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Saint Francis Sues Former Leaders

Sherman SmithAugust 14, 2022

The former CEO, chief counsel and IT director for Saint Francis Ministries used their positions to enrich themselves and their friends as the charity neared financial insolvency, according to allegations made in state and federal lawsuits.

The Salina-based foster care provider in court documents accused the trinity of overbilling for IT and legal services and misusing company funds to support a lavish lifestyle. Federal authorities identified $10.73 million in fraudulent billing for IT services and moved to seize bank accounts.

Meanwhile, the former CEO filed a counterclaim against Saint Francis officials for alleged defamation based on quotes and documented evidence reported by Kansas Reflector.

The legal fallout raises questions about the level of care the organization provides to foster children, as well as renewed interest in examining whether taxpayer funds should be repaid to state agencies in Kansas and Nebraska.

Teresa Woody, litigation director for Kansas Appleseed, said it was appalling that millions of dollars meant to provide foster care went out the door and were not accounted for. Kansas Appleseed settled a lawsuit last year to require improvements in the foster care system, which is administered by the Kansas Department for Children and Families.

“I think DCF should look at all this and take a very hard look at whether they’re an appropriate entity to be trying to help foster children in Kansas,” Woody said.

Saint Francis Ministries quietly filed a civil lawsuit in January in Saline County District Court against its former CEO, Robert “Father Bobby” Smith, IT director William Whymark, chief counsel David Schaffer, and the law firm where Schaffer worked in Chicago. The lawsuit identifies Schaffer as Smith’s friend and Whymark’s brother. Saint Francis is seeking repayment for legal malpractice and breach of fiduciary duties.

The accusations

The former Saint Francis leadership resigned in November 2020 after a newly hired financial officer alerted the board to alleged financial misconduct.

They worked together to place their own financial interests above the nonprofit, failed to disclose conflicts of interest, misappropriated resources, overbilled for services, and concealed material facts, Saint Francis claimed in an amended complaint filed Aug. 5.

Accusations made in state and federal court documents are consistent with an internal investigation, first reported by Kansas Reflector in December 2020, and an audit released by DCF in December 2021.

Smith, an Episcopal priest, began working as CEO for Saint Francis in July 2014. Smith hired Schaffer as chief counsel in October 2014. Schaffer, according to the lawsuit filed in Saline County, urged Saint Francis to hire his brother to provide IT services, even though Schaffer knew Whymark wasn’t qualified for the job.

Smith charged $442,276.17 to Saint Francis credit cards between 2017 and 2020, mostly funding “lavish meals, entertainment, travel and gifts for him and his family,” the lawsuit said. He also spent $57,125.42 in Saint Francis funds to pay for travel, “the majority of which had no legitimate business purpose or was grossly excessive.”

The lawsuit reveals previously undisclosed allegations against Schaffer.

The attorney billed Saint Francis for more than $1 million in legal fees between June 2015 and June 2019 through his law firm. He billed Saint Francis for an additional $500,000 between February 2018 and October 2020 that was paid to him personally. There were at least eight months in which Schaffer billed Saint Francis both through his law firm and as an individual.

According to the lawsuit, the legal fees were “grossly excessive for the services they allegedly performed, but Schaffer knew the invoices would be approved and paid by his friend.” The state audit last year said Smith approved expenses within minutes of receiving them.

Schaffer allegedly outsourced hundreds of thousands of dollars in legal work to friends and lawyers at other firms that should have been performed by him.

Schaffer allegedly billed Saint Francis for legal fees on matters unrelated to his job as general counsel. When Schaffer gave a deposition in May 2019 in a case brought against his former law firm by its former landlord, he directed his attorneys to bill Saint Francis for $6,000. Schaffer then approved the payment in his capacity as general counsel for Saint Francis.

Schaffer allegedly billed Saint Francis nearly $4,000 for moving and storage expenses for office furniture in his Chicago law practice.

Between June 2019 and October 2020, Schaffer allegedly charged about $60,000 on a Saint Francis company credit card. Many of the charges, Saint Francis said in its lawsuit, served no legitimate business purpose.

