Youth sports: Why is it 'easy' to steal from Little League, other teams?

For about six months, people would stop Marianne Kinsmann in her tracks, point to her Little League World Series jacket and ask about Holbrook Little League's time in the tournament last summer.

"You guys went so far," fans of the Jackson-based team would say. "We were all rooting for you."

Now nearly a year after the team of 12-year-old All-Stars — including her son, Ryan — went on their miracle run, their former fans' tone has changed following a high-profile arrest of the group's president and treasurer. "Oh, it's such a shame," they said about the team. "It's really sad."

"People are always asking, and that's the worst part of it," Kinsmann said. "They are really connecting Holbrook with this theft rather than the Little League World Series."

When two Holbrook Little League leaders were charged with misappropriating more than $118,000 in league funds six months after the Little League World Series, it sent a shockwave across the youth sports landscape in New Jersey.

FLASHBACK: Holbrook Little League officials arrested, charged with theft

But in reality, oversight of nonprofits are so lax that it makes theft from youth sports as easy as hitting a T-ball.

Even after the loss of more than $1 million dollars in recent years, the weak laws and poor oversight remain in place, enabling the next set of thieves to steal from parents and young children, an Asbury Park Press investigation found.

Youth sports is a big business. One watchdog estimates that parents spend $800 million on youth sports in New Jersey, and the 150 youth sports leagues in Monmouth and Ocean counties brought in $18 million in revenue last year. But the Press found just 16 of those leagues follow the laws that are supposed to ensure nonprofits stay honest.

As of June, the majority of the leagues were in violation of federal or state laws requiring nonprofits, including youth sports leagues, to file annual financial disclosures — similar to tax returns — with the IRS and the state Division of Consumer Affairs.

The IRS only takes action after three years of delinquent forms and there isn't a single youth sports league at the Shore that's had its charity registration revoked by Consumer Affairs, despite 54 leagues currently listed as non-compliant.

"Stealing from a youth league is easy," said Jay Whitehead, CEO and co-founder of the League Network, a Newark-based company that helps youth sports officials raise money and stay on the right side of the law. "If it's easy, people are going to do it."

To understand the depth of the problems with youth sports, the Press reviewed hundreds of pages of nonprofit tax returns and police records and analyzed IRS data for every youth football, baseball, soccer, basketball and hockey team at the Jersey Shore.

The investigation found:

$1.4 million stolen. Authorities charge that more than $1.4 million was stolen from youth sports leagues over the last 10 years in Monmouth and Ocean counties by former officials of those leagues;

Authorities charge that more than $1.4 million was stolen from youth sports leagues over the last 10 years in Monmouth and Ocean counties by former officials of those leagues; Revoked permissions. Of the nearly 150 youth sports leagues at the Shore, 22 have had their nonprofit status revoked by the IRS since 2010 — including three Little Leagues currently operating without a legal nonprofit status;

Of the nearly 150 youth sports leagues at the Shore, 22 have had their nonprofit status revoked by the IRS since 2010 — including three Little Leagues currently operating without a legal nonprofit status; Lack of reporting. More than half of youth sports leagues were late on filing financial documents with the IRS. A document called the Form 990 is the only publicly available report that allows the public to see how youth sports leagues spend their money. Some leagues haven't filed a Form 990 in more than a decade.

More than half of youth sports leagues were late on filing financial documents with the IRS. A document called the Form 990 is the only publicly available report that allows the public to see how youth sports leagues spend their money. Some leagues haven't filed a Form 990 in more than a decade. Nearly half violate the law. Four-in-10 leagues are violating state charity laws by not reporting their annual finances or conducting audits required by the state Division of Consumer Affairs, which oversees nonprofits in the state;

Four-in-10 leagues are violating state charity laws by not reporting their annual finances or conducting audits required by the state Division of Consumer Affairs, which oversees nonprofits in the state; Almost half run a deficit. Nearly half the youth sports leagues at the Shore can't cover their expenses with the money they take in, relying on one-off fundraisers to fill in the gaps with an annual deficit averaging $21,000. Sixty percent of those teams were also late on their IRS filings.

Nationwide, the youth sports market is estimated at $19 billion with 32.1 million kids playing in leagues — with estimates that it could grow to as much as $41 billion in 2023, despite a string of high-profile arrests in New Jersey and beyond.

A Press report on the Holbrook Little League's financial mess, published 24 hours before the arrests, launched a push for state legislation that would put stringent transparency rules in place for youth sports leagues.

"When I read about it in the Press, I had to do something," said Assemblyman Ronald Dancer, R-Ocean. "We can't let an alleged misappropriation of over $100,000 go unanswered without putting more accountability and transparency into the law."

