Response: The Center for Building Hope wrote a lengthy response to the findings in this story. That response can be found here.

Missing money

A changing relationship

Left in the lurch

An unusual candidate

Risky business

Ritter gets a raise

A home away from home

On paper, a Lakewood Ranch charity appears to be in dire straits. Its most recent tax form came out three weeks ago, showing a deficit of more than $785,000 . Beginning in July 2014, the charity delayed retirement payments to employees for at least six months. It was late twice repaying a loan to a fellow nonprofit, and top officials acknowledge they are juggling cash flow to such an extreme that the Sarasota Ritz-Carlton waited months to get paid for an event they hosted in November.While the Center for Building Hope struggles to make ends meet, CEO Carl Ritter has seen his salary almost triple to more than $335,000 — including a recent bump of about $128,000. The Center's board members insist the raises are appropriate. They say they are working toward a bright future. But the last few years tell a different story. At the height of the recession, the charity's leaders built a posh new headquarters with allergen-free palm trees and a cobblestone labyrinth for meditation. The financial climate caused donors to fall off. Money dried up and the nonprofit teetered near disaster. When the former CEO left in 2010, the nonprofit chose an unusual replacement. Ritter, who had never worked for a nonprofit, once went bankrupt and oversaw a used car company that funneled hundreds of thousands into his pocket even as the business was collapsing. The charity's leaders hoped Ritter would help the Center get back on its feet. Ritter and the board continue to take financial risks: They decided to stop relying as much on donors, bought another nonprofit that was named one of the worst in Oregon and tried to make money by selling donated wedding dresses. Ritter and others defend his large salary increases, saying he took on a bigger workload, deferred some of the payments and forgave $100,000. "We absolutely are running on a shoestring here," said Carol Ann Kalish, a board member and former chairwoman. "If Carl hadn't come here, this organization wouldn't exist. ... We're finally about to get on some solid ground." The Center's struggle to stay afloat raises questions about its long-term viability, especially in a wealthy community where so much is contributed to charities. Powerful figures such as former U.S. Rep. Katherine Harris, the Sarasota County sheriff's wife and the wife of Florida Chamber of Commerce chairman Steve Knopik have sat on the charity's board.The Herald-Tribune spoke with seven experts in nonprofit governance, retail and accounting, all of whom questioned whether the Center is headed in the right direction. "I'm literally in tears I am so upset about what's happened to that organization," said Charlie Ann Syprett, a donor and former board member. "If I were sitting on the board and found out this was going on, I'd do a thorough scrubbing. I would have immediately fired him."In March, the Center's own employees bore the brunt of its financial troubles. At least 11 workers discovered that a collective $22,000 was missing from their retirement accounts. At least one employee's account had a balance of zero. Neither the money set aside by employees nor the amount matched by the Center had been deposited for more than six months. IRS rules require employers to deposit their employees' contributions to their Simple IRA accounts within 30 days of the month that the money is withheld from the employees' paychecks. Ritter said he didn't contribute on time because he didn't know the rules. The departure of Jenny Alday, former vice president of business development, brought the issue to Ritter's attention in January. Alday resigned to pursue another job and found her account empty. Ritter emailed his staff telling them the Center would fully fund everyone's retirement accounts by the end of March. But he didn't do so until more employees complained. The Center reimbursed Alday a week later, but did not correct anyone else's accounts because Ritter thought he had more time, he said. "I believed the rules were May 15 so it was a nonissue," Ritter said. "When it became an issue I said I'd go check. I checked and I saw it was wrong. I fixed it." But the Center followed the rules in the past. It abided by IRA regulations for two full years after the accounts were opened. Raymond James gives all new plan owners paperwork explaining contribution rules, account adviser John Freeman said. The Center opened accounts with Freeman in November 2012, two years after Ritter started as CEO. Everything was fine until about June 2014, Freeman said. That was the last time the organization contributed to the accounts before depositing the missing money last month, he said. "It just appears that something happened last year," Freeman said. "They knew what a Simple IRA was. They had one before." Freeman first noticed the Center wasn't regularly contributing to its employees' IRA accounts last August. He said he called and emailed Ritter at least six times over the next nine months to remind him his contributions were due. "Quite frankly, I didn't know why they were withholding it," Freeman said. "I can't pry into their business. ... It's the employer's responsibility to send us a check." The Center withheld the contributions because it could not afford to pay them. The charity treated its employees' retirement accounts as a bill it could pay off later instead of a regulatory obligation, Kalish said. "If I were in their