Friday, July 31, 2009

Seattle Area Late-Term Abortion Clinic in Financial Scandal?

This blog has spent a long time investigating the finances of Cedar River Clinics, which runs three late-term abortion clinics in Western Washington. Cedar River runs clinics which do abortions up to 24 weeks of pregnancy -- and those are just the ones they admit to! -- in Renton, Yakima, and Tacoma. While our investigation is still ongoing, it's now time to publicize what we know so far.

Cedar River, which also goes by the moniker of Feminist Women's Health Center, is registered as a non-profit, or 501(c)3. This means their tax returns are available, by law, for public scrutiny.

From those tax returns, we learn that they have annual revenues of just over $5 million per year. From documents accompanying their tax returns, we know that they have 5,700 abortion customers a year. According to a Yakima Herald article, they have more than 7,000 clients total per year. Previous IRS filings and reports put their client volume closer to 6,000. 7,000 unduplicated clients seems unlikely, given that unlike Planned Parenthood, Cedar River's business is almost exclusively abortion related. The higher figure would mean that somewhere between 1,700 and 2,000 clients were there for birth control alone. That is unlikely. So we're going with 6,500 unduplicated clients per year.

Dividing the $5m revenue across 6,500 clients gives an average revenue per client of $770. This is the number to focus on. This number is extraordinarily high.

If you compare it to the now defunct Aradia abortion clinic in downtown Seattle, that clinic reported revenues per client near $350. (About $1 million in program service revenue, and just under 3,000 clients).

Planned Parenthood affiliates across the country provide a very valuable reference point. Laughably, but conveniently for these purposes, Planned Parenthood is also a 501(c)3 with public tax returns. Planned Parenthood of Western Washington is notoriously aggressive when it comes to revenue generation, but even they only report $200 revenue per client ($22 million over about 110,000 unduplicated clients), and that includes the $7 million in allegedly illegal profits from 340b Medicaid overbilling fraud! Other Planned Parenthood operations in Washington State show similar revenues per client.

So how does Cedar River come up with $770 in revenue per client? Are they just catering to the rich and famous? Clinic CEO Beverly Whipple claims that they are mostly serving the low-income and indigent, to the tune of 65% of the total clients.

We don't see any legitimate way to explain this figure.

What is more, this abortion chain claims that they are writing off almost half their would-be revenues due to unpaid bills. In other words, their revenues should be closer to $9.5 million. The $5 million in revenues is just the actually realized revenue. That would put the claimed revenue per client at about $1,450!

Of further interest is the fact that for several years, the way in which they were accounting for this on their annual tax returns to the IRS (known as 990s) was highly suspicious. They were actually claiming $9 million in revenue and a single line-item of negative revenue called "Contracts and Other Allowances" in the amount of $4 million.

When we contacted them about this, they said that "Other Allowances" was the amount they were writing off in unclaimed revenue, or unpaid bills. Experts we spoke to informed us that it's not illegal to operate this way, listing a "woulda-coulda-shoulda" idealized figure for your top-line revenue and then subtracting the difference between that and actual revenue, but it is unusual, and it's not clear what purpose it serves.

Additionally, Ms. Whipple told us they started doing this because they changed accountants. When I pointed out to her that the tax returns clearly listed the same Yakima accounting firm of Alegria & Company before and after they started reporting in this way, she had no comment.

Also of interest is a blantant mistake on their 2005 return which they corrected after we brought it to their attention: they accidentally listed the $5+ million writeoff under their management expenses rather than their operational expenses. This made it look like they were spending close to 60% of their expenses on management! Which would make them the worst
"charity" on earth. When we asked them about this, they admitted it was a mistake, and actually refiled their taxes to correct the mistake!

Also, in their most recent tax returns, since we started asking them about the reasons for listing $9 million in revenue and $4-5 million in "unpaid bills" as a single expense, they switched back to the more "natural" way of reporting their finances.

Last year we decided that all these financial shenanigans and unanswered questions deserved the attention of the authorities. We filed a complaint with the Washington State Attorney General's office Charities Division. Unfortunately, this just consisted of the AG's office forwarding a letter to Beverly Whipple.

Ms. Whipple's response was astonishing, and seemed to suggest a certain lack of fear of the authorities.

First, she said if we didn't "understand" the finances of non-profit health care she didn't "have the time to explain it" to us.

Second, she indicated she was aware that we had made inquiries into her finances through other branches of the state government. There is no legal way she should have had any knowledge of these inquries. It would seem that Ms. Whipple has friends in DSHS who are illegally tipping her off, with names.

Third, she issued a threat that she would characterize any further inquiries into her affairs as harassment. What wasn't clear was whether this threat was aimed at us or at the AG's office! But the AG's office said there was nothing further for them to do here!

We are going to continue to press this investigation. Does Ms. Whipple really want to meet us in court and go through a discovery process whereby all her secrets will be revealed? It is our intention to find out how they are making such large amounts of money per client, who in DSHS is feeding them information, and why they seem fearless of being prosecuted.

Stay Tuned!


Christina Dunigan said...

Keep on them! Al Capone was jailed for tax evasion, not his more spectacular crimes.

Sarah said...

They deserve to be scrutinized...

Anonymous said...

Everyone should pay the tax..
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Anonymous said...

Fuck you. Not even true, you bigoted asshole