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Home / Capitol Insiders / Quayle claims Moak made millions off charity; Moak says not so

Quayle claims Moak made millions off charity; Moak says not so

Businessman and philanthropist Steve Moak has been on the defense this week after political rival Ben Quayle claimed in a flyer that Moak used his nonprofit charity to make millions for his former company.

The two are running in the crowded Republican primary in Arizona’s 3rd Congressional District, and rhetoric between the well-funded campaigns has been fierce.

In addition to claims that Moak used his Not My Kid charity to enrich his former company, which he sold for $25 million in 2007, Quayle alleges Moak broke the law by failing to report to the IRS that he had an interest in both organizations.

“From the attorneys we talked to, this relationship needed to be disclosed. So, yes, this is illegal,” said Megan Rose, a Quayle campaign spokeswoman. “And if he profited to the tune of $25 million from this relationship, then this is unethical too.”

Moak’s campaign said the allegation is unwarranted and based on a lack of understanding about IRS reporting. Moak’s for-profit company was successful because of sound business practices and that Quayle is simply trying to smear Moak because he sees him as the latest frontrunner, said Jerry Cobb, a Moak campaign spokesman.

“They finally woke up to the fact that we’re in first place,” Cobb said.

In 2000, Moak began Not My Kid to promote awareness of drug use in adolescents and to help parents prevent their kids from using drugs.

In 2004, Moak purchased First Check Diagnostics – a maker of drug-test kits and other medical test kits – while the company was going through Chapter 11 bankruptcy. In 2007, Moak sold the company for $25 million.

During the years that Moak owned First Check, his charity developed a separate program called the “7th Grade Program,” which included a presentation and a one-time free drug-test kit for any parents who wanted one.

The drug kits given out as part of the 7th Grade Program presentation were produced and donated by First Check. The Quayle campaign said this amounts to using the non-profit to push the drug kits into the hands of parents and creating a market demand for First Check’s product.

Moak’s campaign said this story doesn’t add up. Moak bought First Check because he saw a scarcity of affordable, easy-to-find home drug-test kits, which naturally fit into the Not My Kid curriculum, Cobb said, and because Moak felt he could turn the company around by instituting better business practices.

Cobb admitted that the First Check kits are the only drug-test kits Not My Kid has ever promoted by name on their website, but he said the Not My Kid website has never sold the kit, nor does it have the ability to do so, refuting claims made by the Quayle campaign.

It was practical to have First Check donate drug-test kits to Not My Kid, but Cobb said that in no way were the donations responsible for the success of First Check.

Cobb said the turnaround of First Check, which also produces a home-colon test and a home-cholesterol test, is largely the result of getting the company’s tests into stores.

“Steve is a businessman. He’s an entrepreneur,” Cobb said.

Cobb said the donation of First Check’s drug tests to Not My Kid is no different from any other company that donates some of its products to a nonprofit organization.

“No one would say Apple built its business on the back of a charity that puts computers in schools,” Cobb said. “Does that help the market for Apple? Well, probably it does.”

But Cobb said there was nothing illegal or unethical about the donations.

As for the claims about false IRS reporting, the Quayle campaign alleged that Not My Kid failed to disclose Moak’s involvement with First Check on its 2005 and 2006 IRS reports.

In nonprofit tax reports that were filed those years by Not My Kid, the organization answered “no” to the question of whether the organization is related to any other organization through common membership.

But in 2007, Not My Kid reported “yes” to this question, which the Quayle campaign said indicates a skirting of the issue all along.

Cobb said this was an error made by the organization’s accountant. Not My Kid’s accountant, Cherie Wright, wrote a letter Aug. 9, stating that the answer was an error and needed to be fixed, but only after this was brought to their attention.

According to IRS documents, the threshold for answering this question “yes” is required only when 50 percent of an organization’s governing body, officers, directors, trustees or members are part of any other organization.

