Gratitude House: How a business venture doomed a beloved charity for pregnant addicts

PALM BEACH POST INVESTIGATION


Gratitude House, one of the few nonprofit drug treatment centers in the country that welcomed poor, pregnant drug addicts and newborns, closed quickly and quietly in June amid an unprecedented drug epidemic and a staggering surge in the number of babies born addicted to drugs.

Residents were told simply that mold had been found in the dormitory, and that they would have to leave. Gratitude House’s website offered no explanation. Donors were told nothing. And now the campus is for sale.

But behind the scenes a festering conflict of interest doomed the beloved nonprofit after board members, their relatives and friends bought Lakeside House, a dilapidated apartment house a block away, and saddled Gratitude House with rent, taxes, insurance and repairs in the for-profit venture, The Palm Beach Post has found.

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Gratitude House expected to pay most of Lakeside House’s expenses with additional tax dollars to extend housing for the women, but it wasn’t enough.

The purchase ultimately tore apart the Gratitude House board. Fiefdoms created by long-term members, some who were investors, became entrenched. Some board members resigned; others were asked to quit. The board churned through five executive directors in two years.

With the hostility came crises that could not be addressed by rotating executive directors and a shrinking board. Chief among them was a series of scathing management and financial audits by the nonprofit agency that doled out Gratitude House’s state money. Despite the Gratitude House board’s continual failure to correct mistakes, the agency offered more state money in a desperate attempt to keep the 49-year-old institution afloat.

As the problems came to a head in a pivotal and emotional November meeting, the board cancelled the lease with Lakeside House. The board president, an investor in Lakeside, walked out.

‘Done with the best intention’

In 2013, Gratitude House board members, their relatives and friends created Lakeside House LLC with the sole purpose of doing business with Gratitude House.

The company bought a dilapidated, 90-year-old apartment building for $800,000 then crafted a lopsided lease that required Gratitude House to foot nearly all the bills.

Lynn Gentithes, the board president who sat on the board for nine years, invested $200,000 with her husband, Tom. Executive Director Linda Kane’s father, Tom Kane, and family members, invested $220,000. Board member Christina Goode and her family’s foundation invested about $125,000. In all, 15 investors committed.

They were promised a 7 percent return — paid quarterly, but the board members who invested said profit was not their goal. They wanted Lakeside House to provide low-cost transitional housing for new mothers — who had little money and bad credit — when they graduated from Gratitude House.

“They were so excited, they would be like thanking us up and down, like, ‘Oh my God I’m so excited … to move into my own apartment,’” said Lynn Gentithes, who traveled in mid-summer to West Palm Beach with her husband from Southampton, N.Y., to answer questions for this story.

Mahima Singh/The Palm Beach Post

The women could work during the day while their children were cared for in Gratitude House’s daycare center. They learned how to save money and pay bills, including rent on a sliding scale. At night they continued treatment, she said.

“It was done with the best intention,” Lynn Gentithes said.

The current board adopted a more critical view. In an Aug. 1 statement, board members concluded that Gratitude House’s demise resulted from “a series of matters” between 2013 and early 2016 — the years Lynn Gentithes chaired the board.

Among them: the “failed transitional housing program” at Lakeside House.

Tom and Lynn Gentithes disputed the finding. More than 80 women “achieved long-term sobriety, found stable employment and secured permanent housing,” they said.

As for the conflict, the couple said, they cleared their Lakeside House investment with a lawyer and made the board aware.

But several former board members who did not invest in Lakeside House said they felt duped. Speaking on condition of anonymity, they said they did not understand the terms of the lease and were not made fully aware of the condition of the building and the repairs it needed. They said they regret not asking more questions.

Rusty fire escape deemed ‘unsafe’

Had they read pre-purchase building inspection reports  or toured the structure, they would have learned it needed extensive repairs, documents obtained by The Post showed.

Some electrical outlets were wired “backwards,” creating a shock hazard. Floors sloped. The roof leaked. Cracked stucco had pulled away from exterior walls. Most windows did not work. Steel support columns were rusted.

