The Nieman Foundation for Journalism at Harvard University
The 1999 Watchdog Journalism Conference

Nonprofits

Bill Kovach, Curator, Nieman Foundation

I wanted to moderate this discussion on nonprofits because I personally have a strong interest in pushing the agenda of covering nonprofit organizations. Most news organizations do not and have not covered nonprofits, but as the power of government devolves, and it’s devolving rapidly, to state and local government and away from all sorts of social programs, those aspects of public life are in many cases being picked up by or left to nonprofit organizations to handle, and in this time of enormous wealth creation over the past decade, an awful lot of money has moved into fewer and fewer hands at the top of the economic structure of our country, and more and more of those people who are collecting more and more personal fortune are choosing to withdraw their support from the federal government by investing their profits in nonprofit organizations targeted to things they are personally interested in.

So as broad-based support for broad-based public programs dissipates, the power of nonprofits again is becoming more and more important to how our society is structured.

To just give you a few examples of why it’s such an important area, over the past two decades, since 1970, nearly three decades now, this area of nonprofit organizations has grown four times faster than the overall economy which itself has grown pretty steadily. For the last two years, the IRS reports that they are granting new tax exemptions to 75 organizations a day. That’s on top of nearly a million-and-a-half nonprofit organizations that have federal exemptions from taxes. In 1997, the federal tax exemptions alone withdrew $21 billion from the national treasury. State and local tax exemptions added another 30-plus billion to that.

So you can see the dimensions of the world of finance and investment in social programs, and otherwise, in political programs. A number of these tax-exempt organizations simply put their money into political campaigns. So we have all sorts of aspects of our social and political activity that take place at the direction of private money through nonprofit organizations, and the journalistic problem attached to that is that these are private organizations and private money, and journalistic access to those precincts is not clearly as clear as it is to government organizations.

First Step, Get IRS Form 990’s

Doug Frantz, National Correspondent for The New York Times.

[Doug Frantz is a national correspondent for The New York Times, where he has worked for five years. He worked previously as a reporter at The Los Angeles Times, Time magazine and The Chicago Tribune. He is the author or co-author of six nonfiction books on subjects ranging from architecture to Clark Clifford. Frantz has received several journalism awards, including the Worth Bingham Prize on two occasions and the Goldsmith Prize for Investigative Reporting. He was a Pulitzer Prize finalist for a series of articles on the Church of Scientology in 1997 and for articles in 1992 about American relations with Iraq before the Gulf War. Frantz is a graduate of DePauw University and the Columbia University Graduate School of Journalism.]

First, I want to start with a practical tip for any journalist who wants to try and get inside a nonprofit. It’s the first step, it has nothing to do with sources, but it will help you understand the organization, and that’s to go get the IRS Form 990’s. If you don’t know about them, they’re the key, they’ll give you a good picture of the finances of the nonprofit organization. They are its tax return, although of course they don’t file taxes. They have to be provided to you on the premises of the nonprofit organization. You go there, they must show those to you.

I once went down to visit David Duke outside New Orleans at his National White People’s Party, and I went in and told him that I wanted to see the 990s, and he said, "Well, we don’t have to show you those," and we got the regional commissioner of the IRS on the telephone in Atlanta and he explained to Mr. Duke that in fact he did have to show those to me.

They do not have to let you copy them, so what you do is when you go see them you take in a blank form so that you can just fill out the form in duplicate. They’re supposed to have at least two years there.

Most places won’t let you copy them, surprisingly. I went to Educational Testing Service out in Princeton, a reputable place, as far away from David Duke as you can get, and they wouldn’t let me copy them. I sat in their library and looked at five years’ worth with a copy machine about 10 feet away and they wouldn’t let me copy them, so I used my own blank forms.

If you can’t, for some reason, get to the organization, if you don’t want the organization to know you’re interested, you can get them from the IRS, or you can also contact an organization called the Foundation Center. It’s on lower Fifth Avenue in New York, and they have a lot of them; they don’t have all of them, but they have a lot of them.

They’re just invaluable, whether as I did in the ‘96 campaign for The Times, I was looking at Pat Buchanan’s perpetual campaign and looked at the 501(c)(4) organization that he’d used, and to look at the way he and his sister had taken money out of this foundation just constantly and it enabled him to maintain a constant campaign.

I looked at them for the Red Cross, and I looked at them for Scientology. That was the starting point of my inquiry into Scientology. I just recommend that on a practical level, they’re just invaluable and they may be the only look you get inside the finances of one of these organizations. Because these organizations are all about money. Money is where you’ve got to start, whether it’s the Red Cross or Scientology or a political nonprofit.

