Editor’s Note: This is the final article of this “Reveal.” It exposes the most glaring type of nonprofit abuse; excess benefit transactions that personally benefit those operating tax-exempt groups.
The group in question is the International Remote Viewing Association or IRVA. I first learned about remote viewing in 1996 and have since learned enough to write and publish “The Cassandra Frost Collection: Articles on Intuition, Remote Viewing and Consciousness.”
According to Remoteviewed.com:
Remote Viewing is a psychic skill originally developed and utilized as an operational intelligence gathering tool for the United States Military and Intelligence services from 1972 – 1995. A January 1979 SECRET progress report from SRI to the D.I.A describes Remote Viewing as:
Remote Viewing (RV) is the acquisition and description, by mental means, of information blocked from ordinary perception by distance or shielding, and generally believed to be secure against such access.
I originally wanted to help this group raise money and asked to see their meeting minutes and financials to see why they always seemed to be begging for money.
Up to that point, it was kind of like Alice going to Wonderland.
After I questioned IRVA’s tax-exempt status, the Red Queen started screaming “Off with her head.”
Investigating these CIA trained psychic spies was like a knife fight in a phone booth. They did post IRS compliance documents in March 2006, authorized by former IRS exempt organization director Lois Lerner. I wondered why I spent three years learning about nonprofit rules and regulations. Thirty days later I was contacted by whistleblower Vernon Hill and a former IRS agent who wanted me to look at irregular Shriner tax returns.
Eleven years later, here we are with five examples of nonprofit corruption that illustrate lack of IRS oversight, at the very least, and worst, prosecutable RICO cases.
All are innocent until proven guilty.
This is about a tax-exempt group with an officer allegedly using nonprofit assets for his own benefit.
There are four related components:
- The International Remote Viewing Association (IRVA), a 501c3 tax-exempt group.
- Paul H. Smith, former IRVA President, current board member and founder, who also owns Remote Viewing Instructional Services, Inc. (RVIS).
- The IRVA sponsored CRV-REG experiment, primarily developed, designed, conducted by, and overseen by Paul H. Smith.
- Paul H. Smith, while serving as an officer and board member, then used the IRVA sponsored CRV-REG experiment in his for-profit business to attract and train students.
Paul H. Smith, as a “disqualified person” and as owner of RVIS Inc., appears to have operated unchecked by the IRVA board of directors and:
- Failed to disclose excess benefit transactions or conflict of interest to IRVA's board.
- Failed to disclose Conflict of Interest (COI) to an associated Institutional Review Board (IRB), formed to oversee the IRVA sponsored CRV-REG experiment.
- Failed to disclose that he was going to use and incorporate the experiment’s protocols and equipment into his own training courses to attract and train students.
By doing so, Paul H. Smith, for each of the last four years from 2009 – 2013, as President/Director of IRVA and owner of RVIS Inc., may have diverted, misappropriated and possibly embezzled nonprofit resources to benefit his for-profit business.
Consequently, IRVA and/or RVIS Inc. may have:
- Evaded taxes.
- Committed tax fraud.
- Committed embezzlement.
- Filed false tax returns.
- Committed excess benefit transactions without reporting them to the IRS.
- Misrepresented their nonprofit 501c3 activities to the IRS.
- Designed and ran an experiment based on research misconduct/fraud with little or no regard for clinical research ethics and the conduct of responsible research.
By allegedly using the nonprofit experiment for his own gain, Paul H. Smith caused IRVA to fail its obligations as a 501c3 by not paying excise tax that could possibly result in the imposition of fines from $800,000 to $1.6 million in excise tax liability under section 4958 of the IRS code. IRVA tax returns for 2008 – 2012 indicate that no disqualified person reported an excess benefit transaction and that no excise taxes were ever paid as described in “Instructions for Schedule L.”
Finally, this is part of a well-documented eleven-year pattern of IRVA and Paul H. Smith not complying with IRS 501c3 rules and regulations, even after being called out in the media for negligence, mismanagement and continued nonprofit violations.
