San Francisco Chronicle, June 22, 2000
The chief executive officer of Catholic Charities, a nonprofit organization that is closing a counseling center for teenage runaways in San Francisco for financial reasons, has billed the charity for cosmetic surgery and has averaged more than $500 a week in restaurant tabs over the past two years, internal documents show.
Frank Hudson has charged $51,770 to Catholic Charities since August 1998 for meals at Zuni, Stars and other high-end restaurants, according to documents obtained by The Chronicle. Hudson often had guests but at times dined alone.
Hudson's expense account also shows that Catholic Charities paid for his laser hair-removal treatments and injections of Botox, a temporary cosmetic cure for wrinkles around the eyes.
In all, charity documents show that Hudson has totaled more than $73,000 on his expense account in the past two years.
Hudson said there was nothing improper about his spending and that the restaurant meals were a way to keep the charity connected with civic leaders.
``It could be anything from discussing a bill in the Assembly to talking to someone that I'm trying to get to make a donation to Catholic Charities,'' Hudson said. ``Believe me, I'd much rather be at home eating a peanut butter sandwich.
``I certainly have nothing to apologize for,'' he said. ``Every nickel . . . is spent in the right and proper way.''
Neil Carlson, spokesman for the National Committee for Responsive Philanthropy, said Hudson's spending ``definitely raises eyebrows.'' Carlson's group, based in Washington, D.C., monitors spending by nonprofit organizations nationwide.
``It gets down to what the organization is all about,'' Carlson said when informed of Hudson's expenses. ``If the mission is to alleviate poverty and serve the most vulnerable members of society, then people are justified in asking whether all these expenses are legitimate.”
Founded in 1907, Catholic Charities is the private, not-for-profit human services organization of the Archdiocese of San Francisco. It is one of the largest providers of social services in the Bay Area, employing 400 people and serving 70,000 clients in San Mateo, San Francisco and Marin counties.
The charity operates 37 programs, including residential programs for AIDS patients, community centers for senior citizens, crisis counseling for pregnant women and treatment for alcoholics and drug abusers.
Almost a third of its $23 million budget comes from public donations, including about $270,000 annually from collection-plate contributions at Sunday Masses. Other funding comes from government contracts.
The charity is not under the governance of the Roman Catholic Church, although San Francisco Archbishop William Levada is the chairman of the board of directors.
Through a spokesman, Levada said he is aware that some current and former staff members have criticized Hudson's spending but he believes the complaints ``do not hold water.”
The CEO's dining habits were news to some board members.
“It seems like there's a lot going on here that's not in the financial reports,'' said board member Harry Johnson. ``This is nothing the board knew about.”
Mary Callanan, who sits on the board's finance committee, said, ``I am not aware of any exorbitant expenses, but I don't see any expense accounts.”
Board member Victoria Coe, however, said Hudson's expenses for meals with contributors and government officials were proper. ``I have no problem with that,'' she said.
Finance committee Chairman Jack Burgis said he reviews Hudson's expenses every month and has not found ``anything untoward or unsubstantiated'' about them.
According to a former controller at Catholic Charities, Hudson's spending patterns were not widely known, even to her.
“There's not much oversight,'' said Martha Moon, who has 30 years of experience as a controller. She left the organization for another job in November.
“I was kept less well-informed at Catholic Charities than any other place I have ever worked,'' she said. ``The accounting staff was told what to do and we did it.”
In the world of charities, $500 a week for restaurant meals would be considered excessive, said Pablo Eisenberg, a senior fellow at the Georgetown University Center for Public Policy, who teaches a class on nonprofit organizations. ``He doesn't need that to do business,'' Eisenberg said.
Hudson's favorite restaurant is Zuni Cafe, at 1658 Market St., where he has run up $20,766 on his expense account credit card since August 1998. Several times he ate by himself and entertained no guests, records show.
Another of his favorite restaurants is Stars, at 555 Golden Gate Ave., where he has spent $7,083 in the past two years. One bill shows Hudson ordered a $130 bottle of wine for a party of three on March 2.
Hudson said he makes a point to eat out often to increase his visibility in the city. Many power brokers connected with City Hall are known to frequent Zuni, he said.
“I'm there to work the room, if you will,'' he said.
When he dines alone, he said, it is in line with a Catholic Charities policy that allows employees to bill the nonprofit for a meal if they work more than 10 hours in a day.
Records also show that over the past two years, the 56-year-old Hudson has charged off $6,393 for prescription medicine, $1,050 for hair removal surgery, $700 for anti-wrinkle treatments and $1,788 for five nights at the Campton Place hotel in San Francisco.
He stayed at the four-star hotel when he had to be in the city early and did not want to drive in from his house in Petaluma, he said.
As for the wrinkle-removal treatment, Hudson said his dermatologist ``may have been removing something around my eye.”
All those expenses conformed with charity policy that allows executives to expense most medical costs not covered by insurance, Hudson said.
The arrangement sounded unusual to Carlson. ``I know of no other nonprofit that directly pays any and all medical expenses for its top people,'' he said.
Hudson's expense account charges are separate from his salary of about $172,000, which makes him one of the highest-paid charity executives in the Bay Area. The president of Catholic Charities USA in Alexandria, Va., the Rev. Fred Kammer, is paid $95,227, according to the Chronicle of Philanthropy magazine.
Hudson noted that Kammer is an ordained priest. ``He's taken a vow of poverty and I haven't,'' Hudson said.
The questions about Hudson's expenses come as Catholic Charities is making some service cutbacks. According to senior staff members, Catholic Charities has decided to close Guerrero House, a counseling center for teenage runaways in San Francisco that costs $480,000 a year to operate. The board is also considering cuts at a social service program for the homeless in San Mateo called the Peninsula Family Resource Center, and in counseling at Behavioral Health Care Services in three Bay Area counties. It expects to save $315,000.
The decisions will become final at the board's meeting today.
Hudson said the charity is trying to spend its money more responsibly, and is expanding HIV treatment programs and services for the homeless on Treasure Island even as it cuts elsewhere.
“I don't characterize it as a business approach, but rather as an accountability approach and a sustained growth approach,'' he said.
Maurice Healy, spokesman for the Archdiocese of San Francisco, said 92 percent of the money Catholic Charities brings in goes to programs, ``a ratio that is among the best in the nonprofit arena.”
Part of the problem in gauging the propriety of executive spending at charities is that there is no set of universally recognized guidelines, said Dan Langan of the National Charities Information Bureau in New York.
“Each board can set its own standards, but that can also backfire,'' he said. ``The essence of a charity is that it's a public trust. You pay for what you have to, but you exercise prudence.''