Janine Bianchino, 45, whose two sons have played for Holbrook, said the thefts prove the need for greater transparency among all youth sports leagues.

"It's heartbreaking," Bianchino said. "You're stealing from children ... We're supposed to be a community. We like to think we have a good community around us, and to have a few bad apples steal from these kids, it's an awful thing, but I'd hate to blame everybody for the few bad apples."

Hear what one Holbrook Little League parent thinks of the problem in this video below.

Stealing from youth sports New Jersey parents pay about $800 million for youth sports like Little League and Pop Warner. But most leagues break the law, often without penalty.

How theft happens

If I pay it back next week, nobody’s going to know.

That thought is what usually sparks theft, often in smaller amounts of $100 or less, at youth sports leagues investigated by the Ocean County Prosecutor's Office, said Detective Sgt. Mark Malinowski, who heads up the office's Economic Crimes Unit.

The money usually goes to the vices — gambling and drugs — or day-to-day household needs, Malinowski said. And the perpetrator almost never realizes how much they have stolen.

If the Economic Crimes Unit interviews someone who admits to stealing $20,000, Malinowski guesses the true amount is about three times as much. "It adds up," he said.

Nationwide, an estimated 1,100 people have gone to prison and an estimated $1 billion has been stolen from youth sports leagues since 2009, according to the League Network.

The Jersey Shore is no exception, with prosecutors in both Monmouth and Ocean counties arresting youth sports officials on charges of stealing more than $1.4 million over the last decade — including, most recently, $400,000 from the Freehold Soccer League and another $118,000 from Holbrook Little League in Jackson.

MORE: Ex-Freehold Soccer League treasurer jailed for theft

A changing of the guard usually tips off prosecutors that something is wrong, Malinowski said. A new treasurer or president who is elected to lead a Little League or American Youth Football (AYF) team takes a look at the financials and reports something fishy to law enforcement.

Sometimes, an unpaid bill is the spark that launches an investigation. Other times, it comes time for a big trip to a tournament and there's simply not enough money.

"Somebody questions something," Malinowski said.

At the Toms River East Little League, treasurer Richard Cunningham — who famously donned a gorilla suit as the "Beast of the East" mascot for the 1998 Little League World Series champions — diverted funds raised by a gift card sale from league accounts to his own use, part of a $237,000 theft that resulted in his 10-year prison sentence.

It was more money than the league's annual budget at the time, and stopped plans for field improvements in their tracks.

Cunningham, now 60, was released in 2011 on parole after less than six months in prison. He did not return a call seeking comment.

At Holbrook Little League, it was an anonymous letter to prosecutors casting suspicion over Anthony Del Vecchio and John Lehmann, the president and treasurer who were eventually charged with misappropriating $118,000. Their case has not come before a grand jury and the two men have not entered pleas but are presumed innocent.

Richard Lo Murro, an attorney representing Del Vecchio, said he has been in contact with the Ocean County Prosecutor's Office.

The arrests came just six months after the league's miracle run to the Little League World Series and 24 hours after the Press reported the league's finances were in disarray, with parents casting suspicion on the duo.

Last year, the president of the Freehold Soccer League learned a bill for uniforms was unpaid, but money was missing from league accounts. He contacted the Monmouth County Prosecutor's Office, which eventually charged then-treasurer Anthony Gallo with the second-degree theft of more than $400,000, writing checks to himself that he cashed to pay bills, eat at restaurants and go shopping.

In the years between the thefts and his arrest, Gallo paid back nearly $120,000 of the stolen money. But in January, he was sentenced to six years in prison. He is currently incarcerated at South Woods State Prison in Bridgeton.

"Think about who's actually running these leagues — they're moms and dads," Malinowski said. "They're not usually business people but you’re putting them in charge of running facilities, scholarships and fundraisers.

"They just don't have that background," Malinowski said.

A cautionary tale

Parents — who are more focused on how their kids are doing on the field — often don't know how their registration money is being spent, or who profits. When the registration period rolls around, they pay the required fees, anywhere from $50 per child to $300 or more. Usually, it's paid in cash or a check.

In a perfect world, parents would register their kids for youth sports online, paying the fee on a secure server with a credit card that gives the parent a receipt of their payment, and the league an accurate account of exactly how many kids and dollars are coming in.

The league treasurer then would deposit the funds in the league's bank account, while the secretary would analyze the bank statements to ensure every dollar is accounted for and make the balance sheet available to board members and the league community at the next meeting.

COLUMN: When youth sports become big business

But for half the leagues nationwide, including a majority of leagues at the Jersey Shore, that's not how it's done.

