New Rochelle Fund for Educational Excellence Board President Lied to IRS
Jonathon Stark made false and misleading statements to convince the IRS to reinstate the organization’s tax-exempt status
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NEW ROCHELLE, NY (May 4, 2022) -- New Rochelle Fund for Educational Excellence Board Chairman Jonathan Stark lied in a sworn statement to the Internal Revenue Service, school district records show.
In a Form 1023 filed on February 1, 2022, requesting retroactive reinstatement of the organization’s tax-exempt status, Stark claimed the New Rochelle Fund for Educational Excellence, commonly known as “the Fund”, was unable to get access to its office at New Rochelle High School due to COVID and as a result did not receive any correspondence pertaining to the IRS revocation of the organization’s tax-exempt status until August 23, 2021.
Stark told the IRS:
The CSDNR also cancelled school and shut down their facilities, which is where the Fund's offices are located. This resulted in the Fund never receiving any correspondence from the IRS until August 23, 2021; we did not receive any prior correspondence, to which the IRS revocation letter refers.
The IRS automatically revoked the Fund’s 501(c)(3) non-profit status on May 15, 2021, for failing to file IRS Form 990 for three consecutive years in 2018, 2019, and 2020 (the Fund also failed to file in 2021 by the November 15 deadline).
A “990” is an informational tax form that most tax-exempt organizations must file annually on November 15th to justify maintaining their tax-exempt status. In collecting information on an organization's activities, governance and detailed financial information, the IRS seeks to ensure that organizations continue to qualify for tax exemption after the status is granted.
IRS Penalties for failing to file a 990 form can be substantial. We estimated in December the Fund may owe late-filing penalties of $29,320 based on $10,500 for 2018 and 2019, $7,800 for 2020 and $520 for 2021. Individual penalties may also apply. In addition, they would have to pay taxes as a regular corporation.
The IRS made the revocation public by adding the Fund to its online non-profit revocation list on August 9, 2021.
When an organization’s tax-exempt status is automatically revoked, it must start an entirely new application for tax-exempt “determination letter” which the IRS says can take 6 to 9 months, possibly longer due to COVID, unless it is eligible for the IRS Retroactive Reinstatement Process.
Organizations may have their tax-exempt status retroactively reinstated to the date of revocation if they file required returns for the missing three years and for any other taxable years after, and complete and submit Form 1023 not later than 15 months after the later of the date on the organization's revocation and include a statement establishing that the organization had reasonable cause for its failure to file a required annual return for at least one of the three consecutive years in which it failed to file.
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The Fund filed Form 1023, seeking an expedited retroactive reinstatement, on February 1, 2022.
Stark told the IRS the reinstatement request should be expedited because “an alumnus of New Rochelle High School has bequeathed the NR Fund a donation of over $300,000”.
As of today, none of that $300,000 has been received, according to Stark.
“We anticipate the gift will be deposited once we finalize with the family on the programmatic scope of the endowment,” he said, without saying when that might be.
Stark said the Fund had “reasonable cause” for its failure to file a required annual return for at least one of the three consecutive years in which it failed to file due to a “myriad of mitigating factors” but the retroactive reinstatement letter highlighted two reasons: “many transitions in the years 2016-2020” and the pandemic which arrived in New Rochelle in March 2020.
The IRS does not “invite” organizations to file tax forms, it’s the law which applies to almost every tax-exempt organization in the United States. Stark did not explain to the IRS how a pandemic in 2020 prevented the Fund from filing 990s in 2018 and 2019 or why anyone at the Fund would not know that 990s are due annually on November 15th.
To support his “transitions” claim, Stark listed various titles without names: two Executive Directors, two Bookkeepers, two Treasurers, two auditors, and four Fund Board Chairs.
A bookkeeper and auditor are outside contractors and having nothing to do with filing tax forms.
A Board Chair or Treasurer is a Board officer, not an employee. Board leadership over the past five years has been notably stable.
The Fund sometimes but not always has co-chairs. During the period in question. Jonathan Stark was Chairperson of the Fund in 2017, 2018, 2020, 2021 and 2022. Matthew Costa was Chairperson in 2017, 2018, 2019. The one-year Stark was not Chairperson, he was Fund Secretary, in 2019. Deidre Polow was Vice President of the Board in 2017, 2019, 2020, 2021 and 2022. The one year Polow was not Vice President of the Board, she was Fund Secretary, in 2018. Derek Deutsch was the Board Treasurer in 2017 and 2018. Thomas Livacari was elected Board Treasurer in January 2019 and remains in that position until now.
During a five-year period, the fund replaced its sole employee, Andrea Berman, with Stephanie Tobak as Executive Director and had five people serving in the four key board officer positions.
Stark also claimed instability within school district leadership played a role in not filing 990s. The school district leadership has historically played a passive role on the Fund Board, according to current and past Fund Board members and school district leaders who have or do currently sit on the Fund Board. Stark noted that in the past five years, the District has had five superintendents and five high school principals, including two interims in both positions but not explain the relevance to the Fund not filing 990 tax forms in 2017, 2018, 2019 and 2020.
