BIG GREEN | Inside the Nature Conservancy

$420,000 a Year and No-Strings Fund

By Joe Stephens and David B. Ottaway
Washington Post Staff Writers
Sunday, May 4, 2003

Officials at the Nature Conservancy say their finances are an open book, a stance charity experts describe as essential to promoting public trust. Still, simple answers can prove difficult to get.

Questions about the compensation of Nature Conservancy President Steven J. McCormick and his access to a discretionary fund required prolonged discussions with Conservancy officials or brought conflicting or incomplete responses.

In February 2001, the Conservancy persuaded McCormick, a former longtime executive at the charity's California branch, to leave his San Francisco law practice and move to Virginia to run one of the nation's largest nonprofit organizations.

That fall, the Conservancy reported to the Better Business Bureau's charity-tracking service that McCormick's compensation was $275,000, plus usual health and retirement benefits.

In November 2002 Conservancy communications director David Williamson sent The Washington Post a chart showing that some nonprofits paid their presidents more -- from the Boy Scouts of America at $308,000 to the American Red Cross at $377,000. Williamson also disclosed that McCormick had received a $75,000 down payment on a house.

After repeated inquiries over months, McCormick and other senior officials said that the Conservancy had underreported McCormick's compensation. In addition to his base salary, they said, McCormick also got a $75,000 signing bonus, a $75,000 yearly living allowance and a $1.55 million home loan from the Conservancy.

McCormick ultimately provided information showing that his compensation and benefits for 2002 totaled about $420,000.

He used the loan to buy a new $1.7 million house in the Reserve, an upscale subdivision in McLean.

Williamson initially said the Conservancy made the adjustable-rate home loan at 7 percent, which he described as the prevailing rate at the time. McCormick later said the rate was 6 percent. Real estate records showed it was 4.59 percent. McCormick apologized for providing inaccurate information. "We were wrong," he said.

A Jan. 17 memo to hundreds of Conservancy trustees informing them of the mortgage and The Post's inquiries described the rate as "above market." Mortgage specialists, however, said 4.59 percent appeared below market for such adjustable-rate loans last May. Keith Gumbinger, vice president of loan-monitoring company HSH Associates, described the terms as a "pretty good deal."

A Conservancy internal memo suggested that McCormick would have had trouble securing outside financing because he already had a mortgage in California and "did not have the ability at that time to carry two loans." After confirming the Conservancy's loan, McCormick said he planned to immediately repay it with bank financing to avoid "scrutiny of the propriety of the loan." On Thursday, a Conservancy spokesman said McCormick had repaid the home loan.

"I don't want to do anything that jeopardizes the reputation of the Conservancy," McCormick said.

In an interview Thursday, Williamson said he will be leaving his job on Friday, after 12 years at the Conservancy, to pursue "other business opportunities."

Other Conservancy documents obtained by The Post revealed a pool of cash known as "the President's Discretionary Fund." Those funds, memos show, paid for ads in six major national markets featuring nature scenes and Paul Newman's voice.

Questioned about the fund, Conservancy officials were initially vague. They eventually supplied figures showing it had swelled from $9.5 million in 1998 to $23 million last year.

Williamson told The Post the fund had been abolished. McCormick said that the discretionary account, renamed the Quick Strike Fund, held $3 million this fiscal year.

The documents identify the fund as the source of millions spent on marketing. Some of the fund's cash came from the sale of land considered ecologically insignificant, a memo shows.

The fund also paid for donor-tracking software, government relations programs, an Indonesian ecotourism project and unspecified "emergency needs" determined by McCormick, according to a written statement from the Conservancy in response to reporters' inquiries.

McCormick also used the fund last fall to dole out $600,000 to losing participants in a United Nations environmental competition. In August, at a South African conference, he announced the Conservancy would give $30,000 to each of competition's 20 runners-up. McCormick told The Post his announcement of the gifts was a spur-of-the-moment decision.

Public financial reports do not mention the discretionary account, but Conservancy officials said the funds are included in amounts reported in various categories. Conservancy finance director Craig T. Neyman described the account as money "in the budget without a corresponding use."

Told about the fund by a reporter, charity expert Daniel Kurtz called it "bizarre." Kurtz, a former New York charity regulator and author of guides for nonprofit managers, said such a large sum should be under direct board of directors' control.

"That," he said of the fund, "is a hell of a way to run a business."

Staff researcher Alice Crites contributed to this report.

© 2003 The Washington Post Company