CSW’s Contract with Former Board Member Craig Bowers Appears to Violate State Law and Nonprofit Ethics

christopher street west
Incluence’s Craig Bowers, left, and Chris Classen, right, at an LA Pride event (Facebook)

Christopher Street West has contracted with Craig Bowers, a former CSW board member and the long-time business partner of CSW Chairman Chris Classen, to raise money for the non-profit organization’s annual L.A. Pride parade and festival.

Bowers’s three-year contract guarantees him a commission of 20% of all sponsorship revenue for the annual event, which this year takes place on June 9 and 10 in West Hollywood. That part-time work is likely to be lucrative for Bowers. For example, CSW’s 2016 federal tax return showed it received $827,710 in “gifts, grants, contributions,” which come from sponsorships solicited from local firms and national companies such as Delta Airlines and Budweiser. That would have meant a payment of $165,000 to Bowers for his work soliciting sponsors for the 2016 weekend Pride festival and parade.

CSW’s contract with Bowers raises new questions about the ethics of an organization that long has been tainted by complaints about its poor management and allegations of improper behavior by members of its board.

The contract with Bowers also means it could face legal issues. One concern is that Bowers has been named one of 12 members of CSW’s board emeritus, which CSW describes as “a lifetime advisory position.” Another is that Bowers and Classen remain partners in Incluence, a marketing and event firm. State law bars “self-dealing” transactions, which are described as those in which one of more of a non-profit’s directors has a material financial interest. It is not clear whether the state Department of Justice would consider the emeritus advisory position a conflict of interest, although business partnership would appear to make the contract with Bowers a violation of state law.

In an interview with WEHOville, Classen admitted that he and Bowers remain partners in Incluence, which is listed as CSW’s exclusive sponsorship solicitation contractor. Classen said he didn’t know whether that partnership might put CSW in violation of state law. “I’m not a non-profit attorney,” he said. Classen also said that Incluence has been relatively inactive since he and Bowers joined the CSW board of directors in 2015.

Chris Classen, second from left, and Craig Bowers, on the right, at an Incluence event at the W Hotel.

Another issue is that Bowers appears not to be registered with the California Attorney General’s Registry of Charitable Trusts, which all charities and those raising money for non-profit organizations must do. The registry’s website allows one to search for the federal tax filings of non-profits in California and for the registrations of those who are paid to do fundraising.

In any case, commission payments for charity fundraising are in violation of the standards of both the Association of Fundraising Professionals and the Council of NonProfits. The Council of Nonprofits is an organization of more than 25,000 nonprofit groups around the country that advocates for and sets standards for such groups.

On its website, the Association of Fundraising Professionals says that it “believes that individuals serving a charity for compensation must accept the principle that charitable purpose, not self-gain, is paramount. If this principle is violated and percentage-based compensation is accepted charitable mission can become secondary to self-gain; donor trust can be unalterably damaged; there is incentive for self-dealing to prevail over donors’ best interests. In addition, percentage-based compensation, however administered, can produce reward without merit.”

In its argument against commission-based payments, AFP says “Contributions that materialize at a given moment are often the culmination of the efforts of many people, including volunteers, over long periods of time. The person whose compensation rests on a percentage of contributions raised would wish to include such gifts for the purposes of calculation his/her compensation. For example: Charities receive unexpected or unsolicited gifts, often bequests, sometimes from previously unknown benefactors. Such windfall gifts can provide an unrealistically high base–in effect, an unearned base–on which percentage-based compensation may be calculated.”

The Council of Nonprofits also says that “It is NOT appropriate for a nonprofit to compensate a fundraising professional based on a percentage of the money raised.”

CSW has had financial, community relations and ethical issues for decades. In 2016, it lost nearly $400,000 on the June Pride events after Classen and Bowers turned the annual Pride festival into a music festival that some labeled “the gay Coachella.” That decision came with a large increase in ticket prices and a reduction in programming for lesbians and transgender people, some of which was reversed when members of the community protested and threatened a boycott. Classen has noted that the massacre of gay people at the Pulse nightclub in Orlando, Fla., shortly before Pride and the arrest in Santa Monica of a man with bomb ingredients and weapons who said he was headed to WeHo likely was responsible for the drop in festival attendance and beverage sale revenue.

Another issue was Classen’s demand that members of CSW’s board of directors sign nondisclosure agreements that some described as onerous. That requirement came after WEHOville published details about the financial losses of the 2016 event, which had not yet been disclosed to the board members. Five members of CSW’s 15-member board of directors resigned rather than sign the nondisclosure agreement.

