A Pattern of Lavish Spending at a Leading L.G.B.T.Q. Nonprofit

 

A Pattern of Lavish Spending at a Leading L.G.B.T.Q. Nonprofit

 

GLAAD paid for its chief executive to fly first-class, rent a Cape Cod house and remodel her home office. It may have violated I.R.S. rules.

 

Emily Steel

By Emily Steel

Aug. 1, 2024

Updated 1:38 p.m. ET

https://www.nytimes.com/2024/08/01/business/glaad-ceo-spending.html

 

A light rain fell at the Zurich airport one Sunday morning in January 2023 as Sarah Kate Ellis made her way from a seat in Delta’s most exclusive cabin to a waiting Mercedes. It was there to chauffeur her to the Swiss Alps, where she and her colleagues would stay at the Tivoli Lodge, a seven-bedroom chalet that cost nearly half a million dollars to rent for the week.

 

Ms. Ellis, who was en route to the World Economic Forum in Davos, doesn’t run a Wall Street bank or a high-flying tech start-up. She is the chief executive of the nonprofit organization GLAAD, one of the country’s leading L.G.B.T.Q. advocacy groups.

 

The group, which has an annual budget of roughly $30 million, paid for Ms. Ellis’s trip, as well as a day of skiing, according to internal documents reviewed by The New York Times and interviews with current and former employees and others with knowledge of GLAAD’s operations.

 

The trip was part of a pattern of lavish spending at GLAAD, much of it by Ms. Ellis, that may have violated the organization’s own policies as well as Internal Revenue Service rules.

 

The Times reviewed dozens of GLAAD expense reports and accompanying receipts from January 2022 through June 2023, as well as employment agreements, tax filings, audit reports, other financial documents and internal communications.

 

When Ms. Ellis traveled for work, there were first-class flights, stays at the Waldorf Astoria and other luxury hotels and expensive car services. Not to mention a Cape Cod summer rental and nearly $20,000 to remodel her home office, which was outfitted with a chandelier, among other accouterments.

 

Sarah Kate Ellis’s expenses included a room at a Waldorf Astoria in California, car services in Washington and a chandelier for her home office.

All of that is on top of Ms. Ellis’s annual pay package, which has the potential to stretch into the high six or low seven figures — a sum that would far exceed what her peers at many similarly sized organizations have earned.

 

Such perks, luxurious business travel and large pay packages might be commonplace at a for-profit company. But legal experts said they were inappropriate for a nonprofit organization with about 60 employees that, in exchange for being exempt from federal and state taxes, must ensure that executive pay is reasonable and aligned with the charity’s mission and the intent of donors.

 

The overall pattern of spending represents “a potentially abusive use of charitable funds that would be surprising and insulting to a lot of their donors,” said Michael West, a lawyer who advises charities at the New York Council of Nonprofits. “It appears she may have fallen into the trap of excess.”

 

Based on advice from lawyers, GLAAD did not declare the money spent on the home office renovation as income on Ms. Ellis’s tax forms, a GLAAD spokesman said, meaning that she most likely did not pay taxes on the spending. Nonprofit experts said this may have violated I.R.S. rules.

 

Many of Ms. Ellis’s expenses also appeared to break GLAAD’s own rules for travel and entertainment, which at the time stated that all employees must fly economy, prioritize public transportation and try to keep costs to a minimum.

 

GLAAD’s relatively small size belies its clout. Under Ms. Ellis, the organization has become one of the most prominent proponents of L.G.B.T.Q. equality. The group is well known for campaigning against media coverage of L.G.B.T.Q. issues that it deems unfair or inaccurate. Major companies pay GLAAD hundreds of thousands or even millions of dollars for sponsorships and for consulting and other services.

 

Yet inside GLAAD, some employees voiced concerns about whether the organization raised funds for one purpose and then spent the money on over-the-top pay packages and other extravagances for executives.

 

Last year, GLAAD’s chief financial officer, Emily Plauché, warned Liz Jenkins, the chairwoman of the group’s board of directors, about what she said was excessive spending that conflicted with the organization’s policies and was not being properly disclosed to the I.R.S. and the public, according to people with knowledge of the matter.

 

The board hired an outside law firm to investigate Ms. Plauché’s allegations. Based on the law firm’s recommendations, GLAAD changed its travel policies, including by permitting executives to upgrade flights to business class under certain circumstances, according to Richard Ferraro, a GLAAD spokesman. He said Ms. Ellis’s travel arrangements complied with the updated policy.

