Former Director of U.S. Pain Foundation Questions Misuse of Funds

By Pat Anson, PNN Editor

A former board member of the U.S. Pain Foundation is raising questions about how former CEO Paul Gileno was able to misappropriate over $2 million in funds from the Connecticut-based non-profit. 

Gileno pleaded guilty to fraud and tax evasion charges in June and is awaiting sentencing.  Federal prosecutors say Gileno used donated funds in the charity’s bank account to write checks to himself and other people for his own personal benefit. The money was used to pay Gileno’s mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart recently wrote in her blog.

Stewart was a volunteer “ambassador” at U.S. Pain before she was appointed to the board in January, 2018 – a tumultuous time in the charity’s history, as the extent of the misuse of funds was just becoming known. Stewart resigned from the board 8 months later and has remained relatively silent about her board experience, until now.

Stewart wrote in her blog that she was initially excited to join the board, but soon realized something was amiss when she called another board member.

“I called to ask her a few questions, such as: ‘What was it like, being on the Board? What do we do as Board Members etc?’ She laughed & told me that ‘there was no real Board of Directors’. She added that they’d never even had a board meeting!” said Stewart, who lives with Complex Regional Pain Syndrome and other chronic pain conditions.

SUZANNE STEWART

SUZANNE STEWART

“I was a bit disappointed at hearing this news. But it was soon confirmed. The Board of Directors of the US Pain Foundation, were actually just photographs on the USPF website, prior to January, 2018. There was no true Board of Directors. There had been no board meetings or elections.”

Gileno founded the Connecticut Pain Foundation in 2006 after he was disabled by a back injury. In 2011, he launched U.S. Pain and registered as a charity in the state. Connecticut state law requires non-profits to have annual board meetings and to elect their directors and officers.

“So I’m guessing there was there no secretary or treasurer? I’m guessing this means that nobody had to get permission to write checks?” Stewart asks. “Didn’t they have to answer to anyone about how or where to spend donation monies? How does the President, Vice President & Executive Director & other upper management, not know what & where money is coming in and/or going out?”

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

Only Gileno has been charged with a crime.

“It seems to me that when upper management realized that things had somehow gotten out of hand and that the USPF might be slipping away, they decided to get lawyers and accountants involved in an attempt to ‘fix’ a situation that they’d created. It seemed to have finally become something larger that they could no longer handle alone,” Stewart wrote.

“Over the following months, I found out what a mess things were and I immediately wanted to resign. I was advised by one of the attorneys, that ‘it wouldn’t look good’ for USPF, if anyone on the Board resigned during that time.”

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed until December that “financial irregularities” were behind his sudden departure.

Gileno did not comment on Stewart’s post, but praised her work as a patient advocate.

“I can say that I have always admired Suzanne and she is an amazing advocate and I respect her dearly. She has an amazing and supportive husband and family,” Gileno said in an email.  

‘The Very Last Straw’

Stewart eventually resigned because she was unhappy with decisions being made by Hemmenway and the rest of the board. A redacted version of Stewart’s resignation letter was posted on her blog, in which she complained about being “left in the dark” and not knowing “where money is going or where it comes from.”

“The very last straw for me was when the Interim CEO & the rest of the Board, contemplated not telling the USPF ‘In-person’ support group leaders that they were no longer covered by insurance. I was the only Board member who said that I’d have no part of that,” wrote Stewart, who did not respond to a request for comment from PNN for this story.

Hemmenway also did not respond to a request for comment. In a statement last December, she said that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

Gileno maintains that he kept the board informed.

“They are trying to cover their asses for being (an) inadequate board I guess,” Gileno told PNN last year. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing.”

USPain logo.png

Whether the board knew about the misuse of funds or not, nonprofit experts say board members have a fiduciary responsibility to provide oversight and know how money is being spent. 

“U.S. Pain board members claim they did not know about their former CEO’s misuse of funds. This, however, does not change the fact that they should have known, and are, in fact, required by law to have controls in place to ensure those funds are used for the benefit of its stakeholders,” says Stefanie Lee Berardi, a patient advocate and grant writer who worked in nonprofit management.

“Serving on a board of directors is a great opportunity to contribute your time and talent to non-profit organizations who are doing great work. However, you should know that when you accept that position, you have a legal responsibility to use good judgement when making decisions on behalf of the organization, to put the organization’s interests before your own, and to ensure the organization is legally compliant.”