shoes," Freeman said, "I'd be in that corner office saying: 'Where the heck is my money? I'm working hard for this organization.'" The Center corrected its employees' retirement accounts in March but put off payments to a vendor and a lender. That lender is one of the most important charities in Southwest Florida: the Gulf Coast Community Foundation.The Gulf Coast Community Foundation manages grants and scholarships for local charities and students and has contributed almost $200 million to nonprofits in the region. The organization loaned the Center $675,000 to buy and expand a small nonprofit based out of Oregon, said Mark Pritchett, the foundation's senior vice president for community investment. Ritter planned to use the nonprofit to boost the Center's bottom line, and officials at Gulf Coast Community Foundation thought it was a safe bet. But the Center did not fulfill its end of the deal. Two years after obtaining the money, Ritter stopped sending financial updates, Pritchett said. Then, in December 2014, the Center delayed sending a loan payment of $24,000. In March, it put off another $24,000. "When they weren't sharing information with us like they had been and then they're late with payments, that changes the business relationship because they're not filling their part of the bargain," Pritchett said. The Gulf Coast Community Foundation took a harder look at the Center's governance and finances. Its members spoke with the Center about the loan at least seven times in the last five months. Pritchett and others at the foundation said they are concerned that the charity spends too much on overhead and lacks a chief financial officer. Power at the organization is too centralized, Pritchett said. "We're not going to turn our heads," Pritchett said. "We're going to jump into it and make sure no laws have been broken and people are on top of this thing. If organizational changes need to occur they're going to occur." The Center made its December loan payment in January. It got back on schedule in April — one week after the March payment was due. But once again, the Center had to juggle payments — it simply did not have the cash to meet all its obligations. "A business like ours, there is always going to be a quarter of a million dollars of payables," Ritter said. The IRA issue has been settled and the loans are being repaid, but at least one vendor was owed thousands of dollars as of April 30. The Center had not finished paying off the $43,000 it owes to the Ritz-Carlton Sarasota , where it hosted a gala last November. "We're still feeling the effects of the recession and we do very aggressive payables management," Kalish said. Treasurer Alfred Rose said other board members told him about the organization's outstanding payments, but he has not been directly involved since his wife was found to have Alzheimer's disease four years ago. "I do not have the knowledge nor the ability to understand all the underworkings financially," Rose said.The Center now needs to put off bill payments to manage its cash flow. The organization's costly building, the recession and a loss of donor support buried it in debt — which became apparent when the charity moved into Lakewood Ranch in October 2010.The board obtained a $5.5 million bond in 2009 to build its operation in Lakewood Ranch and counted on the sale of its old building and contributions from major donors to pay it off. But the recession left the charity in the lurch. By the time the Center moved into its building, Americans were feeling the effects of a crippled economy, a 10 percent unemployment rate and a deflated real estate market. The Center expected to make $1 million from the sale of its Clark Road building, but the property only sold for $389,000. The organization lost another $500,000 that year when major donor and Sarasota socialite Diana Cloud lost almost $7 million in a local Ponzi scheme. Other donors had to either significantly cut back or eliminate their pledges, said Dave Shaver, a long-time board member. "We got burned in a lot of ways," Shaver said. The weakened economy put the charity in a bad spot financially, but a series of decisions by the board exacerbated its problems. The board plunged into the construction of the Center's new building at a time they were losing donor support, failed to anticipate increased operational expenses and spent as though they were flush with cash. "We were too stupid to realize that we had an operational deficit because we had a lot more money coming in the door than we were spending, but it was designated for the building," Shaver said. Shaver moved to approve the Center's most recent financials during a board meeting in June 2009. The budget projected an approximate $144,000 deficit for the next fiscal year. Former CEO Jay Lockaby took a five percent salary cut and declined a bonus that year. The Center managed to pay off $2.5 million of the charity's debt by the time Lockaby left to take another job, but the nonprofit still owed Harris Bank $3 million. "When we work with a nonprofit, our recommendation is that they never borrow money, especially for a building, because it's hard to pay back," said David Condon, a nonprofit consultant based out of Connecticut. "Then money is going to debt service instead of the organization's mission." Realizing they could not afford the new building they had just moved into, the board hoped to find a business-savvy executive to replace Lockaby and renegotiate the Center's $3 million debt. "We needed someone with more of an entrepreneurial mindset that might help us figure out some creative ways to dig ourselves out of