Fundraiser’s past a red flag no one saw

Before Nancy Kruse’s fundraising company closed, leaving more than $400,000 in expected public radio proceeds unaccounted for, Kruse’s company bio described her as, among other things, “director of The Writing Center in San Diego” who “has a master’s degree in public policy from Georgetown University and, in 1997, was awarded a Eureka Fellowship for her leadership in nonprofit management.” However, Georgetown University has no record of her graduation and Eureka Communities does not list her as a past fellow.

She did indeed run the Writing Center, once a nonprofit fixture of San Diego’s literary scene, but Kruse’s former co-workers, who knew her under the name Delaney Anderson, say she presided over the center’s collapse.

The center’s last days in 1998 were marked by double-talk and creative accounting, they say, which also characterized the rapid decline and closing of Washington-based Nancy Kruse + Partners this year, according to many of that firm’s employees. The Writing Center’s leaders say Anderson/Kruse suddenly resigned weeks before the center’s demise amid eviction notices and bad debts.

Kruse, who ran online fundraising auctions for more than 40 public radio stations in her company’s 16-month existence, has not explained to stations what happened to more than $400,000 in earnings she had reported from September’s multistation auction. Some investors in her privately limited partnership, unable to reach Kruse since the first rumors of financial trouble surfaced last year, also still wonder exactly what happened. Former employees are still pursuing lost wages and IRA deductions they say never made it into retirement accounts.

Meanwhile, another question lingers: Why did so many people, from volunteers to high-ranking decision-makers at NPR, put their trust in a fundraiser with a short track record in their field and an unexplored past in San Diego?

“She is a really bright woman and she talks a good talk,” says Judy Reeves, author and founder of the Writing Center in San Diego. “It made her very convincing.”

“Her powers of persuasion were legendary,” adds a former Kruse + Partners employee, who hopes to work in pubcasting again and thus declined to be identified. “Everyone was hoodwinked.”

However, Kruse herself suggests that any suspicions of skullduggery would be misguided.

“I think it all seems a lot more interesting than it is,” she says of the Kruse + Partners collapse and the missing national auction money. “There was a business; the business failed.” Kruse has said her family lost hundreds of thousands of dollars on the venture.

Regarding the nonprofit in San Diego, it was foundering before she took over, Kruse says. As for her alternate identity during that period, she says Delaney Anderson is her pen name and became the name by which she was known in the San Diego writing community.

Kruse said she would not be able to comment on the apparent bio discrepancies in time for Current’s deadline.

An auspicious start out west

In San Diego, as in her later stint in public radio, Kruse championed ambitious plans and created early successes that eventually gave way to unpaid bills and bitter disappointments.

She joined the center, which was trying to recover from a previous employee’s embezzlement, as a volunteer in 1996. A fundraiser in Maryland and Washington, D.C., before she moved to California, Kruse secured new grants, established new contacts for the center and otherwise worked to raise its profile within the San Diego arts community.

“She had great ideas . . . membership was up,” Reeves said. “She represented us well to the community and it gave us a certain visibility we hadn’t had before.”

Reeves, a respected writing coach but admittedly unskilled nonprofit manager, asked Kruse to take over as the organization’s executive director in 1997. Kruse says she never wanted the job.

Nevertheless, she continued to impress, pioneering outreach projects such as a writing program for juvenile offenders and organizing a dazzling Literary Lights gala that attracted lots of attention and top-tier talent such as George Plimpton.

“It was so beautifully done,” Reeves says. “Only later did we find out the catering company was never paid.”

“Delaney did have some good ideas, but eventually she was not managing the books quite right,” says Karen Swank-Fitch, the volunteer coordinator at the center.

Writing instructors began to complain that they weren’t being paid. Payroll checks bounced. Creditors the board had never heard of sent notices requesting payment. A second Literary Lights gala fell far short of expectations. Though accounting reports to the board claimed that rent was being paid, a volunteer showed up for work one morning to find an eviction notice taped to the center’s door, Reeves said.
John Chapin, the center’s development director, says he filed a health insurance claim only to discover his policy had lapsed months earlier. Rebecca Pittman, operations director, raised a red flag when she discovered that her signature had been forged on a check to a creditor, though she doesn’t know who did it, she says.

Reeves repeatedly questioned Kruse about the problems, she says, but Kruse’s responses were “beginning more and more to feel like they weren’t answers but excuses. It was like she was tap-dancing to get whoever was calling or questioning her off her back.”

“Toward the end she wasn’t showing up; she wouldn’t accept phone calls,” Reeves adds. “It got to the point that things were clearly worse than we thought.”

The Writing Center’s board called an emergency meeting in May 1998, intending to fire Kruse.

“Before the meeting I found a note left on my front door with her resignation,” Reeves says. “I never saw or heard from her again.”

The center closed for good several weeks later.
Chapin and others backed Kruse’s claims that the Writing Center had money problems long before she showed up. Reeves notes that Kruse deferred her own salary during her time as director.

The center was a “let’s-try-to-make-this-work situation,” Kruse said. “Aside from Judy, no one lost more money than me.” She denies that she acted improperly.

Center workers don’t suspect that Kruse is guilty of any fraud or fundamentally malicious intent. But while they recall the intense charisma and charm that won them over in the beginning, they remain bitter about the director’s evasiveness as the nonprofit crumbled.

“She was incredibly charming, smart, fun . . . people loved her to death,” Chapin says. “My sense is that her heart was in the right place, but she just couldn’t make things work.” He says Kruse resorted to deception when things began to go awry.

WAMU, entrance to radio

As with the Writing Center, Kruse started in public radio with a bang and ended up leaving angry former co-workers.