"You can't have the same person collecting the money, making the deposits, writing out the checks and getting the statements," Malinowski said. "It's all got to be done by separate people."

Take Holbrook Little League, for example.

When one parent asked last year for a copy of the most recent annual tax document — the league is three years behind in reporting to the IRS — Lehmann said the board was "in the process of putting that together," according to emails obtained by the Press.

And if parents wanted to express their concern at a board meeting, they were out of luck. The only people who knew when a board meeting had been scheduled were board members.

It wasn't much better for those board members, who have claimed that only Del Vecchio and Lehmann had control of the finances. They were the only people allowed to sign checks, make deposits or use a debit card for the league bank account, other board members said at a February meeting.

The first time anyone got a look at the books was when Del Vecchio and Lehmann resigned, board member Stewart Bennion said at the time. A day after the meeting, the pair were charged by police with second-degree theft.

"There was extreme reason to believe that something's going on — or might be going on," Bennion said at the time. "The very next day, the board got together and decided to place a call to the Ocean County Prosecutor's Office."

The League Network researched hundreds of youth sports thefts since 2009 and identified three preventive steps that concerned parents and league officials can take to stop theft:

Don't issue league debit or credit cards, as they are too easily used for personal expenses;

Require two signatures on all checks over $500; and

Offer online registration using a secure vendor or processing firm; do not take cash for registrations.

Fewer than half of the 3.2 million leagues nationwide offer online registration, Whitehead said, leading to a reliance on cash and checks — which too often opens the door to theft.

One New Jersey league, which Whitehead did not name, took on a new treasurer that instituted online registration. The number of kids, registration fee and expenses stayed flat.

Yet revenues increased 7 percent — about $42,000 — "virtually overnight," Whitehead said. It wasn't clear where the funds had gone beforehand.

"In 2018, youth sports is about the least technologically advanced segment of the economy," Whitehead said. "It’s privatized, but not professionalized."

How to prevent theft in youth sports More than $1.4 million has been allegedly stolen from Little League, AYF, Pop Warner and other youth sports leagues at the Jersey Shore. But there are simple steps parents and league officials can press for that will prevent future embezzlement.

Whitehead's three rules also apply when it comes to the hundreds in cash that parents raise through league-operated snack stand, or smaller fundraisers such as raffles, bake sales or literally passing a can around at league events. The League Network recommends that there always be a chain of custody — two people to witness the cash coming in, and two people counting and recording cash at the end of the event.

"Cash based fundraising such as can-handing, bake sales and raffles are low-yield, high-effort and at high-risk for theft," Whitehead said. "They are old habits that are both bad and die hard. Bottom line, cash in youth sports is easy to steal."

Rules for a reason

Most youth sports teams operate as a 501(c)(3) charity, which comes with two major perks: The organization doesn't have to pay taxes on its income, and donors — including parents paying registration fees — can deduct contributions from their income taxes

But tax deductions are only valid if the nonprofit files an annual Form 990, which outlines revenue, expenses, board members and salaries. Charities with less than $50,000 in revenue — like 21 Shore youth sports leagues — can file an annual Form 990-N, a simpler version of the form.

According to the League Network, the IRS estimates that six out of 10 youth sports leagues nationwide are out of compliance with federal tax regulations, but the IRS has never shut one down, Whitehead said.

The penalties for violators range from $10,000 to $50,000 in penalties, or revocation of its tax-exempt status — which is what has happened to at least 23 youth sports leagues at the Shore this decade.

According to the IRS, youth soccer organization Stafford SC hasn't filed its Form 990 since July 2004. Its nonprofit status was revoked in August 2011.

In an email, Stafford SC President Roger Budd said the club's board was "aware of the status of its 501(c)(3) and is in the process of having it reinstated" but did not detail what had led to the violations.

Middletown Little League President John Marsini Jr., didn't learn that league's tax-exempt status had been revoked until a sponsor brought it up.

He soon learned that the league hadn't properly filed a Form 990 in over seven years, which Marsini said was due to a clerical error: A former treasurer included the wrong identification number and post office box.

"We are scrambling now to fix the situation," said Marsini, who noted that the league is refiling the last five years of tax returns. "It might take the whole summer, but we're going to fix it."

Other youth baseball organizations — Holbrook Little League and Belmar-Avon-Lake Como Little League — each had their status revoked within the last two months.

A Form 990 is the only nonprofit financial document required to be open to anyone who asks for it. Some of the forms can be found on nonprofit watchdog sites like Guidestar and ProPublica.

Of the nearly 150 youth sports leagues at the Shore, only one — the Asbury Park Little League — publishes its Form 990 on its website.

