Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 23, 1992 TAG: 9202260335
SECTION: HORIZON PAGE: D-1 EDITION: METRO
SOURCE: By CHARLES E. SHEPARD
DATELINE: WASHINGTON LENGTH: Long
UNITED WAY OF AMERICA'S CHIEF WELL-PAID, POWERFUL
For 22 years, William Aramony has run the United Way of America in an unorthodox, domineering manner that impresses some and astonishes others, both inside the national organization's riverfront building in Alexandria, Va., and across the network of 2,100 local United Ways that it serves.Aramony's colleagues describe him as a brilliant and creative man with boundless energy, and they credit him with transforming the United Way movement into the most successful and respected charity in the country, raising $3.1 billion in 1990.
That's one side of William Aramony. The other, some current and former staff members say, is a man who exercises his power much as he pleases as he presides over an operation that spends $29 million a year, most of it paid for by money that donors give to their hometown United Ways. Aramony receives $390,000 a year in salary and $73,000 in other compensation.
He rewards friends and loyal employees, hiring a longtime friend and consultant as his chief financial officer in 1989. In an interview, Aramony said he found out only later about the man's financial and legal problems from failed business ventures in Florida. "I didn't [check his background] because I knew him," Aramony said. Recently, after The Washington Post asked questions about the financial officer, Aramony put him on administrative leave and disclosed plans to replace him.
Aramony's power goes beyond the 275 employees at the United Way of America's five-story building. At his urging, the national organization's board has set up several spinoff companies to use the combined buying power of charities to obtain equipment and services at a discount. The companies operate independently and have their own boards, but Aramony exercises a strong hand in how they are run and frequently has served as their president or board chairman.
One of his sons, Robert, has worked for three of the spinoff companies and now is the president and chief executive officer of a fourth. "I had nothing to do with his hiring," his father said.
Some of the spinoffs have engaged in unusual transactions. One spinoff known as Partnership Umbrella Inc., given $900,000 in seed money by the United Way of America, used about $430,000 to buy and decorate a condominium apartment on New York's Upper East Side, primarily for Aramony's use on his frequent business trips to Manhattan. Partnership Umbrella also spent more than $200,000 to cover the debts of another spinoff, a failing travel agency set up to cut travel costs for non-profit organizations. "We didn't know how to run this travel business," Aramony said.
Aramony enjoys perks and benefits that some of his past and present employees say seem more in keeping with a large corporation than a publicly supported charity.\ United Way of America draws most of its money from charitable donations to the 1,400 local United Ways that voluntarily pay dues to the national office equaling about 1 cent of every dollar raised.
Aramony's pay places him in the top ranks of executives of non-profit organizations. His office is furnished with a kidney-shaped rosewood desk, motorized blinds on windows that give him a sweeping view of the Potomac and a bank of television monitors that allows him to see into the room where his secretaries work.
On occasion, Aramony has flown the Concorde across the Atlantic - because, he said, his schedule demanded it. An aide routinely travels with him to handle secretarial and other matters. In 1989, he took a 20-year-old female friend along on a personal and business trip to Egypt, paying for all of her expenses and his personal costs, he said. Aramony, 64, said he has been separated from his wife since 1988.
On his frequent trips to New York, he likes to use chauffeured automobiles. During one year, United Way of America paid more than $20,000 for chauffeur services in New York. "I can't afford to be waiting for cabs," Aramony said, explaining that he often has back-to-back appointments.
The possibility of a public airing of Aramony's conduct has been a source of distress for years in the United Way movement. Those who have worked hard for the cause worry that even a whiff of controversy could cause donations to plummet.
For several weeks, the locals waited uneasily for the publication of articles delving into Aramony's tenure. The national office sent out faxes offering a list of suggested answers to likely questions.
Aramony said United Way of America is eager to explain what he and others have done - and to consider making changes if necessary. "We want to be very forthcoming with you," he said. "We have honorable intentions here, and we do do good work."
On Feb. 12, eight days after The Post interviewed Aramony about a variety of subjects including his 1989 hiring of his longtime friend, Thomas Merlo, Aramony relieved Merlo of his duties as chief financial officer. The two parties were negotiating a severance agreement, Aramony said.
"We have no choice in this matter. We can't afford to have anyone have the impression that we're anything but a first-class, responsive organization - and responsible," Aramony said.
Aramony praised Merlo's performance, saying that the decision to replace him had nothing to do with Merlo's work. "He did an outstanding job," Aramony said. "He saved us about a million and a half dollars."
Merlo, who lives in Boca Raton, Fla., is a certified public accountant who met Aramony in the 1960s when Aramony ran and Merlo volunteered at the United Way in Miami. According to court records in Florida, Merlo has been a defendant in several lawsuits over unpaid loans and fiduciary duties relating to his business ventures.
Merlo, 61, did not reply to several requests for an interview made through United Way of America.
