When a kid hears the words “Fannie Mae,” a lady’s posterior comes to mind. When an adult hears those same words, what should come to mind lately is not affordable housing, but RICO – as in Racketeer Influenced and Corrupt Organizations Act, aimed originally by Congress at Mafia-styled organized crime syndicates.
The RICO moniker fits both the D.C.-based Fannie Mae and its wholly controlled appendage, the Fannie Mae Foundation. Chartered by Congress in 1938 to promote homeownership among low- and moderate-income families, by 1992 the tax-exempt goliath bore little resemblance to the New Deal friend of the little guy for whom it was intended. In 1968, the parent company went public, but thanks to the application of brute force on Capitol Hill, it kept its tax-exempt status. That free ride now costs the District of Columbia government more than $400 million annually in lost tax revenue.
No problem, said the arrogant company, led until recently by Franklin Raines, who directed the White House Office of Management and Budget during part of the Clinton administration. We’ve got a foundation. “The Foundation is specially committed to improving the quality of life for the people of its hometown, Washington, D.C.,” says the Fannie Mae Foundation website.
While the foundation’s grant-making in the D.C. area is considerable – amounting to about $24 million in 2004 – its grant-making is less than a penny on the dollar that Fannie Mae would pay if it were stripped of its D.C. tax exemption. In return for its foundation largess, Fannie Mae had a pliant stable of grateful nonprofits on call to defend the indefensible before our no-tax and spend-anyway Congress.
But last year, Fannie Mae’s hubris and greed met their match in the obscurest of federal agencies, the Office of Federal Housing Enterprise Oversight, directed by Armando Falcon Jr. Falcon claimed that Fannie Mae had cooked the books, reporting some $9 billion to $12 billion in illusory profits. That Enron-mimicking performance triggered gargantuan performance bonuses to Fannie Mae’s top officials, including Raines, who in 2003 pocketed around $20 million in salary, bonuses and stock options.
Raines certainly had Enron on his mind during the period challenged by the federal auditors. In January 2004, the University of Virginia’s Colgate Darden Graduate School of Business launched the Business Roundtable Institute for Corporate Ethics. Made up of 150 CEOs of huge corporations, with Raines as co-chairman, the institute was created to train business leaders in the practice of sterling on-the-job ethics. The move, Raines told The Washington Post, was necessary because of the “unfortunate failures in corporate governance that we’ve witnessed over the past few years.”
In December 2004, Raines and another top executive were forced out of Fannie Mae and off the board of its foundation.
Now the self-induced meltdown has reached the Fannie Mae Foundation.
In 2004 the foundation made $47 million in grants to nonprofits nationwide. Its favorite charity was itself: It spent an additional $40 million on a lame ad campaign aimed at increasing homeownership, asking people to contact Fannie Mae for a brochure. The post-Raines Fannie Mae now has admitted the campaign was unnecessary. As far back as 1995, a Fannie Mae employee, Brenda W. Simon, told The Washington Post that the “lending outreach program,” as the campaign was officially dubbed, was really aimed at Congress, other politicians and the media. “They may fire me for what I’m about to tell you,” she said, but spending supposedly on behalf of urban neighborhoods was a ruse. “I’m waiting to hear the meat.”
Simon may never have heard those thundering hooves, but the Fannie May Foundation sure bought plenty of fancy meat. Its list of youth group grantees in 2004 could persuade the uninitiated that the Fannie Mae Foundation was really a food bank for the rich and their prosperous bourgeois fellow travelers. Lunches, dinners, banquets, galas, celebrations, benefits and Christmas parties were funded by foundation grants of $5,000 to $100,000. (See chart.) Other youth-related grantees, whose epicurean expenditures are unknown, include America’s Promise-The Alliance for Youth ($75,000), America Scores ($40,000), City Year in Boston ($25,000), Chapin Hall Center for Children in Chicago ($15,000), Earth Conservation Corps ($20,000) and the Dunbar Economic Development Corp. in Los Angeles ($200,000).
So how many staff does it take to eat all those banquet meals? Plenty. When Raines got the meat ax in December 2004, the Fannie Mae Foundation had a staff of 87, surely some kind of featherbedding record worthy of a special award for job creation at next year’s annual luncheon of the Council of Foundations. Undoubtedly, the Fannie Mae Foundation will graciously pick up the tab. Excluding the phony ad campaign, those 87 staff administered $47 million in grants, or a little over half a million dollars per employee. The foundation’s chief executive is Stacey Stewart, who earns $583,319 per year (plus, presumably, unlimited free lunches).
So much for the social justice concerns that animate so many in the Democratic Party, which has been heavily represented in Fannie Mae’s top leadership. Consider this: The YWCA in impoverished Trenton, N.J., received a grant to “empower women and girls and seek to eliminate racism.” The award: $500. But the Trenton YWCA did better than the Washington-based National Network for Youth, which represents several hundred programs serving homeless youth. CEO Victoria Wagner reports that its application in 2004 was turned down. Next time, Wagner should apply to hold a smorgasbord picnic for homeless youth on the Capitol steps.
