Wednesday, November 12, 2003

The great Cincinnati land deal

Drug Free America Foundation used to be called Straight, Inc. It was founded in fraud under the name Straight Foundation, Inc. as a shell corporation to protect Straight, Inc.'s property and cash from civil suits, and to protect Mel Sembler from civil suits and criminal prosecutions. According to its own literature, "Drug Free America Foundation was founded by Ambassador and Mrs. Mel Sembler through private means . . ." But what were those private means.

Much, and probably almost all, of DFAF's initial private funding came from Straight parents and from people and organizations who thought they were donating money to help drug addicted kids become clean at Straight, Inc.--and only at Straight, Inc. Now that money is being used by DFAF to help businesses set up drug free work places and to fly Betty Sembler and company around the world to recommend national and international drug policy. Hopefully PumpGate will shed some light into where Straight's money is going.

Did Straight ever really close? Straights operated in major metropolitan areas across America. Surprisingly, there was never a Straight in the New York City area--the biggest city of all! This has led some to wonder whether Miller Newton ( traight's former national clinical director and a current member of a DFAF forum who headquartered his own Straight-like franchise from the NYC area) was actually working for Straight. There is other data to support that suspicion. (See chain from that area speculate that . cities Probably most of Straight's money was in real estate. The complete story on Straight's real estate holdings is here. In the current articleto After Straight, Inc. was run out of Ohio for abusing kids there, Straight Foundation tried to sale the Cincinnati property. But a group of concerned parents and local companies generally known as the Greater Cincinnati Area Straight Chapter had raised $1.5 million to bring Straight to Cincinnati and they felt that any money made from the sale of the property should stay in the Cincinnati area to help drug addicted kids in that area. Consequently local citizens Donald Bell, Anthony Celebrezze (Attorney General for the state of Ohio), J. Thomas Markham, Samuel B. Thompson, Jr., Nick J. Pishotti, Richard Tarvin, James M. VanBuren, Jr., The Greater Cincinnati Foundation, The Kroger Company and The Proctor & Gamble Company filed a class action suit against Straight in the US District Court in Cincinnati claiming that "at least $1.3 million" of the funds they had raised had been used to purchase the Straight-Cincinnati facility and that any money recovered form the sale of the property should remain in the Cincinnati area [Case # C-1-88-760]. Furthermore they wanted another $62,000 in legal fees they said they had spent trying to keep Straight from walking off with the money.
According to Exhibit A to Garcia’s affidavit, in May 1988 Straight Foundation had received a verbal appraisal from Strickland & Wright for approximately $550,000. Furthermore, the exhibit states that Mr. Wright had been instructed by Straight not to provide a written appraisal. Since Straight claimed the depreciated value of the facility in 1990 to be $1,098,062, and since Straight claimed that it had a verbal appraisal (presumably there is no written confirmation of this appraisal) for only $550,000 or 45.91% of the depreciated value, Mr. Garcia reasoned that all Straight holdings could reasonably be sold for just 45.91% of its depreciated value. He made this claim in spite of the fact that he acknowledges that Faith Tabernacle Church had put down a $15,000 deposit in an effort to buy the property early-on for $650,000 but was unable to raise the money and so Straight Foundation pocketed that $15,000.
According to the settlement agreement approved by the court on September 29, 1989 Straight Foundation and the plaintiffs would split 50-50 on proceeds from the sale of the property, and the plaintiffs would pay their legal fees from their half of the pie. I don’t have complete records of what happened after the 1989 settlement agreement but the best I can piece together from the court docket sheet is that on July 1, 1993 there was a Motion to Intervene by a Tri-State Drug Rehabilitation from across the river in Hebron Kentucky. And on July 2 a hearing was held on a motion to approve the sale and attorney fees. Then, according to Kentucky Post, on July 22, 1993 Tri-State Drug Rehab was the highest bidder on the property. The bid being $301,000. [Kentucky Post, 10/9/93]
The depreciated value of the facility was $1 million. If Straight got a million for it, it would have to give the Cincinnati folks a half million dollars. Even if Straight sold it for just $650,000 they would have to give the Cincinnati folks over $300,000. As it is the building sold for just $301,000 (or 54% of the 45.91% value) and the Cincinnati folks got just $150,500. An affidavit by the plaintiffs dated 9-27-89 shows their legal fees to be $66,345.50. Because of further court actions, I assume their legal fees to have been $70,000 by the time of sale, thus the Cincinnati fathers had managed to recover just $80,000 from their $1,393,165 investment!
Garcia had said that about the only organization that would buy one of their facilities would almost have to be another drug rehab program (as in fat chance of that happening), but that is exactly what did happen. And what is Tri-State Drug Rehab? Its treatment program was formerly called Kids Helping Kids of Hebron and now called Kids Helping Kids of Cincinnati. Kids Helping Kids of Hebron was created, in part, by Straight’s former national training director--Dr. George Ross. The therapeutic program is based almost exclusively on the Straight therapeutic model. At least two program employees have come from Straight. Ruth P. Thomas, first clinical director at KHKs, studied Rational Behavior Training at the University of Kentucky with Dr. Maxie C. Maultsby, as did Dr. Ross. On page 7 of his PhD thesis on Straight, Dr. Newton writes that Straight is "Kids Helping Kids." He went on to call his own Straight-like program Kids of Bergen County. Newton’s thesis was finished in 1981 and Kids Helping Kids of Hebron was founded on July 15, 1981.
The timing of the sale of the Cincinnati facility is worth mentioning. Later you will learn that in 1989 when Dr. Newton’s Kids of Southern California closed failing to get a license, that Straight moved into that very facility and took over the Kids’ clientele. When Straight-Orlando closed on August 14, 1992, Michael Scaletta, Straight’s former director at Straight-Orlando, opened up SAFE, Inc. out of the same facility using the same clients. Straight-Detroit closed in 1993. On June 18, 1993, former Straight official Helen Gowanny helped found Pathway Family Center 15 miles from the old Straight camp. Three days later on June 21, 1993, Kathleen M. Cone, formerly the registered agent for Straight, Inc. in Atlanta opened Phoenix Institute for Adolescents just miles from Straight-Atlanta. Ten days later on July 1, 1993 Straight-Atlanta, the last Straight treatment facility closed. On that very day in Cincinnati Kids Helping Kids filed a Motion to Intervene in federal court. A hearing was IMMEDIATELY held the next day for a motion to approve the sale and attorney fees. The property was sold 20 days later for a fraction of its value and the people who had raised the money got a return of just $70,000 out of a $1.3 million investment. Next you’ll see that exactly one week later, when Straight didn’t have to share anything with anyone, the Saint Petersburg properties sold for more than what they had been purchased for.
So real estate attorney Joseph Garcia gets a big fat F when selling Straight properties in the Cincinnati case. Unless, of course, Straight had no intention of giving the Cincinnati folks a half million dollars. If that were the case then Mr. Garcia would get an A+. So what about real estate transactions where Straight would not have to split with anyone. Let’s look at the sale of the Tampa Bay holdings next.

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