Former CEO of U.S. Pain Foundation Sentenced to Year in Prison

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation has been sentenced to a year in federal prison for embezzling $1.5 million from the Connecticut-based charity and failing to report the income on his tax returns.

U.S. District Judge Victor Bolden sentenced Paul Gileno to 12 months and one day of imprisonment, followed by two years of supervised release. Gileno pleaded guilty to wire fraud and tax evasion in June.

The 47-year old Gileno is also required to pay full restitution to the charity and the Internal Revenue Service, as well as tax penalties and interest.

"By engaging in wire fraud and tax fraud, the defendant committed very serious crimes over the course of several years,” U.S. Attorney John Durham said in court documents.  

“As the Court is well aware, tax fraud undermines the public’s confidence in the tax system and relies on taxpayers to correctly report all taxable income.  As to the wire fraud offense, the defendant stole money from his employer for his own personal gain.  As such, the defendant’s conduct is very serious."

PAUL GILENO

PAUL GILENO

Gileno faced up to 25 years in prison, but as part of his plea agreement prosecutors agreed to ask for a lesser sentence. In a sentencing memo, prosecutors said Gileno was in “relatively good physical and mental health” and was a hard worker committed to his family.

"I cannot even express how sorry I am for what  have done, I made mistakes, I screwed up majorly, I mismanaged, I was careless and I took money that was not mine, I used it for personal use and I was selfish," Gileno wrote in a letter to the judge. "I took the money and, in my mind, justified it by saying to myself I deserved it at the time and US Pain had it. I justified it in multiple ways."

Gileno's defense attorney also presented numerous testimonies from pain patients and advocates about the help they received from Gileno and his work in patient advocacy.

Gileno will report to prison on January 6, 2020. Until then he is free on bond.

Fraud Went Undetected for Three Years

The money embezzled by Gileno was used to pay his 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 U.S. Pain board member Suzanne Stewart recently wrote in her blog. Stewart resigned from the board last year because she was concerned about how the charity was being run.

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2 million 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.

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

Since Gileno’s resignation, U.S. Pain says it has taken steps to ensure there was more internal control and financial oversight of its expenses and cash flows.

According to 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. That means less than half of the $2.1 million raised by the charity was spent on programs and services for the pain community.

Earlier this month, 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. Dickens is the first U.S. Pain board member who was not appointed by Gileno.

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.