Red Cross audit comes up clean: deposed CEO didn't use account for girlfriend.

A review of Mark Everson's expenses during his six-month stint as Chief executive officer of the American Red Cross (ARC) failed to turn up any misappropriation or improper use of funds. The inquiry was conducted by the Red Cross Office of Investigations, Compliance and Ethics, at the direction of the General Counsel and examined documents related to his business travel expenses, said Carrie Martin, a spokesman for ARC.

The Washington, D.C.-based disaster relief agency initiated a forensic audit within days of Everson's Nov. 27 resignation to determine if any money spent by him was used inappropriately. He resigned his position after a romantic relationship with a female subordinate, who is married and reportedly now pregnant, was brought to the board's attention just before Thanksgiving.

The investigation was not initiated because of a complaint from the female subordinate, a chapter executive in Mississippi who is expected to remain with the organization.

Everson, who earned an annual base salary of $500,000, did not get a severance package from the Red Cross board, only a contribution of less than $10,000 to help with the cost of medical insurance, said Martin.

A search committee of about 15 people has been assembled, Martin said, made up of board members and Red Cross employees, representing blood regions and chapters. Although no deadlines for the search have been set yet, the agency wants to complete it as quickly as possible, she said.

In the meantime, the board appointed Mary S. Elcano, general counsel for the Red Cross the past five years, as acting president and CEO, the ninth different CEO or interim CEO in the past 12 years. Three members of Everson's staff whom he brought from the Internal Revenue Service (IRS) agreed to stay with the organization at the board's request.

In terms of accountability, the ARC board got it right, nonprofit sector executives said. "This is a good-news, bad-news story. The good news is the Red Cross board acted deliberately and transparently to address a governance problem. The bad news is that, once again, the Red Cross is in the spotlight with a negative story, which will continue to erode the public's trust in major philanthropic organizations," said John Graham W, CAE, president & CEO, ASAE, in Washington, D.C.

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According to Gary Bass, executive director of OMB Watch in Washington, D.C., "I think everyone has the same reaction, which is: This is shocking."

Added Bass, "Of course this is bad for Red Cross. It's bad for any organization; it's bad for our sector; it's bad for management/employee relations. So he should know better."

H. Art Taylor, president and CEO of the BBB Wise Giving Alliance in Arlington, Va., described the news as a setback because, "The Red Cross was making many positive steps to improve the negative perception that the public has of the organization.... The team in place around Mark Everson was very strong, and a big reason why the organization was moving forward."

Linda Crompton, president and CEO at BoardSource in Washington, D.C., called the situation "extraordinarily bad luck" for the Red Cross. "How do you prevent a kind of thing like this from happening? You do what you can do. You have a whistleblower policy in place, you do your due diligence when you're hiring these people, and you do the reference checking, and you try to prevent this kind of thing from happening," she said.

"What the board should be commended on is that they've taken swift action. Especially when you're in the kind of situation that the Red Cross is in, the worst thing to do is to prevaricate and to delay taking any action. Because you know it's going to be kind of devastating to you,' said Crompton.

The 53-year-old Everson, who is married with two children, took the top post at the Red Cross in May, 2007 after several years as IRS commissioner. His selection by the board culminated a 15-month search to replace Marsha Evans, who resigned in December 2005 amid friction with ARC's 50-member board. Evans' three-year tenure was marked by criticism of the agency's response to Hurricane Katrina. Jack McGuire, former executive vice president of biomedical services, served as an interim CEO between Evans and Everson and was among those considered for the permanent post.

Two weeks before Everson took the helm of the Red Cross last spring, President George W. Bush signed into law major governance reforms for the disaster relief agency.

An October 2006 report of the ARC's Board of Governors set forth recommendations for sweeping changes in governance that Congress approved in May.

The most significant reforms included reducing the board from 50 members to between 12 and 25 members by 2009 and 12 to 20 members by 2012, while also creating a Red Cross Cabinet Advisory Council. The board called for the establishment of an Office of the Ombudsman to provide annual reports to Congress. Everson appointed his former chief of staff at the IRS, Beverly Ortega Babers, to serve as ombudsman.

The report's recommendations also sought to clarify the role of the board "to focus solely on governance and strategic oversight," as well as clarify the three categories of board members into a single category of membership, to be elected by the full board.

In years past, the Red Cross has received its share of criticism following a disaster: After the Sept. 11, 2001 terrorist attacks for the way it handled disbursements of the Liberty Fund and donations for victims, and the bureaucratic and slow response to Hurricane Katrina in August 2005. But Everson generally received praise in recent months for the agency's efforts to aid victims of the Southern California wildfires in October.

NPT staff writer Maria E. Nobles contributed to this report.