JDRF News

This morning, the Juvenile Diabetes Research Foundation (JDRF) got some less-than-flattering press. No, it wasn't from people on the Islet Foundation Public Message Forum, although JDRF-bashing does seem to be a popular pastime there. This time, the news was that JDRF's internal auditors had discovered hundreds of thousands of dollars missing and apparently, two employees were fired as a result of the incident.

To be sure, any organization has a risk of employee dishonesty, and we should be proud that the organization was able to uncover the scheme on its own and was able to take corrective action. But for me, the real news wasn't about the government investigation into that apparent fraud, rather it was that JDRF's CEO since January 2006, Arnold W. Donald, 53 announced earlier this month that he was taking early retirement, which is effective on Friday (tomorrow) February 29, 2008. He cited urgent "family matters" as the reason for his decision.

Obviously, leaders can and do have family matters which may mean they have to step down, but the bigger question is what the organization's succession plans are? What, if anything, will the change mean as far as the organization's strategy, which under Mr. Donald, has been to push into closing gaps by helping startups commercialize products that can advance treatments and bring products to market that might otherwise never have been commercialized because of industry's risk-averse nature.

Certainly something to think about!

Nonprofit Diabetes Group Is Subject of Investigation
By Anthony Ramirez, The New York Times
February 28, 2008

The Manhattan district attorney is investigating the Juvenile Diabetes Research Foundation International after an internal audit showed that hundreds of thousands of dollars was missing. The audit led to the dismissal of two foundation employees.

Barbara Thompson, the spokeswoman for District Attorney Robert M. Morgenthau, would confirm only that an investigation was under way and provided no details. But Gail Pressberg, the secretary of the foundation's board, said the investigation centered on the misappropriation of funds through fake receipts. She said the receipts were generated on computers and appeared legitimate.

Ms. Pressberg said there was no need for stricter fiscal controls at the foundation because the scheme had been detected by an internal investigation.

"It's a foolish person who tries this," Ms. Pressberg said. "We catch people." She noted, "We had enough evidence to terminate the employees. There's no nonsense in this organization."

Separately, Arnold W. Donald, 53, the foundation's president and chief executive since January 2006, announced earlier this month that he was taking early retirement, effective on Friday. He cited urgent "family matters." On Tuesday night, he directed questions to the foundation's public relations office, which said that Mr. Donald's early retirement was unrelated to the investigation.

The district attorney's investigation was begun at the request of the Manhattan-based foundation, a leading fund-raiser and advocate for diabetes research whose public face is Mary Tyler Moore, the actress and the foundation's international chairwoman. The inquiry follows the circulation of a foundation e-mail message that described the employees who were fired as violating the foundation's expense policy.

Staff members of the foundation describe the violations as involving hundreds of thousands of dollars over five years.

The foundation, at 120 Wall Street, has said that its mission is to find a cure for Type 1 diabetes, which often strikes in childhood and requires patients to have multiple injections of insulin daily or a continuous infusion of insulin through a pump.

Although insulin, a hormone that regulates the metabolism of glucose, is used as a long-term therapy for diabetes, it is not a cure.

The foundation has said that since its start in 1970, it has awarded nearly $1.2 billion to diabetes research, including more than $137 million last year. The foundation said it also funded 700 centers, grants and fellowships in 20 countries last year.

In an e-mail message on Dec. 12 addressed to "J.D.R.F. Chapter, Regional and National Staff," William Ahearn, the vice president for strategic communications and information technology, wrote that the foundation's internal audit department had discovered certain undefined "abuses" in the foundation's publications, editorial, and marketing communications group.

Mr. Ahearn confirmed the authenticity of the e-mail message on Wednesday.

"Full restitution is being sought," the e-mail noted, "and the matter is being reported to the appropriate authorities who may consider criminal prosecution."

Mr. Ahearn identified the employees as Jonathan Stenger, national director, and Jason Brown, national manager. They were dismissed late last year.

Mr. Stenger declined to comment through his lawyer, Andrea Weiss. "We have been fully cooperative with all inquiries from the appropriate parties," Ms. Weiss said on Wednesday.

Mr. Brown did not return repeated telephone calls to his home seeking comment on Tuesday night and Wednesday afternoon.

Ms. Pressberg, the board secretary, said Mr. Stenger and Mr. Brown had "learned how to do a pretty amazing job in reproducing receipts. They looked absolutely real."

"We have very strict controls," she said. "That's why we caught them. If someone can figure out how to reproduce a portfolio so it looks like it comes from a Hilton Hotel or a Sheraton, it's only going to be caught on an internal audit."

Foundation auditors, she said, "called the hotels and found out that X person didn't stay there that night and then they unraveled the whole thing."

Don Aron, a board member and Houston businessman, expressed concern about the effect of negative publicity.

"There are 18 million people that are affected with diabetes," Mr. Aron said, "and outside of the United States government, J.D.R.F. has been the largest funding source for diabetes research.

"It would be a shame," he said, "to think that if two people in our organization did something wrong that that would put a black eye on the organization."

URL for this article:
http://www.nytimes.com/2008/02/28/nyregion/28diabetes.html


Thanks to an e-mail from Allison, I did get a follow-up on my inquiry regarding Mr. Donald's succession. See the following for details:

To: International Board of Directors, International Board of Chancellors, All JDRF Staff, International Affiliates, Chapter Board Presidents
From: James C. Tyree, Chairman of the Board
Date: February 26, 2008

I thought it important to keep everyone up-to-date on some developments resulting from Arnold Donald's decision to retire as President and Chief Executive Officer of JDRF last week.

First, the Board of Directors has formed a committee to begin the search for a new President and CEO. Chaired by Chip Halverson, the committee includes current and former board members Maureen Barunas, Rik Bonness, Dayton Coles, Frank Ingrassia, Rik Kirkland, Leo Mullin, George Nethercutt, Gail Pressberg, and me. The committee will quickly be choosing a search firm, and expediting the process of identifying and interviewing candidates.

Second, with the Executive Committee's approval, JDRF will be managed by the Vice Presidents as a "self managed team" until a new President is brought on board. That group, which has been meeting weekly and working closely together for some time now, will drive the strategic, financial and day-to-day operating activities of the organization. As Chair of the Board, I'll participate in their meetings, but will not be in the role of acting CEO.

We will be certain to continue to communicate information about the management of JDRF, as well as news on the search for a new president and CEO as it progresses.

In the meantime, thank you all for your commitment in continuing to focus on the work at hand – accelerating science leading to a cure for type 1 diabetes and its complications.