Screen shots from 2008 to present provided by the “Wayback Machine” show that Paul H. Smith’s “Remote Viewing Instructional Services, Inc.” for-profit website stated:
We are happy to announce a new addition to the Basic CRV courses offered by Remote Viewing Instructional Services Inc. Based on experience gained from recent CRV-REG experiments we assisted with in November, we have decided to make each new class a part of the experiment. The second new feature allows you, the student, to try your hand at a scientifically-designed double blind remote viewing session monitored by a running random event generator (REG) just as we did during the November experiment...Your results will be added to the cumulative data in an ongoing CRV-REG experiment, the results of which may one day revolutionize the remote viewing field. If you find that prospect exciting, here are the upcoming dates for the first quarter of 2009 for RVIS, Inc, Controlled Remote Viewing Courses.
Again, no IRVA tax returns report any excess benefit transactions or that any excise taxes were paid. As early as 2008, Paul H. Smith should have notified IRVA’s board about the excess benefit transactions and conflict of interest per their own policies. These disclosures should have been reported on the group’s tax returns. He confirmed in an email that he did not disclose any conflict of interest to the IRVA board or the experiment's IRB.
The background is that Paul H. Smith made a discovery during one of his training sessions with a student named Dr. Melvin Morse. Smith, with Morse and one other, then proposed an experiment to IRVA. Paul H. Smith then based the experiment on his commercial discovery, then helped design it, conduct it, and then participated in it. The non-profit experiment also required that the six participants be trained by Smith only through his for-profit company, RVIS, Inc.
An IRB oversaw the IRVA sponsored CRV-REG experiment to assure human subject protection by providing each a disclosure/consent form. The CRV-REG study site lists an impressive group of scientists and researchers, including:
· Dr. Jessica Utts (professor, UC-Irvine, and board member, IRVA
· Mr. Stephan Schwartz (board member, IRVA)
· Dr. Tom Brown (Thomas M. Brown, Psy.D. LLC)
· Dr. John Alexander (board member, IRVA)
· Mr. William Eigles (board member, IRVA)
· Dr. Dean Radin (Institute of Noetic Studies)
The IRB thus consisted of five male members and one female member, four of whom are members of IRVA’s governing board, and two of whom are outsiders. Additionally, on the board were a clinical psychologist (Brown), two scientists (Utts and Radin), an experienced researcher (Schwartz), an adviser to the Army Science Board (Alexander), and a legal advisor (Eigles). This configuration meets or exceeds basic requirements for IRB constitution as outlined by the United States Department of Health and Human Services.
Incidentally, “Legal advisor” William Eigles may be practicing law without a license. According to the Colorado Court system attorney registry office, Eigles is not licensed to practice law in Colorado. It appears he wrote legal documents for the study including the consent and liability release forms.
Also from the study page:
Responsibility - The responsibility of the IRB is to review and approve the research proposal, experimental design, and human use documentation for compliance with the United States Department of Health and Human Services, Office of Human Research Protections (OHRP) guidelines.
A Final Guidance Document from the U.S. Department of Health and Human Services states:
Institutions and individuals involved in human subjects research may establish financial relationships related to or separate from particular research projects. Those financial relationships may create financial interests of monetary value, such as payments for services, equity interests, or intellectual property rights. A financial interest related to a research study may be a conflicting financial interest. The Department recognizes that some conflicting financial interests in research may affect the rights and welfare of human subjects. This document provides some possible approaches to consider in assuring that human subjects are adequately protected. Institutional review boards (IRBs), institutions, and investigators engaged in human subjects research each have appropriate roles in ensuring that financial interests do not compromise the protection of research subjects.
This guidance document continues:
II. Guidance for Institutions, IRBs and Investigators
General Approaches to Address Financial Relationships and Interests in Research Involving Human Subjects
The Department recommends that in particular, IRBs, institutions, and investigators consider whether specific financial relationships create financial interests in research studies that may adversely affect the rights and welfare of subjects. These entities may find it useful to include the following questions in their deliberations:
- What financial relationships and resulting financial interests could cause potential or actual conflicts of interest?
