The Pallottine Fathers, whose mail-order fund-raising effort and huge investment of money contributed in the name of charity are being investigated by a grand jury, spent nearly $3 of every $4 they collected last year on fund-raising costs.
A report filed this week with the Maryland secretary of state showed that the Baltimore-based Catholic order spent $5.6 million in 1976 on printing, postage, salaries and related expenses to raise $7.6 million. The order reported that it sent $3 million to its foreign and domestic missions, including about $1 million realized from the force sale of some of its investments in Florida real estate and other speculative ventures.
The grand jury probe, now in its 11th month, was sparked by the revelation two years ago that the Rev. Guido John Carcich, mastermind of the order's massive mail-order business, was pourin millions into real estate ventures, and lent $54,000 to Maryland's then-Gov. Marvin Mandel which was used to help finance Mandel's divorce. In one 18-month period, only 2.5 cents of every $1 collected went to missionary work.
Charitable organizations in Maryland are required to keep certain fund-praising costs at or below 25 per cent of contributions, and the Pallottines reported that their affected fund-raising expenses represented 38.4 per cent cent of their contributions.
The Maryland law, which went into effect July 1, 1976, permits the secretary of state to grant a waiver of the 25 per cent limit to organizations that can establish that their charitable endeavors would be jeopardized by meeting those standards.
Although the Pallottines reported spending $5.6 million on all costs associated with fund raising, the Maryland law exempts the actual costs of goods and postage, an exclusion that amounted to nearly $4.4 million of the $5.6 million in the case of the Pallottines.
A spokesman in the secretary of state's office said accountants from the state comproller's office will review the report to see if it complies with the law.
The Rev. Canice Connors, director of research and planning for the Archdioeese of Baltimore, said Bishop Frank Murphy has convened a committee to review the report to see if it complies with guidelines set by Archbishop William D. Borders.
Joseph M. More, a Philadelphia attorney who represents the Pallottines, said yesterday that in the second half of 1976, the period during which the law was in effect, the Pallottines were "in compliance" with the 25 per cent limit. Although the form did not take into account the fact that the law did not go into effect until July, More said figures in this possession show applicable fund-raising expenses in the last six months of the year were only 23 per cent.
New procedure adopted by the religious order this year will result in a "much lower percentage" of costs for fund raising. MOre said. He predicted that the 1977 audit would show "a dramatic change" in the much-criticized financing of the organization.
Last August, in an interim report to the office of Maryland Attorney General Francis B. Burch, the Pallottines said they gave $2.6 million to missions and other charities in the first six months of 1977. The report was part of an agreement made by the order last year as a condition for its continued operation of business in the state.
The arrangement with the attorney general also calls for the progressive liquidation of the assets of the Pallottines, reduction of mail solicitations, which at one time topped 100 million pieces annually at a cost of $10 million, and evidence that money collected for charity is going to missionary work, as advertised.
Meanwhile, attorneys for Father Carcich, who has been banished from the area by Archbishop Borders, won a round in a legal battle to prevent the state grand jury from getting working papers of an earlier audit of Pallottine books.
The Maryland Court of Appeals agreed Tuesday to require written arguments by the attorney general and Carcich's lawyers on the question.
The disputed audit, completed in June, 1976, disclosed that the order, under Carcich's leadership, collected $20.4 million in an 18-month period ending Dec. 31. 1975, but used only $500,000 of that for charitable work. The remainder was invested in trailer parks, motels, condominiums and undeveloped real estate, or eaten up by fund-raising costs.
In October, 1976, the Pallottines reported they were selling their condominium holdings in Florida for $625,000 and their interest In two Baltimore subdivisions for $116,000. Attorney More said yesterday he order subsequently has sold all its shares in various limited partnerships, which were valued at $2.7 million at the end of 1976. The 1976 report showed that the order still owned motels and trailer parks valued at $843,000.
The state grand jury investigation is focusing on the secret investments made by Father Carcich and several Maryland businessmen, including the Pallottines' former accountant.Donald E. Webster, according to documents filed in connection with Carcich's appeal of a lower court order to turn over work papers from the audit.
Among records subpoenaed by the grand jury, directed by Assistant Attorney General Robert C. Ozer, are some relating to W. Dale Ness, one of five men convicted earlier this year with Mandel on federal charges of political corruption. Webster, who with Carcich is a target of the investigation, according to court the papers, was Mandel's 1974 campaign treasurer.
During the second trial of then-Gov. Mandel, codefendant Harry W. Podgers III testified that "Fathr Carcich and the Pallottines were really in the lending business . . . They advanced loans to builders and developers, had their own businesses, they owned motels and hotels, and they were really a business operation."
Rodgers gave that blunt assessment of the religious order by way of explaining a $42,000 laundered loan from the Pallottines to Mandel. Rodgers testified that Carcich agreed to lend the money to Mandel because he had been "a good governor, very good for state aid to education, which had been beneficial to Catholic schools."
It is believed that Mandel still owes the Pallottines part of that money.
The whereabouts of Father Carcich has been a secret since Archbishop Bonders banished him from the state in the spring of 1976. According to court papers, Prosecutor Ozer did not know Carcich's location as late as July.
Until publicity about their activities, the Pallottines' primary means patterned after promotions by the Reader's Digest, in which automobiles, stereos and pool tables were awarded to pre-selected winners. Archbishop Borders later condemned the Pallottine operation as "immoral."