CEO and Board Are Out at Volunteers of America Southwest

Nonprofits/Community

CEO and Board Are Out at Volunteers of America Southwest

Major fallout continues at one of San Diego’s largest charitable organizations, Volunteers of America Southwest, following revelations of alleged fraud and mismanagement. 

The Volunteers of America Southwest building in San Diego / Photo by Adriana Heldiz

Major fallout continues at one of San Diego’s largest charitable organizations, Volunteers of America Southwest, following revelations of alleged fraud and mismanagement.

The entire board of trustees and CEO Gerald McFadden, who was implicated in the allegations, have left the organization, a spokesman for the national office of Volunteers of America said.

Volunteers of America Southwest is a local chapter of the national organization. But now, in the wake of the allegations, the national office is subsuming the local chapter. And the local chapter’s governing board of trustees has been dissolved.

Volunteers of America Southwest provides treatment and housing to veterans, the homeless and people struggling with addiction. In 2019, it brought in $23 million to help achieve this mission. Much of its money comes from local, state and federal government agencies.

But the organization was misusing public funds and committing potential fraud, according to auditors for San Diego County and two whistleblowers.

McFadden “allowed it to go on. He was presented with evidence of what was going on and he chose to allow it to continue. That was his decision,” said James McGowan, a former finance worker at the nonprofit who said he brought suspicious payments to McFadden’s attention. “I’m glad to see that finally some justice is getting done.”

McGowan worked under the previous chief financial officer, Nagham Hakeem. As he was processing invoices, he noticed hundreds of thousands of dollars in payments to new vendors. McGowan brought the receipts to his colleague, James Harrell, and the two of them started digging further into the companies. It turned out both companies were owned by Hakeem’s sisters-in-law – who also worked in the finance department at Volunteers of America Southwest, according to McGowan and a lawsuit filed by Harrell.

McGowan and Harrell took their evidence to McFadden, who said he would look into it. Months went by. Harrell kept going back to McFadden, who kept rebuffing his concerns. He told Harrell that Volunteers of America Southwest was getting a “fair” deal on the products and services Hakeems’ sisters-in-law were providing, according to the lawsuit. Yet many of the products and services were significantly above market rate, according to receipts obtained by Voice of San Diego.

Eventually, McFadden terminated both McGowan and Harrell. Hakeem eventually left the nonprofit too.

Auditors for San Diego County also looked into the suspicious receipts – because the county was providing millions of dollars a year to Volunteers of America Southwest to treat and house people with addiction problems. The auditors notified the board of trustees that governs Volunteers of America Southwest they had identified many problematic spending practices in October 2020.

But McFadden kept his job until days after VOSD published a story detailing the financial mismanagement and potential fraud.

According to an email sent to employees, McFadden retired.

“The President/CEO has chosen to retire after many long years of service, effective immediately,” wrote former board member Philip Curtis on May 14. “He has made the decision to step aside so the affiliate can rebuild and move on. We thank Gerald for his service and the dedication he has shown to not only this affiliate but everywhere he has served.”

Curtis was himself mentioned in the county audit, when auditors raised concerns about a business he owned called Rezcare Pharmacy. Volunteers of America Southwest was doing business with Rezcare while Curtis also sat on the board of the charity. Such dealings aren’t illegal, but many organizations avoid them to prevent even the appearance of a conflict of interest.

Neither Curtis nor McFadden responded to requests for comment.

When asked if it would look into Curtis’s dealings with the local chapter, a spokesman for the national office said it would be reviewing all of the past protocols, practices and financial arrangements of Volunteers of America Southwest.

The board members for Volunteers of America Southwest included Curtis, Abel Svitavsky, Denise Knight, Martin Loth, Rosemary Rowley and Laura Williams.

The board members voted to relinquish the local charter back to the national organization, Curtis told employees in his May 14 email. When the charter was relinquished, the board in essence dissolved itself.

The Department of Veterans’ Affairs is also withholding nearly $2 million in funding from Volunteers of America Southwest, following VOSD’s revelations.

Barbara Banaszynski, an executive with the national office of Volunteers of America, will take over as acting chief executive officer.

A new local board of trustees will eventually be established to take back over the operations of Volunteers of America Southwest, the spokesman said.

Correction: An earlier version of this story included an incorrect list of the board members who have been dismissed.

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