- At what levels should those potential or actual financial conflicts of interest be managed or eliminated?
- What procedures would be helpful, including those to:
1. collect and evaluate information regarding financial relationships related to research,
2. determine whether those relationships potentially cause a conflict of interest, and
3. determine what actions are necessary to protect human subjects and ensure that those actions are taken?
- Who should be educated regarding financial conflict of interest issues and policies?
- What entity or entities would examine individual and/or institutional financial relationships and interests?
B. Points for Consideration
Financial interests determined to create a conflict of interest may be managed by eliminating them or mitigating their impact. A variety of methods or combinations of methods may be effective. Some methods may be implemented by institutions engaged in the conduct of research, and some methods may be implemented by IRBs or investigators. Some of those may apply before research begins, and some may apply during the conduct of the research.
The IRB consent form fails to provide for conflict of interest (COI) disclosures. The IRB consent form fails to provide a way to disclose to the human subjects that Paul H. Smith had a financial interest in their experimental use. A sample financial interests and arrangements of clinical investigators form could have been easily adopted by the CRV-REG IRB.
Though the IRB referred to the DHHS OHRP guidelines for human subject protection, how could they or their remote viewing related research be trusted if they failed to provide for the disclosure of conflict of interest? On paper, the titles look impressive but do the members of this IRB have enough research experience to know that DHHS OHRP guidelines include the disclosure of COI and financial interests? A seasoned, reliable, and experienced IRB would provide for such disclosure in order to protect research participants from coercion and undue influence.
Question 40B. of IRVA's 2008 990EZ reads:
Section 501c3 and 501c4 organizations. Did the organization engage in any section 4958 excess benefit transaction during the year or is it aware that it engaged in an excess benefit transaction with a disqualified person in a prior year, and that the transaction has not been reported on any of the organization's prior forms 990 or 990EZ? If Yes complete Schedule L, Part 1.
For all years concerned, IRVA marked this question “No.”
A disqualified person is defined by the IRS as:
“Any person who was in a position to exercise substantial influence over the affairs of the applicable tax-exempt organization at any time during the lookback period. It is not necessary that the person actually exercise substantial influence, only that the person be in a position to do so.”
This includes officers, directors, trustees, founders or any individuals having the same powers as these same.
A 4958 excess benefit transaction is defined by the IRS as:
Economic benefit provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of a disqualified person.
Question 40c. asks:
Section 501c3 and 501c4 organizations, enter the amount of tax imposed on organization managers or disqualified persons during the year under sections 4912 (Tax on disqualifying lobbying expenditures of certain organizations), 4955 (Taxes on political expenditures by section 501c3) and 4958 (Excise taxes).
An explanation of 4958 spells out the imposition of excise taxes. According to AN INTRODUCTION TO I.R.C. 4958 (INTERMEDIATE SANCTIONS) by Lawrence M. Brauer, Toussaint T. Tyson, Leonard J. Henzke and Debra J. Kawecki:
Section 1311 of the Taxpayer Bill of Rights 2 (P.L. 104-168, 110 Stat. 1452), enacted July 30, 1996, added IRC 4958 to the Internal Revenue Code. IRC 4958 imposes excise taxes on excess benefit transactions between disqualified persons and IRC 501(c)(3) or 501(c)(4) organizations. The excise tax, which is paid by the disqualified person, is imposed on the amount received by the disqualified person that exceeds the value of consideration provided to the organization. Section 4958 also requires correction of the excess benefit transaction or a second tier tax of 200 percent if imposed. Organization managers may also be liable for IRC 4958 excise taxes if they knowingly participate in an excess benefit transaction. Excess benefit transactions are situations where an IRC 501(c)(3) or 501(c)(4) organization is used for improper personal gain by a person in a position to exercise substantial influence over its affairs. The Section 4958 taxes are popularly known as “intermediate sanctions,” because they provide a remedy short of revocation of exempt status for transactions that constitute inurement. These excise taxes generally apply to excess benefit transactions occurring on or after September 14, 1995.
