The Arizona Department of Economic Security is investigating Tucson charity Cross Country Outreach, which the Star has found is violating building, zoning and health codes, and is likely breaking labor laws.
DES spokeswoman Tasya Peterson would not give details on the subject of its investigation, but the announcement that it has begun came on the heels of a Star reporterβs questions about the charity, which describes its mission as βtransitional housing, meals, clothing distribution and job training.β
Public records show DES previously found that Cross Country Outreach and its predecessor, The Giving Tree, have operated as an unlicensed child welfare agency and may have mishandled homeless clientsβ welfare benefits.
βWeβre tryingβ
The Giving Tree, which shut down in 2012 amid plummeting public support, was the subject of a 2009 Star investigation that found myriad violations of local and state rules, as well as widely accepted standards for charities.
Director Libby Wright stepped down in 2011, then launched Cross Country Outreach in 2013 and registered it as a tax-exempt 501(c)(3) in 2014.
In an interview last week, Wright maintained that The Giving Tree did a great deal of good as it tackled homelessness in Tucson.
βWe are trying to meet a need that is not met in this community,β she said.
She sees rules and regulations as a burden but says Cross Country Outreach wants to do things right.
βIt shouldnβt be so hard to help,β she said. βWeβre trying. Thatβs all I can say. Whatever regulations need to be met, weβre willing to do it.β
But the Starβs investigation found that Cross Country Outreach still engages in the types of practices that got The Giving Tree in trouble: violating city building codes; giving out perishable food without required health department oversight; compelling homeless clients to work without pay in the nonprofitβs thrift store, leaving them less time to seek employment; failing to provide workersβ compensation insurance; and having only one board member, who is the nonprofitβs co-director.
food stamp βscamβ
Four former clients of Cross Country Outreach also told the Star they were required to spend their food stamps on communal meals at the shelter, a practice that is frowned upon by advocates for the poor.
Earlier this month, the charityβs co-director, Jere Pedrazza, said clients must share $100 of their monthly food stamps with roommates at one of the charityβs shelters. But last week, Wright denied that clients are compelled to share food. She said people sometimes sell their food stamps for cash and she doesnβt want that happening at her shelters. So residents must prove they are spending at least $100 of their food stamps on food each month by bringing food to the shelter and showing their receipts.
βWe donβt need their food,β she said. βWe donβt want to be a part of the scam.β
Pedrazza said Cross Country Outreach is a scaled-down version of The Giving Tree, which once provided services at 20 locations and brought in $1.4 million in donations and revenue in 2007.
Wright said the new nonprofitβs first 990 form, for 2015, is due to the IRS in the spring. She would not provide financial information and said her financial advisers were not willing to speak to the Star. But she said, βWeβre trying to cross all our tβs and dot all our iβs. ... We have nothing to hide.β
Cross Country Outreach has two shelters, one for women and children and one for men, and runs Shop 4 A Cause thrift store at 5140 E. Speedway.
Like The Giving Tree, operations run on revenue from the thrift shop, which is not a nonprofit, and from private donations, Wright said.
Troubled past
The 2009 Star investigation of The Giving Tree uncovered breaches of city and state regulations and common standards for nonprofits, including making a public display of giving children gifts, only to take them back later; charging homeless clients hundreds of dollars a month to live in crowded rental homes; serving expired food to the public; and hoarding food that was donated.
Questionable financial practices at The Giving Tree included paying employees as independent contractors to avoid federal payroll taxes, workersβ compensation and unemployment insurance; failing to reconcile accounts and track credit card payments; and requiring clients to sign over their food stamps and other benefits for the needy.
Former clients also alleged Wright failed to help them get back on their feet, instead requiring them to work without pay 20 to 40 hours a week at the nonprofitβs thrift store, leaving little time for them to go to job interviews.
The Giving Treeβs practices raised eyebrows among advocates for the homeless in Tucson.
βWe had clear concerns when The Giving Tree was in operation about the way that they chose to help people experience homelessness and whether the approach they were using was best practices, or even ethical,β said Patti Caldwell, chief executive officer of Our Family Services.
Regarding Cross Country Outreach, she said, βWe would be concerned about any organization that adopted a similar approach to serving people in need.β
Stonewalled, city says
Those familiar with Wright and her nonprofit work say she chafes at government or board oversight, but many emphasize her good intentions.