Other issues under the leadership of former board chairman Rodney Scott included the then-financial director making an unapproved loan to himself and the organization’s habit of exaggerating attendance figures and refusing to make its tax returns easily available. In a September 2000 story, L.A. Weekly revealed CSW’s reimbursement for lavish spending by board members  on travel and entertainment .

CSW recently announced the appointment of Madonna Cacciatore as its first full-time executive director, a move that some hope will result in major changes in the organization, which celebrates its 50th anniversary in 2020. Cacciatore will take office on July 1.

In recent months CSW also has added eight new board members. Among them are Brian Rosman, head of the Dog and A Duck, a locally prominent public relations and marketing agency; Alexandra Magallon of the TransLatin@ Coalition; Gerald Garth of the AMAAD Institute, and Estevan Montemayor, communications director for L.A. City Councilmember David Ryu.

  1. I think we can finally all agree that CSW has become nothing more than a self-dealing enterprise to line the pockets of corrupt board members. Truth be told, I’m actually not surprised by any of this. They say the rot starts at the head and Craig Bowers is as rotten as they get. Enough is enough. Pride is supposed to be a festival celebrating our diverse community and showing the world that we, in fact, do exist. Visibility and a positive community spirit are the goals of the festival, not lining your pockets with other people’s hard earned money. I wish I could say this was a unique problem to LA Pride but it’s not. There are other organizations which use their money for personal purposes belying their mission as only a facade. It’s sad to see LA Pride become another statistic. Enough is enough, CSW needs to lose the right to produce Pride. It’s time to find a responsible guardian for the event which belongs to the community not the organizers. I’m certain that community leaders could come together to form an new and transparent organization which won’t be offering a game of three card monty when the community comes calling to find out where their money has been going. Perhaps the LA LGBT Center could initially take over custodianship of the event until a suitable organization can be formed that answers to the community and which doesn’t hide behind NDA’s and fraudulent accounting practices…

  2. Gee, didn’t I say that two years ago to everyone? I said then that they were in violation of IRS rules and the California Integrity Act, including conflict of interests, various ethical issues, failure of a blind bidding process, self-dealing rules, the Sarbanes and Oxley Act and probably a whole lot more. And yes, IRS even has a rule about a “promoter’s fee of 20%” that likely has been violated.

    Maybe next time people will listen to me, other than just Steve. Board members have a fiduciary responsibility to the public interest as a tax exemption organization that is a “public benefit” agency. It is not a “personal benefit” company like a private sector business. Board members can be held responsible for “willful neglect of fiduciary duties” and that is not covered by their Director’s & Officer’s insurance policy.

    Yes, producing a Pride event is hard work and sometimes a thankless job. But keeping your egos and personal self-dealing interests out of a public event for the benefit of a community should be the reason you get involved in the first place. It should be about being part of your community, not feasting off of it.

    This problem is not limited to CSW alone. CSW is often an influencer to other nearby Pride organizations who exhibited similar traits and behaviors because of their shared resources. Where is the “Pride” when we cannot rise to a higher standard and not have corruption in our own community? Are we not better than that? I would be more than willing to train the board on corporate integrity as I have done for hundreds of others. It’s time to raise the bar.

  3. So Bowers taking a 20% cut of all fundraising – We should commend his new found honesty. At least this year we know how much he is taking versus how much they been stealing from the back door for years..

  4. This non-profit should be shut down. It provides no social benefit. Last year in a face to face meeting at CSW I asked.. ‘what is the core mission of the csw organization’ and they could not provide a mission statement. Can somebody compose a Rachel Maddow wall of ex-CSW members who have resigned in protest?

    Bowers exclusive contract was either agreed to by the entire board of directors or it was created without board approval to the benefit of Bowers business partner Chris Claussen. Its one or the other. If the board was not aware there is just cause to terminate the contract and the person who violated the rules to offer this contract. If the board did approve this deal then lets here some reasoning behind such a lucrative personal deal for one of its ex-directors.

    Sadly I have to ask if any of the city council members are aware of this contract and events that led up to this article exposing the ripoff. I believe we have two city council members appointed to oversee CSW, – there is also at least one board member who was the campaign manager for one of the city council members and another campaign manager of another council member who is very involved and has frequented most of the meetings last year. So, sadly, is anybody paying attention? We really do not need CSW to plan a parade.. we can have local stakeholders volunteer their time and tuck it under the Lesbian and Gay Advisory Board.

  5. Can we finally get rid of this corrupt, poorly run, misnamed organization? I’m sure civic leaders can assemble a group that does a better job than CSW. Let’s get an organization that does visible charitable works with festival profits.

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