Gileno remains under investigation by the Connecticut Attorney General’s office, which may seek a court order to prevent him from ever serving again as a nonprofit officer or director.

Under state law, a Superior Court Judge could remove non-profit directors “engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion,” but no such action against U.S. Pain appears likely.

“As much as we would like to have seen their entire board ousted, the truth of the matter is that the only way that happens is if the state shuts them down. So far, with the completion of their audit, they have likely done enough to satisfy the state,” said Berardi, who thinks U.S. Pain should find new directors and officers to manage the organization. 

“If we are looking at best practices for board management, they absolutely should have a comprehensive plan for recruitment, induction, development, and succession. These board functions should be enumerated in the bylaws, updated at regular intervals, and formally adopted,” she said. “Recruiting ‘new blood’ should just be regular order.” 

(Update: On October 1, 2019 U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier.)

At one time, U.S. Pain claimed to be the nation’s largest pain patient advocacy group, with over 90,000 members and nearly a quarter of a million social media followers. It was a dubious claim, as the non-profit later admitted having only 15,000 people on an email subscriber list.  

According to the audit and U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery.

U.S. Pain Foundation Founder Pleads Guilty to Fraud and Tax Evasion

By Pat Anson, PNN Editor

Paul Gileno, the former CEO and founder of the U.S. Pain Foundation, has pleaded guilty to fraud and tax evasion charges stemming from his misuse of funds from the Connecticut-based non-profit.

Gileno, 46, waived his right to be indicted and pleaded guilty Monday before U.S. District Judge Victor Bolden in Bridgeport, Connecticut. He faces up to 25 years in prison, but as part of the plea agreement prosecutors agreed to ask for a lesser sentence because of Gileno’s “prompt recognition and affirmative acceptance of personal responsibility.” A sentencing date has not been set.

According to court documents, Gileno embezzled nearly $1.6 million from the foundation from 2015 to 2017 and failed to report the income on his personal tax returns. For that, he owes an unpaid federal tax of over $532,000. Gileno must also pay a fine and make full restitution to the foundation and Internal Revenue Service, as well as tax penalties and interest.

Prosecutors say Gileno used the foundation’s bank account to write checks to himself and issued payments to other people for his own benefit. The money was used to pay for personal expenses, such as Gileno’s mortgage, car payments and a $3,600 visit to Universal Studios in Orlando, Florida. The misuse of funds went undetected for three years.

“Gileno failed to maintain accurate books and records of the United States Pain Foundation and in a number of instances, made false and fraudulent representations to the Board regarding the expenditures,” prosecutors said.

PAUL GILENO

PAUL GILENO

“I hope your readers realize I did make mistakes but that should not take away from all the good work I did and the organization I created,” Gileno said in an email to PNN. “The board has been the same for the past 9 years and I hope they continue to help people with pain and use the programs we created together."

As he awaits sentencing, Gileno said he was “trying to focus my life on my two boys who are 5 and 4 and need their dad."

Acting CEO Nicole Hemmenway did not respond to a request for comment on Gileno’s guilty plea, but the foundation released a statement.

“While the last year has been difficult, the organization has never lost sight of its guiding mission to educate, empower, support, and advocate for the 50 million Americans living with chronic pain,” the foundation said. “We are thankful that resolution of these issues is coming to an end, and are committed to continuing to serve people with pain, stronger than ever.”

As PNN has reported, Gileno was forced to resign in May, 2018 after “financial irregularities” were finally discovered by the board. A few months later, Gileno confessed in an email to misusing charitable funds.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this. I did take money and I will pay the ultimate price,” Gileno wrote.

According to an audit released last month and U.S. Pain’s 2018 tax return, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for personal expenses, and payments to Gileno’s family members.

In addition to the $32,537 that Gileno was paid for roughly five months of work in 2018, he collected over $166,000 in excess benefits. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

Gileno’s wife, sister and step-daughter were paid nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave.

USPain logo.png

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid, according to the audit.  

Gileno disputes the auditor’s finding and says most of the money was paid back.

“U.S. Pain has failed to tell you that the investment that was made with my brothers have been mostly paid back and they were paid 4 years of interest at 6 percent a year which was paid monthly and was deposited by people from U.S. Pain. It was never a surprise U.S. Pain cashed all the checks,” Gileno wrote. 

The foundation at one time claimed to be the nation’s largest non-profit patient advocacy group. While it’s unclear how many members U.S. Pain actually has, it remains well-funded. Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

After Gileno’s departure, the board scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering.