Let me go on to sources, because, as these are organizations that by and large are closed to the prying eyes of the press, you can’t file a FOIA and get their information. Very rarely are they subjects of lawsuits, and even more rarely do they in fact file them themselves. It’s very difficult to find a public record about these organizations. So sources are invaluable, but you have to treat them the way you do any other source, and more so, for reasons I’m going to get to in a second.

I’ve been an investigative reporter for almost 20 years, and I couldn’t have done my job during those 20 years without sources, without relying on sources, on people who took risks to themselves, who risked going to jail. People on the Scientology story who risked something worse than jail, which is the wrath of Scientology.

But also, I couldn’t have done my job if I had only relied on those sources. It is essential that you use a source, particularly when you’re dealing with a nonprofit, as a point of origin - it’s the beginning place - because they’re most likely to be disgruntled, former true believers, whether they’re ex-members of the Red Cross or former Scientologists.

And you’ll find no person in the world more zealous than a former Scientologist, believe me. They’re an extraordinary group of people. But you have to take what they say only as a starting point, you cannot rely on a single world of a single sentence without checking it out yourself. These are people who joined an organization like that for very idealistic reasons and became incredibly disillusioned. They’ve had their lives turned upside down, and I think this applies to a lot of nonprofit organizations, not just Scientology.

But let me talk about Scientology and tell a war story.

Three rules quick.

I worked for five years in Washington, I never went to a party with sources. I’m working on a story now where I’ve seen the value in that, in refusing to be friends with sources on any level, and that is on a project that I’ve been working on for about four months for The Times. I went to a big city and had dinner with a guy I’d known sort of as an acquaintance over the years, and I knew about his involvement in an episode of this story that I’m working on, and so we sat down over dinner one night and he told me on a background basis a lot about how this particular episode went down. He knew it was on background; he knew, I think, that I was going to use his name because I knew his name before I went in.

He’s spent the last week on the phone with colleagues of mine and last night with an editor of mine trying to convince him that because he knew me, I can’t use his name in the story. Well, that is not going to happen. His name is going to go in the story, not what he told me on background, but because of his involvement. He tried to play on what he considered to be friendship. I said we’re not friends.

I think that particularly for the five years I spent in Washington for The Los Angeles Times that it was vital to my independence that I not be on a first-name basis with my sources, that I not go to parties with them. That was important.

Rule 2 --- Give Background of Sources

The second rule, and I think this is illustrated very well, I hope, in the Scientology story, is transparency. We have to tell our readers where these sources are coming from. Even if you use their names I think you need to provide some background. One of the key people in the biggest and the longest of the Scientology stories I wrote in March of ‘97 about Scientology’s battle with the IRS was a private detective named Michael Shomers, and from the outset he was on the record, I could use his name, and he provided me with enormous documents, and I’ll talk about that in just a second, but what I did was about the third or fourth time I sat down with him over a series of several weeks, I said, "Why are you talking to me, because Scientology is known for going after its critics with great vigor?" And he knew this as well as anyone, having been on the attack side of it, and he said, "Well, I don’t trust Scientology anymore, and also I had a financial dispute with my former partner at the private detective agency."

So it was good for me to know that, and also I put that in the newspaper, and I told him I was going to put that in the newspaper, because it’s not enough that I know it, my readers have to know it. They need to be able to evaluate what this source is saying, not just to me, but to them in the newspaper. I think you need that kind of transparency.

Rule 3 --- Don’t Give Advice to Sources

The third one is just a silly little thing which is illustrated well, I think, in the Scientology story, and that is that I don’t give advice to sources. People often call up - I’m sure you must have had people call up and ask you, "What do I do now? Should I go talk to the government, should I talk to the prosecutor, should I blow the whistle to the IRS?" I just have a flat rule not to tell them anything.

This rule was underlined for after the first Scientology appeared in The Times. A woman called me up, a stranger, and she had some information about her husband, his financial dealings with the Church of Scientology, which was very interesting, and she told it to me, and I dutifully took notes. Then she said to me, "Who can I go to to find out more about this church?" I gave her a piece of advice, and I wish now I hadn’t. It seems a little too pure perhaps, but I wish I hadn’t, because I told her, "Talk to this guy, Stephen Kent, at the University of Alberta."

I quoted him in the story, she could have figured it out on her own, but what happened was she called Kent - and I found this out later as I sat in the office of Scientology out in Los Angeles - she called Kent, Kent put her in touch with a deprogrammer named Rick Ross down in Arizona, and Rick Ross told her how she could infiltrate the church and go in and find out about the church personally and then she was to come back out and tell this information to Rick Ross.

