerto Rican or other Hispanic descent. Among other things, the investigation found that the Diversity Foundation was used to commingle funds that had been raised to benefit the NPRDP’s separate scholarship program; that Diversity’s name was used on behalf NPRDP without NPRDP’s consent; and that Diversity spent less on scholarships than it stated in its public filings.
Pursuant to the settlement reached by Attorney General Schneiderman’s office, the NPRDP-GALOS contract is terminated effective immediately, GALOS may not collect any portion of NPRDP’s nearly $1 million debt, and GALOS is required to pay NPRDP an additional $100,000. In addition, GALOS and Mr. Velasquez are required to cooperate with NPRDP in its reorganization of the parade with new personnel, and any acts of interference on their part could result in additional monetary penalties. GALOS and Mr. Velasquez are permanently banned from further fundraising on behalf of the NPRDP or any marketing of the parade.
The settlement also contains provisions designed to substantially strengthen the NPRDP board and enhance its ability to carry out its mission in a transparent and financially responsible manner. First, as required by the settlement, former Chairperson Madelyn Lugo, NPRDP Treasurer Shirley Cox and Lugo’s husband, Luis Rivera, the General Coordinator of NPRDP, have resigned their positions, as have honorary board members Rosalinda Ortega and Maria Roman Dumen. Three current board members, Vice Chairperson Melissa Quesada-Carino, Secretary Trinity Padilla and Director of External Affairs Rafael Dominguez, will remain on the board. Second, the agreement calls for the nomination by NPRDP of ten new directors acceptable to the Attorney General’s office. Working cooperatively, the NPRDP board has nominated, and the Attorney General’s office has approved, the following nine new directors; together, they bring a much broader range of competencies and perspectives to the leadership of the parade than it has ever enjoyed before:
- Lorraine Cortes-Vazquez, Executive Vice President for Multicultural Markets & Engagement at AARP
- Anthony Diaz, a Senior VP in Sales & Trading for a prominent blue chip company
- Maria Elena Girone, President & CEO of Puerto Rican Family Institute
- Rosa Gutierrez, Vice President in finance at AIG
- Louis Maldonado, Partner and Managing Director at d expósito & Partners, a multimedia communications agency
- Ululy Rafael Martinez, community activist, attorney and Bronx Community College Foundation board member
- Carmen A. Pacheco, Esq., founding Partner at Pacheco & Lugo, PLLC
- Orlando Plaza, owner of Camaradas El Barrio, a restaurant and cultural mainstay in Spanish Harlem
- Lorraine Rodriguez-Reyes, actress and producer with extensive experience in the film, television and theater industry
Third, the agreement requires NPRDP to amend its by-laws and adopt new policies and procedures to enhance its internal controls and financial oversight, including the formation of an audit committee, processes for the nomination and election of new directors, the adoption of anti-nepotism rules and conflict-of-interest and whistleblower policies, and the requirement to obtain competitive bids from prospective fundraisers or marketing agents. In addition, all directors, both the remaining ones and the newly elected, will be required to complete an ethics and non-profit compliance training course.
The settlement agreement also requires the dissolution of the Diversity Foundation, with any remaining assets to be distributed by the Attorney General’s office in a manner consistent with the scholarship purposes for which the funds were solicited. In addition, for a period of five years, the members of the Diversity Foundation’s board, its Executive Director Debra Martinez and its advisor Karen Pillot are barred from serving as an officer, director or employee of NPRDP or in connection with any parade-related activity.
The investigation of this matter was conducted by Executive Division Senior Enforcement Counsel David Nachman and Assistant Attorney General Jennifer Michael of the Charities Bureau, with the assistance of Senior Accountant Cintia Brown-Felder, Principal Accountant Judith Welsh-Liebross and Research Analyst Liam Arbetman, under the supervision of Executive Deputy Attorney General for Social Justice Alvin Bragg.
A copy of today's settlement can be viewed here.