this," Shaver said. They turned to a Canadian businessman who had financial trouble of his own.Board members hired Ritter in September 2010, convinced they had found someone with the financial skills to save the Center — even though Ritter had trouble paying past debts and the last company he ran failed as he profited. Ritter first filed for bankruptcy protection in his native Canada in 1985. He was 25 and $31,000 in debt. He was back in Canadian bankruptcy court in 2002 , this time as part of a "commercial proposal" to pay off a $500,000 debt. "It was a negotiated settlement on a tax deal, and that was the only way they could process it," Ritter said. He settled in Southwest Florida in 2003, then the steward of a group of "buy-here, pay-here" used car lots. These types of dealerships typically deal with people who have bad credit and cannot get traditional loans. Ritter's company, Carbiz, changed interest rates weekly and quickly repossessed vehicles when people could not repay their loans. "Collecting is part of the business," Ritter said. Ritter spent 17 years at the helm of Carbiz, which went public in the U.S. in 2006. During the three years that Carbiz traded as a penny stock on the over-the-counter market — a volatile exchange often subject to fraudulent schemes — it did not once turn an annual profit. "The fact that it came out and never made any money and the fact that it traded for pennies says there was something wrong from the very beginning," said Irv DeGraw, a banking professor at St. Petersburg College who has spent more than 30 years analyzing and trading stocks. "Nobody wants to buy penny stock because it's worthless." While the company bled, Ritter's salary rose. From 2004 to January 2009, Carbiz lost almost $42 million, and Ritter's salary more than tripled. In 2009, Carbiz paid Ritter $802,000 — including a bonus of half a million dollars. The next year, it closed for good . Unemployed after the Carbiz failure, Ritter was casting about for a job. He turned to a headhunter for help — the same headhunter the Center would use to find its new CEO. Some experts say it is common for headhunters to provide their clients as candidates. But such an arrangement can be a conflict of interest, said Bruce Dingman, president of The Dingman Co., an executive search firm in California. "It's really not a level playing field for the employer who has hired them to go out and find the best possible candidate," Dingman said. "They're going to make more money if they also place the candidate who is paying them." The Center's board members knew that Ritter was a client of the headhunting firm they used, but didn't see it as a problem, Shaver said. Shaver thought of the firm's president Mary Beth Bos as "a nonprofit guru" and her husband, vice president Jim Bos, thought Ritter's experience with finances and a board made him a good candidate. "Carl had background history ... that fit to what this organization was looking for," Jim Bos said. But it is unclear how deeply they checked that "background history." For one thing, at least four of Ritter's five references were linked to Carbiz, and at least two had financial backgrounds similar to Ritter's. Investor Mel Gilbert failed to pay off a $175,000 mortgage in 1982 and owed the federal government about $23,000 in tax liens in 1991. Former Carbiz Chief Operating Officer Paul Whitley filed for bankruptcy in 1999 and owed more than $1.1 million in state and federal tax liens between 1994 and 2006. Whitley would not comment on his liens. Gilbert said he didn't recall his debts. These men attested that Ritter had the "highest character," was a "smart businessman" and a "great team builder," Shaver said. The board looked no further into Ritter's background. He was hired in September 2010.Ritter walked into a nonprofit in turmoil. The Center's CEO was leaving. The charity had just lost its program director and cut programs in Venice and Bradenton. It faced tremendous debt and needed to raise money to avoid foreclosure. Morale was at an all-time low, said two long-term program facilitators. Ritter's plan for the Center was different than what the nonprofit was used to — he replaced almost 70 percent of the money that came from donors with a retail venture that even Ritter acknowledged was risky. The Center acquired a failing Oregon nonprofit that sold used wedding dresses. Called "Making Memories Breast Cancer Foundation of America," the nonprofit made the Oregon Department of Justice's "20 Worst Charities" list in 2011. At the time, it spent less than 12 percent of its donations on cancer victims. Where others saw failure, Ritter saw opportunity. At the time, the Center had an operational deficit of $650,000, he said. "We were running paycheck to paycheck," Kalish said. Ritter and the board renamed the nonprofit "Brides Against Breast Cancer" and hoped their new business model would turn it into a cash cow. Brides Against Breast Cancer made a net profit of about $681,000 during fiscal year 2013 and has been self-sustaining since its conception, according to unaudited cash flow reports provided by Ritter. Ritter could not show the Herald-Tribune audited financial statements from this past year, but he said the organization is on the right track. "Brides Against Breast Cancer is the savior," Ritter said. But even Ritter acknowledged that depending on steady income from wedding dress sales is dicey.Each year, Brides Against Breast Cancer puts on about 150 bridal shows around the country. The group ships donated dresses out on its own trucks and pays for its show managers to fly to the shows. "I think that is a hugely