U.S. Pain says it has implemented new policies, oversight measures and a system of checks and balances to ensure that only appropriate expenses are paid by the foundation.

Audit Details Misuse of Funds at U.S. Pain Foundation

By Pat Anson, PNN Editor

It’s been over a year since serious “financial irregularities” were uncovered at the U.S. Pain Foundation and former CEO Paul Gileno was forced to resign under pressure. But the Connecticut based non-profit is still dealing with legal and financial fallout from years of nepotism, self-dealing and lax oversight by its management and board of directors under Gileno’s leadership.

A newly released audit of U.S. Pain and its 2018 tax return indicate that Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The board did not discover the financial irregularities until April 2018, when it hired an auditor and attorney to investigate.

‘The findings were clear that the former president had engaged in unauthorized transactions involving the misuse of assets of the organization. The Board demanded and received the former CEO’s immediate resignation on May 29, 2018, and shortly thereafter reported the matter to federal authorities,” the audit states. “The criminal investigation is still ongoing into the former president’s activities.”

In addition to the federal investigation, PNN has learned that the Connecticut Attorney General’s office is planning to seek a court order to prohibit Gileno from ever handling charitable funds again.

U.S. Pain is providing few details on how Gileno was able to misappropriate over $2 million from the charity over a three year period. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for Gileno’s personal expenses, and payments to Gileno’s family members for unspecified work.

In addition to the $32,537 that Gileno received in wages for roughly five months of work in 2018, he collected over $166,000 in excess benefits last year. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

PAUL GILENO

PAUL GILENO

Gileno’s wife, sister and step-daughter were also on the charity’s payroll, collecting nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave, according to the tax return.

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid.  

Poor Business Decisions

In addition to the questionable payments to Gileno and his family, the audit and tax return show that U.S. Pain entered into a series of poor business decisions.

In 2016, U.S. Pain launched an “unrelated bakery business” that Gileno, a former caterer, established to “further the general mission” of the charity. Nothing in U.S. Pain’s mission statement says anything about a bakery.

The bakery was unprofitable from the start, reporting a net loss of nearly $70,000 in 2017. The board voted to liquidate the business last year at a cost of over $72,000 and recently agreed to pay another $23,900 to settle lease obligations for the bakery. In all, over $165,000 in charitable funds were wasted on the failed enterprise.

After Gileno’s departure, the board agreed to forfeit a non-refundable deposit of $50,000 that Gileno authorized in a failed attempt to purchase PainPathways magazine.

The board also scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering. U.S. Pain said it would no longer accept funding from Insys, but rather than return leftover funds the board has kept $200,000 from the company in an escrow account.

Dealing with all of these legal and financial issues has been costly. According to its tax return, U.S. Pain paid nearly $514,000 for legal services, accounting and penalties in 2018 — nearly a quarter of its revenue for the year.

Gileno: “I Never Misled Them”

How could the self-dealing and financial irregularities go undetected for so long? Interim CEO and board chair Nicole Hemmenway said in a statement last December that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

But Gileno, who has admitted taking money from U.S. Pain for his own personal use, maintains that he kept the board informed. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing,” Gileno told PNN last year. 

Gileno did not respond to a request for comment for this story. Neither did Hemmenway. A spokesperson for U.S. Pain said in an email the tax return and audit “constitutes our public statements on these matters.”

The charity’s 2018 tax return was filed on time, but its 2016 and 2017 returns were delinquent and filed late in 2018. They indicate there was no real oversight of Gileno by the board until last year.

“The former President/CEO controlled the board process. The records maintained under his leadership list the officers and directors… but contain no evidence that election of officers and directors occurred,” the tax returns said.

43021737_2173383489398319_6334634096500670464_n.jpg

The audit indicates that U.S Pain “rents its main office from the father in law of an employee” who is not identified. Public records for the city of Middletown, CT indicate the building is owned by Ottavio Monarca, who is the father-in-law of Lori Monarca, U.S. Pain’s Executive Office Manager. Rent of $25,000 was paid for the office in 2018 and the lease continues until 2020.

Hemmenway was paid a salary of $71,750 in 2018. The other two board members, Wendy Foster and Ellen Lenox Smith, a former PNN columnist, did not receive any compensation. Smith’s daughter-in-law, Shaina Smith, was paid a salary of $76,700 in 2018 as Director of State Advocacy for U.S. Pain.

