Breaking the Faith – A Close Look at Covenant House

 By Russ Baker

   Recent revelations of insider loans from an unregistered trust fund to board members and friends of Father Bruce Ritter, including a $131,000 loan to Father Ritter’s sister, Cassie Wallace, have splintered the management of Covenant House and raised doubts about the future of the $85 million charity. But the Voice has learned that the pattern of favoritism didn’t end there: Father Ritter’s niece, Ellen Wallace Lofland, was given the exclusive contract to decorate and furnish Covenant House crisis centers throughout the country, overseeing hundreds of thousands of dollars in expenditures annually. In addition, Lofland’s husband Tandy was hired to manage multimillion dollar construction and remodeling projects at the Houston and Fort Lauderdale Covenant Centers.

The spreading financial scandal has already led to the forced resignations of two board members, including Ritter’s personal physician, James T. Kennedy, who left after his loan from the hidden trust was revealed by The New York Times. But the Voice has learned that Kennedy remains Covenant House New York’s medical director, earning $100,000 a year for his 20-hour-a-week position. The increasingly compromised board has descended into charges of scape­goating over the extraordinarily high per client costs and huge salaries for top administrators. But the central question is how such a wasteful and ill managed program could become the brightest of a thousand points of light beamed on the problems of troubled youth of right wing "voluntarism" by accident. Working closely with former board member Robert Macauley, a wealthy businessman and life long chum of President George Bush, Ritter built a network of well-connected allies across the country to help pave the way for Covenant House’s rapid expansion. He made friends with many Reagan­/Bush friends, like Peter Grace, the conservative billionaire head of W. R. Grace, William Simon, the former Treasury secretary, and Charles Keating, chief of California’s failed Lincoln Savings and Loan, which is under federal investigation for influence peddling in Congress. Many of these new friendships went well beyond a hefty Christmas contribution. Keating’s company, for example, made so many “substandard” loans - as much as $40 million worth - to Covenant, that the S&L took out a $10 million “key man” life insurance policy on Father Ritter, based on his proven ability to raise money via direct mail appeals.

In return, Covenant House’s rise as a seemingly effective, private outreach to homeless youths was the perfect symbol for the Reagan administration’s policy of privatizing poor relief. One of the foremost goals of the New Right politicians, who clustered around Reagan in 1980, was to reform what they believed to be an overweening, inefficient, and liberal federal bureaucracy that was bent on dispensing tax funds to social welfare programs. An early tactical aim was to “defund the left,” by which they meant cutting off all federal monies to private, nonprofit organizations they considered leftish like the Sharecropper’s Fund in the South, consumer co-op groups, and public policy think tanks.

As an alternative, they looked toward a network of private charities based on “voluntarism.” The Reagan administration favored tapioca nonprofit agencies like the Boys Clubs of America (Herbert Hoover was its chairman for 30 years), the National Crime Prevention Council, (which never mentions guns), and various 'just say no drug’ groups. Outfits like Ritter’s proved what private voluntary organizations could do, and they gave the far right the opportunity to show compassion for the poor. This in turn encouraged Washington to loosen its purse strings for Father Ritter. While other charities found federal grants to be drying up in the ‘80s, Covenant found a wellspring of nearly $1 million in federal funds in 1989.

By sensationalizing a narrow aspect of youth homelessness—teenage prostitution, usually depicting white, middle American males, Covenant House was able to tap a vast flow of small donations, which it maintained with innovative mass mail techniques. Size became almost a goal of its own: the big shelters attracted big press’s attention and ever bigger donations, even though most childcare experts argue that meaningful counseling can only take place in small, long term group shelters.

   Running throughout the history of Covenant House is Father Ritter’s peculiar penchant for secrecy—the false identities, the trades in privately held stock, the secret trust fund that masked his actual salary. If most of the Covenant board was sympathetic to Father Ritter’s larger vision, they were pretty much kept in the dark about the friar’s financial dealings with board members Robert Macauley, Kennedy, chief counsel Ed Burns, and members of the priest’s immediate family.  “The board people were mostly Republicans, mostly Irish Catholic,” says Linda Glassman, former New York program director for Covenant House.  “They don’t understand social policy.  If a priest says something, they have a tendency to believe it."

$pending More To Do Le$$

Without question, Covenant House has provided shelter, hot meals, and limited counseling to thousands of kids—far more than any other single program. But Covenant House has been more successful at racking up numbers than at keeping kids off the street.

Covenant House’s budget is enormous by any standards. Starting at $7.7 million in 1980, by 1985 when Ronald Reagan, in his State of the Union address, called Father Ritter an “unsung hero” in America’s battle against homelessness, it had grown to more than $30 million; by 1987, $54 million; and last year it topped out at $85 million.

According to its own figures, Covenant House serves 25,000 needy teens a year with that money, which works out to $3400 a head. Critics say the total served includes large numbers of recidivists. In contrast, Boston’s Bridge Over Troubled Waters, a combination long term living and crisis center for Street youths run by two Catholic nuns, spends $1.5 million to serve 4000 youths annually, or $375 a head. Bridge houses many of these people for an entire year for between $3000 and $6000 apiece, instead of the one week or less that most youths spend in Covenant House. And the Boston facility offers a full range of in-depth counseling and treatment designed to lift clients out of the context of poverty, while Covenant offers primarily “crisis care”: vans that dispense food and drink, short term shelter, and food and clothing. In response to heavy criticism of its numbers oriented approach, Covenant has recently expanded into more comprehensive care, like its highly regarded 12  to 18 month Rights of Passage residential program. But this program is new and serves a tiny percentage of its kids.