βShe didnβt give a hoot about the rules,β said Craig Littlefield, a former board member of The Giving Tree. βShe could talk anybody into anything and I think she really cared. But she did everything her way. She didnβt want anybody telling her what to do.β
That seems to be the case at Cross Country Outreach as well. Its Grace Home shelter for women and children has an outdated certificate of occupancy β issued by the city in 2004 β allowing for eight people. As of Jan. 8, the shelter housed about 20 people, Pedrazza said. Two former residents said there are often closer to 30.
To meet building codes, a property housing more than 10 would trigger additional safety requirements, including a fire sprinkler system, said Clayton Trevillyan, the cityβs interim building official.
The Promise Home menβs shelter, next door, doesnβt have a certificate of occupancy, which the nonprofitβs directors should have applied for when it opened.
A bigger problem is zoning compliance. The shelters are in an R-2 residential zone, so a shelter housing more than 15 people requires at least 1.5 acres, or 65,340 square feet. Grace Homeβs lot is 8,289 square feet.
Code inspectors responding to complaints of overcrowding at Grace Home have been stonewalled, said Michael Wyneken, code enforcement administrator for the city.
After a December 2013 complaint, βThe inspector was out there three times and couldnβt get someone to open the door,β Wyneken said. βWe could never establish there were more than eight people living there because nobody is really cooperative.β
Getting a court warrant to enter against the occupantsβ will is difficult unless there is evidence of an immediate threat to health and safety, he said.
Wright said she didnβt know of any compliance issues with Grace Home and Promise Home.
Still, she said, βWeβre willing to comply.β
The Shop 4 A Cause thrift store was given a notice of violation in April 2015 for dispensing potentially hazardous food β those that require temperature controls to remain safe β without a license.
The store receives regular donations of food past its best-by date from grocery stores. It gives away produce and dry goods like bread at the front of the store, but it also keeps refrigerated items in the back.
But the nonprofit never secured the license required to distribute potentially hazardous food, which would require regular inspections, said David Ludwig, program manager at the Pima County Health Department. In response to the Starβs inquiry, inspectors followed up this month at the thrift shop and ordered it to cease and desist distributing potentially hazardous foods until it obtains a license and a commercial-grade refrigerator.
A lone board member
Cross Country Outreach does not have an independent board of directors. Four directors are listed with the Arizona Corporation Commission, but two, Jill Reilly and Vickie Williams, have left the board, Pedrazza said. Another, Sylvia Figueroa, died last year.
Reached by phone, Reilly would not comment. Her husband owns the building that houses Shop 4 A Cause, the nonprofitβs main source of revenue. Williams could not be reached for comment.
That leaves Pedrazza as the only director. The Arizona Corporation Commission only requires nonprofits to have one board member, but experts say an independent board, including members who arenβt involved in the operations, is critical to running a reputable nonprofit.
For nonprofits, integrity in financial practices and proper oversight is critical to ensure effective use of donorsβ contributions, said Peggy Hutchison, chief executive officer of the Primavera Foundation. The nonprofit provides transitional housing and other services to help clients escape poverty and homelessness.
Careful tracking of how well programs perform allows Primavera to drop or adjust programs based on real data, she said.
βItβs not about us feeling good about what weβre doing,β Hutchison said. βItβs really about, whatβs the impact and how do we know we really are making a difference?β
The nonprofit has a new volunteer, whom Pedrazza would only identify as βTom,β who helps with finances, which she acknowledged are not her or Wrightβs strong suit.
βWe share a common ground in that we like helping people, but there are times when certain areas are neglected,β she said. βThatβs why we have Tom.β
Employment violations
Documents reviewed by the Star show that The Giving Tree was cited by two state agencies for failing to comply with employment requirements β and that Cross Country Outreach appears to be replicating its predecessorβs violations.
In 2011, The Giving Tree paid $1,000 to the Industrial Commission of Arizona for its failure to pay for workersβ compensation coverage.
In 2012, DES determined that the nonprofit was also not exempt from requirements to pay state taxes for unemployment insurance. It ordered the nonprofit to pay $1,466 for unemployment insurance for the nonprofitβs executive director, bookkeeper, store manager, program director and office staff for 2010 and 2011, the DES audit report shows.
Neither the DES nor the Industrial Commission would say whether Cross Country Outreach is in compliance with employment regulations. But Wright said she recently received a βletter of inquiryβ from the Industrial Commission asking for proof the nonprofit is paying for workersβ comp.