"In all my years serving on a myriad of nonprofit boards ... I have never seen a governing set of rules as dysfunctional as the Gratitude House by-laws."
—Tom Kane, Lakeside House co-founder and investor, in a letter to the Gratitude House board

But the most serious concern was the rusty fire escape, so “unstable and unsafe” that it “should not be used by the public.” The inspector recommended “immediate repair and shoring.” But it wasn’t until October 2014 — a year after women and their babies moved into Lakeside House — that the fire escape was repaired for $60,000. The Lakeside House investors decided they could pay the bill because of an extra $100,000 they raised when they bought Lakeside.

Gratitude House quickly fell behind on rent and repair payments to the Lakeside House investors.

In June 2016, board member Michael Cabot was so concerned about the structural conditions that he hired a forensic engineering firm to inspect. Before issuing his final report, the engineer warned Cabot in a letter that Lakeside House was so structurally unsound that it was no longer safe for the women and babies to live there.

“Due to many years of neglected maintenance, the steel-framed stairway (outside) and catwalk structure has suffered extensive damage from corrosion,” the engineer wrote in the June 6, 2016, letter. “The structure is no longer safe for use.”

The women and babies moved back to Gratitude House that day.

Mahima Singh/The Palm Beach Post

Gratitude House campus for sale

Despite the closing, the animosity endured.

In a Feb. 1 letter after the lease canceled, Kane threatened to sue the nonprofit for past and future rent and repairs worth $171,132 that he says Gratitude House owes to investors. Kane also warned that he would be “monitoring” any comments of board members who misrepresented his version of the facts.

“It is unfortunate the situation has evolved to this point,” Kane wrote.

Today, three rookie board members, down from a board that once numbered 14, voted to sell the 1.6-acre campus near the West Palm Beach waterfront. The property appraiser values the site at $2 million.

49 years of helping women

Gratitude House was founded in 1968 by 11 resolute women who emptied their pockets to pool together $23 to start. Their mission was to create a safe place where homeless, poor and addicted women could live while they got clean and sober. They found that in an old, two-story clapboard house between Dixie Highway and North Flagler Drive north of Good Samaritan Medical Center in West Palm Beach.

Over the years, a new dormitory with meeting rooms and a kitchen was built next door. The older home housed recovered addicts and alcoholics with HIV and AIDS.

In 2005, Gratitude House expanded its mission to provide housing, treatment and care for pregnant addicts in a unique program called Mothers and Infants in Treatment Together. Gratitude House was among a limited number of residential drug treatment programs in the country that allowed pregnant addicts to live with their newborns for up to a year.

Gratitude House eventually bought more land, adding a daycare center, playground and offices. It offered treatment for 34 mostly poor and homeless women. The nonprofit developed a following among wealthy donors in Palm Beach, who mixed with Gratitude House residents and alumni at charity galas, teas and fashion shows.

On rare occasions a seven-figure donation came in. Lynn and Tom Gentithes were among Gratitude House’s biggest donors. Their names adorn the daycare center.

In early 2013, Linda Kane proposed to the board expanding the mission of Gratitude House to transitional housing.

Months later, Kane’s father partnered with Lynn and Tom Gentithes to form Lakeside House.

The two Toms

Tom Gentithes and Tom Kane had extensive business experience and say they were deeply committed to helping poor and homeless women with alcoholism and addiction.

Gentithes of West Palm Beach earned his law degree at Cornell and undergraduate degree at Harvard. In 1990, he became chief executive of the largest concessionaire of in-flight duty free merchandise on international airlines.

Kane, a Marine fighter pilot in Vietnam who lives in Jupiter, started a securities firm in New Jersey in 1972. In 1988, Kane purchased and managed Adare Manor, an 847-acre estate in Ireland that he converted to a golf resort. In 2011, an insurance company sued Kane, claiming he failed to repay a $13 million loan. Kane counter sued the insurance company. Costly legal bills forced him into personal bankruptcy in 2011.

In spring 2013, Kane and Gentithes began looking for investors to buy a dilapidated three-story stucco building built in 1922. Conveniently a block from Gratitude House, the building had 12 apartments where woman could live while they continued treatment.

In a 28-page confidential prospectus, Kane and Gentithes told potential investors Lakeside House would lease the building to Gratitude House — even though the board had yet to approve the lease.

