A tiny tax exempt school gives president a lavish life2
OUR OVERUSE OF THE EXCLAMATION MARK VOLUME 281 NUMBER 117 Suggested retail price $2.00 outside of Metro Boston Point made $1.25 * abcde Th u r s day , A p r i l 2 6 , 2 01 2 SPORTS: SOX COMPLETE A SWEEP OF TWINS, 7-6 SQUISH FULFILLMENT Today: Cloudy, showers later. High 57-62. Low 44-49. Tomorrow: Mostly sunny, breezy. High 57-62. Low 36-41. Boom in pools BUSINESS B5 High Tide: 3:01 a.m. 3:38 p.m. Sunrise: 5:46 a.m. Sunset: 7:38 p.m. Full Report: Page B13 In the news Supreme Court justices appeared inclined to uphold Arizona’s requirement that ofﬁcers determine the immigration status of anyone they stop if they suspect the person to be an illegal immigrant. A2. SEASON’S SUDDEN END as frustration rose over the continuing violence. A3. France raised the idea of UN military intervention in Syria on Victoria Reggie Kennedy as commencement speaker at Anna Maria College. B1. An online religious group urged Bishop Robert McManus of Worcester to lift his ban Reputed Maﬁa boss is indicted East Boston man faces racketeering charges By Milton J. Valencia GLOBE STAFF struggling Massachusetts homeowners under a program that uses proceeds from a settlement with big banks. B5. Counseling and grants worth $16 million will be offered to Governor Deval Patrick refused to negotiate with the Wampanoag of Aquinnah over a casino, saying the tribe surrendered gambling rights in a 1980s land accord. B1. JOHN TLUMACKI/GLOBE STAFF with political leaders but said he did not try to manipulate British governments. A5. Media power Rupert Murdoch acknowledged close contact Andrew Ference hugged goalie Tim Thomas after the Bruins bowed out in Game 7. Coverage, C1. Fans’ reaction, B2. Dan Shaughnessy plastic water bottles. The bylaw still needs approval of the attorney general’s ofﬁce. B3. Concord residents voted to ban the sale of single-serving Capitals knock out champion Bruins, 2-1, in OT It was not a good New England winter for ice. Maybe that was a sign. The Boston Bruins, Stanley Cup champions who skated until mid-June in the glorious spring of 2011, are done for the season. The Spoked-Bs were sent home Wednesday night, losing Game 7 of their ﬁrst-round series to the upstart Washington Capitals, 2-1, in the third minute of overtime, in front of a stunned TD Garden sellout crowd. Winger Joel Ward scored the winning goal, muscling the puck past Tim Thomas after a rush by former Bruin Mike Knuble. ‘‘We had to really grind it out,’’ said Bruins coach Claude Julien. ‘‘It was a challenging year for the guys. At the end of the day when you look at your team, your team wasn’t playing its best in this series.’’ It’s somewhat of a shocker. We thought there would be another two, four, six weeks of playoff hockey, but now the bull gang can melt the cold sheet and switch to parquet for the rest of the spring. The NBA postseason doesn’t start until this weekend and already hockey is done for the year. Bring on the Celtics and Atlanta Hawks. Bring on the NFL draft. Bring on the (gulp) Red Sox. We won’t see the Bruins again until September. ‘‘We deﬁnitely had obstacles this season,’’ said Bruins captain Zdeno SHAUGHNESSY, Page A16 Retiring Representative Barney Frank said President Obama erred by pushing for a health care overhaul in 2009 before trying to change the ﬁnancial system. A12. endorse Mitt Romney. A13. Newt Gingrich said he will suspend his long presidential quest next week and formally Anthony L. DiNunzio, the reputed leader of the New England Maﬁa who allegedly bragged that he would enforce his authority by burying opponents alive, was charged with racketeering and extortion Wednesday in US District Court in Rhode Island, in yet another blow to a criminal organization that continues to see its power erode. DiNunzio, 53, the younger brother of the convicted mobster Carmen ‘‘ The Cheese Man’’ DiNunzio, is the sixth consecutive boss or acting boss of the New England Maﬁa to face criminal charges. His predecessors have all been convicted. DiNunzio, of East Boston, was arrested just before 7 a.m. at the Gemini Social Club in the North End of Boston. Wearing glasses and a windbreaker jacket, he pleaded not guilty in federal court later to charges of racketeering conspiracy, extortion, and traveling to aid extortion. Prosecutors have asked that he be held without bail, and a hearing is scheduled in Providence May 3. ‘‘Organized crime likes to believe their reach is long,’’ US Attorney Peter F. Neronha said at a press conference after the hearing. ‘‘Our reach is longer.’’ Neronha said the indictment should serve as a message to organized crime ﬁgures who hope to assume DiNunzio’s role. DINUNZIO, Page A10 ‘This is the engineers ﬁnally passing the baton to the creative folks and retailers.’ Have a news tip? E-mail firstname.lastname@example.org or call 617-929-TIPS (8477). Other contact information, B2. POINT OF VIEW: YVONNE ABRAHAM JULIE WORMSER Boston Harbor Association ‘‘About 1,000 of the state’s roughly 166,000 employers paid the Fare Share contribution in 2010. Some of them deserved the ﬁne, and more. But shouldn’t we make a distinction between employers of good faith who can’t get employees to sign up for health insurance, and the scofﬂaw employers who simply won’t?’’ B1. Inside Features Classiﬁed Business B5-9 Legal notices B6 Deaths B10-12 g Editorials A14 TV/Radio, Comics, Lottery B2 Crossword, Weather B13 Sudoku, KenKen, Movies, Horoscope © Globe Newspaper Co. All-out effort to get people to waterfront this summer Events showcase local attractions By Joseph P. Kahn GLOBE STAFF DAVID L. RYAN/GLOBE STAFF Citizens in $137.5m overdraft settlement Bank accused of manipulation to increase fees By Beth Healy and Todd Wallack GLOBE STAFF A six-bedroom president’s house with swimming pool and ocean views is part of the campus of the National Graduate School of Quality Management in Falmouth. For breaking news, updated stories, and more, visit our website: BostonGlobe.com 17439 0 947725 4 The Big Dig was completed ﬁve years ago, resulting in the Central Artery’s demolition and creation of the Rose Fitzgerald Kennedy Greenway, 15 acres of public land. Once-polluted Boston Harbor has become not only a chic dining destination but clean enough to swim in. For many Bostonians, though, the waterfront neighborhood and Greenway remain terra incognita. How to lure them down there? That is the aim of a consortium of nonproﬁt organizations, governmental agencies, and business owners behind a campaign labeled ‘‘Summer on the Waterfront: Eat, Splash, Shop, Learn.’’ Backed by a six-ﬁgure marketing effort, it will be formally unveiled June 1 and celebrated with a kickoff ceremony June 2 on the Greenway. The campaign runs through Labor Day. Along with a dedicated webWATERFRONT , Page A11 A tiny tax-exempt school gives president a lavish life Critic calls board a ‘puppet group’ By Brian Jordan, Kristina Finn, and Walter V. Robinson GLOBE CORRESPONDENTS FALMOUTH — It is a tiny school, with an enrollment the size of a modest elementary school. There is no campus, just a small ofﬁce building. Its 400 part-time students are invisible here, attending classes at off-site facilities across the country. Yet the National Graduate School of Quality Management awarded its president, Robert J. Gee, $732,891 in compensation two years ago. By comparison, the president of Tufts University, with 10,800 employees and 5,500 students, had nearly identical compensation the same year, $738,596. Gee has champagne tastes. In 2009, he persuaded the Massachusetts Development Finance Agency to authorize $2.64 million in low-interest bonds. That made possible his school’s purchase of a $3.25 million waterfront compound on Oyster Pond with spectacular views of Martha’s Vineyard, especially from the six-bedroom house earmarked to be Gee’s presidential residence. SCHOOL, Page A10 State-backed bonds with low interest rates helped Robert J. Gee open his school. Citizens Bank customers hit with questionable overdraft fees could receive refunds under a settlement announced Wednesday in which the bank agreed to pay $137.5 million to settle charges it manipulated customers’ debit card and ATM transactions. The bank was accused of processing the transactions in a way that made overdrafts more likely, boosting the income it collected from customers forced to pay overdraft fees. Citizens did not admit wrongdoing in the case, which is being heard in federal court in Miami. The court must still approve the settlement. Details of how customer refunds would be distributed will be determined after the settlement is approved. In a statement, the bank’s spokesman, Jim Hughes, said, ‘‘We are pleased to have this matter behind us. As our industry evolves, we continue to provide our customers with choices to help them manage their accounts and their ﬁnances.’’ Overdraft fees, which disproportionately affect lower-income CITIZENS, Page A8 A10 The Region T H E B O S T O N G L O B E THURSDAY, APRIL 26, 2012 400-student school gives president a lavish life Continued from Page A1 º SCHOOL Five months later, the school, which focuses on a particular ﬁeld of business management, purchased new automobiles to ﬁt the estate setting: a silver Mercedes-Benz S550 sedan for Gee and a silver Mercedes-Benz station wagon for his wife, Aileen Waters Gee. The cost: $130,638, or about 2 percent of the school’s revenues that year. There was no sales tax, because the school is tax-exempt. For years, the school’s revenues have ﬁnanced a lavish lifestyle for Gee and for his wife, who has been paid at least $100,000 a year since 2003. And they have vacationed together at school expense: The school owns a deluxe winter getaway in the US Virgin Islands for their use, part of a 17-year employment contract that expires in 2023, when Gee will be 79. Gee, after ignoring the Globe’s calls and e-mails for more than a month, issued a statement Wednesday asserting that his compensation and perks are warranted. He said that they are comparable with those given to leaders of similar institutions, but did not identify any. Attorney General Martha Coakley, who oversees public charities, said Gee’s ‘‘compensation, employment contract, and other beneﬁts . . . seem excessive.’’ After reviewing the reports at the Globe’s request, Coakley’s ofﬁce sent a letter to the school Wednesday demanding information from board members. The public documents, she said, ‘‘raise questions about the appropriate use of charitable funds, as well as the organizational governance process that led to their approval.’’ Elizabeth K. Keating, a nonproﬁt ﬁnance expert who reviewed the school’s documents, went further: ‘‘If I sat down to write a ﬁctional case study that was designed to wave red ﬂags about an organization that is misusing its tax exemption for personal gain, this would be it.’’ Gee’s extraordinary compensation was discovered as part of a Globe analysis, conducted by Northeastern University investigative reporting students, of data culled from publicly available tax returns ﬁled by more than 22,000 nonproﬁts in Massachusetts. While compensation agreements at nonproﬁts are supposed to be scrutinized by boards of directors, it is not clear how diligently the National Graduate School’s board carried out its duties. Several board members, including its chairman, Thomas Kneaval of Delaware, refused to discuss their role. One former member, Scott Adams, said the board was mostly a ‘‘puppet group’’ of Gee’s friends. Sometimes, he said, the board was not consulted about important decisions. Often, he said, the board was informed after the fact. It was, he said, ‘‘a one-way conversation.’’ Adams, a board member from 2004 to 2007 and subsequently a DAVID L. RYAN/GLOBE STAFF A statement from the school’s president, Robert J. Gee, said the Falmouth compound was never intended to be his residence, but school records said it would be. Gee said his $732,891 compensation was justiﬁed in part because he was the school’s founder. full-time ofﬁcial at the school, said Kneaval’s attitude seemed to be that it was Gee’s school and the board was to do what Gee wanted. Adams said he does not remember that Gee’s 17-year contract even came to the board for approval in October 2006. ‘‘If that contract came to the board, it would have been rubber-stamped,’’ Adams said. Gee agreed during a brief telephone interview on April 11 to answer questions, which were sent to him the next day. On April 16, Gee promised to provide answers by Monday of this week, but did not, asking for another delay. Late Wednesday, Gee emailed some answers to the Globe, saying they should be attributed to Kneaval, the chairman. The statement said Gee’s compensation is justiﬁed because he is the school’s founder and because he maintains a full teaching load. The statement said the Oyster Pond compound was never intended to be his residence, even though the school’s own documents, some with Gee’s signature, consistently said it would be. It said his wife’s hiring had nothing to do with her being his spouse. The statement was silent about her Mercedes-Benz. Gee, who is 67, founded the school in 1994. Its focus is graduate-level coursework in total quality management, the practice of training workers and managers, and even customers and suppliers, to more efﬁciently manage production and processes. These practices, which helped make Japan an economic superpower, are now widely used by American manufacturers and have become a staple in business school course catalogues. Keating, who teaches at Boston College and at Boston University and has written extensively about executive compensation, said that Gee’s salary and perquisites are so excessive that the Internal Revenue Service might levy substantial excise tax what Bentley University pays its president, Gloria Cordes Larson. In 2010, Bentley had $227 million in revenue and 4,200 students. (Ironically, Larson’s husband, Allen R. Larson, sits on the board of Gee’s school.) The 20 percent drop in revenue may have triggered problems with Bank of America, which holds the $2.64 million mortgage on the Island Pond property that was approved by MassDevelopment. The school’s auditor, G.T. Reilly & Co. of Milton, noted that the school failed to maintain the required ratio between its debt and net worth, but had negotiated new requirements with the bank. The auditor, however, expressed concern that the school could still default on the debt. Wednesday, Gee did not respond to written questions asking whether the school is current on its debt payments. What’s more, the Falmouth assessor refused to waive property taxes for the Oyster Pond compound and an adjacent waterfront property the school bought for $1.25 million in 2010, citing its intended use for lodging for Gee and others. The school, which now faces annual property taxes of $25,000, has appealed the decision to the state Appellate Tax Board. Gee and his wife are in the process of getting