Queens Defenders and Nonprofit Governance

The New York Times (among other outlets) reported today that yesterday, Lori Zeno pleaded guilty to one count of wire fraud conspiracy. Zeno was, until about a year ago, the executive director and CEO of Queens Defenders, a nonprofit and tax-exempt organization that provides legal services to indigent defendants in Queens County, New York.

Queens Defenders (incorporated under the name Queens Law Associates Not-for-Profit Corporation) raises very little money from charitable contributions–in 2023, only about $78,000 of its $28.6 million of revenue came from contributions and grants. Almost $28 million came from program service revenue. (On its Form 990, Queens Defenders says that its sole source of revenue is from contracts with the city and state of New York. More on that shortly.)

Ms. Zeno, it turns out, was apparently using organizational funds for personal expenses. The Times article says that she and her romantic partner ended up spending $300,000 on things including teeth-whitening, a vacation to Bali, and repairs on a Mercedes. (The Daily News adds trips to California, $6,000/month in rent, an 85-inch television, and designer clothing to the list of nonprofit-funded expenditures.)

How did she access the money? And how did nobody notice? The news stories didn’t detail that, but the DOJ’s press release indicates that, among other things, she used a company credit card and falsified documents to make it look like her personal spending was business expenses.

In the end, though, this seems to be a significant failure of oversight on the part of the board. And the board’s negligence has real consequences to Queens Defenders and possibly to the indigent people that it represents: the New York Mayor’s Office announced that it was reassigning the services underlying Queens Defenders’s $32 million contract with the city to Brooklyn Defenders. $32 million is more than the the organization’s gross revenue in 2023; I suspect that will leave it with little to no revenue going forward, and may represent the end of the organization.

I’ll admit that my research in nonprofits and tax-exempt organizations has tended to focus on questions of tax. But board composition and internal governance is absolutely critical, not just to nonprofits’ success in their missions, but to their very survival.

Photo by Wesley Tingey on Unsplash