INVESTIGATION: PPAC Bosses Make Millions from Secret Companies

Monday, March 31, 2014

Stephen Beale, GoLocalProv News Contributor

The president of the Providence Performing Arts Center, James “Lynn” Singleton, earned nearly $800,000 in 2012, with most—about $555,000—coming from outside companies, despite IRS records showing that he works 60 hours a week alone for PPAC.

IRS filings for PPAC identify three related organizations—Professional Facilities Management, Inc., PFM, LLC, and Professional Facilities Operations, LLC, all state-registered businesses headquartered at PPAC’s office on 220 Weybosset Street in downtown Providence. One of the three, Professional Facilities Management, for which Singleton is also president, pays the rest of his salary, according to a spokesperson. However, the IRS filings do not specify how many hours, if any, he worked for the other companies. Singleton also has repeatedly refused to disclose his ownership interest in the companies.

Filings for previous years show a similar pattern. In 2011, Singleton worked an average of 60 hours a week for PPAC, earning $208,431 for that time. He then had an additional income of at least $524,200 from one or more of three for-profit businesses affiliated with PPAC.

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In 2010, he was paid $191,123 by PPAC, again working 60 hours a week for PPAC. His outside income was at least $396,000, according to IRS Form 990, which nonprofit tax-exempt organizations like PPAC must file annually with the IRS. (Click here, here, and here to see the forms for each of the three years.)

Tax expert questions PPAC IRS filings

The hours PPAC reports on its IRS filings should only be for the nonprofit, according to the instructions on Form 990. Marcus Owens, an attorney with Caplin & Drysdale, a Washington, DC-based law firm, confirmed that the hours reported should not include any time spent working for other businesses, even if they are related to the nonprofit. Owens, who worked for the IRS for 25 years and ran its tax-exempt division for a decade, said that any hours worked for a related organization should be listed on a separate form.

That means that, based upon its IRS filings, PPAC is claiming Singleton is working 60 hours a week exclusively for PPAC, before any time devoted to the related organizations.

Owens said there could be any number of explanations for how Singleton could earn about $200,000 annually from PPAC working 60 hours a week plus another $500,000 from other work. “You could see it as an error in filling out the form,” Owen said. “Or you could view it as an effort to disguise the compensation they get.”

“The for-profit has been used as a vehicle to funnel excessive compensation to the individual," Owens added, speaking of general practices he has seen during his career in nonprofit tax law. “It’s OK assuming that the compensation is reasonable for the work he does. You can’t really tell that from what you have in front of you.”

PPAC dodges questions

GoLocalProv submitted a series of questions to PPAC officials. Most went unaddressed. (Click here for the full list). Instead a PPAC spokesperson sent the following response:

“The relationship between the not-for-profit Providence Performing Arts Center (PPAC) and its wholly owned for-profit subsidiary Professional Facilities Management (PFM), showcases the benefit of a board thinking in an entrepreneurial and innovative way to catapult the reputation of a local theater into one that is respected on a national stage,” said Arianne Corrente Lynch, spokesperson for PPAC/PFM.

She added: “Mr. Singleton serves as President to both PPAC and PFM. In 2012, he earned a salary of $207,000 from the not-for-profit PPAC as president. The remainder of his compensation is derived from the for-profit corporation PFM. PFM manages, programs, consults, and acts as owner-representatives for nine performing arts facilities across eight states. Mr. Singleton’s overall compensation has been determined by Abruzzo Associates, a firm that conducts compensation studies for arts organizations throughout the country, to be ‘fair and reasonable’ and commensurate with industry standards.”

Lynch declined to provide any documentation of Abruzzo Associates’ analysis and officials at the company did not respond to a request for comment in time for publication.

PPAC president’s salary above peers

By Rhode Island standards, Singleton’s salary outpaces any comparable peers—even when comparing only on the basis of his PPAC salary. “$200,000 is a pretty handsome salary in a town like Providence for a theater company,” Owens said.

In Rhode Island, the next largest performing arts nonprofit not affiliated with PPAC is the Trinity Repertory Theater, also in downtown Providence. Its highest paid employee earned $181,883 with no income from related organizations in 2011, the latest available year. Likewise, the top position at the Sandra Feinstein-Gamm Theatre in Pawtucket fetches $125,830 a year as of 2012.

When his outside income is included, Singleton’s salary also exceeds other comparable nonprofits in the Northeast. The president and CEO of the Wang Theatre in Boston earned $482,912, all of which came from a related organization, according to that nonprofit’s 990 Form filed for 2012. In New York City, the Shubert Theatre’s top-paid employee earned $334,743 for the same year.

The typical top administrator for a performing arts centers or performing companies with budgets ranging from $10 million to just under $25 million—the category in which PPAC falls—earned $273,107 in 2011, to a salary survey the national Association of Performing Arts Presenters provided upon request to GoLocalProv. The top administrator for the largest category of organizations surveyed—those with budgets exceeding $25 million—typically earned $357,000 annual. The maximum reported salary was $580,000, according to the survey.