Despite all of these expenses and business losses, U.S. Pain appears to be in fairly good financial shape compared to other charities. It received over $1.8 million in donations and grants in 2018, and ended the year with over $454,000 in cash — an enviable position for most non-profits, which often struggle to raise money.

Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

Sen. Ron Wyden (D-OR), the ranking member of the U.S. Senate Finance Committee, sent a letter last December to Hemmenway asking a series of detailed questions about the charity’s relationship with Insys  and other drug makers. According to the senator’s office, Wyden has still not received a full response.  

“A substantial amount of information that Senator Wyden requested from the U.S. Pain Foundation remains outstanding. Staff continues to communicate with the foundation in order to fully understand the financial relationship and contacts it has had with pharmaceutical manufacturers, including Insys, and its compliance with applicable federal laws,” a Wyden spokesman said in a statement to PNN.

How to Check Out a Charity Before You Donate

By Stefanie Lee Berardi, Guest Columnist

Many of us have been following PNN’s reporting on the misuse of donated funds by the former CEO of the U.S. Pain Foundation. Paul Gileno allegedly misappropriated about $2 million for his own personal use from the non-profit from 2015 to 2017.

The acting CEO and chair of U.S. Pain’s board of directors has admitted that a lack of financial oversight enabled Gileno to commit his misdeeds. Nicole Hemmenway says the board has instituted “a robust system of checks and balances” to make sure it doesn’t happen again.

As the story continues to unfold, U.S. Pain has attempted to refocus the public’s view of this fraudulent activity by claiming that 2018 was “its most successful year of programs and services,” while also indicating that additional financial irregularities may be reported on its 2018 tax return.

Arguably, their claim of success does not comport with the facts and does not enumerate the numerous failings of the board and senior staff that enabled the fraud to continue for years. Until there is full disclosure of what happened and people are held accountable, the public cannot be sure that U.S. Pain’s resources are being utilized effectively going forward.

US-Pain-300.jpg

Choosing to support a non-profit organization is an investment. And those of us who give our limited time and money to a charity must protect that investment by learning all that we can about what the organization does, what senior staff they employ, where they get their money and how they spend it.

It is not always easy to find reliable information about a non-profit, but if you know where to look, a short online search can give you a wealth of information. Here are some tips that donors and volunteers may want to explore.

Search Their Website

Consider an organization’s website as the front door to its operations and core mission. A disease-related organization’s mission, for example, might be to provide support for those affected, education about the disease, and research to find a cure.

An organization must be accountable and transparent to its investors. Their website should provide an annual report of its accomplishments from the previous year and goals for the next. You will need to review several annual reports to evaluate if the organization is making progress on the previous years’ goals.

Look at Their Tax Returns

Examine the organization’s tax returns to learn about how they operate, where they get their funding, and what proportion of their money is spent on programs that actually help people versus overhead costs like administration, salaries and fundraising.

There are a few exceptions, but most non-profit organizations’ tax returns are public information, meaning anyone can inspect them. When you compare two or three years of the organization’s tax returns, you can get a sense of the organization’s financial stability over time.

I find ProPublica to be the easiest place to find these documents. You can also search an IRS database to see if an organization’s tax-exempt status is in good standing. If a non-profit misses a tax return filing deadline, as was the case with U.S. Pain, that could be a sign of trouble.

Identify Their Funding Sources

In order for a non-profit to remain financially healthy and compliant with IRS regulations, it must seek funding from different types of revenue streams, such as grants and corporate or individual donations. For example, an organization may accept donations from pharmaceutical companies or charge membership dues or fees to attend their events.

Investors need to know where the organization gets its money. If the organization is growing and thriving, you will see a steady increase in the money they bring in (revenue); the money they spend (expenses) will remain proportional to their revenue; and their bottom line (net assets) will remain stable from year to year.

Learn Where They Are Spending Their Money

There are well-established benchmarks for how much of a non-profit’s budget should be spent on programs versus administration and fundraising. Organizations should be spending at least 75% of their revenue on programs that raise awareness or directly benefit a cause and less than 25% of their revenue on overhead.

As a reference, Charity Navigator publishes an annual report on CEO pay that finds mid-sized non-profits pay their CEO’s in the low $100,000’s. And the Better Business Bureau’s accountability standards indicate that fundraising expenses should not exceed 10 to 25 cents of every dollar raised.