Wright explained in her letter that because only two members, Moak and his wife Debbie, or 14 percent of Not My Kid’s board, were part of First Check, the answer should always have been “no,” and that the 2007 answer was incorrect.

Cobb said the Moak campaign stands by Wright’s assessment.

“Our accountants and Not My Kid’s independent board have reviewed it,” Cobb said.

Cobb also said that the fact that no scrutiny has come from the IRS on these points further indicates no wrongdoing.

Watch Managing Editor Matt Bunk discuss the Moak-Quayle rivalry on ABC15′s Daybreak below, or click here to watch the video on ABC15′s website.

11 comments

  1. Steve Moak made $25 million off of a non-profit company. This is a serious ethical issue and this doesn’t make me feel that he is quaylified to be a leader. Steve Moak is not what I consider a man of moral integrity to scare parents across the country and promote his drug testing kit. This all comes down to moral issues and how he made his money. He is exactly the type of person we don’t need to represent us.

  2. This is amazing, Steve Moak told me he made all of his money before he started NotMykid, obviously he took advantage of a lot of people. This is an ethical question of integrity. Do you think Steve Moak is an ethical man by profiting $25 million from a non-profit organization?

  3. Clearly Moak made the money off of the purchase and sale of a for-profit company. You don’t make money off of a non-profit.

    I’m tired of hearing all the smut the media and the candidates – also, the candidates friends – can stir up about each other. The election is in less than a week. Can any of the nine candidates go on record about things that really matter aka NOT dirtyscottsdale.com, law suits against the government and accounting mistakes?

  4. Tired of Govt telling us what to do

    PAULINA MORRIS BRAGS ABOUT HER FIXING “BROKEN GOVERNMENT”

    Unfortunately, her bragging includes taxing your pocketbook and incurring increased debt for the future. Then, she walked away from the job before it was fixed.

    FACT: Republican Arizona Congressional District 3 candidate PAULINA MORRIS was a member of the Maricopa County Special Health Care District.

    FACT: During her tenure, total liabilities rose and operating losses continued in the millions.

    FACT: A property tax was initiated to help PAULINA MORRIS fix “broken government”

    FACT: The District began operations on January 1, 2005 and they imposed a secondary
    property tax. Paulina Morris was elected to the inaugural board in 11/2004.
    ———————————————
    The Jewish News of Greater Phoenix (July 2, 2010 Friday, Pg. 1 Vol. 62 No. 4) reports:
    “In 2005, Morris became the chair of the district’s board. By the end of her tenure in 2008, “I had led a financial turnaround of the system by running it as a business,” she said. The health-care system was then $100 million in the black.”
    ———————————————
    LET’S EXAMINE THE RECORD:

    According to a March 2009 audit by State of Arizona Auditor General, the Health District under Morris’ tenure had:

    Total Liabilities
    2005 $44,536,760
    2008 $121,857,128
    ———————–
    Operating Loss
    2006 (31,801,467)
    2007 (50,151,251)
    2008 (15,838,376)
    ———————–
    Property Tax Revenues
    2005 Zero
    2006 40,000,000
    2007 43,000,000
    2008 46,310,880

    Source: State of Arizona Auditor General, March • 2009, Maricopa County Special Health Care District,
    Report No. 09-03
    ———————————————
    Therefore, Morris is saying she fixed government by:
     Raising your property taxes,
     Increasing debt liabilities,
     In addition, as chair of the board authorized and approved budgets with millions of dollars still in operating losses that has to be paid for by the taxpayers,
     Believes Big Government is the answer to our health care needs.
    ———————————————
    Sounds like tax and spend Democrat financial policy. Government taxes you and we still have to pay increased debt. Just what we need in Washington, D.C.

    Paulina Morris brags, “I’m the only candidate in this race who has fixed broken government”.

    Not only did she not fix it, she walked away from the job before it was done.

    Too bad, Morris, who has spent most of her career as a government bureaucrat, talks big about accomplishing so little.

    Maybe, Big Government taxing us to pay for government run health care is something to brag about for Morris.

  5. Tired of Govt telling us what to do

    You can make money from a non profit. Otherwise one would be out of business. It’s what you do with the money that is key to the organization and their non profit status..

  6. This concerns me. Moak is always talking about knowing how to create jobs. But Where? Moak owns a call center, you know a company that calls at dinner trying to sell you something you don’t want or need in an english dialect you can’t understand.
    Steve Moak, a Questionable Candidate
    Arizona Republican Congressional candidate Steve Moak, Chairman of the telemarketing company Synergy Solutions.
    Steve Moak, a Republican Congressional candidate in the State of Arizona, is running his political campaign from the backs of the employees of Synergy Solutions, a company for which he is the active Chairman. Synergy Solutions, a company that caters to outsourcing call center operations in the United States, has been using their employees to make phone calls on Moak’s behalf, in support of his Congressional run in Arizona.
    This issue was brought to my {Matt Rock} attention by an employee of Synergy Solutions, who works in one of their call centers. Worried they might be fired as a result of this article, the employee has asked that I conceal their identity. This person explained that Synergy Solutions’ employees have been making campaign calls for Moak for an undisclosed period of time. Of Synergy Solutions’ eight call centers, only two are in the State of Arizona. The other six facilities, including the one where this employee works, are in different States. These employees aren’t volunteering to make the calls, but are rather being ordered to do so by the managerial staff of the call centers. Some employees have opted to make a stand and not call on Moak’s behalf, and as far as it seems, this has yet to challenge anyone’s job security at the centers.
    Prior to being assigned to calling for Moak, employees are instructed to sign a “Political Disclosure Agreement,” which is little more than a non-disclosure agreement. This document, which I’ve been provided a copy of, reads as follows:
    I understand that I can never give any of the following information to any customer on a political project:
    1. Who our client is
    2. Who I work for (or give the Synergy Name)
    3. What state or region I am calling from
    I understand that if I do give any of the information listed above under any circumstance, I put the company at risk.
    Moak’s campaign website claims that Synergy Solutions is a company “which provides customer service focused on healthcare.” This is not true. Synergy Solutions has had a number of clients over the years, including Bank of America, Lifelock (an identity theft protection company), Verizon, and many others. They are best described as a telemarketing organization, and while a small minority of their clients are related to the health care industry, they make no effort to focus on any particular field. The website continues to claim that “Synergy Solutions currently has hundreds of employees in Arizona,” while ignoring the fact that most of their employees work in call centers hundreds of miles from the State, and that the primary role of the company is to outsource customer service jobs from locales where their clients are headquartered.
    Approximately one week prior to my writing this article, I attempted to contact Moak’s campaign via the “contact us” form on their website, asking if they would like to comment. They did not respond as of the time I published this article. Should they respond to that message, I will be sure to update this article. Written for Newsvine by: Matt Rock

  7. PUHLEASE! The bottom line is that it is NOT a BAD thing to bring people from beyond the nonprofit sector into charity work, even if they ultimately profit by it, IF they are using their expertise/resources solving a problem that would otherwise not get solved! If people would just get past their egos and self-serving interests, they would see that the community value (IRR – tangible and intangible!!) far outweighs the fact that someone MAY have profited. The fact is, his efforts probably effectively deterred many kids from drugs. THAT is all that TRULY matters!

  8. Hilarious: Quayle condemns another’s ethics/judgment………Ha Ha.

  9. Moak is everything that is wrong in Washington. Moak screams unethical. Anyone who can set up a Not For Profit to actually ENHANCE HIS OWN life is a sick minded individual and NOT who we want for Congress. If you are wondering what I am talking about, check out these links- http://blogs.phoenixnewtimes.com/valleyfever/2010/08/did_congressional_candidate_st.php http://azgadsden.wordpress.com/2010/08/16/got-moak-careful-its-sour-moak/

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