IT problems

Saint Francis employed Schaffer’s brother, Whymark, as its chief information officer and paid Whymark’s company, WMK Research, more than $11 million between January 2018 and February 2021.

“WMK’s services were grossly deficient and overpriced,” Saint Francis said in its lawsuit.

Saint Francis paid WMK more than $6 million to build a software system that failed to function. Whymark outsourced most of the work without telling Saint Francis, according to federal and state court documents, while inflating the cost of actual services. When the IT system crashed in the fall of 2019, Whymark wiped the hard drives on the crashed server, claiming it was necessary to reuse the server. At the time, Saint Francis was in the middle of a financial audit.

“The crash halted the audit for months and delayed the discovery of defendants’ self-dealing,” Saint Francis said in its lawsuit.

Saint Francis estimated it overpaid in excess of $7 million to WMK, and the cost to repair WMK’s work was estimated at $3.2 million.

Federal authorities, in a court filing Aug. 1, moved to seize more than $700,000 in cash held in three bank accounts controlled by Whymark. The action was based on an FBI investigation that found probable cause to believe Whymark, of Mount Kisco, New York, ripped off Saint Francis for $10.73 million.

Financial ruin

An interim financial officer warned Smith and Schaffer in January 2020 that Saint Francis was in dire financial condition and could be completely out of cash by March 2020.

The Saint Francis lawsuit said Smith and Schaffer never disclosed the financial condition to their board of directors.

The organization avoided financial collapse because it received the maximum $10 million loan through the federal Paycheck Protection Program. A state auditor later discovered the organization wasn’t eligible for the loan, although it was forgiven anyway by the Small Business Administration.

The lawsuit said Smith and Schaffer were advised to reserve funds from the PPP loan to gain liquidity. Instead, Schaffer allegedly said the obligations to his brother’s company would be taken care of first.

The organization’s financial hardships were complicated by winning a severely underbid contract in 2019 to provide foster care services in the Omaha, Nebraska, area. The state of Nebraska severed ties with Saint Francis earlier this year because of extensive performance problems.

Nebraska impact

Nebraska Sen. Machaela Cavanaugh, who spearheaded an investigation into her state’s dealings with Saint Francis, said the revelations in court filings were upsetting.

“I think you can draw a correlation between defrauding the organization and the outcomes that are coming out,” Cavanaugh said. “I mean, any organization is only as good as its weakest link, as people say, and if you have this toxic, corrupt mentality at the very top of the organization, then you’re not going to be a high-performing, high-quality organization. It doesn’t matter how many wonderful people you hire underneath that person. That’s where you’re starting from. That’s the cornerstone of the organization, and that toxicity and that lack of integrity in the work that you’re doing will trickle down.”

Cavanaugh said Saint Francis was short staffed in Nebraska and had a high turnover rate. Employees didn’t receive adequate training. As a result, children ended up in the system longer than they should have, and there were concerns about the accuracy of caseworker reports.

Cavanaugh also said it was time to “revisit the conversation” about whether Nebraska should recoup money the state invested in Saint Francis.

“We clearly were defrauded, and I think the children of Nebraska deserve us to advocate on their behalf,” Cavanaugh said. “By not going after the money, not going after the people that ultimately hurt these children, I think it’s us just continuing to fail these children.”

Counterclaim

In March of this year, Smith filed a counterclaim for defamation by current Saint Francis leadership for “numerous false and defamatory statements” made about Smith and his wife in reports published by Kansas Reflector.

Smith said his former employer “knowingly and/or recklessly provided” an internal investigation report to Kansas Reflector, which published articles based on “unsubstantiated, false and defamatory statements” made within the investigation report.

“Smith has been suffered economic, reputational damages, personal humiliation, mental anguish, and loss of consortium damages,” the counterclaim said.

_ _ _

Sherman Smith / Kansas Reflector 

Copyright © Meridian Media, 2022. All Rights Reserved. No part of this story may be reproduced without Meridian Media’s express consent.

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