Wright maintains she has no employees, only volunteers and independent contractors. But she said if sheβs required to pay for workersβ comp and unemployment insurance, she will.
Pedrazza said clients are required to either pay $50 a week to stay in the shelters or work 20 hours a week at the thrift store to help bring in revenue to support the shelters.
The arrangement is likely a violation of federal and state labor laws, said Don Awerkamp, employment attorney at Awerkamp & Bonilla law firm in Tucson. The $50 value of the housing benefit clients receive in exchange for their work-week equates to $2.50 an hour β less than Arizonaβs minimum wage of $8.05, he said.
He also disputes the argument that thrift store workers are volunteers, if the work is required.
βIf theyβre forced to do so, thatβs really not volunteering. If theyβre doing so in return for a benefit like housing, thatβs not volunteering,β he said. That would also mean the business is required to pay for workersβ compensation insurance, he said.
Unlicensed agency
Wright and the charities she runs are well-known among state agencies, including the Department of Health Services, the former Child Protective Services, and the Office of Licensing, Certification and Regulation within DES, according to records the Star received last month in response to a public-records request.
βDHS, OLCR, CPS and the Tucson Police Department are very familiar with Ms. Wright and her questionable practices,β said an Aug. 8, 2013, DES Office of Special InvestigationsβInternal Affairs memo.
βOnce accepted into the home, Ms. Wright persuaded parents and vulnerable adults to transfer guardianship, executor or payee status over to her.β Then Wright retained the residentβs Supplemental Security Income, for people with disabilities; Direct Express Debit Card, which holds federal benefits like Social Security payments; EBT card for food stamps; or child support payments, the memo said.
Wright called the claim βludicrous.β
βI am financially secure,β she said. βI donβt need anybodyβs Social Security card or anything like that.β
DES spokesman Todd Stone said he could not say whether any disciplinary action resulted from the investigation.
A separate, undated report from the DES Office of Internal Affairs describes a 15-year-old girl who lived at Grace Home in 2009 and was released into Wrightβs custody after a hospitalization.
It concludes: βAll documentation supports the determination that Ms. Wright is in fact operating an unlicensed Child Welfare Agency.β In 2009, the investigator would have been referring to The Giving Treeβs activities. Allegations of the nonprofitβs habit of caring for unaccompanied children were detailed in the Starβs 2009 investigation.
The 2013 DES memo shows the DES believed those practices continued at Cross Country Outreach. It notes that the Arizona Corporation Commission lists someone else as statutory agent, but that βinformation gained by a member of the Office of Child Welfare Investigations (OCWI) demonstrates Ms. Wright is probably operating Cross Country Outreach as an unlicensed group home.β
DES spokesman Stone said he doesnβt know of any disciplinary action that resulted from the finding, as those records would now be with the Department of Child Safety, created in 2014 to replace Child Protective Services.
DCS spokesman Bryan Pahia said the agency has no public documents related to those findings but that operating as an unlicensed child welfare agency would typically result in a Superior Court injunction to stop the activity.
Wright said she was never notified by DES that she was doing anything wrong and that children only come to the shelters with their parents.
Like The Giving Tree, Cross Country Outreach has been criticized for staffing the thrift store with homeless clients, who work in exchange for their housing if they canβt afford a $50-per-week fee. Some positions with more responsibility pay clients a stipend, co-director Pedrazza said.
Jose Amador, 41, started living in the Cross Country Outreachβs menβs shelter in summer 2013, while he was on parole following a conviction for drunk driving. He said he worked nearly 40 hours a week at the thrift store when he was unable to pay the $50 weekly charge, and was still told to work 15 hours a week even when he could pay.
The time commitment made it difficult to apply for other jobs, he said.
βSheβs not helping people go look for work,β said Amador, who said he was kicked out of the shelter in January 2015, referring to Wright.
Recent Grace Home resident Holley Augusta lost her job last summer and fell into homelessness. Augusta, 33, stayed at Grace Home in August and September 2015. She recalls being scolded for missing a work shift at the thrift store in order to attend orientation for her new job at Jack in the Box.
βItβs not a transitional living program if theyβd rather me work at their thrift store than doing things to get myself back on my feet,β she said.
Wright said many clients have found jobs β and independence β after working at Shop 4 A Cause.
βWe have enough success stories,β she said, βthat we want to continue helping the community.β
