There is an old saying that you shouldn’t pick a fight with a newspaper because they buy ink by the barrel. But there is another old saying that you should never back down from a bully. Recently The Tennessean picked a fight with Soles4Souls by printing a story that, to say the least, was biased, sensationalistic and full of false statements. So, we at Soles4Souls have determined not to lie down, but to respond directly and, if necessary, pursue legal action to hold the newspaper accountable for their disservice to the truth.

Overall, it is important to note that the article would never have occurred if Soles4Souls was not an open and transparent charity – the initial reason The Tennessean reporter contacted us was to ask questions about a disclosure that appeared on our annual IRS tax report. So for the newspaper to attempt to portray Soles4Souls as a charity that hides information from the public is nothing less than unconscionable.

To set the record straight, here are a few points and corrections organized by the topics that appear in the article.

Regarding micro-enterprise:

The gist of the micro-enterprise article is that Soles4Souls has not talked openly about its micro-enterprise program. In fact, nothing could be further from the truth. We are proud of our micro-enterprise efforts, which have enabled us to increase the number of people we serve and is consistent with social enterprise undertaken by the US government and nation’s leading nonprofits. In 2009, we discussed the program in an article published by The Tennessean! Although the article no longer appears on The Tennessean’s website, you can read it here on our site where it has been since it was published: Click here to read that story. If you would like more information about our micro-enterprise efforts, visit our FAQ page.

Contrary to the reporter’s representations that micro-enterprise is inconsistent with S4S’ mission, S4S’ initial formation documents – its Articles of Incorporation and By-laws – provide for micro-enterprise as a purpose on Page 1. They list as S4S’ “purpose”: “To provide and to assist other organizations in the providing of shoes at little or no cost to individuals in the United States and throughout the world who are poor . . . .” These documents were provided to the IRS as part of its initial application for tax exemption and were reviewed before the IRS granted us tax exempt status.

Regarding Wayne’s previous employment at Kodiak:

Perhaps the most telling and deceitful misrepresentation in the articles is the statement that Wayne “was asked to leave Kodiak”, a shoe company where he was president before leaving to run Soles4Souls full-time. In support, the reporter quotes a question and answer from a trial against Soles4Souls’ former landlord, Donelson Cedarstone Associates (which has resulted in a fraud judgment against the landlord). The question posed was: “You left Kodiak in April of 2007?”, to which Wayne testified: “At their choice, that’s correct.” The truth is that Wayne provided his notice of voluntary resignation in February 2007 and was contractually required to remain with Kodiak for six months thereafter, but Kodiak released him from this obligation in April when it found and hired his replacement. When one reads the testimony in context, it is clear that this is what his testimony means. During the months of inquiries from the newspaper’s reporters, they never once asked about or raised this issue. This exhibits a clear desire and intent to smear Wayne. You can read the letter from Kodiak confirming this by clicking here.

Regarding the loan guaranty:

All actions taken by Soles4Souls were reviewed by legal counsel and auditors to verify compliance with applicable laws. In April 2009, Soles4Souls’ supporting organization, Changing the World Foundation, entered into a loan with our CEO in order to obtain a fixed rate of return on assets that had been hemorrhaging money during the stock market collapse. At the time, our independent certified public accountants and attorneys advised that the loan was permissible under the applicable rules and regulations. This turned out to be bad advice, and when S4S hired in-house counsel a year later, he immediately discovered it and worked with the Board of Directors to correct the issue. In doing so, S4S acted with the advice of a new attorney who specializes in non-profit compliance issues and with our independent CPAs. All disclosures on its tax returns were prepared by these accountants and attorneys.

The reporter’s contention that S4S and Changing the World Foundation wrongfully failed to disclose the loans on their tax returns is blatantly and recklessly false. S4S correctly and accurately disclosed the transactions to the IRS on its annual tax report and its Audited Financial Statements. In fact, the only reason the reporter learned of the transaction was through this public disclosures on S4S tax return and financial statements. Regarding the sufficiency of the collateral securing the current guaranty, S4S’s current external auditors—who, unlike the reporter, are experts at analyzing financial records – determined and stated in its audited financial statements that the collateral securing the guaranty was sufficient. The executives and board of S4S has relied on this expert opinion in making is decisions regarding the current guaranty.

In an abundance of caution, Mr. Elsey voluntarily granted S4S additional assets to secure the guaranty above and beyond what the auditors deemed sufficient.

The reporter’s contention that Mr. Elsey declined to be interviewed is false. When the reporter asked for an interview, Mr. Elsey invited the reporter to join him that weekend in Haiti to have unfettered access and to observe S4S’ ongoing relief and micro-enterprise efforts. In less than thirty minutes, the reporter rejected the offer. Soles4Souls, however, continued to cooperate by providing our General Counsel and a spokesperson for a 1.5 hour interview, by providing voluminous documents that the reporters requested, and by indicating our willingness to consider any written questions that they wanted to submit as recently as the day before the article was published.

The reporter claims that S4S provided false information on its application for tax-exemption that pertained to payments to employees, but the application only asks for information that is accurate at the time of the application. All answers were complete and accurate at the time the application was filed and all information was properly disclosed in its tax return a year later. Therefore, the reporter’s attempt to create inconsistencies between an application filed in 2006 and a tax report filed a year later is very misleading.

Regarding CEO compensation:

Each year, the S4S board sets CEO compensation based upon performance (such as acquiring an $8 million unrestricted grant one year and doubling the outreach capacity of the corporation in another) and complies with IRS best practices by relying upon a compensation study produced by an independent compensation expert’s analysis. The reporters chose to ignore the objective data that Soles4Souls provided that supports its level of CEO compensation. Despite The Tennessean’s subjective opinion, Soles4Souls’ CEO compensation last year fell within the median range of compensation for CEO’s of non-profits with over $50 million in revenue, and S4S was well over this benchmark at $76 million.

Last year, only 3 cents of every dollar collected by S4S, both in cash and in-kind gifts, went towards general/administrative and fundraising expenses.

We hope this helps set the record straight. Please don’t hesitate to call us if you have any questions. We always welcome inquiries and hope that you will continue to support Soles4Souls and its mission!