United Way officials provided many documents in response to requests from The Post, answered numerous questions and arranged interviews with Aramony and LaSalle Leffall, chairman of the group's executive committee and a professor at Howard University College of Medicine.
But United Way of America declined a request for the audited financial statements of Partnership Umbrella Inc., the spinoff that purchased the New York condo, and for Sales Service-America, the spinoff run by Robert Aramony. United Way of America also did not provide requested information on Aramony's travels.
Aramony's board, which is made up largely of top executives from America's biggest corporations, has stood behind him. Aramony's ability to attract this high-powered board - now chaired by John Akers of IBM - is cited by supporters as one of his most important accomplishments.
In mid-December, after learning of inquiries by The Post, the 14-member executive committee of the board of governors hired an outside independent group to do an internal review at Aramony's suggestion. The board and United Way of America declined to identify the group or the scope of the inquiry.
On Feb. 3, a day before The Post's first interview with Aramony, the executive committee received a report by telephone on the continuing inquiry and took a "resounding vote of confidence" in Aramony, according to Leffall.
Aramony reacted with surprise and then dismay at the questions that have been raised about his style and leadership. He said some of the criticism stemmed from a misperception of what he had done, particularly how the spinoffs operate. The spinoffs are not owned by anyone; any money they make goes back into the spinoffs for future operations or to United Way and other charities, United Way said.
For example, he said, the United Way of America gets free use of the New York condominium, rather than renting an apartment as it did once before or paying costly hotel bills on a regular basis. Leffall agreed.
Aramony said he plans to ask his board to "take a new look at how we do our business," particularly with regard to the spinoff companies and whether they should be more accountable somehow to United Way of America.
Aramony grew up in Worcester, Mass., the youngest of four children, his parents emigrants from Lebanon. His father sold clothes door to door to make a living, and Aramony was the first in his family to attend college. He later earned a master's degree from the Boston College Graduate School of Social Work.
He won the national executive's job in 1970 after running United Ways in Columbia, S.C., South Bend, Ind., and Miami. When he took over the national organization, then located in New York, its budget was a tenth what it is today and the locals were a loose confederation that did not even share a single name.
Aramony set out to unify that confederation under the United Way name and symbol. He recruited high-profile chief executive officers to his board, fashioned a shrewd marketing alliance with the National Football League that gives United Ways tens of millions of dollars in free advertising time and built a talented staff to advise and train local United Way executives and volunteers.
Lane Adams, former chief executive officer of the American Cancer Society and an Aramony friend, said of Aramony: "He has done more to advance the cause of voluntarism than any professional I know."
Aramony's creativity and restlessness sometimes add up to frustration for staff members and local United Ways trying to execute the ideas he is pushing. "I have heard my colleagues criticize Bill for the latest plan of the month or idea for the month," said Robert X. Chandler, a friend and, overall, an admirer who retired this month as head of the United Way in Boston.
Reorganizations and executive departures are so routine that some local United Ways complain they cannot keep track of whom to talk to in the national office. Some believe the staff changes are a strategic effort by Aramony to keep his professional staff fresh and learning; others say that it keeps the staff in a steady state of anxiety.
George Wilkinson, a former senior vice president who worked under Aramony until he left last year, considers Aramony a "visionary" who had serious flaws as a manager. Whenever the United Way staff had to cut back on travel, Wilkinson said, "I don't think that we ever saw any evidence that he constricted his travel. It was, `Do as I say, not as I do.' "
Aramony says that his sense of personal mission has little do with management. "That's not my bag," he said. "I'm not a bean counter. I have a sense of the fundamental issues that have got to be dealt with, and I think that the way people at the bottom of the pile - the economic pile in this country - have been treated is horrible."
For years, Aramony relied on Merlo for help at United Way on "spot projects." By the 1980s, Merlo was being paid a retainer of $15,000 a year. In 1988, records show, Merlo's accounting firm received $44,715 for consulting work. In 1989, he started the year with a $60,000-a-year contract.
Over the years, Aramony said, he and Merlo became close friends. They occasionally played poker and gin rummy and visited the racetrack. Aramony sold a Florida condominium to Merlo's son in 1985 and Merlo later employed a young woman at his accounting firm whom Aramony dated in the late 1980s.
But Aramony said they did not talk about Merlo's business dealings, some of which had been reported in the Florida press.
In May 1979 the Miami Herald reported that Merlo had earned $200,000 for accounting work on bond issues in Sunrise, Fla., charging a rate that was five times as high as any paid by six other Broward County cities. Merlo had been a political supporter of the Sunrise mayor, according to the Herald account.
Also in May 1979, a well-publicized General Accounting Office report alleged that Merlo's accounting firm had charged Medicare excessive fees for service to home health care agencies that Merlo had helped establish. Merlo called the report inaccurate and said the fees were reasonable.
Aramony offered Merlo the job of chief financial officer at a time when Merlo's business enterprises in Florida were in trouble, according to court records. His pizza takeout business was late on bills. His development company was on the verge of losing his headquarters building to foreclosure. A bank whose board he chaired was struggling.
