LESSONS OF HALE HOUSE

Lorraine Hale and her husband, Jesse DeVore, have been indicted for
allegedly transforming the cherished institution that was Hale House into a
personal piggy bank at the expense of some of the city's most vulnerable
citizens: the babies of drug-addicted and jailed moms. New York must ensure
that no charity ever again can operate without oversight, accountability
and internal controls.

For the past eight years, after its beloved founder, Mother Clara Hale,
died and her daughter, Lorraine, took over, the Harlem charity had no
functioning board of directors, no auditing committee, no fiscal checks and
balances. Thus, there was no one to stop the self- dealing. It was only
when Daily News reporters Heidi Evans and Dave Saltonstall broke the story
last year that the scandal was unmasked.

The details are ugly. Hale is said to have raised millions for programs
that didn't exist, placed abandoned kids in homes with no regard for
adoption rules and squandered funds by investing in hubby's failed
Off-Broadway musical. She is charged with duping donors by siphoning cash
intended for the children and using it to buy a Jacuzzi and make
improvements to her Scarsdale home.

What happened at Hale House was not carelessness, but outright criminality,
says state Attorney General Eliot Spitzer, who slapped Hale and DeVore with
a 72-count indictment for allegedly misappropriating more than $1 million.
He also has sued to recover the booty.

Hale House now has a functioning board of directors that is moving
aggressively to restore the charity's credibility. To that end, the board
hired a private investigative firm, Kroll, to probe the thievery, and it is
adopting the reforms proposed by Kroll. These include the board taking a
proactive role in Hale House's fiscal affairs.

Are there more Hale Houses are out there? To make sure there are not, New
York must set standards for nonprofit organizations along the lines of
Kroll's sweeping recommendations. Nonprofits must: 1) ensure accountability
through an activist board; 2) enact and enforce conflict-of-interest
policies; 3) prohibit loans to officers, directors, senior managers and
members of their families; 4) establish internal controls for handling
contributions.

Does that all sound obvious? These are the sort of regulations the public
assumes are already in place. Unfortunately, that's not always the case.
Until such a code is established, and monitored, other charities can be
hijacked by duplicitous managers. The kind who see a sacred trust as a cash cow.