Pubdate: Thu, 11 Jun 2009
Source: Los Angeles Times (CA)
Page: Front page, above the fold
Copyright: 2009 Los Angeles Times
Contact: http://drugsense.org/url/bc7El3Yo
Website: http://www.latimes.com/news/printedition/front/
Details: http://www.mapinc.org/media/248
Author: Alan Zarembo
Bookmark: http://www.mapinc.org/prop36.htm (Substance Abuse and Crime 
Prevention Act)
Bookmark: http://www.mapinc.org/rehab.htm (Treatment)

EXECS EARN BIG MONEY AT DRUG TREATMENT CENTER

Salaries at a Tarzana Nonprofit Far Exceed Others in the Field.

In an industrial zone a few blocks off the 101 Freeway, the Tarzana 
Treatment Center relies on government contracts and nonprofit tax 
status to serve drug addicts in poverty or trouble with the law.

A clerk sits behind protective glass in the lobby. Down a hallway in 
the detox wing, down-and-out men are curled on their cots. The coat 
hooks in the rooms flip down so patients can't hang themselves.

It hardly seems like the headquarters of a $45-million-a-year business.

Tarzana dwarfs most other nonprofits in the same line of work. By far 
the largest user of public funds for drug treatment in Los Angeles 
County, it draws 85% of its money from taxpayers.

Its top executives have also made it a lucrative operation for 
themselves, with compensation and business arrangements that are 
highly unusual in the industry.

Chief operating officer Albert Senella earned $428,057 in 2007, 
soaring above the highest paid county employee -- the medical 
director of Harbor UCLA Medical Center, which has a budget 12 times 
Tarzana's. Chief executive Scott Taylor made $330,732 working 32 hours a week.

The two men collected hundreds of thousands more in deferred 
compensation in recent years, boosting their earnings far above those 
of top executives at comparably sized treatment centers, such as 
Walden House in San Francisco, Gaudenzia in Norristown, Pa., and 
Gateway Foundation in Chicago, according to federal tax filings.

And that's not counting income from other arrangements involving 
legal services and real estate that several industry experts said 
they had never before seen at a nonprofit.

Taylor is also a lawyer with a long-standing contract to provide 
Tarzana with legal counsel. Tax filings show the deal paid him 
$237,956 in 2007 -- on top of his salary.

Taylor, Senella and two other board members also have ownership 
stakes in six properties that Tarzana leases as its headquarters and 
treatment sites.

In 2007, the four men collected rent of more than $2.27 million.

Taken together, the compensation and the other financial deals raise 
questions about Tarzana's public mission and about how the government 
allocates drug treatment dollars, experts in drug treatment and 
nonprofits said.

Although Tarzana gets more than double the public funding of its 
closest competitor, government payers can't say whether its patients 
fare any better than those at other centers after treatment. 
Nationally, no one comprehensively tracks whether patients use drugs 
again, find work or get arrested.

Steven Winston, who earns $173,000 a year as the highest-paid 
executive at Daytop Village, a New York-based nonprofit treatment 
center that takes in $53 million a year, was incredulous at the 
compensation at Tarzana.

"These people are making what for-profit people make," he said. "It's 
anathema to what real nonprofits and real charitable organizations do."

Frances Hill, a professor at the University of Miami specializing in 
nonprofit tax law, said conflicts of interest were inherent at 
Tarzana because the chief executive wears so many other hats: 
chairman of the board, lawyer and landlord.

"My jaw is dropping over this," she said.

The Internal Revenue Service allows self-dealing as long as a 
nonprofit can show that it considered alternatives and found that 
they were not as good a deal, said Marcus Owens, who led the IRS' tax 
exempt section during the 1990s.

"These are all hot-button issues for the IRS right now," he said.

Tarzana executives said they are meeting all legal requirements. They 
said board members always sought the best deal for taxpayers, 
disclosing potential conflicts of interest in tax filings and 
abstaining from votes on those matters.

The pay, they said, reflects decades of success achieved by chasing 
government grants and expanding services. Although the business is 
nonprofit, Senella said, "we are allowed to make money as individuals."

The federal government places a $196,700 cap on what an executive can 
earn from a contract, but that does not restrict what one can collect 
from other sources.

Senella and Taylor said they comply with that cap because much of 
what they earn comes from a subset of patients who pay out-of-pocket 
or with insurance, an assertion the county confirmed. In 2007, that 
was $7 million of the center's $45 million in revenue.

"That doesn't impress me," said Ken Berger, head of the nonprofit 
watchdog group Charity Navigator, explaining that such high 
compensation undermines a nonprofit's core mission of public service.

If the executives weren't paid so much, he asked, "how many more 
services could be provided to people who need them?"

An Industry Was Born in the '70s

In the early 1970s, California shuttered its drug rehabilitation 
programs at state mental hospitals and, along with many other states, 
began contracting the work out.

An industry was born. From the early days of fly-by-night operations 
run by former addicts in rented garages, the treatment industry has 
grown rapidly, relying largely on federal dollars passed through 
states and counties.

Federal grants for drug treatment now total more than $2.5 billion a 
year. But the basic requirement has remained the same: Only 
nonprofits need apply. Nobody was supposed to get rich.