a divorce, according to court records. She began a two-year stint as board chairman in July 2001, 11 months before she and Gee were married. In July 2003, she left the board and joined the staff at $100,000 a year. The same year, the school bought the couple their ﬁrst two Mercedes-Benzes, which were replaced with new models in 2009. But it is the two high-season timeshare units in St. John that remain perhaps the most curious expenditure for the school. According to several annual reports by the school’s audit ﬁrm, the school loaned Gee $41,990 in 2006 to help him buy two wintertime weeks at the posh timeshare. Later the same year, the school took over the mortgage and assumed ownership of the timeshares. It later refunded Gee $20,462 for the timeshares, though the audit does not say why. Since 2006, the school has been paying $36,648 a year on the timeshare mortgage, at an interest rate of 16.9 percent. But that is not the school’s only contribution to Gee’s St. John vacations. In Gee’s 2006 compensation agreement, the school agreed to pay the roundtrip travel for Gee and his wife and ‘‘related expenses.’’ And if Gee is unable to take the time, the school reimburses him $1,000 a week. In the written response Wednesday, the school said the timeshares were part of a ‘‘strategic expansion’’ that was later ‘‘modiﬁed.’’ The agreement awarded Gee a base salary of $400,000 a year, an annual cost-of-living adjustment, annual incentive compensation of ‘‘not less than’’ 15 percent of his base pay, and a deferred com- The school earmarks barely half of its expenses for services. assessments against the school and Gee. If the IRS ﬁnds the violations extreme, she added, the school could be stripped of its tax-exempt status. Even without scrutiny from Coakley and the IRS, the school that Gee built faces other ﬁnancial issues, according to its tax return and auditor’s report for the ﬁscal year that ended June 30, 2011, which the Globe obtained Tuesday. There is a long lag time between the time nonproﬁts ﬁle their returns and when they are publicly available. In the prior year, when Gee’s compensation was $732,891, the school’s revenues were $7.1 million. In the most recent year, revenues fell to $5.7 million, and Gee’s total compensation tumbled to $539,610. That is close to pensation package that has yet to be determined. Other provisions in Gee’s compensation include: ª Four weeks’ vacation and 30 sick days a year, as well as pay for days he does not take. ª An expense account that allows ‘‘expenses well above the norm,’’ according to the wording in the contract. ª Pay for the cost of clothing and luggage ‘‘damaged or depleted’’ during his extensive travel ª Reimbursement ‘‘on a perevent basis for renovations and refurbishment to his residence preparatory to host employer events.’’ The agreement provides for Gee to have one automobile, not two. Eric Nelson, a former highranking school ofﬁcial, recalled in an interview that Gee bought the second set of Mercedes just after telling his staff in 2009 that the school had no money for salary increases. After reviewing the school’s ﬁnancial reports and the employment agreement, Keating, the nonproﬁt ﬁnance expert, expressed disbelief that the Massachusetts Development Finance Agency would fund the project in light of the spending practices that are evident in the school’s ﬁnancial reports. Aside from the compensation and perks, Keating pointed to a more obvious red ﬂag, that the school now earmarks barely half of its expenses for delivering program services. A recent analysis of 102 colleges and universities in Massachusetts, she said, showed that, on average, they devoted 80.5 percent of expenses to program services. ‘‘The lending criteria and the lack of due diligence by MassDevelopment is pretty shocking,’’ Keating said. MassDevelopment, a quasistate agency that helps not-forproﬁts ﬁnd affordable ﬁnancing for capital projects, made all of its records about the loan available to the Globe. Laura Canter, the agency’s executive vice president for ﬁnance programs, said the agency’s review is intended ‘‘to ensure that the borrower and the project are eligible for tax-exempt ﬁnancing.’’ As for the school, Canter said, both faculty housing and housing for presidents are eligible for ﬁnancing under the tax code. ‘‘We do not make arbitrary judgments about who is or is not worthy,’’ Canter said. ‘‘If projects are eligible, they are eligible.’’ In addition to Jordan and Finn, this article was reported by Betty Wang, Sara Feijo, Samantha Laine, Matt Kauffman, and Melissa Tabeek for a seminar in investigative reporting at Northeastern University. Their work was overseen by journalism professor Walter V. Robinson, a former editor of the Globe Spotlight Team. He can be reached at email@example.com. Conﬁdential messages can be left at 617-929-3334. Reputed Maﬁa boss charged in US court Continued from Page A1 º DINUNZIO ‘‘These are not light punches,’’ he said. ‘‘These are heavy blows, and we hope they will . . . continue to have an effect.’’ DiNunzio’s lawyer, Robert Sheketoff, would not comment outside the courtroom Wednesday. DiNunzio was ensnared in a case that began in Rhode Island two years ago and was followed by a nationwide sweep of Maﬁa ﬁgures in January 2011, the largest roundup of Maﬁa ﬁgures of its kind in history. In the Rhode Island case, several Maﬁa ﬁgures, including former acting boss Luigi ‘‘Louie’’ Manocchio, and their associates were accused of and later pleaded guilty to extorting thousands of dollars in protection payments from strip clubs, including the Satin Doll and the Cadillac Lounge. Manocchio and several associates have yet to be sentenced. Manocchio, 84, yielded control of the Maﬁa around late 2009. For a short time, according to law enforcement ofﬁcials, Peter Limone, one of the men vindicated after serving 33 years in prison for a gangland murder he did not commit, assumed the role of acting boss. Limone was subsequently arrested and convicted in Massachusetts state court on bookmaking charges. Authorities said Wednesday that DiNunzio, whose criminal record includes an extortion conviction, then took control of the New England Maﬁa, overseeing operations in Boston and Rhode Island. DiNunzio immediately sought to collect on the cash payments that Manocchio’s crew was receiving from the Rhode Island strip clubs, according to court documents ﬁled Wednesday. He named a top Maﬁa member from Rhode Island, Edward Lato, as head of the organization in that state and had him deliver money, authorities said. DiNunzio also sought the permission of the New York-based Gambino crime family to require payoffs from someone involved in the adult entertainment industry who was doing business in Rhode Island, authorities said. DiNunzio, according to the authorities, deﬁned his leadership style. ‘‘As soon as I took over, I changed everything,’’ he allegedly told an associate. According to court records, DiNunzio issued the warning to bury alive those who deﬁed his rule during a meeting with an associate at My Cousin Vinny’s restaurant in Malden in June 2011. . If someone disobeyed him, he allegedly said, ‘‘I get to watch you die in the ground.’’ He added: ‘‘I stay there 10 [expletive] hours until your [sic] dead. And I’ll dig you back up and make sure you are dead.’’ Several of DiNunzio’s conversations were recorded on wiretaps, including those he apparently had with members of the Gambino family. The other members of the Maﬁa were not identiﬁed in court records and are referred to only as Maﬁa members or associates. DiNunzio began to suspect he was under investigation after Lato and other associates were charged, along with Manocchio, in 2011, according to court records. DiNunzio was searched and had $5,000 seized by the FBI after Lato had given him the money. DiNunzio told an associate from the Gambino family that he had come to realize that he was being recorded during a meeting at Billy Tse Chinese restaurant in Boston, the records say, conﬁding to an associate that the Rhode Island investigation could be his downfall. ‘‘That’s the only thing I could think that could set me up,’’ he allegedly said. Law enforcement ofﬁcials said Wednesday that the case against DiNunzio shows the inner workings of organized crime. DiNunzio can be heard on wiretaps discussing the process of becoming a ‘‘made’’ member, for instance, according to court records. The ofﬁcials pledged to continue investigating organized crime in Rhode Island and Boston. ‘‘This is a regional problem that crosses state borders,’’ said Richard DesLauriers, special agent in charge of the FBI ofﬁce in Boston. To date nine people, including DiNunzio, have been charged in the extortion of Rhode Island strip clubs, and six have been convicted. Before DiNunzio and Limone, New England Maﬁa bosses Frank ‘‘Cadillac Frank’’ Salemme, the late Nicholas Bianco, and Raymond ‘‘Junior’’ Patriarca were convicted. ‘‘The Justice Department and its law enforcement partners are determined to put La Cosa STEVEN SENNE/ASSOCIATED PRESS ‘‘Organized crime likes to believe their reach is long,’’ said Peter Neronha, US attorney for Rhode Island, in announcing the arrest of Anthony DiNunzio. ‘‘Our reach is longer.’’ Nostra out of business, and we won’t stop until we’ve done just that,’’ said James M. Trusty, chief of the organized crime and gang unit for the Justice Department. Ofﬁcials acknowledged, however, that the arrest of DiNunzio opens a window for someone else to assume the leadership role and that the Maﬁa continues to operate. DiNunzio, according to court records, has told associates that his son was working with La Cosa Nostra as ‘‘an administrative guy.’’ He has also told an associate that he would not yield his power, not even after an arrest, the records say. ‘‘If I go to the can, I’m still the boss . . . no matter what,’’ he allegedly said. Milton J. Valencia can be reached at MValencia@globe.com. Follow him on Twitter @MiltonValencia.