Nonprofit Chronicles

Today, my story in the Chronicle of Philanthropy reports on a complaint filed by the attorney general of CA against ZeroDivide, its former CEO Tessie Guillermo and other officers and directors of the defunct and disgraced foundation.

San Francisco-based ZeroDivide collapsed abruptly in 2016, leaving unpaid debts, unanswered questions, and a trail of hurt behind.

Donations that it was holding for other charities disappeared. ZeroDivide failed to file federal informational tax returns. No explanation was forthcoming from Tessie Guillermo, CEO of ZeroDivide, or Carladenise Edwards, a health care executive who chaired its board. They went into “radio silence,” one of their funders told me.

They ducked questions again in 2019 when I broke the news in the Chronicle about the troubles at ZeroDivide. The foundation was created in 1998 and over time raised more than $50 million from other foundations, corporations and the government to bridge the so-called digital divide between rich and poor.

Guillermo hoped, it seems, to be able to tough out the scandal. At the time, she held two lucrative board seats — one at CommonSpirit, a big chain of nonprofit hospitals, which paid her more than $150,000 as its board chair and another at the Marguerite Casey Foundation, which paid her $36,000. It’s no wonder that she ducked responsibility for the mess at ZeroDivide.

No longer can she hide. The complaint from CA attorney general Rob Bonta is damning. It says that Guillermo and colleagues took more than $600,000 in funds that they were supposed to be holding for nonprofits that ZeroDivide fiscally sponsored, and instead spent that money elsewhere, apparently on ZeroDivide’s operations.

You can read the AG’s complaint here, with all the sordid details. It says that Guillermo and others knew what they were doing, and knew it was wrong. The defendants settled the civil lawsuit rather than face trial.

The foundations whose money was misappropriated by ZeroDivide include the California Endowment, the California Wellness Foundation, the Ford Foundation, the Whitman Institute, Wyncote Foundation, and the Vesper Society. When ZeroDivide collapsed, they mostly got the brush off from Guillermo. So did Renaissance Journalism, a small nonprofit that supports advocacy reporting on behalf of marginalized communities, which had entrusted more than $500,000 to ZeroDivide. Those funds vanished.

In my Chronicle story today, Jan Masaoka, chief executive of the California Association of Nonprofits, said: “Too often we in nonprofits don’t like to admit that there has been misconduct by people and organizations that we have trusted and liked. Misdeeds often go without consequences. I appreciate the rigor with which the attorney general’s office conducted the investigation, and I’m glad that there are real consequences for those responsible.”

Guillermo has been publicly shamed. She is barred from serving in a position of responsibility in the California nonprofit sector for three years. Presumably, she’ll have to give up her lucrative board seat at CommonSpirit, which operates hospitals in California.

Yesterday, Guillermo’s lawyer agreed to comment on the attorney general’s complaint for The Chronicle.

I expected that Guillermo would finally take responsibility for her misdeeds and perhaps express remorse. Silly me. Here is his statement, in full:

“ZeroDivide was an honorable and game-changing philanthropic leader, ahead of its time, that benefitted countless vulnerable individuals and communities through its work and support to create equity and narrow the digital divide for the underserved.  This case highlights the dilemma not-for-profit organizations can face from a scarcity of unrestricted funding, i.e., when precisely to abandon both the fundraising and the mission.  The Attorney General’s answer and legal theory remain untested given this settlement.  The defendants stand by their unequivocal denial of the allegations in the complaint.  Also, Tessie Guillermo had retired as CEO nearly a year prior to the end of ZeroDivide’s operations.  Even so, the defendants collectively agreed to settle the matter rather than undergo the expense and disruption of litigation.”