Suspicious Swiping: The I-Team investigates where a local nonprofit racked up $1,000’s in charges
The credit card statements read like the itinerary of a luxury vacation, shopping spree and pampering package all in one, with charges made to the Omni Rancho las Palmas, Riviera Palm Springs, Miramonte Resort and La Quinta Resort. Plus St. John, Sunglass Hut Gucci, Planet Beauty, Sephora and Hot Spot Tanning.
But those charges aren’t what catches the eye of Certified Public Accountant Brian Wachs.
“Cosmetic surgery. Victoria’s Secret. That’s pretty blatant…Unless there’s dogs wearing negligees,” he laughs.
Reams of documents obtained by News Channel 3 show hundreds of charges accrued and paid for on Wells Fargo and American Express business credit cards issued to the Humane Society of the Desert, and former Humane Society president Malinda Bustos.
Wachs took a look, and questioned what the charges have to do with a nonprofit organization.
“Nothing that I can see,” he said. “Or (with) animals.”
In the eyes of the Internal Revenue Service, Wach said it would constitute “fraud.”
“Typically a nonprofit would have a requirement that you don’t use (a credit card) for personal use,” said Wachs. “(The money) either gets paid back immediately, or if it doesn’t maybe, it’s a problem. They could lose their nonprofit status for sure. And there could be some significant penalties to boot.”
The statements obtained show tens of thousands of dollars spent at luxury resorts, stores and restaurants over the course of two or more years, which eventually got the attention of board members.
In fact, the day after a more than $4,000 check was written by the Humane Society to cover a Wells Fargo credit card balance in Bustos’ name, the board suspended her to “determine if any improprieties exist.’ The documents show in May of 2018, Bustos was also prohibited from contacting current or former employees, signing documents, or using company assets like computers or vehicles.
Accountant Adam Ochoa of The Practice, was hired by the board to conduct a forensic investigation in September, which he summarized to the Board of Directors in December.
He said he had no obligation to take what he found and give it to police, but he did.
“I felt like the sheriff’s department was going to come see me eventually,” said Ochoa.
Ochoa says he looked over bank statements, legal forms and tax paperwork.
“There were some areas that were grey, such as someone paying themselves salaries, that I couldn’t confirm if it was authorized or not. (And others) such as purchasing at a department store. Or reimbursement for lets say, beauty care.” The total, he said, “could be as high as $600,000.”
The Internal Revenue Service agreed.
Board minutes show an audit of the Humane Society revealed “personal inurement,” which the IRS describes in detail on it’s website, concluding that 501c3’s “must not be operated for the benefit of the creator or their family, or shareholders of the organization.”
Bustos not only sat on the board of directors, so did her husband.
Current board members appeared stunned when they saw evidence of Humane Society funds going toward sushi dinners, and TrueCare cosmetic surgery in Chino Hills to the tune of several thousand dollars a month.
Board member Phil Cox could not speculate on why a Humane Society credit card would be used on purchases to Nordstrom, BCBC, or the Classy Bag Lady. $449 was spent at A & A Jewelry Repair in Chino Hills.
“You’d have to ask the person who used those (credit cards),” said Cox. “But to your larger point, is this acceptable in an organization like this? By my standards, I think by Kim (Hardee)’s standards, absolutely not.”
“I would apologize for this type of expenditure, and assure (donors) that this will never never happen again,” added Cox.
Bustos did not return numerous calls or emails requesting a comment about the charges, or money spent by the Humane Society to take care of horses.
In it’s 2016 990 form filed with the IRS, the Humane Society claimed more than $54,000 spend on horse care. That figure is almost three times as much as the organization spent to feed all the rest of it’s animals that year.
Documents show $1,500 was paid to a horse hospital in San Dimas.
Hardee says Bustos “did take in four horses in a very bad situation. And those horses cannot be kept here (in Desert Hot Springs) because there are no stalls.”
Property records show Bustos and her husband now own a $1.3 million, 4.86 acre property north of Phoenix, which boasts riding areas a a barn.
Current board members said half of the organization’s bank accounts are still frozen, although they have access to most of the money.
“It’s like a tug of war over the accounts,” said Hardee. “Half are frozen, one was closed, and actually three other ones were created by four of the board members.”
Cox and Hardee claim they and other board members Lissa Solomon, Ken Solomon and Rick Buren are still untangling the finances resulting from numerous board turnovers while trying to fulfill their mission to “rescue, heal, protect and adopt for life.”
“People walk through these front gates with very very warm and generous hearts,” described Cox on a tour through the Humane Society property.
“This is a new board, with new visions and new standards,” said Cox.
As hopeful as the Humane Society is in the future, Wachs and others believe there could be consequences.
“You’re getting public money and you’re earning public trust, right?” asked Wachs “And when you don’t follow the rules there’s a price to pay.”
Until this winter, the Humane Society ran the Animal Hospital of Desert Hot Springs, but it shut down after the medical director left.
Learn about how to adopt with the Humane Society.
According to the Riverside Co. Sheriff’s Department, investigators are “still seeking to identify and speak with persons that may have information regarding this case involving the Humane Society of the Desert.” Anyone with information is urged to call Investigator Aron Wolfe at 760-836-1767.
What’s next for the Animal Shelter of Desert Hot Springs?
Read some of the documents uncovered by the I-Team:
