When San Diego City Attorney Jan Goldsmith’s office offered a plea deal in May to a man prosecuted for writing protest graffiti in chalk outside a local bank, it included a common stipulation.

Along with admitting guilt, Jeff Olson would’ve had to take a day-long class and perform 32 hours of community service through the Corrective Behavior Institute, a nonprofit life skills organization that operates out of an inconspicuous La Mesa business park.

“I thought I’d be in there with 17-year-old taggers watching an outdated video that says it’s not cool to damage public property,” said Olson, 40. He rejected the deal and was later acquitted.

Organizations like Corrective Behavior are a common part of the legal system, supervising community service and offering classes that teach defendants the wrongs of their ways in misdemeanor cases involving shoplifting, graffiti, theft and more. Corrective Behavior says it hires instructors who lead participants in talks about triggers for their anger and their attitudes about shoplifting. They have group conversations about graffiti and do community cleanups.

But by turning to the Corrective Behavior Institute, local law enforcement officials have sent people who haven’t followed the rules to a nonprofit that hasn’t followed them either.

A Voice of San Diego review found shoddy recordkeeping, red flags in financial records and poor internal oversight at the organization. Even those who have led the nonprofit haven’t always known who was in charge.

In 2008, its leader, Margherita Martinez, testified that she was not running the organization, even though she signed forms telling the IRS she was. Martinez was under oath, answering questions because she and Corrective Behavior had been sued over an outstanding loan. Martinez said she didn’t know who was on the organization’s board or whether it even had one – even though records show she was on its board and was its only member.

California’s Secretary of State office, which registers corporations, has revoked the institute’s rights to operate as a business. It’s nine years late filing statements of information with the secretary of state and its annual reports with state Attorney General Kamala Harris’ office.

And yet it has received a steady stream of referrals from Goldsmith’s office and the San Diego County Probation Department, highlighting a statewide shortcoming with regulating court-ordered classroom programs.

State law has invited life-skills organizations like Corrective Behavior into the criminal justice system. But the state hasn’t subjected the companies to formal regulation or oversight, allowing them to operate without professional standards, experience requirements or common curriculum.

“The law seems to be silent as to oversight,” said Michael Roddy, executive officer of the San Diego Superior Court. “It’s a hole out there I wish the Legislature would address. It’s a real concern.”

San Diego Superior Court includes Corrective Behavior in a list of providers for people guilty of misdemeanors like theft, shoplifting and graffiti. Being listed there takes little effort. Complete a short one-page form swearing that you’re qualified and you’re good to go.

Claiming you’re qualified is easy enough, since no state or county qualification standards exist. No resume, training or experience are required.

The result: Anyone can start a business offering rehabilitation classes and be listed by the courts, regardless of whether they’re trained and qualified to teach.

To be listed as a provider in graffiti cases like Olson’s, Corrective Behavior provided only the following sparse description of its offering: “Community clean-up, group discussion. Guest speaker. Nine hour program.” 

The court’s list has influence. Regan Savalla, a chief deputy city attorney, said she has recommended Corrective Behavior because it appears there. But that’s no seal of approval. The court system disavows responsibility for the quality of the providers listed.

In response to our findings, Goldsmith told VOSD he was directing his prosecutors to stop recommending Corrective Behavior pending a review by his office. Sarah Gordon, a spokeswoman for the San Diego County Probation Department, also said her office would review the issues VOSD has raised.

As a 501(c)(3) nonprofit, Corrective Behavior gets benefits other businesses don’t. It is exempt from paying state and federal corporate income taxes. It’s also eligible to receive tax-deductible donations.

But because its budget is so small, with $85,000 in revenue in 2011, Corrective Behavior also falls into an oversight gap federally. The IRS pays little attention to small nonprofits like it, said Daniel Borochoff, president of CharityWatch, which rates and evaluates charities for donors.

Voice of San Diego asked Borochoff to review Corrective Behavior’s annual disclosures to the IRS, documents meant to increase transparency. He said they were sloppy, completed in a way that makes it impossible to determine how much money is being spent on administrative costs versus programs, a basic measure of a nonprofit’s effectiveness.

“It’s lacking financial accountability and oversight, two bedrock principles of well-run nonprofits,” Borochoff said. “It’s so small it’s probably not on anyone’s radar screen.”

Lauren Dunlap, who’s now running the organization, said responsibility for it had been passed down from her grandmother to her mother, and now to her. She said she was unaware of any of the issues VOSD raised.

“My tax lady does all that with me,” she said. “I need to get in contact with her as soon as possible. I was under the impression that everything was running smoothly and taken care of.”

Corrective Behavior has a significant debt that it hasn’t reported on IRS disclosures. It borrowed $85,000 in 2005, when it was run by Ann Ledee, Dunlap’s now-deceased grandmother. Ledee secured the loan with Corrective Behavior and its assets as collateral, records show.

Dunlap said the money isn’t owed by Corrective Behavior, but instead by her mother, Martinez. But a judge’s order lists the nonprofit as one of the parties responsible for repaying the money. Borochoff, the nonprofit watchdog, said the organization should have disclosed the debt.

Other expenses stand out. Though Corrective Behavior is classroom-based, it’s reported spending $75,000 on telephones in the last five years. It isn’t clear why. Dunlap sounded surprised when asked about the expenditure.

“On telephones?” she said, noting the organization’s phone bill is approximately $150 per month. “I don’t see $75,000 worth of telephone bills. That’s odd to me.

“I don’t know where this info is coming from, but I need to get to the bottom of it.”

The information comes from the organization’s own disclosures to the IRS, which are filed under penalty of perjury. Dunlap told me she would investigate and immediately call back. She did not.

Have you attended classes or done community service through Corrective Behavior Institute or another local provider? We want to hear from you. Share your experience with Rob Davis at robdaviswrites@gmail.com or call him at 619.259.0529.

Voice of San Diego is a nonprofit that depends on you, our readers. Please donate to keep the service strong. Click here to find out more about our supporters and how we operate independently.

Rob Davis

Rob Davis was formerly a senior reporter for Voice of San Diego.

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