 

Mr. Ferraro denied that Ms. Ellis traveled luxuriously and defended the group’s spending on her home improvements and summer housing, saying they enabled her to advance GLAAD’s mission. He said that GLAAD had relied on lawyers and accountants to ensure that the group complied with I.R.S. rules and that its executives were “good financial stewards.”

 

Mr. Ferraro said the Davos trip was funded through a donation from the Ariadne Getty Foundation, which said it was proud to support GLAAD’s work in Davos. He said GLAAD used the Tivoli Lodge as a venue for receptions and other events. Mr. Ferraro added that GLAAD paid for the day of skiing “due to an administrative oversight” and that Ms. Ellis, 52, later reimbursed the organization.

 

Ms. Jenkins said the board stood firmly behind Ms. Ellis, “with respect and appreciation for how she and her team are leading the movement at a time when our community is under attack. We have full confidence that they’re doing so with integrity and that they share the board’s commitment to irrefutably strong governance and business practices.”

 

Ms. Ellis said, “I take my role as GLAAD’s financial steward incredibly seriously, and we’ll continue updating our procedures to keep pace with the organization’s rapid growth.”

 

Big Bonuses, Guaranteed

GLAAD was founded in 1985 as the Gay and Lesbian Alliance Against Defamation, with the goal to combat homophobic news coverage of AIDS. The group gradually expanded its mission to fight for “fair, accurate and inclusive” representation in the media. Among its high-profile victories: persuading ABC to allow the main character on the show “Ellen,” played by Ellen DeGeneres, to come out as gay in 1997.

 

By 2013, though, GLAAD’s finances were in shambles. Its assets had dwindled as expenses far outpaced donations, which had declined steeply.

 

The organization’s future was in jeopardy — GLAAD was in danger of being unable to make payroll — when Ms. Ellis joined in 2014.

 

A Staten Island native, Ms. Ellis had been working in magazine publishing when she became known as an advocate for L.G.B.T.Q. equality. In 2011, she wrote a memoir with her wife, Kristen Ellis-Henderson, a member of the rock band Antigone Rising, about their simultaneous pregnancies. Two years later, a photograph of the couple kissing appeared on the cover of Time magazine under the headline “Gay Marriage Already Won.”

 

Ms. Ellis made it her mission to elevate GLAAD’s profile and broaden its scope — and in turn to rev up the fund-raising engines that would rescue the group’s finances. Soon she was doing regular TV appearances and gracing the red carpet at awards shows.

 

The strategy worked. By 2022, GLAAD’s revenue — from donors as well as new programs that she helped create — had quintupled to nearly $19 million.

 

Major donors have included media and tech companies such as Netflix, Google and the Walt Disney Company; philanthropists like Ariadne Getty; and the New York City Council. In 2022, the billionaire MacKenzie Scott donated $10 million.

 

GLAAD now acts as both a watchdog and a cheerleader for the media, calling out what it views as unfair or incorrect coverage. The Times has been a frequent target of criticism, with GLAAD recently arguing that the news organization has published inaccurate and biased pieces about transgender issues. (The Times has said it stands by its work.) The group also consults with entertainment studios and hands out awards at galas that have honored stars like Oprah Winfrey and Taylor Swift.

 

In 2022, Ms. Ellis’s contract was up for renegotiation. With the organization’s fortunes having rebounded, board members saw her as indispensable and feared that she might leave for a lucrative corporate job, according to a person familiar with the directors’ thinking.

 

At a meeting in Provincetown, Mass., that July, the board decided to give her more money to ensure that she stayed. Ms. Ellis’s new employment agreement, which The Times reviewed, increased her base salary by 5 percent, to $441,000, with automatic 5 percent increases each year through the end of the contract in 2027.

 

The contract granted Ms. Ellis a $150,000 signing bonus. Then there were additional payments of up to $300,000 per year tied to GLAAD’s fund-raising. There was also a discretionary annual bonus of up to 40 percent of her salary. Finally, there was a $225,000 “farewell appreciation bonus” that Ms. Ellis would collect in 2027 assuming she still worked at GLAAD.

 

The new contract put Ms. Ellis on track to receive anywhere from about $700,000 to $1.3 million a year. Mr. Ferraro, the GLAAD spokesman, said it was “practically impossible” for her to hit the high end of that range.

