After admitting mistakes involving questionable financial practices, Wyclef Jean’s Yele Haiti charity foundation announced Jan. 22 that it has hired a new accounting firm to help manage its finances.
The announcement was made just hours before a globally-broadcast charity concert called “Hope for Haiti Now: A Global Benefit for Earthquake Relief.”
The foundation’s finances were questioned after it was revealed that the charity purchased advertising air time from a television station Jean co-owns and had paid Jean to perform at fundraising events.
On Jan. 22, Jean told Oprah Winfrey that the foundation had been poorly orchestrated, but pledged not to repeat the errors.
“I think we have learned from our mistakes,” he said. “In moving forward, I think we’re going to be stronger than ever.”
Jean urged supporters to text “Yele” to 501501 to donate $5 to the foundation. In just two days, the foundation had garnered over $2 million.
RSM McGladrey, the charity’s new accounting firm, will oversee donations being made for Haitian earthquake relief through Jean’s foundation. The foundation said that any funds it receives will be solely used to help earthquake victims, while funds to pay for its own business expenses will be raised separately.
The foundation said it will still retain Grant Thornton LLP, its former accounting firm.
It is not illegal for charitable organizations to pay for the services of board members such as Jean as long as they are market-value rates, tax experts claim. However, the practice is in severe contrast to the free services being offered by star performers for the Jan. 22 telethon.
An IRS tax return from 2006 revealed that the Yele Haiti foundation paid $250,000 to purchase airtime from Telemax S.A., a television station in Haiti that is mostly owned by Jean and business partner Jerry Duplessis.
Also, a portion of the funds went on to support a concert in Haiti put on by Jean himself, said Yele Haiti President Hugh Locke. An additional $160,000 that year was spent on a concert in Monte Carlo that featured Jean, in which $75,000 paid for backup singers and $25,000 went to Jean through Platinum Sound Studios, a company he owns, Locke said. The foundation garnered $1.1 million in total revenue that year.
But according to John Colombo, a University of Illinois law professor specializing in tax-exempt organizations, tax laws allow such fees.
“If you told me the organization raised $1 million and it all went to him, then I would have some issues,” Colombo said. “Paying him an arm’s length salary for services he actually performed just isn’t a problem.”