As an investor, we want to see these figures as low as possible and to ensure they are aligned with organizations of similar size and type.

Engage with a Non-Profit at All Levels

If an organization is worthy of receiving your financial support, it should also be worthy of receiving your time and talent. Volunteering for the organization is an important way for you to increase the value of your investment. Most non-profits depend on volunteers to help them run programs, raise funds and promote awareness.

When you find the right organization, consider pledging a monthly, rather than a one-time annual donation. Large foundations that offer grants to non-profits want to see repeat donations because it is an indication of a healthy, growing organization that is capable of using their grant money effectively. Staying involved with an organization helps ensure your investment is used to its fullest potential.

There is simply too little time and money to waste on an organization that lacks oversight and is not using its resources effectively. Many of us have made donations to organizations simply because they asked and believed they were doing good things. In the future, we must raise that benchmark.

When nonprofit organizations solicit for financial support, they are in a position of public trust. That money is not theirs to misuse and they should be held accountable if they lose that trust.

Each of us has the responsibility to learn everything we can about an organization before we offer our time, talent and money. We must advocate for each other and contribute to the body of knowledge about the organizations that we support. 

headshot.jpg

Stefanie Lee Berardi worked as an advancement and communications professional, grant writer and principal investigator of several multi-agency grant programs at Illinois State University. She has a graduate degree specializing in the management and administration of non-profit organizations.

Stefanie is an avid volunteer in her local community and has volunteered for organizations supporting individuals with Complex Regional Pain Syndrome, a disease she developed in 2008.

The information in this column should not be considered as professional medical advice, diagnosis or treatment. It is for informational purposes only and represents the author’s opinions alone. It does not inherently express or reflect the views, opinions and/or positions of Pain News Network.

$2 Million in Donations Misused at U.S. Pain Foundation

By Pat Anson, PNN Editor

Over $2 million in funds were misappropriated by former U.S. Pain Foundation CEO Paul Gileno or used in questionable transactions with his family, according to a statement and tax returns released Thursday by the Connecticut based non-profit. Some of the money was paid to Gileno’s wife, sister and brothers.

The misuse of donor funds by Gileno was discovered in April 2018, which led to his resignation the following month. Until now, the extent of the fraud has not been disclosed to U.S. Pain’s staff, volunteers and donors.

“The former CEO was widely respected and beloved in the pain community, and took advantage of that trust in him. He was able to do this by both withholding key information and providing dishonest information that deceived staff and volunteers in leadership positions,” interim CEO and board chair Nicole Hemmenway said in a statement that curiously avoided using Gileno’s name.

“He controlled the organization’s operations, finances, records and bank accounts, as well as the Board process. His mismanagement and dishonesty left the records in disarray.”

According to Hemmenway, Gileno misappropriated nearly $1.9 million from U.S. Pain from 2015 to 2017. The non-profit raised over $7 million in donations during that period, meaning almost a third of it was misused by its founder and CEO.

The misuse of funds was characterized as an “excess benefit transaction” on U.S. Pain’s delinquent tax returns for 2016 and 2017, which were filed late last month with the IRS. An excess benefit transaction is when a payment made by a tax-exempt organization exceeds the actual value of that benefit.

The tax returns indicate the misappropriated funds were spent on “related party vendors” and “personal expenses,” but disclosed no other details. Hemmenway said additional excess benefits would be reported on U.S. Pain’s 2018 tax return.

US-Pain-300.jpg

Gileno did not immediately respond to a request for comment, but has previously admitted misusing donor funds. “I made some big mistakes over the past few years and took money from US Pain for my personal use,” Gileno wrote in an email sent to U.S. Pain’s leadership last year.

Payments to Family Members

In addition to the nearly $1.9 million in misappropriated funds, U.S. Pain’s 2017 tax return indicates that about $160,000 was spent in transactions involving Gileno’s family.

Nearly $48,000 was paid to Gileno’s wife and nearly $12,000 to his sister. The tax return does not explain what those payments were for. Another $100,000 was spent on an investment in SMJ Homes Inc., a real estate investment company controlled by Gileno’s brothers. The tax return indicates the investment has already lost over half its value.  

There was apparently very little oversight or financial controls at U.S. Pain and Gileno was permitted by the board — which has legal and fiduciary responsibilities — to spend money as he wished.

“The former President/CEO controlled the board process. The records maintained under his leadership list the officers and directors… but contain no evidence that election of officers and directors occurred,” the tax returns said.