So, lo and behold, she went into the church and she lasted about three days, and they’re going through their tests and stuff and she confessed to her Scientology handler that "This is how I got her," and so it came right back to me, and what it did was make Scientology question my motives because it looked to them like I had taken a strong side against them, and I’d made a mistake, and I told them, I told them exactly what happened, that I made a mistake because I violated my own rule, and it’s a rule I think about which you cannot be too pure.

Summary of Scientology Story

So let me real quickly recap that story, because it was kind of an old story. The first story I did on Scientology, the first in this series of about four or five stories, was about the IRS tax exemption that they were granted in 1993, and by the time I came to it, it was June of 1996, so the story’s almost three years old. There have been front-page pieces in The New York Times, in The Los Angeles Times, and other publications about it, and it seemed like an old dead story, and Scientology certainly would have preferred that it stay that way.

I was having lunch with a friend of mine in New York and he said, "I heard a story about a private investigator who spent a long time looking at the IRS on behalf of Scientology," and he had heard this from another private investigator who was a friend of his. I said, "What’s the guy’s name," and he said, "I think his name is something like Shomers or Schooner or something."

So that was my tip and that was what got the story started. He knew he lived in Maryland. Going through a lot of records in Maryland, I finally tracked Shomers down in another state, and I went down and heard his story, and it was a pretty chilling story about how he had been hired by the Church of Scientology to dog several IRS officials and how he’d done things like steal documents from an IRS conference, used photo surveillance on IRS agents, gone into private financial dealings that IRS officials held outside their government jobs, and it was fascinating stuff.

Fortunately for me, and for the readers of my newspaper, he had maintained copies of almost all of the documents he generated for the Church of Scientology. So here I had the perfect source, it seemed to me, to start this story. I had a guy who was willing to go on the record, who ultimately disclosed what his agenda was, and who had the documents to back up everything that he said. It was a wonderful find and the best possible way to begin that story.

Defectors Incredibly Cynical

The next batch of sources I dealt with really were the Scientology defectors. If any of you have ever written the word Scientology in a story, your E-mail box has been filled with notices from these folks.

Their motives were as suspect to me as those of any source or any official within the Church of Scientology because they clearly had an axe to grind, they had their own agenda. It was vitally important that I hear what they had to say, and then that I be able to go out and corroborate that.

As I said initially, I can’t make the point too strong, that people who have been involved with organizations like the Church of Scientology at one time were true believers and they’re now incredibly cynical and they feel, many of them, that their lives were ruined by the church. I’m not sure that that’s necessarily true, but one of the people I talked to was a woman named Stacy Young, and I was focusing on the her relationship with the Church of Scientology. She had been a high official in the church who defected in 1989 with her husband, Robert Vaughn Young, and they were both outspoken critics of the church, they were very public in their criticism. I spoke with her at great length about an organization she’d managed on behalf of the church. It was a front organization that the church had set up called IRS whistleblowers - I forget the formal name of it - but it had no association outwardly with the Church of Scientology, but she had said to me, "We set this up, this was a front. We recruited former IRS agents and this was part of a war they were waging against the IRS."

This was a 20-year war that had begun with break-ins at the Justice Department and bugs planted in conference rooms. It was an out-and-out war. She had been not a soldier in this war, but one of the leaders, one of the generals in this war.

She said she set up this organization, and she gave me all the details. She had no paperwork left and so on my own I was able to go out and find three former IRS employees who had been members of that organization, had been the fronts, and two of them didn’t even know it, two of them were completely unaware, but the third one, and the guy who was really the leader of this organization, acknowledged that he knew Stacy Young, that he’d received financing and advice from her and other officials in the church.

So there again, it’s a matter I think of using the source as a beginning point and finding out what you can do to corroborate that information. For me, it was essential on that story. It’s that essential on every story. They don’t all come as smoothly as that one does.

I wrote about a 5,000-word story that ran to two full inside pages in The New York Times, and in those 5,000 words about a very controversial subject I had one unnamed source, and that was a person who was identified as a senior government official who was involved in the decision-making process, and that’s because it was an IRS official who couldn’t, under law, speak about the internal deliberations of the IRS, but I spelled that out in the story, so I think that that provided the transparency that met one of my rules.

It was an amazing story for me because of the way the sources initiated it, and then the way, through their help and through the help of colleagues and editors at the time, we were able to corroborate everything they said. That’s the way it ought to be, and if you work outside Washington, at least, that’s the way it is most of the time I think.

