Goliath, Meet David

A St. Louis charity tries to kill a Cleveland program for children, but the little guys fight back

By the time Cindy Dougherty arrived in Cleveland, she was an expert in delivering bad news. Twice in the two months leading up to February, she flew from her St. Louis office to faraway cities. Twice she faced unsuspecting staffs. Twice she announced she was closing their nursing homes. They were all out of work.

It couldn't have been pleasant, but it was part of being the National Benevolent Association's CEO during a recession. Affiliated with the Disciples of Christ church, NBA is the 51st-largest nonprofit in the country, just behind the American Lung Association. It owns nursing homes, assisted-living centers and programs for troubled kids in 23 states. These services are seldom cash cows, and NBA hit a bad patch in 2000 that only worsened in 2001. Its financial woes reached their zenith in the weeks after Sept. 11, with investment losses of nearly $38 million, according to NBA's newsletter.

In November, the agency's board decided that shuttering unprofitable locations would best stop the bleeding, so Dougherty headed to Martinsville, Ind., and Jacksonville, Fla., in December to close nursing homes. The third casualty, the 99-year-old Cleveland Christian Home for Children, came Feb. 14. Dougherty told staffers that NBA would close the agency June 1.

Christian Home CEO David Lundeen
Walter Novak
Christian Home CEO David Lundeen

Unfortunately for her, the home's leadership had already vowed to not let it die.

The Christian Home serves children with disabilities and behavioral problems. About 30 live at the home on Cleveland's Lorain Avenue; 45 older teens depend on its independent-living program. At least 90 kids are in foster homes supervised by the agency, and 100 families use its intensive counseling.

"When you think about the number of children and families we serve and their needs, we were not just going to close," says George Hrbek, the board's vice president.

Dougherty left soon after her announcement, and Christian Home CEO David Lundeen returned to face his staff. Some were in tears. "I told them we had no intention of closing, and we weren't sure what we could do, but we wanted them to stay firm," he says.

Dougherty had made it clear the home was to be closed and offered no options for independence or assistance if Cleveland wanted to go its own way. NBA owned Christian Home's buildings and controlled its endowment, and that was that.

It wasn't that easy, however. "We couldn't just walk away and say we were going to close after 100 years," Lundeen says. If Dougherty wasn't offering independence, the Cleveland Christian Home was prepared to fight for it.

Dougherty's announcement sent shock waves through Cleveland's nonprofit community. Jim McCafferty, director of Cuyahoga County's Children and Family Services, has seen smaller agencies fold in his 22 years in the field, but he's never seen a national organization force a local affiliate to close.

Yet NBA's decision made financial sense, says Rob Wetzler, a director at Fitch Ratings, which analyzes the financial standing of companies: "They've been reluctant to close any facility, but they're losing money. I would expect they're trying to close the institutions with bigger losses or less upside."

Some of NBA's financial troubles were beyond its control. Health-care agencies were rocked when federal and state governments cut patient reimbursements even as labor costs skyrocketed, Wetzler says.

But other problems might have been avoided. In 1997, a jury in Fremont, Calif., socked NBA for millions in damages after it closed a residential center for disabled adults. The patients' parents bought the campus in the 1970s and gave it to NBA. They claimed that NBA had promised their children could stay there for the rest of their lives. But in the early '90s, NBA sold the land to a developer and moved the residents to scattered rental homes. Claiming fraud, parents sued. NBA had set aside money for a settlement, but the jury's $8.7 million award went beyond the allocation, Wetzler says.

There were smaller problems, too. NBA's closure of a home in Columbia, Mo., also ended in a class-action suit, which NBA settled in 1996. And when the agency tried to build a new nursing home in Jacksonville, Fla., residents opposed the plans. Appeasing neighbors added more than $1 million to construction costs, according to the Florida Times-Union. The project was eventually scrapped.

At the same time, the Cleveland home was trying to expand. It opened as an orphanage in 1901 and joined NBA two years later. For decades, it was well respected, if not particularly innovative. It wasn't until the 1960s, as traditional orphanages were closing, that the home shifted its focus to abused and neglected children.

In 1993, when Lundeen took over as CEO, housing those kids and providing daycare was the extent of the agency's mission. Lundeen, soft-spoken and deceptively low-key, was eager to change that: "As a smaller agency, you're always running the risk of closing. We decided to grow." Over the next nine years, the home's $1.8 million budget grew by about $1 million a year, he says, sprouting new programs such as counseling and training for foster parents.

In 1999, the home merged with Cleveland Crossroads for Youth and took on an independent-living program for older teens making the transition from foster care to adulthood. Susan Rhee, longtime president of Crossroads' board, says the merger was helpful to the county: "They like agencies that are large enough to do one-stop shopping."

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