Gileno was paid a salary of $94,000 in 2017 and no salary in 2016. A $403,000 salary paid to Gileno in 2015 is now being characterized as an excess benefit.

PAUL GILENO

PAUL GILENO

Hemmenway was paid a salary of $49,900 in 2017 for her work as vice-president. She has been a key member of U.S. Pain since its founding in 2011. So have board members Wendy Foster and Ellen Lenox Smith.

Smith’s daughter-in-law, Shaina Smith, was paid a salary of $76,700 in 2017 as director of state advocacy for the non-profit.

‘I Never Mislead Them’

Multiple sources familiar with U.S. Pain have questioned how Gileno was able to misappropriate funds for so long without Hemmenway or the board being aware.  Gileno himself has said they were kept informed.

“I never mislead them. They were part of US Pain for over 10 years and I talked with them daily,” Gileno wrote in an email to PNN last month. “Nicole and I were close like a brother and sister and I never hid one thing. I feel bad they are trying to use me as an excuse.”

Some insight into how U.S. Pain and its board operate is provided in a blog post by former board member Suzanne Stewart, who resigned last September after serving on the board for only a few months.    

“I don’t feel safe being involved with voting on big decisions yet being left in the dark much of the time. I don’t really know where money is going or where it comes from in all honesty,” she wrote.

In Thursday’s statement, Hemmenway acknowledged that “the organization should have had stronger financial controls” and said a “robust system of checks and balances” now requires U.S. Pain’s chair and chief financial officer to approve all expenditures.

“With these checks and balances in place, the organization is stronger than ever before,” Hemmenway said. “U.S. Pain fills a vital gap in support for the pain community and refuses to let the actions of one individual impede its efforts to educate, connect, empower, and advocate for those living with chronic pain.”

The statement gave no indication if others were implicated in the misuse of funds or if Hemmenway and the remaining board members will resign or be replaced.

U.S. Pain Foundation Suspends Fundraising

By Pat Anson, PNN Editor

The U.S. Pain Foundation, which is under investigation for financial irregularities and the misuse of funds by its former CEO, has stopped soliciting donations.

In a statement posted on U.S. Pain’s website, interim CEO Nicole Hemmenway said the Connecticut-based non-profit has “ceased soliciting funds.” For many charities this is a key time of year for fundraising, but as PNN has reported, U.S. Pain’s registration with the Connecticut Department of Consumer Protection, which regulates charities in the state, has expired. Without an active registration, U.S. Pain cannot legally solicit donations in Connecticut.

(Update: U.S. Pain’s charitable solicitation registration was renewed by the Connecticut Department of Consumer Protection on January 4, 2019) 

In her statement, Hemmenway said U.S. Pain would renew its registration once its delinquent tax returns – known as 990 Returns – for 2016 and 2017 are filed.  She blamed former CEO Paul Gileno for the long delay in filing them.

“The delay in filing the 2016 and 2017 Returns can be attributed to inaccurate and incomplete financial records maintained by the former CEO. The delayed preparation of the 990 Returns in turn delayed the renewal of our charitable solicitation registration in the state of Connecticut, which expired as of November 30,” she said.

“We are cooperating with the Connecticut Department of Consumer Protection, which has not opened a formal investigation into U.S. Pain. Once the 990 Returns are available, we anticipate the registration will be renewed. In the interim, we have ceased soliciting funds. In addition to working with the Department of Consumer Protection, we initiated a meeting regarding the former CEO’s actions with the Office of the Connecticut Attorney General.”

NICOLE HEMMENWAY

NICOLE HEMMENWAY

To be clear, Hemmenway and U.S. Pain’s board of directors did not contact Connecticut Attorney General George Jepsen’s office until this month, when they became aware that PNN was planning to publish stories about the foundation’s delinquent tax returns and other questionable activities.

Hemmenway and the board have been aware of Gileno’s alleged embezzlement for some time. An internal audit found evidence of “financial irregularities” and possible criminal acts several months ago. The board requested and received Gileno’s resignation on May 29.

On September 5th, Gileno confessed in an email that he “took money from US Pain for my personal use.” The email was sent to over a dozen key leaders at U.S. Pain, including board members Ellen Lenox Smith, Wendy Foster and Suzanne Stewart. Stewart resigned from the board soon afterward, saying she felt “kept in the dark about many things.”

Only recently has any of this been brought to the attention of law enforcement, or U.S. Pain’s members, volunteers and donors.