In addition to the IRS, nonprofits are also beholden to the rule of the Division of Consumer Affairs, an arm of the New Jersey Attorney General’s Office. But there isn't a single youth sports league that's had its charity status revoked by the Division of Consumer Affairs, despite 47 percent of Shore leagues listed as non-compliant by the division, according to its charity registry.

"In cases where a charitable organization is noncompliant, the Division looks at the entire picture to determine whether enforcement action is appropriate, including revocation or suspension of registration status," said Lisa Coryell, a spokeswoman for the New Jersey Attorney General's office.

Another 54 leagues are nowhere to be found in the division's list of registered charities, the Press found.

Even though local sports teams might carry the names of national organizations like Little League or American Youth Football, the local teams are considered independent entities that are expected to follow federal and state reporting guidelines, officials said. The national organizations will provide information, and Little League also offers clinics and webinars on how to handle finances.

But keeping the books up-to-date is up to each individual team.

"Failure to do so can result in a loss of charter with Little League International," said Kevin Fountain, director of media relations for Little League International. He declined to say how many leagues had lost their charter.

AYF doesn't "believe in penalizing youth organizations run by volunteers," said Chris Petrich, social media and event coordinator at American Youth Football. "Penalties would ultimately penalize parents, kids and volunteers, which is not in line with our programs."

Officials with Pop Warner did not return an email seeking comment.

"We want leagues to be open. We want opportunities for access, to play and be out there," Whitehead said. "Sometimes, these leagues are out of compliance. Sometimes, these leagues are behind on their taxes. Sometimes, there's theft.

"But does that mean we abandon the youth sports leagues? Generally, no. We like these leagues to recover. We like comeback stories."

Transparency is important

Dana Quackenbush spends $200 for her daughter to play softball with North Wall Little League. Playing on the travel team is $125 more.

She's happy with the transparency at the league: The league's website advertises board meetings and anything involving fundraising — from annual fees to bus trips — is done with online registration.

"I think people have their eyes open a little more to make sure that their money is not being taken and used for other things," Quackenbush said. "If there are any questions, there's a lot of openness and there's not a hesitation to ask those questions."

But that's not the case at all leagues, despite experts agreeing that transparency is critical — and one of the best practices for any youth sports league to stop theft before it happens.

Kinsmann, the Jackson baseball mom who has routinely questioned about the league, said her family has "zero trust" in the Holbrook Little League, she said.

And the league's declining enrollment — youth baseball enrollment numbers are decreasing nationwide — means fewer teams, coaches and games. Kinsmann has started to wonder whether she gets any value in the more than $400 she pays for her two kids to register with Holbrook.

"Anytime you feel like you're paying more and getting less, there's going to be an issue," Kinsmann said. "This is just making it worse, wondering, 'What are you doing with all that money?'"

Holbrook board members have been working on setting up new guidelines for transparency. They range from the simple — announcing meeting dates — to complex, including hiring an accountant to conduct a monthly audit, Holbrook board member John Braun said.

"Everything that was an issue is being actively worked on. It's just a mountain of things to go through," he said.

Nevin Mann, whose children play for Holbrook, said there's room for improvement when it comes to keeping financial records open.

"Instead of posting on the league website, which I thought would be more convenient, they've made it known that if you want to see what's going on…for you to come to the board meetings," Mann said.

Those steps to make league finances more transparent may soon become state law.

After the Press investigation of financial problems at Holbrook Little League, Assemblyman Ronald Dancer, R-Ocean, began drafting legislation aimed at making youth sports organization more transparent and accountable.

A draft version of Dancer's Holbrook bill would require "youth athletic nonprofits" to maintain a website with access to financial statements and tax returns, conduct annual audits, advertise board meetings with five days' notice and keep receipts for cash payments greater than $25.

"Motherhood, apple pie and Little League, to me, they're all together," Dancer said. "Nobody wants to dampen the enthusiasm of those who volunteer and give and perform public service on behalf of youth sports leagues.

"But there needs to be some oversight and greater accountability from a statutory level."

Such legislation would be a good start, but there’s more work to do, Malinowski said.

Many leagues don't perform a criminal background check on board members and administrators, despite the search being required of youth coaches. And that simple delineation of responsibilities should be a requirement, he said, as it can go a long way in preventing theft, he said: The more eyes on a league’s finances, the better.

"You definitely have to have an internal control system, checks and balances," Malinowski said. "If there's no checks and balances, then it's not going to work.

"It's all about manipulating the system. And a lot of these people figure out the system."

Mike Davis; @byMikeDavis: 732-643-4223; mdavis@gannettnj.com