Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 14, 1994 TAG: 9409150015
SECTION: NATIONAL/INTERNATIONAL PAGE: B-5 EDITION: METRO
SOURCE: From staff and wire reports
DATELINE: ALEXANDRIA LENGTH: Medium
The 71-count federal indictment named William Aramony, 67, president of United Way from 1970 until 1992; Stephen J. Paulachak, 49, a United Way executive from 1971 to 1988 and also president of an indicted spinoff company; and Thomas J. Merlo, 63, chief financial officer of the charity from 1990 until 1992.
The diversion of funds, previously reported in news stories, caused a shakeup at the national charity organization known to virtually all Americans, and depressed contributions to local United Way organizations.
United Way of America is the national service and training center for local United Way organizations and is financed by dues from the local groups.
The local organizations collect contributions and distribute them to charities. They had nothing to do with the alleged wrongdoing.
The resurfacing of the allegations could not have been more ill-timed for the United Way of Roanoke Valley.
The organization on Friday kicked off its fall campaign, with a goal of raising $4.9 million.
Tuesday, administrators went into damage control.
"There is no cause for people to be concerned about giving to the United Way," said Linda Holsinger, vice president of marketing and communications for Roanoke Valley's United Way.
"These activities occurred more than two years ago, and since that time United Way of America has put controls in place that will prevent these things from happening again."
The Roanoke Valley United Way was the first local United Way in the country to withhold membership support dues and withdraw from the national association in February 1992, when allegations of Aramony's lavish lifestyle, excessive compensation and questionable management practices were made.
Within a week, United Ways across the country had followed suit and Aramony had stepped down.
United Way of Roanoke Valley has resumed paying dues to the national United Way, though it is "less than three-quarters of every penny of every contributed dollar," Holsinger said.
Last year, the United Way of Roanoke Valley raised $4.5 million.
"It's important to remember that we have total control of money given to this United Way," she said. "We fund local agencies in the Roanoke Valley. The money people give here, stays here."
The indictment said more than $1.5 million was diverted, with some of the money spent for purchase of a New York City apartment; a Coral Gables, Fla., condominium; a vacation to London and Egypt - complete with a Nile cruise - and a lifetime pass on American Airlines.
Some of the money went to Aramony's girlfriend, who was not named in the indictment handed down by a federal grand jury and announced by the U.S. attorney's office in Alexandria.
The indictment says money went to pay for construction of a sunroom at the woman's Gainesville, Fla., home; for her personal income tax payments; her own vacations and trips she took with Aramony; and for ``consulting payments'' even though she did no work for the United Way.
``Today's news represents a critical step forward because it reinforces all the positive changes that have been made to restructure United Way of America,'' said Dr. Tommy Frist Jr., chairman of the Alexandria-based United Way of America.
After the diversion of money became known, the national group brought in former Peace Corps chief Elaine Chao as president, instituted new financial controls, adopted a new code of ethics and gave local United Ways more control over the national organization.
The indictment charged Aramony, Paulachak, Merlo and a spinoff company with conspiracy to defraud United Way, mail fraud, wire fraud, interstate transportation of fraudulently acquired property and money laundering.
Aramony, Paulachak and Merlo were accused of filing false personal and corporate tax returns and Merlo was charged with perjury.
The three are to be arraigned Sept. 26.
Staff writer Leslie Taylor contributed information to this story.
by CNB