Last month, Fannie Mae’s interim chief executive, Daniel Mudd, put the gout-suffering foundation on a diet. The budget was cut from $92 million to $72 million, and the staff reduced to 75. Given the fact that the foundation, says its website, “is not accepting letters of inquiry,” that still seems extraordinarily excessive. If all that the staff is doing is stamping “return to sender” on inquiries, then a staff of 0.75 seems sufficient. After all, $437,500 for a three-quarter time glorified mail clerk is a living wage even in elite circles.
Contact: The Fannie Mae Foundation, (202) 274-8000, www.fanniemaefoundation.org
The All-American City of Spokane, Wash. (population: 195,000), like most of America, loves a man in uniform. Jim West, who served as the leader of Boy Scout Troop 345 while a deputy sheriff, can so testify. Elected to the state Senate in 1982, he was elected mayor of Spokane in November 2003. The staunch conservative Republican has now been catapulted out of the closet by the Spokane Spokesman-Review in a series of articles that lays bare his active bisexual life – including trolling on Gay.com as “RightBi-Guy” for local high school boys, who were enticed into sexual encounters with a promise of an internship at City Hall. Confronted during an interview with the Spokesman-Review on May 4, West ’fessed up to a double life, one that was decidedly not kid-friendly and may yet land him on U.S. Attorney General Alberto Gonzales’ new National Sex Offender Public Registry.
West is no stranger to Justice Department funding. Beginning in 1977, West and another deputy sheriff, David Hahn, received a Justice Department grant, through what was then known as LEAA and is now the Office of Justice Programs, which includes the Office of Juvenile Justice and Delinquency Prevention.
According to West, the law enforcement officers worked with a group called YES to staff something called the Positive Image Program, or PIP. West told the newspaper that the program was created “so that the kids could relate to cops … real well.” A more accurate acronym might be PIU, for “Pimps in Uniform.”
Although some boys in PIP were not Boy Scouts, the deputies took the children to Camp Cowles, run by the Inland Northwest Council of the Boy Scouts of America. There and back in Spokane, claim several men suing the county government, West and Hahn repeatedly molested the boys, sometimes after giving them marijuana, and sometimes had sex with them in a police car while on duty and (more or less) in uniform. Could this be what Horace Greeley meant when he famously said after the Civil War, “Go West, young man, go West”?
One of those alleged victims, Robert Galliher, claims the two deputies and Boy Scout leaders molested him repeatedly. In August 1981, Hahn, then 36, took Galliher to his apartment and put his service revolver to the boy’s head. “I closed my eyes, and then he moved the gun to his head and blew his brains out,” Galliher told reporter Bill Morlin.
Galliher ran and told no one. Now a self-described drug addict, he was serving time at the Geiger Correctional Center when West was elected mayor. West’s housemate during that period was Tim Carlson, a young man whom West believes he met at the Boy Scout council office. Carlson has since twice been convicted of molesting boys.
With Hahn and another squirrelly Boy Scout leader from a neighboring troop both suicides, West moved on – to electoral politics.
Teen Kisses Left Behind
While in the state Senate in 1986, West joined 14 other Republicans in sponsoring legislation that would bar gays from working in schools, day-care centers, after-school programs and some state agencies. He supported criminal background checks for teachers and youth workers, because child abusers “often try to gain a position of trust and authority,” West accurately observed at the time.
The highpoint – or was it the low point? – of West’s career in the legislature came in 1990. He co-sponsored a bill drafted in part by Teen-Aid, a Spokane chastity-until-marriage group led by Leanna Benn. Teen-Aid receives $1,551,000 of the federal government’s $31 million appropriation for Special Projects of Regional and National Significance-Community-Based Abstinence Education (SPRANS-CBAE).
West, then the state Senate majority leader, co-sponsored Teen-Aid’s proposal to criminalize sexual contact between people under the age of 18. The bill defined sexual contact as “any touching of the sexual or other intimate parts of a person” that involves sexual gratification. Benn said in a recent interview that the bill would have made “only penile penetration” by an adult with someone under 18 a sex crime.
The recent stories about the mayor’s sex life sent some of Spokane’s youth-serving agencies running for cover. The Spokesman-Review reported that West and fellow sheriff’s deputy Hahn had “checked out” boys from Morning Star Boys’ Ranch,
a child welfare agency located on 225 acres on Spokane’s outskirts. West and the Rev. Joe Weitensteiner, director of the 23-bed facility since its founding in 1957, deny the charges. The claims of molestation at Morning Star have “been devastating,” says PJ Watters, the agency’s public relations director.
It was not Morning Star’s first brush with sex offenders. In the 1980s, Spokane was rocked by a Catholic priest sex crime scandal that eventually drove the local Catholic diocese into bankruptcy. The scandal’s leading bad actor was the Rev. Patrick O’Donnell, a regular visitor to Morning Star and chaplain to the local Boy Scouts.
Morning Star insists there is no record of any contact between West and its charges. But Weitensteiner has so far resisted requests for independent verification. What is not in dispute is that one day after the story broke, West resigned from the Catholic-affiliated agency’s board of directors, on which he had served for 12 years.
