Case Study: United Way of America, 1992
Prepared by Dr. Martha Dede
A MATTER OF GOVERNANCE: UNITED WAY OF AMERICA, 1992
United Way of America (UWA) was incorporated in 1932 with the mission “[t]o improve lives by mobilizing the caring power of communities”. Since, UWA has been a significant constituent in the flywheel of American philanthropy. Headquartered in Alexandria, Virginia, UWA is comprised of 1,400 dues-paying and another 700 non dues-paying affiliates which, in aggregate, raise about $3.1 billion annually, and fund approximately 50,000 service-providing health and human service agencies nationwide. (1) In 1992, UWA President ...view middle of the document...
Later that same day, Aramony wrote a letter to Mr. Leffall, signaling his decision to retire immediately: “I do this because media attention is overshadowing the importance of the work of United Way….” (4).
In a video teleconference beamed to United Way chapter officials nationwide on February 27, 1992, Aramony announced his retirement, citing a “’lack of sensitivity to perceptions’ about his spending and management practices.” Specifically, said Aramony, “I did not pay enough attention to detail or to the way some of my actions could have been perceived and my personal style could have been perceived by certain people” (5).
On September 13, 1994, Aramony, former UWA staffer Stephen J. Paulachak, and Thomas J. Merlo, UWA chief financial officer, were indicted on 71 federal counts of “conspiracy to defraud United Way, mail fraud, wire fraud, interstate transportation of fraudulently acquired property and money laundering”. In addition, the three were charged with filing false personal and corporate tax returns; Merlo, with perjury. All pleaded innocent. (6)
At the center of the case was Lori Villasor, Aramony’s young mistress of four years. (The affair began when Villasor was 17; Aramony, 59.) It is estimated that Aramony, who was paid $463,000 (including benefits) annually, appropriated nearly $1.2 million to support a “lavish lifestyle” with Villasor and others. That included a New York apartment, an expensive condominium in Florida, use of a limousine, a lifetime pass on American Airlines, and trips on the Concorde. (7)
The federal trial of the three took place in early 1995 and, on April 3rd of that year, Aramony was convicted of 25 counts of fraud, conspiracy, and money laundering. Merlo and Pauachak were convicted on 17 and eight counts, respectively. On June 22, 1995, the three were sentenced. Aramony received seven years in a Federal prison, and three years probation. Paulachak received a sentence of two and one half years; and Merlo, four years and seven months. In addition, Aramony and Merlo each were ordered to pay $552,000 to UWA in restitution (8).
In January, 2000, in response to a suit brought by Aramony against UWA, a New York federal judge ruled that UWA was required to pay Aramony’s $4.4 million pension, as called for in the latter’s contract. The judge, noting that UWA had been “careless” when it approved Aramony’s...