Sammy Sosa's Foundation Is a Major League Fiasco HURRICANE RELIEF OR TAX RELIEF?
(FORTUNE Magazine) – During the magical summer of 1998, when Cubs slugger Sammy Sosa battled the Cardinals' Mark McGwire for the single-season home-run record, Sosa did what rich celebrity athletes sometimes do. He set up his own foundation. The timing was fortunate. That fall Hurricane George battered Sosa's native Dominican Republic. "We became famous," says Bill Chase, president of the Sammy Sosa Charitable Foundation. "Everybody wanted to help Sammy and his country." Small donations poured in. "A lot of kids would send their allowance," says Rebecca Polihronis, who coordinates charitable giving for the Cubs.
Yet the total was hardly staggering: The foundation disbursed $82,842 in relief supplies, according to its 1998 tax return. Nonetheless, Sosa got credit for bringing attention to the plight of his country. For his civic and charitable acts, Major League Baseball honored him with the Roberto Clemente Man of the Year Award.
Today, a year and a half after its high-profile debut, the Sosa Foundation is broke and in disarray. Amid a board member's allegations of misuse of funds, operations are at a standstill. Seven thousand pounds of food, clothing, and medical equipment have been accumulating $2,000-a-month storage charges in a Miami warehouse since last fall. What's more, there's no evidence that Sosa, who's halfway through a four-year, $42.5 million contract, has ever made a significant cash contribution to his own foundation. (Even rival McGwire pitched in $100,000 last year.)
It appears that Sosa's foundation was a dog from the start. He established it in June 1998 by donating a three-story office building called 30/30 Plaza (in recognition of his two-time feat of hitting at least 30 home runs and stealing at least 30 bases in a season), which he had built a couple of years earlier. Located in an impoverished neighborhood of San Pedro de Macoris, where Sosa grew up, the property was a money-loser. Many of the tenants that ran businesses from it didn't pay their rents. By handing over the building, appraised at $2.7 million, to his nonprofit, Sosa got a tidy federal tax deduction of at least $1 million.
The deadbeat tenants are still there--including two of Sosa's sisters, who run a boutique, a disco, and a beauty shop--but Sosa's off the hook. "Sammy don't want to get involved," says Gordon Skitt, the building manager. "It's the foundation's problem."
Financial woes aside, the internal squabble--pitting the foundation's secretary, Arturo Sandoval, against Sosa and other members of the board--threatens the foundation's survival. In a November 1999 memo Sandoval has since shared with the IRS, he informed his fellow directors, Chase and Dana Kaufman, of the back rent the Sosa sisters owed. He also said Sosa took a check for $1,500 from the foundation as a security deposit on an apartment to be used by the nonprofit. But before the foundation could move in, he sold the apartment--and kept the deposit. "Someone has to clarify with Sammy that he cannot take charitable contributions from the United States and directly deposit [them] into his business account in the Dominican Republic," Sandoval summed up. Chase does not dispute those charges. He even admitted to FORTUNE that he once bought a new sports car for Sosa's brother Jose using foundation money. But he responded to Sandoval's allegations by terminating his consulting contract, withholding his last month's pay, and locking him out of foundation headquarters. Sosa did not return a call to his cell phone the day before he left for the Cubs season opener in Japan, but his agent, Adam Katz, says, "I'm going to go down [to Miami] and clean this thing up. I can virtually assure you there's been no impropriety."
Not so fast. At the very least, Sosa's setup violates basic standards of philanthropy laid out by the National Charities Information Bureau: A public charity, like Sosa's foundation, should have at least five members on its board to guarantee diversity (Sosa's has three, plus himself); board members shouldn't profit from their affiliation with the charity (Sandoval has earned $4,000 a month as a consultant to the foundation); and the board shouldn't be beholden to special interests (Chase, who once owned a factory in the Dominican Republic, used to pay the young Sosa to shine his shoes; now he lives in a home in Coral Springs, Fla., that Sosa owns. Kaufman, the remaining board member, is Sosa's accountant).
The irony is that despite Sosa's selfishness and questionable practices, agencies housed at 30/30 Plaza are doing good work--inoculating children, educating young mothers, and providing dental care. But with the escalating shenanigans inside the Sosa Foundation, the future looks cloudy. In January, Paul Schenkel, a senior technical adviser with the U.S. Agency for International Development's health and population team in the Dominican Republic, sent an e-mail to Chase in which he concluded, "I believe the foundation is at a critical moment. I am convinced that without Sammy's direct involvement the foundation will run out of funds and be forced to terminate a great project." Hey, Sosa, you're up.