Any economic benefit received by a disqualified person from the assets of an organization is considered to be provided by the organization even if the transfer was not authorized under the organization’s regular procedures. So, amounts embezzled by a disqualified person from an organization are considered an excess benefit transaction.
From the Free Legal Dictionary by Farlex, embezzlement is:
The fraudulent conversion of another's property by a person who is in a position of trust, such as an agent or employee. Elements common to embezzlement are as follows:
(1) The property must belong to a person other than the accused, such as an employer or principal.
(2) The property must be converted subsequent to the defendant's original and lawful possession of it.
(3) The defendant must be in a position of trust, so that the property is held by him or her pursuant to some fiduciary duty.
(4) The defendant must have an intent to defraud the owner at the time of the conversion.
This alleged excess benefit situation could be resolved if Paul H. Smith disclosed his financial interests to IRVA and the IRB and then paid the excise tax on his excess benefit.
Per the IRS:
A disqualified person corrects an excess benefit transaction by making a payment in cash or cash equivalents equal to the correction amount to the applicable tax-exempt organization. The correction amount equals the excess benefit plus the interest on the excess benefit.
IRVA could then address the excess benefit situation by refilling the proper tax returns with Schedule L that reports excess benefit transactions for the years 2008 - 2012 and pay the IRS the excise tax amounts due from Paul H. Smith.
Hypothetically, if Paul H. Smith held 40 courses that included the experiment’s protocols and equipment, with 10 students paying $2K each, this could possibly amount to $840,000 in income. A 25% excise tax paid by Paul H. Smith to IRVA could amount to approximately $200,000.
If he had five students, the excise tax could amount to $100,000.
If IRVA and/or Paul H. Smith were found guilty of tax evasion, the tax plus fine could double to $400,000 and $200,000 respectively. Other penalties include up to five years in prison and a $250,000 fine for each felony.
Per 4958, a 200% second tier tax could double those amounts to either $800,000 or $400,000.
So what is tax fraud?
Per the IRS, tax fraud is any disregard of the rules and regulations set forth by the Internal Revenue Service.
Is there any way that Paul H. Smith and the IRVA board should know about nonprofit compliance, specifically the requirement to report excess benefit transactions and conflict of interest?
I investigated IRVA's nonprofit claims for three years, from March 2003 until they posted their IRS compliance documents online in March 2006. As a result of investigating their nonprofit status, I was endangered when Paul H. Smith violated my privacy rights, threatened, censored offline and targeted by a hate site that mocks my Native American spirituality and calls for my termination. As recently as June 29, 2013, the harassment, retaliation and intimidation continued on a Facebook page after an IRVA director violated my privacy rights in a post that was immediately removed.
The original IRVA investigative articles remain uncorrected.
These articles, full of excruciatingly dry detail about nonprofit rules and regulations, put IRVA on public notice eleven years ago that their nonprofit status needed to comply with IRS laws. Over 14,500 words were published that admonished IRVA, and in particular Paul H. Smith, for endangering me.
Ten years later, on June 29, 2013, his ex-sister in law, Angela Thompson Smith wrote a Facebook post that mirrored what Paul H. Smith did the day after I published my first article that questioned IRVA's nonprofit status. The administrator immediately deleted her comment because it violated Facebook privacy guidelines.
I alerted IRVA President Pam Coronado that Angela Thompson Smith violated their Ethics and Whistleblower Protection policies. I also asked Pam Coronado for the IRVA attacks to stop. She has yet to respond. On July 7, 2013, I sent her an email to ask if she was going to comply with IRVA’s own whistleblower policy. She has yet to respond.
It appears that this nonprofit group does not operate according to their own rules and regulations.
My initial research found that IRVA had been a DBA of an existing 501c3, like piggy backing on a similar group named the Bay Research Institute. At the time, the group had been delinquent in taxes and filing timely notices with the proper California authorities. Tax returns show that, among other things, Paul H. Smith mismanaged IRVA conferences by losing thousands of dollars, explained from my investigative articles:
In mid-October 2003, the State of California posted IRVA's delinquent 2001 federal tax returns. These documents showed, among other things, that the incomes reported to the State of California on 2001 state and federal documents did not match and differ by approximately $7,500.