She was hired in 2001 as a direct mail consultant at Washington’s WAMU on the recommendation of then-Development Director Ann Hummer, who was Kruse’s aunt by marriage at the time. Kruse went on to play an expanded role, enlarging the station’s membership numbers in the process, says Susan Clampitt, WAMU’s GM at the time.

In September 2002 Kruse produced the station’s first online auction, which doubled as the first auction for Nancy Kruse + Partners. The firm went on to win high marks from other fundraising consultants and produce well-received auctions for stations such as KPBS in San Diego and WABE in Atlanta.

Kruse “had a lot of passion for what she was doing,” says Jay Clayton, who experimented with online auctions while at Boston’s WBUR. “I consulted early on and got paid what I was owed and had no complaints.”

Growing station interest in auctions led to plans for a national coordinated event, which would make it easier for NPR to contribute some of the most popular items for sale — meet-and-greet prizes involving its personalities. The auction went off without a hitch, but stations soon became frustrated as weeks passed without payment or communication from the Kruse firm.

Though each of the 25 stations participating in the September national auction paid a fee of just over $15,000 to cover the Kruse company’s costs, each received only $10,000 in auction proceeds before the company suddenly shut its doors (Current, Feb. 28).

Much more reportedly had been raised. The September auction fell well short of its $1 million goal but did earn nearly $679,000 for the stations, according to Kruse + Partners’ reports to stations, NPR and Current. Assuming that each of the 25 stations received the same $10,000 payout, totaling $250,000, that leaves roughly $429,000 unaccounted for.

“It was very embarrassing for those of us who’d been in the industry for a long time,” says Sue Winking, former Kruse stations relations director, based in Twin Cities, whose 20-year public radio career has included stints at PRI and Minnesota Public Radio. “I tried to call and email [Kruse] about stations not getting their money, but I received no response.”

Occasional paychecks had bounced earlier in 2004, but Kruse employees say they started bouncing more regularly around the time of the national auction. The company also failed to reimburse some travel expenses to staffers and though it was deducting IRA contributions from paychecks, it didn’t always put the money in employees’ retirement accounts.

“I would say, ‘Is there more to this? Is the company in trouble?’ and I’d hear, ‘No, absolutely not—cash flow is just a little difficult,’” Winking says.

“Everything was always fine,” says former staffer Sally Ginsberg. “We got furloughed, but they said everything was fine. Once we started really asking questions, they told us everything was fine up to last minute when they told us we were closing down.”

Adding up unpaid wages, retirement deductions and reimbursements, the jilted staffers estimated that they’re owed more than $93,000.

Included in that sum is the $829.08 check Justin Beck paid in January 2005, after leaving the company, to make sure there would be no gaps in his health coverage. Beck has diabetes. He soon discovered he had no COBRA post-employment coverage. The check he wrote to Kruse + Partners had been cashed, but the insurance company, Blue Cross Blue Shield, never received the money, he says.

While there are clear risks involved in joining a startup effort, the employees believe they were consistently misled about the health of a company that was, in retrospect, going down the tubes.

“We were told that we’d earn money in our third year and were blowing past (Kruse’s) projections,” one staffer said. “There was a sense was that we were succeeding wildly.”

“Early on she was a great leader — charming, open, communicative, complimentary,” Winking adds. But when problems arose, “she sort of disappeared and we were only getting bits and pieces of information.”

“Everybody’s bitter because there have never been any answers,” says Andrea Jalbert, a former development officer who invested $25,000 in the company.

One unhappy surprise led to another. After the company closed, Ginsberg applied for unemployment and was rejected initially. The District of Columbia employment commission had no record of her employment for several quarters, according to a letter from the agency. She had to produce pay stubs to prove her status.

Civil actions, maybe more

Perhaps answers will arise in court. Former Kruse consultant Barbara Appleby is suing the company for more than $77,000 in unpaid wages, according to Maryland court records.

An investor in the company, who declines to be named because he has not decided whether to take legal action, claims to have “lost a substantial sum” after Kruse wooed him by claiming that the firm had interested buyers.

Deducting IRA contributions without making corresponding deposits may be a violation of the Employee Retirement Income Security Act, according to Department of Labor spokeswoman Kathleen Dugan. In an early January e-mail exchange with an employee, Kruse assistant Amy Drayer acknowledged, “We are absolutely aware of the shortfalls and will make them up as soon as we can.” Employees say the shortfall was never paid up.

E-mail correspondence between former Kruse staffers and the Department of Labor suggest the agency is checking into the charges, but the department declines to confirm or deny the existence of any investigation, Dugan says.

NPR, which lent its name and prestige to the multistation auction, has refused to say whether it or any national auction stations will pursue any legal action.

Kruse says she can’t comment on anything pertaining to employee concerns or the national auction.

Theories abound regarding the ultimate fate of the missing national auction revenue. Most center on the large and relatively top-heavy staff. Noting the abundance of senior staffers, one former employee notes, “There were too many chiefs and not enough Indians.”

The company was also eating into its own bottom line by purchasing travel packages from an auction supplier — after finding it was unable to get pricey merchandise donated. Bidders snapped up the packages, which added excitement to the merchandise lineup while sweetening the reported sales totals for Kruse’s single-station auctions, according to a staffer familiar with the transaction. “She was trying to ring up a series of spectacular successes to show the system we were going like gangbusters.”

The person with the best insight into the issue — Kruse — can’t comment, she says.

She realizes that a possible conspiracy is far more intriguing than a business that simply closed because it was losing money, but she says anyone hoping to uncover a juicy scandal is out of luck.

“It’s not like I have some trust fund or stash of cash under my bed,” she says. “People are welcome to come over and look.”