(Update: In a December 20 press release, U.S. Pain said the financial irregularities were discovered in April and that “appropriate authorities” were notified in early June. Hemmenway has not responded to a request to identify who or what agency was contacted. PNN has been unable to verify any contact between U.S. Pain and law enforcement until early December.)

“It does seem like they will blame it all on me which makes me sad but I guess their legal counsel thought it was the best route for them to take no responsibility and to ignore all of the good I have done and the lives I have changed,” Gileno said in an email to PNN.

“I guess they don’t want to discuss that they all were part of US Pain for over 8 years and Nicole was Vice President since we changed from CT Pain Foundation to US Pain Foundation in January 2011. I took responsibility for any mistakes and worked to rectify it ASAP so the organization I created and founded could continue to help others. I did not hide this and it seems they only brought this out because you discovered it and pressed them.” 

PAUL GILENO

PAUL GILENO

PNN has asked Hemmenway if the audit found evidence that others besides Gileno misused donated funds. She has not responded to that and other questions, such as how much money was misappropriated, what it was spent on, and for how long the misuse occurred.

“We did not previously comment on these matters on the advice of counsel, due to the ongoing investigation,” Hemmenway said in her statement.

U.S. Senator Wants Audit Details

U.S. Senator Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, also wants to know if others are involved.

In a letter sent to Hemmenway yesterday,  Wyden asked for a copy of the audit and a detailed accounting of whether “any other employees, contractors, board members, volunteers or people otherwise associated with the foundation (have) been implicated in the misuse of funds.”

Wyden also asked for an explanation of why U.S. Pain’s membership was grossly inflated and how a $2.5 million donation from Insys Therapeutics, a controversial drug maker under criminal investigation, was spent on a prescription co-pay program called Gain Against Pain. As PNN has reported, Gileno and Hemmenway — who is board chair — disagree on whether the board even authorized the co-pay program.

“There are conflicting accounts of when the foundation’s board of directors was made aware of Gain Against Pain. Please clarify when the foundation’s board learned of the program’s existence, and when it learned of funding from Insys,” Wyden asked. “Were there any conditions connected to any of the donations from Insys to the foundation or the Gain Against Pain program?”

As Stat News has reported, Wyden and other senators have questioned the relationship that Insys and other drug makers have with patient advocacy groups, saying their donations present a conflict of interest. Over the years healthcare companies have donated several million dollars to U.S. Pain.

In a letter sent yesterday to Health and Human Services Secretary Alex Azar, Wyden suggested that it may be inappropriate for Cindy Steinberg, U.S. Pain’s National Director of Policy and Advocacy, to continue serving on a federal pain management advisory board because of “the legal and financial control issues faced by the U.S. Pain Foundation.”

As PNN has reported, Wyden himself has accepted donations from industries that he helps regulate. According to OpenSecrets, Wyden has received over $2.5 million in campaign donations over the last five years from individuals or PACs affiliated with healthcare and insurance companies.

How U.S. Pain Foundation Inflated Its Membership

By Pat Anson, PNN Editor

The U.S. Pain Foundation has long claimed to be “the leading chronic pain advocacy organization in the country,” with volunteers in 50 states and nearly a quarter of a million social media followers.

“What started as a small grassroots group now has 90,000 members nationwide and a network of 1,000 volunteers,” a U.S. Pain press release said in 2017.  

Impressive numbers like that helped the Connecticut based non-profit rise to national prominence in the pain community and raise several million dollars in donations from major healthcare companies such as Pfizer, Lilly, AstraZeneca, Novartis and Johnson & Johnson.

But PNN has learned that the tabulation of U.S. Pain’s membership and followers is unreliable and misleading. At best, they’re a product of bad metrics and marketing hype. At worst, they’re evidence of consumer fraud.  

“If they’re talking about members, then they should have a verified roll of members. And if they’ve inflated that number and there’s no rational basis for coming up with the number that they’re telling the public, then that could potentially be considered consumer fraud,” says attorney Seth Perlman, who has represented non-profits for 30 years.

In recent months, U.S. Pain has announced it is “undergoing a complete revamp of its transparency policies and procedures.” One of the first things the organization did was significantly downsize its membership from 90,000 to 15,000.

U.S. PAIN FOUNDATION 2016 PROMOTION

U.S. PAIN FOUNDATION 2016 PROMOTION

What happened to the 75,000 missing members?

