Long, Strange Trip for Hospitality House

Tiny - Posted on 26 February 2011

Trent Hayward and Max Nolan, Raising Our Voices

Central City Hospitality House (CCHH) is a shelter and a social service provider with a long history in San Francisco. Founded in 1967 at the onset of the Summer of Love, it was a safe haven for the multitudes of youth that flocked to the city chasing the dream and finding the Tenderloin. In the early years, Hospitality House was committed to a nonjudgmental and nontraditional approach to social work. The outfit offered sandwiches, referrals to treatment programs and a place to sleep - as well as publishing a neighborhood newspaper, the Tenderloin Times, and an open arts studio for poor and homeless craftspeople.

This community center built to serve those who have hit the skids has fallen on hard times of its own in recent years. Last year, financial woes forced Hospitality House to axe its entire youth program, including Orlando House, a 12-bed home for street kids. The closure left some 30 staffers looking for jobs, and hundreds of homeless youth looking for help. In the process of a city-ordered reorganization, the agency has acquired its fifth executive director in as many years. Paul Boden, executive director at the Coalition on Homelessness, as well as being a past resident of the program and a former staff of Hospitality House, recently was asked to serve as board chair and take on the task of restructuring the troubled nonprofit.

"It's [CCHH] been in trouble for so long," he said. "I think losing the Tenderloin Times was the beginning of the endS when they lost their spirit."

A Raising Our Voices investigation shed some light on CCHH's troubles. An inspection of the nonprofit's financial records found the statements of CCHH and outside parties to be noncorroborative, showing either negligent bookkeeping, gross financial mismanagement, or, in the worst case, white-collar crime.

Problems with arithmetic

The agency is funded in large part by government monies: federal, state and city funds accounted for 80 percent or more of $3,237,936 in operational assets for fiscal year 1996-97 (the last year available), according to forms filed with the IRS. But a close look at the books shows that CCHH must have had a problem performing simple arithmetic. The Raising Our Voices investigation has disclosed the following: v CCHH does not acknowledge any funding from the Roberts Foundation in 1990 and 1991. But Roberts Foundation IRS filings show a total funding of $103,050 in those two years.

In 1994 IRS filings, the agency claims to have received $1,300 from the Leanne and George Roberts Foundation. However, the Roberts Foundation IRS filings report funding CCHH a sum of $101,300. v In 1995, CCHH told the IRS it received $54,000 from the Roberts Foundation. The Roberts Foundation reports funding for $88,500. Where did the money go?

The annual report filed with the State Attorney General for FY 1996-97, fails to report $400,000 received from the CCSF. It also fails to report $52,672 received from the San Francisco Department of Public Health of a total of $561,473.

"I don't know enough to say for sure," said Boden. "So far I haven't seen any money that was stolen, but I'll tell you right now if money was stolen, whoever stole it is gonna have to deal with me as president of the board directly coming after them."

Were poor artists underpaid?

The Art Studio is the most renowned component of Hospitality House, offering a creative and productive outlet for low-income people to find a voice in self expression, and a diversion from the realities of life on the street.

The agency sells some of the artwork that low-income artisans create in the CCHH studio. The nonprofit claims that the artists receive a 60 percent commission on their pieces. But IRS documents for the last three fiscal years show an average commission rate of 18 percent. CCHH officers consistently misrepresented themselves to potential donors and clients in their advertising and brochures made available for fundraising purposes.

In a 1992 edition of the Tenderloin Times, Board member Cheryl Ward quotes a 60 percent commission to the artists, while in a sales brochure of the same year Art Director Sharon Tanenbaum quotes 50 percent. "The fact of the matter is, they never even paid one third of thatS and they didn't bother to match the numbers," said an artist formerly with the program. "Sending a CCHH card makes a difference for those who receive it as well as those who created it. Funds from card sales support our artists, who earn 40 percent of the profits from their designs." - statement quoted from a 1993 brochure.

In an interview in The Chronicle of Philanthropy, Jed Emerson, director of the Homeless Enterprise Development Fund at the Roberts Foundation, publicizes $250,000 in sales of Christmas cards produced by artists at CCHH's Art Studio in 1995 and more than $500,000 in total funding. In the book, New Social Entrepreneurs, CCHH shows only $100,000 in sales. Where did the money go?

"From 1995 on, Hospitality House got smarter and they didn't mention an exact commission rate," said a former craftsman.

In an April, 1997, letter to AFL-CIO Local 3, CCHH Director Kate Durham attempted to avoid a picket at CCHH's annual anniversary and fundraising event by citing "the difficult financial situation currently facing CCHH [and the need to] eliminate our debt," as her excuse for the shortchanging, while at the same time, spouting charity rhetoric praising CCHH's mission in helping the less fortunate.