 

Legal experts said nonprofits can justify paying large sums to attract top talent but that, under federal and state rules, their boards of directors must ensure that compensation is fair and comparable to the pay of executives at similar organizations. Such determinations are subjective, but if the I.R.S. or state regulators deem executive pay to be excessive, the nonprofit and its leaders can face financial or other penalties, including the revocation of its tax-exempt status.

 

If Ms. Ellis were to receive the more than $1 million that she is potentially eligible for some years, it would be comparable to what giant nonprofits like Feeding America, the American Red Cross, Planned Parenthood and the American Civil Liberties Union pay their leaders. Those organizations are many times the size of GLAAD.

 

Ms. Ellis’s pay and perks look “much more like a pay package of a for-profit executive and less like that of a person directing a charity,” said Brian Mittendorf, a professor at Ohio State University’s Fisher College of Business who specializes in nonprofit accounting.

 

“It’s quite a generous package,” added David Samuels, a partner at law firm Perlman & Perlman who previously helped oversee tax-exempt organizations in the New York attorney general’s office. “Is this a proper and reasonable use of the charity’s assets?”

 

Mr. Ferraro said the board set Ms. Ellis’s pay after reviewing the compensation at 10 other organizations. The board wanted her to receive more than the average of what those groups paid their leaders. Though some of those organizations, like the A.C.L.U., are larger than GLAAD, he said, its “visibility, impact and influence is similar.”

 

Expensing a Chandelier

In addition to her salary and bonuses, Ms. Ellis’s new contract included a variety of other items.

 

There were airline tickets for Ms. Ellis’s wife and two children to accompany her on trips up to four times a year. There was a $25,000 annual allowance for Ms. Ellis to rent a home in Provincetown, the Cape Cod community where she had long vacationed with her family.

 

Before the new contract took effect in October 2022, Ms. Ellis billed GLAAD about $15,000 for a three-week stay that summer at a cottage in Provincetown, which is a popular L.G.B.T.Q. destination.

 

One of her expense reports, which The Times reviewed, described the rental as her housing for a GLAAD board meeting. But Ms. Ellis had separately charged the organization for a hotel room during the Provincetown board meeting, and the rental cottage — booked for two adults and two children — extended weeks after the meeting, according to receipts and expense reports reviewed by The Times.

 

By the time the summer was over, Ms. Ellis had expensed another $14,636 for a down payment on a Provincetown rental for the following summer.

 

Mr. Ferraro said it was important for Ms. Ellis to summer in Provincetown so that she could meet with donors and activists and attend events. Being there enabled Ms. Ellis “to raise millions of dollars during a traditionally slow time of year for fund-raising,” he said, adding that GLAAD considered her housing to be a business expense.

 

Ms. Ellis’s contract also provided up to $20,000 to renovate her home office. She spent at least $18,000 overhauling the top floor of her house on Long Island, submitting expenses for everything from cotton-ball-colored paint and ivory pillows to a sectional sofa and chandelier.

 

Mr. Ferraro said the spending ensured that Ms. Ellis’s home office was suitable for her television appearances and hosting virtual events.

 

Ms. Ellis also requested that GLAAD’s chief operating officer, Darra Gordon, be allowed to expense $2,500 for her own home office makeover, according to expense reports. Ms. Gordon used the money to buy an abstract blue and gold artwork from Etsy, a throw blanket and a ceramic vase. (Mr. Ferraro said that the “aesthetics” of Ms. Gordon’s home office had previously not been “suitable for the many externally facing meetings that she is required to conduct.”)

 

And Ms. Ellis sought reimbursement for more than 30 first-class flights in the 18 months for which The Times reviewed expense reports.

 

For example, GLAAD spent more than $13,000 on first-class airfare, a room at the Waldorf and car services so Ms. Ellis could speak at a conference in California hosted by Fortune magazine. (That didn’t include the conference’s $6,750 registration fee, which GLAAD also covered.)

 

Car services over two days in Washington cost GLAAD $3,900 — including $1,000 for an SUV to pick her up at the airport, stop at the White House and then drop her off at her hotel, a total of about seven miles. The bills for car services for Ms. Ellis and her colleagues on the Davos trip topped $15,000. There were repeated first-class flights to and from Los Angeles at thousands of dollars each. GLAAD spent more than $60,000 on airfare and hotel accommodations for Ms. Ellis and Ms. Gordon when they attended last year’s Cannes Lions advertising industry festival on the French Riviera.