Every school official this reporter questioned about the Fund’s IRS troubles disavowed any district responsibility for the Fund.
To the contrary, Stark told the IRS the Board of Education of the City School District of New Rochelle is the sole member of the Fund and that the Superintendent of Schools, the high school principal and one or more BOE members are required to sit on the Fund board, in accordance with the Fund's Charter and Bylaws.
Stark told the IRS the Fund had begun to work with its accountants in early 2020 to file the missing 990s for 2017, 2018 and 2019.
As you will see in the attached records, once the mishaps of not filing for 2017 and 2018 were realized, the Executive Director and the new Treasurer were working with an accountant to file the Fund's 2019 tax returns in a timely manner. Unfortunately, that was March of 2020 and New Rochelle was an early COVID hotspot. The accounting firm essentially shut down operations due to COVID.
No records showing “the Executive Director and the new Treasurer were working with an accountant to file the Fund's 2019 tax returns in a timely manner” were included in the Form 1024 application Stark provided to this reporter. The was no “new” Board Treasurer in 2020. As noted previously, Thomas Livacari, the current Board Treasurer, was elected to that position in January 2019, more than a year before the first cases of COVID were reported in New Rochelle, and he has served in that position the past three years.
Stark offered the IRS his assurance that order has been restored at the Fund.
The Fund and the CSDNR now have new leadership that is dedicated to the renewal and rebuilding upon past successes. Approximately 80% of the Fund's board of directors has been replaced. To ensure that this type of mishap never happens again, the Fund has strengthened its governance, inclusive of the finance committee, and has charged the committee with presenting quarterly financial updates at Fund board meetings. We have also contracted with a new accountant to provide related tax services. Financials will be reviewed by the full board during the first quarter, and our tax returns will be reviewed and approved for filing by the full board during the second quarter.
This statement is duplicitous and misleading.
Stark and Deidre Polow (she founded the Fund with then-Superintendent Linda Kelly in 1998) have held senior leadership positions on the Fund Board throughout the period 990s were not filed and the Fund’s tax-exempt status revoked and from 2009 to present, Livacari has been Board Treasurer since January 2019. It’s mostly the same people running the Fund that were running it when the 990s were not filed in 2018, 2019, 2020 and 2021.
We would be interested to know which accounting firm is it that “closed down” due to the pandemic in the middle of tax season, then remained closed for years?
What Stark did not address about accounting services is that he hand-picked the current account firm. At a recent Fund Board meeting, Stark told board members that Jack Sardis of Sanossian, Sardis & Company, LLP in Scarsdale, NY is his accountant.
As school district records show, the Fund was not locked out of its offices at New Rochelle High School for about 18 months, from March 12, 2020, and August 23, 2021. Even if they were, their mail was delivered to the Main Office at New Rochelle High School which was open and led by a Fund Board Member, the New Rochelle High School Principal. There was no obstacle whatsoever to the Fund getting its mail.
Based solely on the information provided by Stark, Stephen A. Martin, Director of Exempt Organizations Rulings and Agreements at the IRS retroactively reinstated the Fund’s tax-exempt status to the automatic revocation date of May 15, 2021, in a determination letter dated February 25, 2022.
Stark has claimed he was unaware of the revocation until August 23, 2021. Even after that date, he failed to notify the Board, Fund donors or the public of the Fund’s loss of its tax-exempt status.
For seven months the Fund continued to promote itself as a non-profit organization on Twitter, Facebook and its website even after this reporter published a story on the revocation on December 1, 2021.
IRS Revokes Non-Profit Status of The New Rochelle Fund for Educational Excellence
For that story, Stark issued a brief statement:
During this challenging time, as soon as we became aware of the issue, we began measures to resolve the matter expeditiously.
In his letter to the IRS, Stark said the Executive Director and new Treasurer were working with the soon-to-be hibernating accounting firm to file the Fund’s 2019 990s, already aware that the Fund’s 2017 and 2018 990s had not been filed.
The Fund was “aware of the issue” in early 2020, but did not file those 990s until two years later — not expeditiously.
Stark has repeatedly stonewalled this reporter, refusing to respond to questions or produce records that might shed light on possible financial malfeasance or self-dealing.
The City School District of New Rochelle did not, as Stark told the IRS, “cancel school” and “shut down their facilities”. The District did switch to remote learning for regular education students and visitors were prohibited from school buildings from March 12, 2020, to October 6, 2020. In-person learning did not resume until November 1, 2021, but New Rochelle High School was not “shut down” during any of that period when it became the hub of the District’s COVID response.
Employees continued to report to work throughout the COVID period: Administrators & Staff (Main Office, House Office) Security, Custodial, Buildings & Grounds, Special Education, Medical, Food Service and Bond Construction continued from March 12, 2020, to November 1, 2021.
