Ultimate Injustice: More Shenanigans from Charles Wang

Don Tennant

If you were going to donate money to a charity, who is the one person in the annals of IT history you'd least want to have control over that money? For me, that person is Charles Wang, the co-founder and former CEO of CA Technologies, the company formerly known as Computer Associates. So let's just say I'm troubled by a recent development on the charitable organization scene.


In a December post, "As Charles Wang's World Crumbles, Justice is Served," I wrote about the ongoing collapse of Wang's empire, notably the financial problems he's confronting with his New York Islanders hockey team and with NeuLion, his Internet TV company. Now it appears that the collateral damage from that collapse will include Smile Train, a charitable organization headed by Wang that does surgeries on cleft lips and palates of children in developing countries.


The New York Times reported last week that boardroom shenanigans on Feb. 14 had resulted in plans to merge Smile Train with Operation Smile, a rival charity with a similar mission. While the goal of the merger ostensibly was to create a more efficient organization that would be better positioned to help the kids, the financial structure underlying the merger proposal suggests that the real beneficiary is Wang himself.


According to the NYT article, the deal was arranged so that Wang would have control of a huge percentage of Smile Train's assets, which are estimated to be in the range of $160 million:

The new entity will not, however, have the combined assets of the two organizations. Only roughly one-third of Smile Train's assets will go into the new charity, according to the merger agreement.


The rest, estimated by Smile Train board members to most likely exceed $100 million when the deal is complete, will go into a separate "legacy fund." Mr. Wang, who will be chairman emeritus, will have the right to appoint - and remove - four of the fund's five board members; they will decide how to disburse and invest the money.

In addition, the agreement stipulates that half of all the money the merged organization raises over the next three years will go into the fund that's under Wang's control. Wang was able to pull all of this off because four of Smile Train's nine board members work for him, and with their help, he had a majority. Those board members are:


  • Robert Bell, executive director of the Charles B. Wang Foundation
  • Susannah Schaefer, Wang's assistant at the New York Islanders
  • Roy Reichbach, corporate secretary and general counsel at NeuLion
  • Arthur McCarthy, chief financial officer at NeuLion


Of the four remaining board members, three voted against the deal, and the fourth abstained because his company manages Smile Train's assets.


While both the Islanders and NeuLion are losing money hand over fist, it's the NeuLion connection that I find especially troubling. The NYT article linked to my aforementioned post to provide background about NeuLion's financial woes, and added something I didn't know:

Smile Train's most recent tax form includes a $108,000 payment to NeuLion for services, and earlier, it was paid to build the charity's digital patient charts.

Smile Train donors can be forgiven for being concerned about how much more of the money they've donated-$100 million of which is under Wang's control-will go to the ailing NeuLion. It's worth noting that Reichbach sits on NeuLion's board of directors, a board that, as I indicated in my previous post, has some members with interesting histories:

NeuLion's board of directors includes Shirley Strum Kenny, president of the State University of New York at Stony Brook, who served on the CA board that in 1998 approved the infamous $1.1 billion bonus that was split between Wang, Kumar, and CA co-founder Russell Artzt. Wang's share of that fortune was $670 million. In the late 90s, Kenny was embroiled in a conflict-of-interest controversy at SUNY Stony Brook stemming from her service on the CA board.


The board's vice chairman is G. Scott Paterson, who in December 2001 was fired from his job as chairman and CEO of Canadian brokerage Yorkton Securities due to what the Vancouver Sun called "complaints about fast-and-loose dealings." That same month, Paterson reached a settlement with the Ontario Securities Commission in connection with what Forbes.com described as "conduct that was, in the view of the commission, contrary to the public interest in connection with certain corporate finance and trading activities engaged in by Mr. Paterson and the investment dealer with which he was associated." Under the settlement, Paterson paid CAN$1 million to the commission and was barred from trading for six months.

While all of this is extremely discouraging for many of Smile Train's donors, they're not letting Wang get away without a fight. They're pinning their hopes on the fact that the deal has to be approved by the New York State Attorney General, and they've drafted a petition to call on him to block the deal. Here's an excerpt from the petition overview:

Over the past few months, without the knowledge or approval of the Smile Train Board, Co-Founder and Chairman of the Board, Charles Wang, secretly negotiated a deal that will ensure Smile Train, as we know it, will cease to exist.


Wang shocked the Smile Train Board and staff members two weeks ago announcing his intent to merge with Operation Smile. Requests by independent board members for more information were ignored or dismissed; repeated requests for more time were met with a rushed board vote on Valentine's Day.


Not one independent director voted for the merger.

Let's hope the petition doesn't fall on deaf ears. If this deal goes through, all of the injustices Wang oversaw at CA will pale in comparison. This one's about money that was donated to help kids who really need it, not to pay for the ramifications of a seedy boardroom coup.

Add Comment      Leave a comment on this blog post
Feb 28, 2011 4:07 AM Kathy Egbert Kathy Egbert  says:

Thank you!!  Let's hope the Attorney General is listening.

Mar 2, 2011 9:28 AM Roy Hinkle Roy Hinkle  says:

I too, have been a Smile Train supporter for many years. If this travesty is allowed to stand it is a disservice to the children and donors.

Of course if Wang gets his 100 million dollar slush fund, I doubt if he will care about either.

No amount of whitewash or flowery words can eradicate the stain and stench of this sham.

Mar 2, 2011 11:40 AM Kevin OBrien Kevin OBrien  says: in response to Kathy Egbert

Don, Thank you for bring this to my attention. It is shameful what is taking place. The AG must know Charles Wang and associates very well by now. It is terrible that the victims are the children.

Mar 2, 2011 11:53 AM Sheila Doyle Sheila Doyle  says: in response to Kathy Egbert

How dreadful for this to happen. Hopefully it will have a happy ending and that the money I have donated for the children will find its way to them.

Mar 3, 2011 1:42 AM Gerald Barbo Gerald Barbo  says:

As a long-time contributor to Smile Train I am shocked by these developments.  If this transaction is completed in its current form, I will find another childrens' charity to support.

Mar 3, 2011 2:09 AM Robert Egbert Robert Egbert  says:

Smile Train is (was) a fantastic organization who has helped over 650,000 children born with cleft lip and palates.  Charles Wang must not be allowed to remove from the coffers money that was donated to help more children like them.

Mar 3, 2011 9:16 AM Steve C Steve C  says:

Thanks for the article.  My wife and I have been monthly donors for several years, and will suspend them today until (unless) this is resolved.

Mar 7, 2011 3:07 AM charles sommer charles sommer  says:

I can see there should be sense in merging two charities with the same goal. However the furore this has created is disturbing.

I have looked at the last report. This appears unaudited . Given the size of the organization there should be an independent auditors report. What was the cause for the investment loss ? Extraordinary that the directors failed to comment on this. ! What fees / salaries are paid to the directors / highest paid executive ?

Does the UK organization submit reports to the Charity commission in the UK ? Are they vetted/ audited ?

The corporate governance looks to be in need of an overhaul. Perhaps Mr Wang should stand down for the good of the charity . I am unable to make any further contributions until the questions are satisfactorily answered.

CS in the UK

Ps. I was not pleased to receive an expensive glossy colour hardback book showing the work carried out by the organization . This seemed a waste of donators


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