Tarzana, named Free Men Inc. when it opened in 1973, started as a 
collaboration between Taylor, a young lawyer, and a social worker who 
had run a drug program at a state mental hospital.

Senella, a high school dropout and a former patient at that hospital 
program, was among the first hires, he said. He started as a 
20-year-old drug counselor and climbed the ranks.

"Albert has the blood of Tarzana," said Silvia Cadena, who joined 
Tarzana as a bookkeeper in 1979 and now earns $280,422 a year, plus 
deferred compensation, as chief financial officer, the No. 3 executive.

In the late 1970s, after drastic state budget cuts, the nonprofit 
adopted a more entrepreneurial strategy, Senella said. It began 
expanding its services, eventually adding mental health programs, 
basic medical clinics and HIV treatment, which attracted more 
government funding and qualified Tarzana for some private insurance plans.

With about 600 employees, the center treats more than 6,000 people a 
year for drug addiction and alcoholism, about 2,000 of whom are in 
its residential programs.

In Sacramento, Senella has gained the ear of state legislators as 
head of the California Assn. of Alcohol and Drug Program Executives, 
an advocacy group that often lobbies for drug treatment funding.

He was an outspoken proponent of Proposition 36, the successful state 
ballot measure in 2000 that allowed some drug offenders to get 
treatment instead of jail time and pumped $120 million a year into 
the industry.

If Senella is the public face of Tarzana, Taylor is its management 
guru. He has always been president of the board, and in the mid-1980s 
he took over as chief executive.

It was natural for him to handle contracts, corporate filings and 
some litigation for Tarzana, said Bruce Glickfeld, an outside 
attorney who said he steps in when Taylor has a potential conflict of interest.

Taylor's legal contract has never been put out for competitive bid, 
but the amount is less than Tarzana would have to pay an outside 
lawyer for the same work, Glickfeld said.

Glickfeld also defended real estate deals among board members as fair 
and in taxpayers' best interest, saying that no one was collecting 
inordinate rents.

In the early 1990s, the building that Tarzana had been renting as its 
headquarters was for sale. Taylor and Lane Weitzman, a real estate 
investor on the board, saw buying it as a way to ensure that the 
business would not have to move, Taylor said.

Taylor, Weitzman and Weitzman's brother, Barry, bought a 50% stake in 
the building, the first of six arrangements that allowed board 
members to collect rent from Tarzana.

Many Patients Are Repeat Customers

With long waiting lists for residential drug treatment in L.A. 
County, there is never a shortage of patients, many of them repeat customers.

Simon Yebio grew up in Alexandria, Va., got hooked on crack cocaine 
and methamphetamine and wound up on skid row in Los Angeles, he said. 
He is now in residential treatment at Tarzana headquarters; it's his 
first time at Tarzana but, at age 29, his 14th time in taxpayer-funded rehab.

"As far as being professional, this place blows the others out of the 
water," he said.

Yebio said he's been clean since he moved in late last year, but he 
is not hopeful about what will happen when he reenters the outside world.

"I don't think it is going to work," he said of his treatment.

L.A. County, like most other jurisdictions, doesn't keep track of 
what happens in cases like Yebio's. It is considered too expensive, 
treatment experts said. Public funding of the treatment industry has 
largely been a product of tradition: Treatment centers with contracts 
tend to get more contracts, interviews and records show.

Each typically runs for two or three years and, as long as money is 
available, renewal is almost a given.

"They don't change hands very often," said Jim Gilmore of Behavioral 
Health Services, L.A. County's second biggest provider with a 
$16.8-million budget.

The county routinely conducts audits to monitor how money is being 
spent. But the incomes of Tarzana executives have not been questioned.

"Everyone agrees that they are one of the better providers in the 
area," said John Viernes Jr., director the county Alcohol and Drug 
Program Administration. "We don't tell them what to pay their executives."

Tarzana executives said their compensation is based on a report by an 
independent consultant who looks at the going rates in the market, 
but they declined to release the report.

"It's pretty tough to compare us to anybody," Taylor said, explaining 
that Tarzana offers a range of services beyond basic drug treatment. 
"I think we are so unique."

Senella said the board of directors has "gone through great lengths 
to make sure that what we are doing is done openly and properly."

But experts in nonprofits said the board itself is problematic.

Six of the nine members were receiving income from Tarzana -- three 
executives, two landlords and a psychologist who until recently was 
paid $26,500 a year as a consultant, tax filings show. Three 
directors have been in place for at least 30 years, three more for at 
least 20 years and one for 15.

"It shouldn't be an old buddy network," said Berger. The head of 
Charity Navigator said he favors term limits. He also explained that 
industry best practices restrict compensation to a third of board 
members or fewer.

The board may soon be tested by some difficult financial choices.

To help rein in the state's budget deficit, Gov. Arnold 
Schwarzenegger wants to slash funding for drug treatment. Tarzana 
would lose about $10 million a year, said Senella, who visited 
Sacramento last month to lobby against the governor's proposal.

With $12 million in cash reserves, Tarzana is in a better position 
than many centers -- a testament to its management, Senella said.

Still, he said, employees would lose their jobs; two dozen were laid 
off last year in response to state budget cuts. Salaries could go 
down, including those of executives.

"The system is just too underfunded," he said.

Researcher Maloy Moore contributed to this report.
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