The 2001 documents report a $3,900 loss resulting from that year’s conference. A comparison of expenditures v revenue shows that for every dollar taken in, $1.28 was spent; that revenue was 78% of expenses. In other words, IRVA spent 128% over revenue taken in, they lost money on the conference and the year ended with a deficit of $1,812.
The 2002 documents report a $3,040 loss resulting from that year’s conference. A comparison of expenditures v revenue shows that for every dollar taken in, $1.52 was spent; that revenue was 66% of expenses.
In other words, IRVA spent 152% of revenue taken in, lost money for a second year in a row on the conference and the year ended with a deficit of $1,787. “Debts remaining from 2002 Conference” were reported as $4,689.
According to information at www.irva.org, Paul H. Smith was conference chair for both years.
My last email request to IRVA for further financial documentation was sent on October 30, 2003. To date, the 30-day deadline has passed and my request for the legally mandated information remains unmet and unanswered. According to the IRS, a fine of $20 a day may be levied if a group fails to provide the requested documentation. IRVA may have placed themselves in the avoidable position of possibly owing the IRS at least $4800 if they, at some time in the future, are investigated, found guilty of and fined for nondisclosure.
I also calculated:
Compared to a list of items used to determine nonprofit compliance by Give.org, the Better Business Bureau’s Wise Giving Alliance, it appears that IRVA may be currently meeting two and a half of Give.org’s fourteen basic guidelines. If Give.org were to audit IRVA today, they would most likely get a grade of 17% for compliance in the areas of governance, effectiveness, and finances.
My conclusions as of 4/2/2005 read:
- It appears that IRVA is still losing money.
- It appears that IRVA has trouble answering questions on their tax returns correctly.
- It appears that five board members and two officers will be ineligible to serve after April 21, 2005, per their own bylaws.
- It appears that IRVA was never supposed to be a membership group.
- It appears that IRVA may be giving the impression that they have 501c3 status, when, according to the IRS, they do not.
So, it appears that the answer to the two year old question, “Is IRVA really a nonprofit group?” still seems to be “No.”
After a decade, IRVA's officers and directors should be aware of nonprofit compliance like no other. Instead, IRVA officers and directors seem to be acting as if they are above the law. They knew they were out of compliance with IRS 501c3 rules and regulations per an email dated 12/14/2003 in which I called for then Vice President Paul H. Smith’s resignation. Emails from early March, 2003 show that IRVA didn’t know the basics of nonprofit disclosure. Instead of answering my request for financial information by providing their 990s, I was wrongly sent a cease and desist.
Finally, how much influence does Paul H. Smith have over IRVA other than serving as President, Vice President and Director? Page captures show that he also wrote the definitive sections for www.irva.org including:
- RV History, a Brief Timeline of Remote Viewing History
- What is Remote Viewing?
- History of Remote Viewing
- How to do a simple remote viewing session
In conclusion, did any IRVA officers or directors commit tax fraud and/or tax evasion through “willful neglect” by failing, for five years from 2008 to 2013, to enforce their own COI and Ethics policies? Per the IRS, “Willful neglect” implies failure to exercise the care a reasonable person would observe under the circumstances to see that the standards were observed, despite knowledge of the standards or rules in question.
Did Paul H. Smith fail to exercise due diligence as a nonprofit officer/board member by not disclosing excess benefit transactions as he planned to use the IRVA sponsored CRV-REG experiment to attract and train students through his company, RVIS Inc.?
Did Paul H. Smith manipulate a nonprofit group and hijack nonprofit resources, including the donor-advised Gabi Pettingelle Memorial Fund, for competitive commercial advantage by attempting to create an experiment that favored, and could ultimately validate, his particular training methodology using participants trained exclusively by him?
If the IRB fails to issue a corrected consent form for the subjects to re-sign, would the experiment be rendered invalid?
And did Paul H. Smith report the required excise taxes on his 2009 – 2012 RVIS Inc. 1040s?
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