Durham also ignored clients' written complaints, and the air of secrecy surrounding the agency left the artists suspecting this as a sign that the nonprofit was being run by an administration with its own agenda. At this time, Durham did not complete proper tax returns, and when asked recently if she ever had any involvement with CCHH or the Orlando House, she denied her position of three years. "No, not that I know of," Durham said.

In February, 1998, the CCHH Board of Directors decided to shut down the rent-free store at the Crocker Galleria where ceramics and paintings were sold. Meanwhile, Executive Director Michael Bala also implemented a 50 percent cut in the artists' commissions. In a written response to the artists' concerns, Bala attempts to justify the cut by giving as his rationale: "The longstanding financial issue and [the need to] reduce our expenses and reduce [the] costs of the arts program." Bala also stated, "Hospitality House has an annual audit performed every year. When the audits are completed you are welcome to review them." Both statements, the artists felt, became landmark examples of blatant falsehoods. In a March, 1998, "Town Hall Meeting," 26 craftsmen in person and in writing requested to review Hospitality House's financial records. They were met by a wall of harassment and intimidation.

In retaliation, Arts Program Director Kathy Gernatt banned the use of the program to at least two artists: Randy Sizemore and William Bacon, who openly criticized the program and its policies. Gernatt claimed in writing that the clients' request to view the public records "makes for an unsafe environment for everyone." She resigned soon after the artists repeatedly charged her with "fostering an environment that oppressed, devalued, disempowered and frustrated the clientele."

Demonstrations and lawsuits

In April, 1998, a group of donors and artists demonstrated at the annual fundraiser. Hospitality House staff were confronted - but without any positive result. In May, 1998, another group of clients wishing to express their grievances to the CCHH Board were denied entrance to the meeting room. Chair Khristine Bailey proceeded to misrepresent herself as "a volunteer that helps out with the [Central City Hospitality] house," while physically blocking the door. Bailey and fellow board members Elizabeth "Suzy" Cain, and John Thompson then began to remove the protesters from the building.

"I attend each board meeting and I have known that there are some issues to be worked on for the Arts Program. [We will] get back to you if we feel like we need to hear from you," Thompson said. They never did.

Also that May, then-CCHH Executive Director Gemmie Jones forced a group of clients to turn off a video camera in a Town Hall Meeting called for the express purpose of hearing their concerns. In the next Town Hall Meeting in June, Jones brought in the S.F.P.D. to intimidate clientele and witnesses. "I have received death threats on the phone," Jones told officers on the scene. The clients saw it as a pathetic attempt to save her job and to protect her fellow board members.

By the end of the summer of 1998, CCHH Chairperson Khristine Bailey, Elizabeth "Suzy" Cain, two additional board members, and several high-ranking employees resigned.

In March of 1999, a cascade of lawsuits were filed by the independent craftspeople to recover unpaid commissions withheld by Hospitality House's Arts Department. In accordance with the city's Sunshine Ordinance, nonprofits utilizing more than $250,000 of city funding are required to hold two board meetings per year that are open to the public. In February and March of 1999, the artists filed suit in small claims court and made formal complaints to the city, forcing Hospitality House into holding a mandatory public meeting. The artists, then and now, feel that the August, 1999, meeting was held in an "unusual location" - in direct violation of the ordinance. The "public" meeting was held at the Art Studio rather than at the usual location, the administrative offices at 290 Turk Street.

"If Hospitality House owes money to poor people from the Arts Program that they have not paid that money out to, those debts would go to the top of the list," Boden asserted. "My thing will be when Hospitality House can print its budget in the new Tenderloin TimesS and pass its budget out to volunteers and paid staff.

"And if you're running an organization and that makes you nervous, and you feel that you can't do that amongst your own people (or) the people the money is for, then you got a serious problem in your organization. And so I feel that Hospitality House went full circle and came back around when we can do thatS There's a lot of time and resources that go into lying, which Hospitality House has been doing for about seven yearsS That's an incredible thing to maintainS The lies change with each new personS You can't operate that way."

The peril of fast growth The years between 1987 and 1988 were the times that would decide if Hospitality House would survive. The little neighborhood center with the bad coffee and single cigarettes for sale was about to lose its soul. At this time, Executive Director Robert Tobin received a leadership award from the Chamber of Commerce and the United Way; meanwhile, the McKinney Act was passed by Congress in 1987 and that money started to flow into San Francisco in 1988.

Being the darlings in the eyes of the mayor's office and the United Way, suddenly CCHH's budget doubled in two years, from roughly $750,000 to $1.5 million. Boden said he believes that an explosive growth in a short time destroys the infrastructure of an organization. "People that were qualified to be a director when you were a funky little center now aren't even qualified to be the fucking janitor now because you are a big fancy center."

This cultural shift is directly related to the influx of McKinney money in 1988, and is reflected in the attempted purchase by CCHH of a building on the corner of Leavenworth and Golden Gate. Hospitality House wanted very much to be the big kid on the block, but after about a year they settled on the property at 290 Turk Street. Also around this time, Hospitality House's Mission Statement changed, from referring to themselves as a "Neighborhood Center" to a "Homeless Program."