costly way to do business and very complicated and logistically impossible," said Stan Rutstein, a former retail executive. "I don't think it will work." Ritter said he mitigates the risk and cost involved with bridal dress sales by selling promotional tables to wedding planners, cake makers and other bridal businesses that want to advertise at dress shows. The business-to-business component, he said, "becomes a balancer for the more volatile side of that model." Still, Brides Against Breast Cancer's overhead costs raise questions about the long-term viability of the subsidiary, Rutstein said. "Do I think that's the savior?" Rutstein asked. "I question that."The Center's new venture caused overhead costs to go through the roof. The board spent more than $1.5 million on salaries in 2012 — a 55 percent increase from the previous year. New Brides Against Breast Cancer employees accounted for part of the increased salary spending. The Center also hired Ritter's son and daughter after he started, and Ritter's compensation increased the most. The Center gave Ritter a raise of almost 70 percent during the 2011-12 fiscal year, well above the national and state averages for CEOs at similarly sized organizations. In 2012, the average compensation increase for Florida CEOs at like-sized charities was 2.3 percent and the national average was 2.9 percent, according to a report by GuideStar, an organization that promotes transparency in the nonprofit world. The first time the board increased Ritter's salary, they ran the decision by Pete Smith, a nationally recognized executive compensation consultant. He told them a 70 percent increase was "not unreasonable." "The board knew there was risk in this, but they felt they needed strong leadership to turn that around," Smith said. "At the time I was advising them, the board had already made the decision." Ritter's new salary fell above the national average, but Smith and the board agreed it was fair considering his new role managing Brides Against Breast Cancer. The Center gave Ritter another raise during the 2013-14 fiscal year — this time by nearly $128,000. The Center spent more than 10 percent of that year's revenue on his salary alone. That same year, the nonprofit reported a deficit of more than $785,000, its worst in history. Again, Center officials said they gave Ritter a raise because he took on more responsibilities related to Brides Against Breast Cancer — but the Center also paid an executive, Amy Paulishak, about $112,000 to oversee the program. "Typically if the organization is not performing well you wouldn't increase your spending for the director," said Bethany Carr, an accountant at Cavanaugh and Co. who has specialized in nonprofit audits. The Center's large payroll raised concerns for the Gulf Coast Community Foundation, which loaned money to the Center, Pritchett said. "We look at the whole payroll," Pritchett said. "If that's most of your operations, that's where you have to make the cuts." During the recession, the Gulf Coast Community Foundation furloughed its employees, shrunk its staff by 25 percent and cut about one third of its operating costs, Pritchett said. "Sometimes you have to make those kinds of decisions," Pritchett said. "You have to look at the expense side as well as the revenue side."If the Center fails, those who will be hurt the most are already ailing. When Andrea Feldmar learned her 2-year-old daughter had one of the rarest forms of leukemia, the road ahead looked grim. Her toddler would undergo spinal taps of chemotherapy that would likely give her irreparable brain damage. To complete a bone marrow transplant, Robin's last hope, doctors told the family they would have to take the child to death's door and try to bring her back. Feldmar asked doctors if she could speak with the other families whose kids had gone through that. She couldn't, they said. The outlook wasn't good. "Talk about a sense of isolation," Feldmar said.Feldmar is now the program director at the Center for Building Hope, which has become a home away from home and an extended family for more than 1,500 participants, she said. Children with cancer attend free summer camps where they realize they are not alone. Participants, volunteers and counselors become advocates for one another, sharing information and inspiring one another in support groups. Newtown residents gather in their local library for a group catered to them. Cancer survivors who have found comfort in the Center have also found purpose in returning to lead classes after they've completed their treatment. "You feel like this is your family," said Linda Keegan, a former participant who now teaches a free watercolor class. "It's an extended family. This is where you belong after you've been diagnosed." The Center's failure would have a devastating impact on its participants, Feldmar said. Wearing a scarf around her head that matches her blouse, Julie O'Brien stepped into Feldmar's office on a Thursday afternoon. O'Brien has led support groups at the Center for 15 years, but Feldmar didn't expect to see her that afternoon. She was scheduled to get shots to increase her white blood cell count. She was diagnosed with stage 1 breast cancer in October. "At least it's not experimental anymore," Feldmar told her. Her daughter, now a 23-year-old working in marketing, had the same shots back when she was a 2-year-old with leukemia. Feldmar gave O'Brien calendars to hand out in the waiting room. O'Brien thanked her for giving her something else to think about. "What people get here, they cannot get anywhere else," O'Brien said. "What happens here is remarkable."