According to the prospectus, which was used to attract investors, Gratitude House would pay virtually all of the bills. Besides rent, Gratitude House also would be responsible for property taxes, insurance, utilities, maintenance and repairs for Lakeside House.

If Gratitude House missed a rent payment or could not afford other expenses, Lakeside House would add it to a tab, with interest. After 10 years, Gratitude House could buy Lakeside House at cost, plus unpaid rent and repair expenses.

On Sept. 13, 2013, the lease was signed. Tom Kane — a month after his bankruptcy case closed — signed for Lakeside House. His daughter, Linda, signed for Gratitude House.

Afraid to walk barefoot

Women and babies moved into Lakeside House in October 2013 — delighted to have their freedom from the confines of treatment.

Board members and investors watched their dream come true.

“Having transitional housing saved our lives,” said one woman who arrived in 2014. “I couldn’t imagine what would have happened to me if it didn’t exist. The purpose was fantastic.”

But the conditions were “disgusting” she said.

“I was afraid to walk barefoot on the carpet,” she said. Ceilings collapsed in two apartments. Two babies ended up in the emergency room with welts from bug bites, she said. Still, “all of us were very excited at the beginning.”

Despite her concerns, “it was all rosy,” one former board member said. But the board quickly learned the costs when it received the 2014 property tax bill for Lakeside House: $9,246.

“I was appalled,” said a former board member who voted for the lease. “I could not believe that Gratitude House was responsible for the taxes. The owner pays the taxes.”

Other unforeseen expenses arose. Lakeside House needed to be treated for bugs in 2013 and again in 2015. Each treatment cost $3,500. To help out, Tom and Lynn Gentithes and other board members kicked in another $100,000 for repairs.

A block away, Gratitude House needed its own repairs for its aging campus.

Repairing and maintaining two aging properties put a dent in Gratitude House’s budget, the bulk of which came from taxpayers. Gratitude House borrowed money from its own accounts to settle its debt with Lakeside House.

When it fell behind on property tax payments, Gratitude House borrowed $30,000 from Lakeside House, the minutes from a 2015 meeting show.

Rent was increased from $5,600 a month to $8,500 to cover the loan. As expenses grew and board members realized the consequences of the lease they had approved, two camps formed: Those who supported Lynn Gentithes and those who did not.

Opponents said she shut out those who disagreed with her and micromanaged day-to-day operations, including the responsibilities of then-Executive Director Linda Kane.

After months of friction between Linda Kane and Lynn Gentithes, Linda Kane resigned on June 8, 2015. Kane’s father was furious.

In a letter he sent to the board on the day his daughter resigned, he wrote: “And to make it perfectly clear, there will be no further support, either in funds or guidance, from the Kane family or our friends. You are on your own!”

From bad to worse

Rather than consult an expert to conduct a search for a new director, board members hired people they knew or those who had worked in the local treatment industry. Most didn’t last more than a few months.

Meanwhile, another donor joined the Gratitude House board. Michael Cabot, a stepson in the blue-blood Boston Cabot family, was voted in as treasurer. Cabot, a Realtor who specializes in selling medical and health care properties, was known among board members from the sale of another revered program that treated poor and homeless addicts — CARP.

In 2015, he represented the New York real estate investment firm that paid $11.5 million for 7.2 acres on 45th Street in West Palm Beach that was CARP’s home.

Soon Cabot and Lynn Gentithes clashed. Cabot questioned the conflict of interest between Gratitude House and Lakeside House. “It didn’t look appropriate,” Cabot said.

By the spring of 2016, operations at Gratitude House were in chaos. On April 11, 2016, the Southeast Florida Behavioral Health Network — the agency that distributes Gratitude House’s state money — pulled Gratitude House’s licenses for aftercare and intervention services. Lynn Gentithes and another board member said they were shocked.

An unscheduled inspection by Behavioral Health in mid-April 2016 found serious problems:



Twenty-three employees had left Gratitude House in the prior nine months.
A nine-member staff served 61 clients.
Therapists claimed to be treating different patients at the same time, according to their notes.
Group therapy frequently consisted of movies and TED talks.
Patient histories were incomplete with some pages missing a patient name or date.
Finance and billing staff functioned as case managers.

In May 2016, the agency briefly put a moratorium on new admissions until corrections were made. Gratitude House agreed to accept help in hiring an executive director and addressing critical issues.