" For any neighborhood center to change its mission statement is a really bad sign," Boden said. "Neighborhood centers tend to be incredibly effective when they're small and healthy and old and have been aroundS Hospitality House has that kind of history."

Robert Tobin left Hospitality House in 1994. "When Robert Tobin left," Boden recalls, "he didn't leave stuffin' his pockets with moneyS I know for a fact that he didn't steal the money; he fucked the money up." In 1995, Kate Durham was the new executive director of CCHH, the year that San Francisco assessor's records show that CCHH defaulted on the building at 290 Turk Street, the location of the main offices as well as the Youth Program.

CCHH then became the defendant in a lawsuit brought by American First Federal Inc. over the loan to buy the building. Meanwhile, taxpayers without knowledge of the financial difficulties involved kept bailing out a nonprofit that was using public money to defend itself in court. On July 6, 1999, the Public Health Commission requested a "financial restructuring within this [CCHH] contract agency," and recommended "the provision of technical assistance and a 3 month renewal on the current contractS" September of 1999 saw the closing of Orlando House shelter for youth and the Youth Program at 290 Turk Street.

An attempted sell-out

At this point in time, Hospitality House was trying to pull off a fast one, with the sale of Orlando House on the "open market," a move that would be lucrative enough to dig CCHH out of the hole it had been using public money to dig for years.

"So Orlando House I heard was being sold, and it was being sold as a way to bail out the organization and it was being sold on the 'open market,' and I thought, 'well okay, these guys just don't understand,'" said Boden. What CCHH did not appear to understand is that when you receive federal funding for a program or to serve a population, and then purchase and provide services, you must continue to do that for the population the money was earmarked for.

In response, Boden called up Supervisor Tom Ammiano's office and called a meeting to specifically address the laws affecting Hospitality House that were governed by the federal Housing and Urban Development. HUD, the Mayor's Office on Homelessness, the Mayor's Office on Children, Youth and Families, and Ammiano and his staff met with CCHH Board Chair Kelly Walsh and CCHH Executive Director Phil Clark.

Recalls Boden, "I was pretty pissed offS and said something like, 'You can't fucking sell it on the open market so you can bail yourself out like Orlando House is the goose that laid your golden egg.' And the room got real quiet."

Steve Saks from HUD agreed, saying "me and Paul often phrase things differently, but that's a pretty good description of the law, [and] of the situation you're in right now."

Boden's next move was to call Larkin Street Youth Services - the only youth program he believed that, with an infusion of city money, could pull Orlando House out of the fire so they could continue to serve the underrepresented street youth population in the future.

"It had to happen right away," he said. "It had to involve city money in order for them to be able to buy (Orlando House), and the only youth program set up to handle that kind of infusion of program and money and changing shit around and not going under was Larkin Street."

Larkin Street Youth Services offered a special loan without interest for $250,000 to bail out CCHH, and the City held special negotiations with HUD to sell Orlando House and get the funds needed to make up the CCHH debt. Escrow closed on the building at 290 Turk on March 17. The building is now owned and operated by Larkin Street, with Hospitality House receiving some $475,000 to offset their debts.

Larkin Street will continue to operate as a transitional housing program for youth. "At least 18-21-year-olds in the future will have 12 other units that they can play musical chairs in, because kids don't have fucking shit," said Boden.

In this new incarnation of Hospitality House, funding will come primarily from the City. The largest allocation will go to the Tenderloin Self-Help Center, which will receive $500,000 from the Department of Public Health; the men's shelter will receive $250,000 from the Department of Human Services; and the Employment Center will receive $90,000 in federal funds. Newly appointed CCHH Board Chair Boden's future vision of Hospitality House relates back to the times of a simple and honest organization founded and operated with integrity. When asked if he believed that Hospitality House could ever return to being what it once was, Boden's reply was guardedly optimistic.

"I think there's a chance it could go back to being a funky little place on Leavenworth Street and have an arts program and a neighborhood paper," he said. "I mean that's what it used to be. It used to be just a fucking place to hang out and get really basic necessitiesS It had very little, but what it had was coming from somebody that you would be hanging out with or you would run into on the corner.

"One of the great things about working there - I lived on Leavenworth Street and I worked at Hospitality House - you couldn't (verbally abuse) the clientsS You see shelter staff do that shit all the time. And you couldn't play that shit at Hospitality House and survive. To the extent that we can recreate that, that's what we're shooting for."

Researched and written by the Raising Our Voices Task Force: Trent Hayward, Max Nolan, and A. Clay Thompson. Raising Our Voices is a Media Alliance program, in collaboration with Street Spirit, Street Sheet and Poor magazine, that trains homeless and low-income people in investigative journalism.


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