The CEO of one of the city’s largest nonprofit shelters stashed kin on the payroll and funneled millions of dollars into companies he has financial stakes in — alleged glaring conflicts of interest that the city claims it’s now cracking down on.
The Post examined 2,000 pages of tax returns, contracting disclosures and legal documents involving CORE Services Group and found a web of companies with extensive ties to the nonprofit’s CEO, Jack Brown.
Experts told The Post that the set-up appears to serve little purpose other than placing Brown at the center of lucrative transactions.
Among the alleged questionable practices revealed by the documents:
- Brown created a string of for-profit companies that have received millions of dollars to provide key services at CORE’s shelters, documents show.
- A firm in which Brown holds a substantial stake received more than $3 million in rent over two years from his non-profit, according to tax filings.
- At least three family members of Brown or members of the CORE’s various boards are employed by the nonprofit or related entities, according to records.
City officials have now revealed that last month, they ordered CORE Services to shutter the for-profits companies Brown had established to provide services.
“Any time a provider doesn’t comply with our oversight efforts, we take corrective action, including requiring restructuring as necessary, ending business relationships in some cases, or in rare instances working with law enforcement to identify bad actors,” said Department of Homeless Services spokesman Isaac McGinn.
City Department of Investigation spokeswoman Diane Struzzi added, “DOI is aware of concerns surrounding CORE and declines further comment.”
Questions about CORE’s financial set-up come as the nonprofit has scored more than $800 million in city contracts since 2014, primarily to operate homeless shelters across the city.
The Post first began inquiring about CORE and Brown in February after learning the nonprofit operated the shelter in Brooklyn’s Gowanus neighborhood where accused subway ripper Rigoberto Lopez allegedly stayed before the A-train stabbing spree in February. The crime spree left two dead and two others badly injured.
Brown made at least $501,000 from CORE and its affiliated nonprofits in 2019 alone, according to the group’s tax returns from that year, which are the most recently available.
Brown got another more than half a million dollars from his related for-profit subsidiaries, the New York Times said in a report published Sunday.
His brother, Curtis, was paid $140,000 the same year, the documents show.
The brother of a member of the nonprofit’s board of directors, Gordon Jackson, made at least $190,000 as CORE’s head of community affairs.
Additionally, records reveal that another tightly linked nonprofit controlled by Brown employs Mallory Jones, whose husband sits on the subsidiary organization’s board and made $174,000 that year.
Previously, Brown was a top executive at a private prison operator, Correctional Services Corp, enmeshed in an early 2000s Albany bribery scandal. The company was fined $300,000.
He later scored a contract from the federal government to operate a halfway house near the Navy Yard in Brooklyn. The site was exposed in newspaper reports in the early 2010s as offering shoddy services.
Several experts who examined CORE’s tax returns and other filings reviewed by The Post said they are full of “red flags” that warrant further examination by local and state authorities.
“What I’ve seen is that there are lots of flags in these filings, and there may be a perfectly good explanation, but somebody ought to be looking at this,” said Daniel Kurtz, the former head of the state Attorney General’s Charities Bureau.
“There are too many transactions where there are more questions than answers,” he added.
For instance, on one part of the CORE’s annual filings with the IRS, the organization certifies that its board is provided with copies of its tax returns before they are submitted to the feds, Kurtz said. But buried in a disclosure toward the end of the document, CORE clarifies that its “president” — Brown — “reviews [tax return] before it is filed.
“They tick the box saying the board is checking the tax returns before they are filed, but further back they acknowledge that it’s the president [Jack Brown] doing the review,” Kurtz said. “You can’t have the president reviewing his own conflicts of interest — and both statements can’t be true.”
A controversial shelter for seniors that CORE Services operates on a tree-lined stretch of Bergen Street in Brooklyn’s working-class Crown Heights neighborhood provides a Rosetta Stone into Brown’s operation.
Residents sued over the plans in 2017, charging that city officials were effectively dumping the Big Apple’s homelessness crisis into their community.
Officials and the residents settled the same year, after agreeing to a host of concessions including a promise from CORE that it would retain “the services of a security company to provide uniformed security personnel who will be on site twenty-four (24) hours a day, seven days a week.”
That same month, Brown filed paperwork to establish a for-profit security contractor, ProCore LLC, which accounts for virtually all of Core Services spending on contracted spending, tax documents show.
It netted $7.6 million of the $7.7 million that CORE spent on ‘security and monitoring’ services in 2018, according to the filings. The next year, in 2019, Core Services paid ProCore was paid $22.7 million for “security.”
The for-profit is one of at least three companies that Brown established to provide services for CORE’s sprawling shelter operation, which also includes Flavor Foods LLC for food distribution and Core Facilities Management for property management.
The Mayor’s Office of Contracts and City Comptroller Scott Stringer raised questions about CORE and Brown’s “business affiliations” in July 2017, as the contract to run the Bergen Street shelter wound its way through the bureaucracy.
CORE responded by telling officials its new for-profit companies — and a new holding company created for them — were wholly owned by the non-profit and “part of a recently formed corporate structure that will enable CORE to further its mission.”
But CORE told the IRS something different when it disclosed the new holding company on a tax return for an affiliated nonprofit in 2018, the nearly identically named Core Services Group NY.
It described Core Companies Inc. as owned by an “officer” of the non-profit.
Only two executives received compensation from the affiliated non-profit that year, one of whom was Brown. Brown is also listed as the holding company’s CEO in state records.
It did not disclose the connection on its 2019 return.
However, that year it did reveal that it employs Jones as its vice president of human resources.
The tax returns filed by the main CORE Services nonprofit in 2018 and 2019 also revealed the non-profit has shelled out $3.1 million to a company that Brown has a substantial stake in to rent the Bergen Street shelter building.
“New York City government’s [oversight process] is badly broken. How many red flags do they need waved in their faces?” said John Kaehny, the executive director of good-government group Reinvent Albany, to The Post.
“There is a chain of failure here that includes the Mayor’s Office of Contracting, DOI and the New York City comptroller.”
CORE Services told The Post in a statement Sunday that the for-profit companies Brown runs are owned by the non-profit and claimed that city officials signed off on the arrangement.
The rep disputed news accounts from February that placed Lopez, the accused subway slasher, as a resident of the motel-turned-shelter CORE runs in Brooklyn, claiming he only stayed there from July 8 to July 20, 2020.
“This story contains numerous inaccuracies, including false claims made by the City of New York, and rehashes outdated and unsubstantiated allegations against CORE or its leadership in a seeming effort to attack the integrity of a successful African American business leader,” the spokesman said.
The rep did not elaborate on the alleged “inaccuracies” besides the claim about Lopez.
— Additional reporting by Reuven Fenton and Sam Raskin