Clarification on Not Advising Sources

Kovach - I want to clarify one thing for the record. You have three very good rules; on the third one though, do not give advice to sources, you first said maybe that’s too pure, then you told the anecdote and you said you can’t be pure enough on that point. I want to make sure which it is.

Frantz - I’ll go with the latter there. What I was saying that you may find that too pure, but what I found out is you can’t adhere strictly enough to that rule.

Kovach - It’s part of what set your work apart, too. I think it’s a good rule, I don’t think you can be too pure on that.

How Fertility Clinic Misuse of Eggs Was Exposed

Susan Kelleher, reporter for The Orange County Register.

[Susan Kelleher joined the staff of the Orange County Register in 1989, starting as a city government reporter and moving to the health care beat a year later. While covering health care, Susan developed a subspecialty in bad doctors and the culture that breeds them. In 1995, she teamed up with Kim Christensen to break the story of a renegade fertility clinic that was stealing eggs from infertility patients and using them to create children for other infertile women. Coverage of the scandal, which spanned more than a year and involved a team of reporters, won a Pulitzer Prize for investigative reporting, a George Polk Award for medical reporting, and a host of other national and state awards. Susan now works on the investigations team, specializing in health care topics. A native of Pearl River, N.Y., she graduated from the University of Colorado-Boulder.]

Let me give you a little bit of background on the [story of the illegal and secret transfer of women’s eggs] just because I wasn’t a doctor before I started it; I’m not now. What this whole story involved was fertility specialist surgeons at the University of California at Irvine, and what they would do is people would come to them with various infertility problems and they would solve them and they had a number of ways to do so.

One way that was very popular and wickedly expensive was that they would pump women full of hormones so that they produced instead of one or two eggs a month, they would produce many, sometimes as many as 25 or more, and then extract those eggs surgically, wash them off, take the husband’s sperm, put them in a little dish, fertilize them so they created embryos, and then they would put the embryos back in.

Sometimes they would take the sperm and the egg and they would put it back in the fallopian tube, which the Pope was thrilled with because then conception took place inside the body. So it was loved by the Pope, loved by the university because they made a lot of money and they were like these golden boys.

What I found out is what they were doing was taking women’s eggs after they had extracted them, and they would take them without telling the women they had taken them, and what they had done was schedule other women who were menopausal, or for other reasons, like chemotherapy, didn’t have their own eggs, and they would give them to those other women. So women who thought they were giving their own eggs for themselves were in fact becoming donors for other women.

What the reporting showed, as well, is that the university tried to cover this up and tried to cut a deal with the doctors to make them go away quietly. Happily, we found them out.

On-the-Record Policy Helpful

My newspaper has a policy that we have to quote everybody on the record; no one’s allowed to be quoted in our paper anonymously. I am enormously grateful for that because it has made me a very hard-working reporter. I think that had I been allowed to use anonymous sources a lot, I probably would have gotten myself into some trouble, especially early on when I was not really wise to the ways of the people who tried to manipulate. Also, I think that the stories were much more solid, they had much more credibility, and I think the people also felt good about their participation in them.

One of the things I really have developed as sort of a personal style is that I have a lot of guilt when people get hurt. One of the reasons why I really like my job is that I stop people from getting hurt. So, for me to sort of contribute to their hurt would really upset me.

So before anybody participates with me in a story - and I say with me, in a sense of a source - I sort of tell them how I work. I tell them they have to go on the record. I tell them I’m going to be asking other people about them, that even though I find them a really nice person, I’m still going to have to check them out.

I ask them what their concerns are, I tell them what my concerns are. I tell them I don’t like to be lied to, and that if I find out that I’m lied to I get really upset. I tell them basically everything they ask me. If they want to know anything about anything, if I have an answer to it, I’ll give it to them.

I basically give them a choice of whether to be a part of the story as opposed to controlling the content, because I say, "Once you agree to talk to me, that’s it, you don’t really have control, but you have control to the degree you want to participate, and once you’re on the record, if there’s something you don’t need me to know, then don’t tell me because it’s going to be on the record and we’re not going to be playing games."

First Tip Came From Hospital Official

I tried as much as possible to stand in people’s shoes, and when I first got the tip it came from a senior administrator at the hospital who has called me sort of out of the blue to talk about some financial shenanigans that were going on at the hospital, and it was a pain in the neck to report, a lot of things that she was saying weren’t really checking out paperwork-wise.

But I did notice that the university had a really hostile response to my initial inquiries, which was pretty interesting, because it’s a fairly non-controversial beat, health care, and they had been very cooperative. So my alarm bells sort of went off that way.