“We have changed the way we classify and report members,” interim CEO and board chair Nicole Hemmenway said in an email to PNN. “Previously, ‘members’ included mailing list subscribers, support group participants, INvisible Project readers, anyone who received our print materials, and people who attend our events. Now the term ‘member’ has been redefined as the number of individuals who have signed up for our mailing list.”

Hemmenway has been interim CEO since May, when U.S. Pain’s founder and longtime CEO Paul Gileno resigned at the request of the board of directors.  “As the new leader, I am heading up a review and revision of our governance and transparency policies,” Hemmenway said. 

But full transparency has been slow in coming. Not until last week did Hemmenway and the board disclose the reason behind Gileno’s forced resignation. An internal audit found evidence of “financial irregularities” and that Gileno embezzled an undisclosed amount of money from the non-profit.  

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this,” Gileno confessed in an email sent to U.S. Pain’s leadership.  

We asked Gileno why U.S. Pain’s membership numbers were so high while he was CEO. 

“Our stats were based on email sign ups, social media sign ups and in-person sign ups,” Gileno said. “I have no clue why they were reduced.” 

In addition to the steep drop in membership, U.S. Pain has also seen a decline in its social media following. At one time, the organization claimed to have 59,000 followers on Twitter.

That was reduced to about 13,000 followers after Twitter purged from its system millions of fake and inactive accounts. 

from US Pain foundation 2018 promotion

from US Pain foundation 2018 promotion

“The (Twitter) reform takes aim at a pervasive form of social media fraud,” The New York Times reported. “Many users have inflated their followers on Twitter or other services with automated or fake accounts, buying the appearance of social influence to bolster their political activism, business endeavors or entertainment careers.”  

Some of the followers that U.S. Pain has on Twitter were apparently bought and paid for in a promotional scheme to sign up new followers. Hemmenway says the board never authorized such an expenditure. 

“Based on records, in 2016, $515 was spent on a Twitter digital marketing initiative under previous leadership. This is not something the Board or others within the organization were aware of or approved,” Hemmenway said. 

Hemmenway has been a key member of U.S. Pain since it was founded in 2011, serving as vice-president until Gileno’s departure. According to Gileno, she oversaw the non-profit’s social media efforts. “Nicole and the board have always been in charge of that, as was director of communications,” Gileno told PNN. 

Even after the Twitter purge, U.S. Pain still appears to have an unusual number of suspicious followers. StatusPeople.com, a website that analyzes Twitter data, estimates that only a third of @US_Pain’s 13,000 followers are legitimate. The rest are either fake or inactive.

SOURCE: STATUSPEOPLE.COM

SOURCE: STATUSPEOPLE.COM

There is no similar way to analyze the legitimacy of U.S. Pain’s 216,000 followers on Facebook, a social media platform where you can also buy followers.

Consumer Fraud Issue

Marketing that misleads or exaggerates may be all too common in the for-profit world, but it’s risky business for a charity dependent on donations and public goodwill. Taken too far, it could lead to allegations of civil or even criminal misconduct, according to attorney Seth Perlman. 

“That’s only an issue if they use those numbers to impress upon the donating public or their supporters about how widespread their message is. And how much awareness the organization has with the public. If they’re using it as a way to inducing people to support the organization, it’s a potential consumer fraud issue,” said Perlman. “If you mislead the public and present information that is incorrect and is purposely inflated, the regulators take an extremely dim view of that.  

“It’s almost always a civil matter, unless it rises to the level of an absolute egregious fraud where there is absolutely no basis for making the claims that they did and it was simply a rip off.  Then that could turn into criminal (fraud). But the civil remedies are significant, including removal of the board of directors.” 

As PNN has reported, U.S. Pain is now under investigation by the Connecticut Attorney General’s office and the Connecticut Department of Consumer Protection, which regulates charities in the state.  Because its registration as a charity recently expired, U.S. Pain at this time cannot legally solicit donations in Connecticut. 

Federal prosecutors at the U.S. Attorney’s Office would neither confirm or deny if they were investigating U.S. Pain and its former CEO, although Gileno anticipates going to prison for fraud or tax evasion.  

“I will have to go to jail maybe as long as 3 years for taking the money from US Pain,” Gileno said in his confession. 

U.S. Pain is also in danger of losing its tax-exempt status.  The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent.  Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. Hemmenway blames Gileno for the long delay in filing, but expects the tax returns to be completed in coming weeks. 

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” she said. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”