The kitchen at the high school prepared thousands of meal packages every school day, which were distributed throughout the City of New Rochelle.
After visitors were allowed back in the buildings on October 6, 2020, over a thousand visitors were allowed into New Rochelle High School from that date until August 23, 2021.
Stark told the IRS that due to COVID, the Fund did not have access to its office at New Rochelle High School from March 12, 2020, to August 23, 2021. As a result, the Fund never received any correspondence from the IRS during that period, including any prior correspondence referenced in the IRS revocation letter.
Setting aside that the High School Principal was in the building and a member of the Fund Board, thousands of people accessed the building between March 12, 2020, until August 23, 2021, including many employees and some students.
New Rochelle High School Visitor Logs from March 12, 2020, to August 23, 2021, seen by Talk of the Sound, show just 5 visitors admitted to the building from March 12, 2020, to October 6, 2020, and 1,279 visitors admitted to the building from October 6, 2020, to August 23, 2021. Each entry is logged with a Date, Time, and Purpose for Visit.
Among the 1,279 visitors from October 6, 2020, to August 23, 2021, this reporter broke them down into categories: Food (Kitchen. Food Service, Food Distribution); Student Related (Chromebook Distribution. Tours, Prom Tickets, Diplomas, Registrars Office, Helping W Award Ceremony, Young Achievers, IGNITE, AP Test); Buildings & Grounds (Construction Meetings, Meetings with Facilities Director); Vendors/Service Providers (Boiler Room, Vending Machines, Xerox, Verizon, Elevator. Pest Control, Roof, Heating/Cooling, Duct Cleaning, Information Technology, Interstate Fire, Honeywell, Water Testing, Smart Board Installer; Medical (Nurse's Office, Mask Fitting, COVID Vaccine); Arts (Dance Studio, Piano Tuner, PAVE, Art Teachers; Sports (Game Referee, Swimming Pool, Life Guarding, Sports Coaches, Picking up Football Uniforms, Photographer for Football Game, Softball Photos; Human Resources (Teacher Training, Job Interviews, Interns, Substitute Teachers); Special Education (Special Education, Life Skills, Therapy, Special Education Tours; Departments/Administrative (Main Office, Principal, English Department, Social Studies Department, Guidance, Delivery, House 2 Office, House 3 Office, House 4 Office, BOCES, Security Office, Library, Summer School).
On April 30, 2021, New Rochelle High School debuted its production of the musical “Is There Life After High School?” Apple wrote about the production on their website. Major media outlets covered the event. Students and parents were invited to participate.
When in-person learning was interrupted due to the COVID-19 pandemic, drama teacher Anthony Stirpe used iPhones, iPads, and Mac computers to aid students in reinventing the annual high school musical. Scenes were filmed both at school and in the students’ homes, with their parents as added cast members. A major scene filmed at New Rochelle High School featured parents lining the halls as Stirpe moved past them, capturing their exultations on video. News media were there that day, documenting the making of the musical and the innovative use of technology.
The claim to the IRS that New Rochelle High School was “shut down” from March 12, 2020, to August 23, 2021, is unequivocally and demonstrably false.
In addition to High School Principals, Superintendents and School Board Members who both sit on the Fund Board and have key fob access to New Rochelle High School, five members of the Board Fund were documented in the visitor logs entering the building during the period Stark claimed the Fund did not have access to the Fund office at the high school.
On January 4, 2021, Fund Board President Jonathan Stark was admitted to New Rochelle High School at 3:00 pm.
On March 3, 2021, Fund Board Member Linda (Kelly) Fauci was admitted to New Rochelle High School at 1:30 pm. Not listed in the visitor logs but present in the Fund office was Fund Board Member Meredith Hilton, according to Fauci.
On May 13, 2021, two days before the Fund was due to lose its tax-exempt status, Stark was admitted to New Rochelle High School at 2:13 pm.
On May 20, 2021, five days after the Fund lost its tax-exempt status, former Fund Board Member and current Fund Executive Director Stephanie Tomei was admitted to New Rochelle High School at 1:30 pm. Stark followed close behind, admitted to the building at 1:43 pm.
Asked about these visits to the Fund office at a school he told the IRS was shut down, Stark admitted he was there on Fund business.
“Each visit was centered on meeting for updates with the part-time Fund administrators to go over management of the fund,” said Stark.
On June 15, 2021, Fund Board Member Richard Relkin was admitted to New Rochelle High School at 2:13 pm.
Stark was asked to comment before a 5 pm Wednesday deadline. He asked for a meeting the following day, so the deadline was pushed to 5 pm Thursday. Stark proposed a phone call at 2:30 pm on Thursday. It was agreed that Stark would initiate the call. He sent an email at 2:24 pm.
“I am unable to make our scheduled call for 2:30 pm as planned.”
Lying to the IRS in a sworn statement is bad but the tip of an iceberg of malfeasance at the New Rochelle Fund for Educational Excellence, which I will address along with Stark’s inappropriate behavior in a future.
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