Ultimately, in order to gauge whether Singleton’s compensation is reasonable, Owens said one would need to review his qualifications, the nature and duty of the job, and any required special skills needed for the position. “For all we know, he is working a like a dog and earning every penny of it,” Owens said. “But then I spent 25 years [in] the IRS and I’m very cynical.”

PPAC revenues declined by $6 million

Like Singleton, other top administrators at PPAC draw more than half their salary from a related organization.

Norbert Mongeon, Jr., the director of finance for PPAC, earned a total of $370,607 in 2012. But more than half of that—$246,338—came from an unidentified “related organization.” Alan J. Chile, PPAC’s general manager, had a total compensation of $249,038, with $146,312, coming from an outside source. Like Singleton, both Mongeon and Chile reportedly work 60 hours a week for PPAC, according to its IRS filings.

PPAC had $13.8 million in revenues in 2012. That was about $6 million less than the previous year.

Despite the decline in revenue, Singleton’s total compensation in 2012 actually increased by $13,679 over the $781,920 he was paid in salary and benefits in 2011. Nearly half of his 2012 compensation—a reported $382,000—was a “bonus” or “incentive” pay from a related organization. His base pay for PPAC that year was $207,138, slightly more than his base pay from the related organization, which was $141,000. (Singleton also received roughly a combined $60,000 in retirement pay, deferred pay, and non-taxable benefits that year.)

PPAC also ran an apparent operating deficit of $183,336 in 2012. For the previous year, the comparable loss was $1.1 million, according to IRS filings.

Probing PPAC’s business relationships

PPAC is one of the most prominent performing arts organizations in Rhode Island, with a board of directors that includes many of the state’s leaders in government, law, labor, and business. Members include: U.S. Senator Jack Reed, Congressman James Langevin, Governor Lincoln Chafee, Providence Mayor Angel Taveras, Mark T. Ryan, a principal at Moses Afonso Ryan, former state Supreme Court Justice Bob Flanders, AFL-CIO President George Nee.

Embattled former House Speaker Gordon Fox—who resigned his leadership position earlier this month after federal and state law enforcement officers raided his office and home—is also still listed as a board member. There has been no public announcement that he has resigned his position with PPAC.

IRS filings show that PPAC owns Professional Facilities Management. That business, in turn, owns two others, PFM, LLC, and Professional Facilities Operations, LLC. All three are headquartered on Weybosset Street. And Singleton, along with PPAC’s finance director, Norbert Mongeon, is listed as a manager and director for the two LLCs, according to filings with the Rhode Island Secretary of State. The most recently available annual report does not disclose Singleton’s position as president of the third business, Professional Facilities Management.

Those filings indicate in only the barest terms possible what the other three businesses do. Professional Facilities Management manages entertainment venues and provides booking services. According to the company’s Web site, it manages nine other venues all over the country, ranging from Prescott, Arizona to Fort Meyers, Florida. That leaves two other businesses: Professional Facilities Operations, which is described as only a “management company” and PFM, which manages the Veterans Auditorium, according to annual reports filed with the state Secretary of State.

The precise nature of the relationship between PPAC and its three affiliated businesses remains unclear. A local attorney listed as the registered agent for all three businesses, Cameron Colby, said he could not comment on its relationship with PPAC, saying the information was confidential. He also declined a request for a copy of any contracts between PPAC and the other companies.

Nonprofits can own for-profits, a practice that became more common after changes in nonprofit tax law in the 1960s, according to Owens. There also is no rule that the owned businesses be smaller than the nonprofit—as appears to the case with PPAC, a single-venue nonprofit, which owns Professional Facilities Management, which has about nine venues.

It is not unusual for a nonprofit performing arts agency to partner with a for-profit business, according to Jenny Thomas, the director of marketing and communications for the Association of Performing Arts Presenters.

“Like any industry, the arts are looking for creative ways to sustain themselves,” Thomas said. “There are members who run multiple venues. There are many different solutions and business models that exist in the performing arts industry.” Thomas declined to comment on the specifics of PPAC, saying she needed more information.

States seek to limit nonprofit salaries

Across the country, compensation of nonprofit CEOs has become controversial in recent years, according to a report in the Boston-based Nonprofit Quarterly. Some states have considered capping the pay of top executives at $1 million for those nonprofits that receive government funding, according to the report. (Forbes magazine has suggested even $1 million is too much, citing legislative efforts in Florida and Massachusetts to limit compensation at $129,972 and $500,000, respectively.)

PPAC has received at least one federal grant, a reported $1 million for facilities improvements in 2004, according to a federal grants database.

But PPAC may have received additional federal arts funds via state agencies. Last May, Rhode Island’s Congressional delegation announced a $675,300 partnership grant was awarded to the Rhode Island State Council on the Arts which in turn would redistribute those funds in support of “Rhode Island organizations that contribute to the cultural and economic development of the state through the arts.” A press release stressing the benefits of the grant included mention of PPAC.

Stephen Beale can be reached at [email protected] Follow him on Twitter @bealenews

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