Nowhere did d’affaire West strike more trepidation than in the – as usual – unprepared Boy Scouts. Local Scout executive Tim McCandless says the revelations were “a shock for everyone involved.” West resigned from the Inland Northwest Council’s board the day the story broke.
West has admitted to “poor judgment” in having sex with young men, but in a press release from City Hall, he said, “the allegations that I molested young boys over 20 years ago are entirely false.” Teen-Aid’s Benn says, “I don’t believe for a second that he’s a child molester.”
At the other end of the culture wars spectrum, Laurel Kelly is not so sure. She’s director of the humble Odyssey Youth Center, with a staff of three that serves gay youths, most 16 to 21 years old. When the story broke, the teens she works with were “disgusted” by West’s public homophobia. Kelly says that now that West’s screen names, including RightBi-Guy, are known, several teens believe they have chatted online with their mayor. The topic was not civic engagement.
Adding to the personal tragedy of the mayor and his entwinement with Spokane’s youth services is that by all accounts, Spokane is a town that tries hard to do right by its youth. The city and county have a Spokane Regional Youth Commission, run by Joanne Benham since its city component was set up in 1986. The commission, Benham proudly notes, is composed of seven youths and eight adults.
Named a “City of Promise” by America’s Promise-The Alliance for Youth, Spokane was one of 13 America’s Promise demonstration sites. The commission works within the framework of America’s Promise’s five promises, which are “Caring Adults, Safe Places, A Healthy Start and Future, Effective Education, and Opportunities to Help Others.” A youth empowerment project financed by the federal Juvenile Justice Act used the Search Institute’s 40 Assets approach to do extensive youth “asset-mapping,” and reported the results to all who would listen.
Service providers have formed several collaborations, including Breakthrough, a collaborative forum and grant-seeker founded 11 years ago after a young runaway girl was murdered.
Linda Stone, eastern Washington director of the Seattle-based Children’s Alliance, calls Spokane a “uniquely collaborative place.” But the city contains the state’s poorest legislative district, and there is enormous underinvestment in children. A “very grim” state budget picture has led to the recent loss of funding for the local Foster Parents Association and of Sally’s House, a women and children’s shelter run by the Salvation Army. Breakthrough’s members include the Odyssey Youth Center, the Inland Northwest Council of the Boy Scouts and Big Brothers Big Sisters.
The shock waves of the West scandal have been uneven. For Big Brothers Big Sisters Director Don Kauffman, it has had “no impact.” For Morning Star, says Watters, it was “like Sept. 11.” Benn of Teen-Aid thinks the Spokesman-Review was out to get West for reasons of “self interest.” It’s a “fairly well-contrived” scandal, she maintains.
If any good can come out of this tawdry case, it’s that the drive to condemn and over-regulate youth behavior while providing services on the cheap will, in Spokane at least, pause for reflection. Asked by a teen during a Gay.com chat if he would be mayor if his conservative supporters knew about his sex life, West replied, “Two consenting adults must have the ability to protect their privacy, or else the damn sex-Nazis will be telling everyone what to do.” With several criminal investigations under way, one led by the FBI, West’s days of “telling everyone what to do,” agreed everyone interviewed for this article, are numbered.
Contact: City of Spokane (509) 625-6250, www.spokane city.org; Inland Northwest Council of the Boy Scouts of America (509) 325-4562, www.inwc-bsa.org; Teen-Aid (509) 482-2868, www.teen-aid.org; Morning Star Boys Ranch (509) 448-1411, www.morningstarboysranch.org; Odyssey Youth Center (509) 325-3637, www.odysseyyouth.org; Children’s Alliance (509) 747-7205, www.childrensalliance.org.
Hey Fannie, What’s Cookin’?
When it comes to funding for youth-related programs, it seems like the Fannie Foundation is following the crowd at chow time. Below are some grants the foundation made to nonprofits in late 2004.
• Big Brothers Big Sisters of the National Capital Area
Awards dinner, $5,000
• Boys & Girls Clubs of Greater Washington – Silver Spring, Md.
Congressional dinner, $100,000
• Childhelp, USA – Fairfax, Va.
Charity gala, $20,000
• Children’s National Medical Center – Washington, D.C.
Jazzmatazz concert, $12,500
• Covenant House – New York, N.Y.
Awards dinner, $25,000
• Fight for Children – Vienna, Va.
School Night ’04 benefit, $25,000
• Girls Incorporated – New York
Celebration luncheon, $25,000
• Jobs for America’s Graduates – Alexandria, Va.
Leadership awards, $25,000
• Junior Achievement of the National Capital Area
Hall of Fame banquet, $5,000
• Perry School Community Services Center – Washington, D.C.
Gala celebration, $25,000
• See Forever Foundation – Washington, D.C.
Charity Works gala, $25,000
• Thurgood Marshal Academy – Washington, D.C.
Shining Star gala, $25,000
• United Black Fund – Washington, D.C.
Memorial luncheon, $30,000
The May Nose Knows column incorrectly reported that Cornerstones For Kids has awarded an $85,000 grant to The Forum for Youth Investment. The forum reports that while it is awaiting word on a grant, an $85,000 grant did go to the National Collaboration for Youth.