Then at the end of one meeting, after maybe about a month of checking things out, while I was working on my beat, this woman, Debra Krahel, who has now said it’s okay to talk about her, she says to me, "Would you be interested if there was a case where the woman got the wrong eggs, they were taken?" I was like, "Absolutely."

That wouldn’t necessarily have stood out to me, but I had covered a really ugly surrogate case a couple years earlier where a surrogate mother who had been implanted with another couple’s embryo decided she wanted to keep the baby. It was full employment for a year, so I knew that even if this was an accident, it was going to be a great story.

So what I started doing then was just finding people at the clinic. I would meet at sort of strange times and strange places with people, and again have these same conversations, "This is how I work," and then telling them what I need, like, "I can’t do the story just with people, I’m going to need records."

Unmarked Envelopes, Unlocked Car Trunks

I needed to find a way to get records to me. People would always ask, never fail, "Are you going to have to tell anybody that I gave you these records?" I would say, "Yeah, if we get sued and I base the story on these records, then yeah, I’m going to have to disclose where they came from." I said, "However, if they come to me anonymously in the mail in an unmarked envelope, which I have a habit of throwing away, then it’s up to me to validate them and I will have no idea where they came from because I really don’t know."

My other favorite trick was to tell people where I was having lunch, and I had a really distinct car at the time, it was a blue Toyota Tercel with cow-covered car seats. I’d tell them I had a really bad habit of leaving the trunk open, and that really paid off because I got like a mother lode of documents one time that way. I did have to eat at the Sizzler though. [Laughter]

Basically, I think my first big break came when I found the former manager of the practice, and unbeknownst to me she was pretty freaked out at that time because the university was having its own secret investigation, this is when they were trying to squeeze the doctors out. So she asked me a lot of questions about what I was doing and I really got uncomfortable. It was like, I don’t know if I want to tell this woman the things that I’m looking at.

Without compromising other sources, I did tell her, and over a period of probably about three weeks, she finally just cracked. We would meet at a park by her house where her kids would play soccer and finally one day, I had a single record that somebody had sent me anonymously in the mail, and I said, "Could you tell me what this means, I have no ideas what this means. I know it involves this patient here."

So she said, "I don’t know why you keep pointing to that patient, because there’s a lot of patients on there." I’m like, "What? I can’t even read this thing!" Then she told me that there were hundreds of patients involved.

Support From Top Editors

At that point I told my editor what I was looking into, because I was doing a lot of this on my own time, but sort of working it into my beat. He very wisely told the top editor of the paper who said she thought it was bullshit but if I proved that it was true that I would win a Pulitzer Prize. She was pretty cool that way. She said, "Do whatever you need to do, go ahead."

I teamed up with Kim Christensen, who was a really experienced reporter, he had done a lot of things on prisons and we got really organized that way, just with files, and started doing public information requests to the university to get stuff that would be accessible.

In the meantime, it was sort of really slow trying to find people, and I say slow, it took about five weeks, but trying to find people and going back and getting rejected again and again and again. I hate being rejected, it bugs me, and I hate bothering people at their house, but I would go there and say, "Oh, sorry," and I think after a while they just saw me as this really pathetic person who was just not going to be going away.

I started getting into their homes, and that was really helpful because then what I would always do is I would tape them, I would say, "If you’re so concerned about being misquoted," which many people are, "I’ll tape you and this way I’ll give you a copy of the tape, and you’ll have a record of what you say and I’ll have a record of what you say, and if there’s questions I can call you." What that did is it also gave me another reason to go back. So every time we would tape, even if it was like three words, I would always insist on bringing a copy of that tape back for those three words.

University Files a Lawsuit

It got to the point where we had pretty much confirmed that this had happened, and we decided we were going to keep going until we found all the patients this had had happened to, but the university by this time sort of figured out what we were on to, and they tried to preempt us by filing a lawsuit that made it look like they were doing their job in just trying to ferret out this information and that the doctors were just so uncooperative.

In the lawsuit, on like the 115th page, they made reference to Dr. [Ricardo] Asch, who was one of the doctors, going and trying to get consent from a patient after the fact for egg donation. Well, in Orange County we’re in a dogfight with The LA Times, so we figured, well, they got the lawsuit, too, we’ve got to start moving ahead with what we’ve got.

So we wrote that story and then the next day I figured we would go and contact the patient, and instead I got called into the editor’s office and I saw my partner, Kim Christensen, and by that time Michelle Nicolosi, another reporter who had joined us, and all these editors sitting there, and we were going to call an ethicist and talk about whether we should run the story.

Working in Pairs

I kept thinking, gee, I really wish we had done this before I did all this work, but he was really helpful, and we just set out ground rules. We’re going to always go with two people, we’re going to.