 

Mr. Ferraro said the trip to the Fortune conference served GLAAD’s purposes and that Ms. Ellis stayed at the Waldorf because it was cheaper than the conference hotel. He said the car services in Washington were for Ms. Ellis and survivors of a recent nightclub shooting and that the trip was packed with meetings and media interviews. In general, Mr. Ferraro said, Ms. Ellis used private car services at the recommendation of a security consultant, who was hired after Ms. Ellis and others received threats.

 

Mr. Ferraro said Ms. Ellis and Ms. Gordon attended the event in Cannes so that they could “speak directly to companies about not turning their backs on the L.G.B.T.Q. community.” He said Ms. Ellis shared her hotel room with a GLAAD colleague.

 

‘Be Cost Conscious’

Charity experts such as Mr. West and Mr. Samuels said that first-class flights, high-end hotels and expensive car services are typically considered taboo at nonprofits. They said using charitable funds to finance summer housing or family travel or to remodel a home office was similarly questionable.

 

Like many other nonprofits, GLAAD pushes employees to keep a tight lid on costs. The group’s travel and entertainment policy, a summary of which Ms. Ellis signed in 2017, called for all employees to “be cost conscious.” The policy instructed employees to limit hotel costs to $350 a night in big cities. It said that without exception, GLAAD would not reimburse employees for black cars or business- and first-class airfare.

 

Some GLAAD employees were upset when they encountered executives’ globe-trotting Instagram photos and as word spread that Ms. Ellis often flew first-class — especially since employees said they faced scrutiny over minor violations of the group’s expense policy. One employee who expensed a cup of coffee was chastised for taking money away from the L.G.T.B.Q. cause and had to reimburse GLAAD, according to a former employee.

 

Mr. Ferraro said that GLAAD had no record of the coffee incident and that an internal survey found that its employees have high morale. He provided a letter that four longtime GLAAD employees wrote to The Times that voiced support for Ms. Ellis taking advantage of “services to make that frequent travel convenient, efficient and safe.”

 

Several experts, including Phil Hackney, a law professor at the University of Pittsburgh who specializes in nonprofits, said that because the home-office renovation improved Ms. Ellis’s property, at least some of the spending typically would have been classified as taxable income for Ms. Ellis.

 

GLAAD’s accountants, lawyers and auditors disagreed, Mr. Ferraro said. He said they advised GLAAD that because the spending was work-related, it should not be classified as taxable income.

 

Ms. Plauché, who joined GLAAD as its chief financial officer in the fall of 2022, was worried that the group was not disclosing Ms. Ellis’s first-class flights and summer housing on publicly available I.R.S. forms, according to people familiar with the situation. She also thought that some of Ms. Ellis’s spending violated GLAAD’s expense policies.

 

Ms. Gordon, the chief operating officer, resisted Ms. Plauché’s entreaties to disclose the spending in GLAAD’s I.R.S. filings, the people said.

 

The dispute intensified to such a degree that Ms. Plauché complained to others that Ms. Gordon was bullying her in an attempt to keep the group’s spending on Ms. Ellis hidden from the public. Mr. Ferraro said that “there was no harassment or bullying” and that “Ms. Gordon encouraged Ms. Plauché to seek advice from outside tax accountants, lawyers and auditors.”

 

Last summer, Ms. Plauché shared her concerns about GLAAD’s spending and other matters with Ms. Jenkins, the chairwoman of GLAAD’s board. That led the board to hire the law firm Sheppard Mullin to investigate and then to change its travel policy last November.

 

Ms. Plauché left GLAAD around that time and signed a financial settlement that barred her from speaking publicly about the organization.

 

Mr. Ferraro said that “GLAAD parted ways with Ms. Plauché due to her poor performance.” Bruce Menken, a lawyer for Ms. Plauché, said that was false and that his client left by mutual agreement. He said Ms. Plauché was proud of what she accomplished at GLAAD.

 

In an internal email last fall that was reviewed by The Times, a GLAAD employee said that the organization’s longtime outside auditor, the Harrington Group, would be resigning and that it had recommended that GLAAD get a better handle on its spending.

 

A Harrington partner, Oswaldo D. Torres, disputed that the firm had made that recommendation. “Our resignation was solely due to the growth and development of our firm,” he said.

 

Kirsten Noyes contributed research.

 

Emily Steel is an investigative reporter covering business for The Times. She has uncovered sexual harassment at major companies and recently has focused on aviation safety issues. More about Emily Steel