Aramony said Merlo never discussed these problems with him. "I don't know anything about his personal finances," he said. Earlier in the interview, Aramony remarked that he would not ask Merlo for personal financial advice because "he's not the most successful entrepreneur in the world."
United Way of America paid Merlo $211,000 in 1990, $40,000 more than his predecessor. To accommodate his new chief financial officer, Aramony also paid housing and commuting expenses for 18 months so that Merlo could continue to live in Florida. United Way paid for a $1,050-a-month apartment in Alexandria as well as weekly flights home. When the 18 months were up, Merlo continued to commute. "If we paid moving expenses, it would have cost us a heck of a lot more," Aramony said. United Way officials could not provide the total cost of this arrangement.
Aramony said he visited Merlo at his Florida home two weeks ago to tell him of the decision to put him on leave with pay because of questions about his background. Merlo is immobilized by an injured foot, Aramony said.
> If Aramony's son, Robert, 34, had wanted a job with the United Way of America, his father said, corporate policy would have prohibited it. But those rules do not apply to the corporations spun off from United Way, to the discomfort of some on Aramony's staff.
Aramony said his son's position as president of Sales Service-America, a catalog and telephone sales operation set up in 1990 to offer merchandise with the United Way helping hand logo, presents the "appearance" of a problem, but not a real one. He said his son is talented, had an outstanding resume that includes a master's degree in business administration from Pennsylvania State University and was hired by an independent board of directors. By all accounts, Robert Aramony has done well in the job.
William Aramony said he played no role.
The elder Aramony said he recruited Sales Service-America's board, a group of friends whom he said he could trust to do a good job. Aramony said he has no idea what kind of search the board conducted before hiring Robert Aramony as the spinoff's first president. The new company is supported by a $1.5 million loan from United Way of America.
Robert Aramony recalls it somewhat differently. He said he was working at another spinoff, Partnership Umbrella, when his boss assigned him to lay the groundwork for creating a new company out of United Way of America's existing Sales Service-America division. "My job was to select a board of directors," which he said he did with suggestions from his father and others. Later, the board offered him the job; he declined to disclose his salary.
O. Stanley Smith, the board chairman of Sales Service-America, said the board never advertised that the job was open, which he now regrets. Smith, who hired the elder Aramony in 1958 to head the United Way in Columbia, S.C., said Robert Aramony was suggested to him by then-chief financial officer Merlo.
William Aramony's pace of work and travel is legendary. "I wouldn't live the life he lives," says Stanley Smith who also serves on the United Way of America board.
Aramony spent so much on travel and related expenses that he routinely exceeded the initial budget for his office, former employees familiar with Aramony's travel patterns said. In some years, the budget overrun was more than $100,000, they said.
Travel costs are a touchy subject at United Way. Many United Way organizations and employees argue that they have a special responsibility to spend the donated dollar carefully, saving as much as possible for the needy. Others contend that the public expects frugality beyond reason.
Executives of three United Ways, asked their policy on travel, said they do not spend their organization's money on first-class tickets. "Never have I flown first-class in my 30 years in this business," said Jack Costello of Cleveland's United Way.
Virginia Mason, Costello's counterpart in Jacksonville, Fla., said she does not fly first-class because she believes it "would be an unethical use of a charitable dollar."
Aramony - who, employees say, routinely has traveled first-class in the past - said he no longer does so. "With . . . our cost cutting, it's all coach now. . . . Has been, oh, about the last year." The only time he flies first-class now is when he uses an upgrade from a frequent flyer program or when he travels to several cities in one day, he said.
Staff members say that Aramony has explained to them that he must function like the corporate CEOs he is courting if he expects to gain their time, corporate support and respect.
Each year Aramony and aides travel to the Super Bowl to cultivate the organization's relationships with the National Football League. United Way of America said it paid for Aramony and one other executive to attend the game in Minneapolis last month. Former employees say larger groups have been sent in past years.
Aramony said he sent board members of one spinoff company, Partnership Umbrella, to the Super Bowl several years ago. "It's a thank you for volunteering their time and their effort. They're not getting paid."
Note to readers
The Roanoke Times & World-News received this letter from Linda Holsinger, vice president, marketing and communications, of United Way of Roanoke Valley: you choose to publish a Washington Post story . . . concerning United Way of America President Bill Aramony, you may be interested in the United Way of Roanoke Valley's relationship with that organization. Without such an explanation, many readers are likely to think that our United Way is a "local office" of United Way of America, which is not true.
The United Way of Roanoke Valley is a completely autonomous organization under the direction and stewardship of local community leaders and not a "chapter" of the national organization. We voluntarily support the United Way of America and benefit from membership in the national organization, which operates much like a trade association.
The United Way of Roanoke Valley has earned a reputation for integrity and high ethical standards and we are concerned that serious allegations concerning the national executive have the potential to reflect unfavorably on all United Ways.