Cabot suggested the board bring in a consultant. He recommended a colleague, Jeff Miller, whom he said specialized in restructuring medical businesses. The board agreed. By the end of the year, Miller, too, was gone. He declined to comment.

Lease suddenly canceled

At the same time Gratitude House is unraveling, Lakeside House was uninhabitable and Gratitude House was responsible for the repairs. Bids were put out and Eretzor Construction, a builder with ties to Cabot, submitted the low bid.

With the building empty, vandals and vagrants moved in. West Palm Beach police were called to Lakeside House four times after Gratitude House evacuated the building in June 2016. A 23-year-old woman overdosed and died in Apartment 2C on May 16. Twelve days later, a 26-year-old overdosed in Apartment 1B but survived.

Police said the building appeared abandoned and was being used by prostitutes. Trash, clothes and used condoms littered the floor, along with an air mattress.

Tom and Lynn Gentithes blame Eretzor for the damage. They say Eretzor did shoddy work and left the building unsecured.

Daniel Statlander, president of Eretzor and Statland Brown Real Estate, where Cabot works, said his crews secured the building as best they could, but break-ins occurred at night.

“There is only so much we can do,” Statlander said. “We are not a police force.”

As for the quality of the work, Statlander said it passed inspection and he was paid in full.

“If they didn’t like the work, why did they pay for it?” Statlander asked, adding that he discounted the price to help Gratitude House.

Disputing the construction, Cabot and Lynn Gentithes continued to butt heads. The rift turned nasty when Gentithes shared with board members details of a civil lawsuit in which Cabot and Miller are accused of defrauding investors in a real estate deal.

Gentithes chastised Cabot for not revealing the lawsuit. Cabot sloughed off Gentithes’ accusations, saying the lawsuit was simply a long-running business dispute.

The hostility boiled over at the Nov. 17 board meeting. Without notice, the board voted to terminate the Lakeside lease. Lynn Gentithes stormed out. Susan Ramsey and Cabot were elected interim co-presidents.

The next day, Ramsey sent an email on behalf of the board, asking Gentithes to take a leave of absence. Ramsey also asked how she would like her absence explained to donors and the community.

Three days later, Lynn Gentithes fired off her own email. She said the board’s vote to end the lease was “null and void” because the meeting was not properly noticed.

“I feel that the speed with which this action was taken did not allow for fair warning or deliberation,” Lynn Gentithes wrote. Suspecting that it was a unanimous vote to remove her from the board, she said she accepted the “involuntary, temporary leave of absence.”

The aftermath

Board members began turning in their resignations. But Gentithes wanted back in. On Dec. 7, she asked to return and agreed to become co-executive director with another board member while they searched for another executive director.

Tom Kane re-entered the fray on Feb. 1, when he threatened to sue Gratitude House.

But not all investors were on board. When Nicole Morris, an attorney and a longtime board member, learned of the potential lawsuit, she contacted Tom Kane and Tom Gentithes and offered to donate her investment in Lakeside House to Gratitude House.

“I could never put my name on a lawsuit against Gratitude House,” Morris said.

Four days after Kane’s threat, Lynn Gentithes again was booted. What was left of the board — three members with less than a year’s experience — cited her conflict of interest with Lakeside House.

Still reeling from the board battle and struggling with a leadership vacuum, disaster struck. On April 17 mold was discovered in Gratitude House’s main residence. Residents — including those expecting or with newborns — were forced out. Gratitude House closed in June.

Some went to Wayside House, a successful Delray Beach nonprofit treatment center for women. Some went to the publicly financed nonprofit Drug Abuse Foundation in Delray Beach. Some sought refuge with others in the recovery community.

With Gratitude House and Lakeside House closed, the state stopped paying for services. Facing mounting bills and a potential lawsuit, the board decided to sell Gratitude House, though the price is undisclosed. What they’ll do with the proceeds is unknown.

Meanwhile, the investors sold Lakeside House in July for $1.02 million. Through a gift, Gratitude House owned 10 shares in Lakeside worth $100,000. Though the Lakeside sale has gone through, Gratitude House is still waiting for its share of the proceeds.

Design and production: Mahima Singh, Michele Kelley.



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