  So where, if not to care, does all the money go? One major budget item is real estate. Most of Covenant’s $35 million debt represents mortgage loans on the spacious shelters bought  in the past few years. The Fort Lauderdale center was installed in a former luxury resort hotel. The New Orleans shelter is considered one of the best looking buildings in the French Quarter. “I thought it was a resort hotel when I drove by,” says Richard Derr, who served as Covenant House corporation senior accountant in the mid-’80s. And the Houston quarters came with approximately 20,000 square feet of glass that made it tremendously expensive to air condition. It even had a swimming pool.

“Everybody on the

staff had the feeling

of ‘Spend it, spend it,

spend it,’ “says John

MacNeil, head of the

Toronto Covenant

House in the mid­-

‘80s. “There was

often no

justification...”

   “Everybody on the staff had the feeling of ‘Spend it, spend it, spend it,’” says John MacNeil, head of the Toronto Covenant House in the mid-’80s. “On a moment’s notice, for absolutely no reason, somebody would be flying up from New York. There was often no justification.  A phone call would do.”

   Father Bruce bragged that he only took the “top of the line” when it came to furnishings. To decorate all the Covenant branches in the U.S., Ritter turned to his niece, Ellen Lofland. Starting in 1982, she was given carte blanche to order everything from carpets to bunkbeds to office furniture. For the Houston facility, she ordered custom made furniture. According to Larry Norton, a former associate executive director in Houston, Lofland spent nearly $30,000 just to have furniture recovered.

   Lofland learned by doing. In Houston, all of the beds she ordered quickly fell apart under the strain of constant use, and had to be replaced. The new corporate headquarters at Ninth Avenue and 35th Street in Manhattan were dazzling. “It was a great atmosphere,” says one former executive. “Beautiful offices--like working on Wall Street."

   Lofland defends her work for Ritter. “The Covenant House portion of my income is minimum,” she said. “I don’t think anybody would do it for the price I’m doing it.” She insisted that her fee was limited to a small consulting charge. But a Covenant House spokesman said that they had no idea how much Lofland earned. “She made a bid for the entire contract,” he said. "Whatever she earned would have come out of that bid.”

Father Bruce also asked Lofland’s husband, Tandy, to be the construction manager for work on the brand new Houston facility. Richard Derr, who was purchasing director in Houston for a time and rented a condo from the Loflands, says Tandy Lofland had little experience running construction/renovation projects before Father Bruce asked him to try his hand. Lofland disputes that, saying he had worked in that field for several years prior. “His forte was not rehabilitating property,” Derr says.

When Tandy landed the larger contract for the renovation of the Fort Lauderdale resort hotel, however, he failed to impress. "I don’t think they liked the product they were getting, so they didn’t ask him to do anything again,” Derr says. Tandy confirms that this was his last job for Covenant House.

Ellen Lofland ran into occasional opposition as well: Houston executive director Malcolm Host, who had not been on staff when Lofland decorated the facility, rejected an aide’s suggestion that Lofland be hired again. “I’ve been in human services for 40 years, and I know you don’t use relatives,” says Host.

Good Jobs at

Good Wages

After real estate and renovation costs, the next biggest non-childcare budget item is fundraising. In 1988, Covenant House spent $12 million to raise more millions, plus an additional $4 million in postage on “informational mailings.” Covenant House also paid Epsilon Data Management $1,097,150 in 1988 for “fundraising counsel,” bringing the fundraising total to $17.1 million, or about 20 cents out of every dollar donated. In some years, acting president James Harnett says, it has actually gone as high as 28 cents for every dollar. Many of the programs sponsored by Covenant House seemed to be fundraising driven. For example, Father Ritter established a toll free hotline, the Nineline, that cost $3 million a year to run; though it was better publicized, this service replicated hotlines that already existed. Within Covenant’s executive ranks, Nineline was reportedly seen primarily as a vehicle for getting more names on the mailing list. “Nineline brought in as many calls from potential donors as runaways,” a former Covenant executive said. Besides, Covenant House got extensive free radio and television time for its Nineline public service announcements.

Spending in the executive suites was very free for a charity. While childcare staffers were either volunteers or paid annual salaries between $13,000 and $15,000, Father Ritter’s inner circle of advisers—particularly those in fundraising, public relations, and expansion efforts, were paid much better.

The following were considered to be members of Father Ritter's cabinet:

    John Kells: When he became Ritter’s press secretary in 1985, Kells was awarded a whopping $90,000 salary and, reportedly, a free Upper East Side apartment and a car. He was 25 at the time, and earning more than the chief operating officer, James Hatnelt. When other staffers asked why Kells got so much, Ritter said he had received a comparable salary at his previous TV job in Houston. where he said Kells was a top producer. "The assumption was that Kells knew the media business and had a lot of contacts, and was a pretty creative guy in terms of his use and management of the media,” says Larry Wenger, who set up the Houston Covenant House.

In fact, although Ritter touted Kells’s involvement in an award winning film called Boys for Sale, he was an assignment editor, a job that typically entails “mostly mechanical functions, involving listening to police radios and so on,” according to the current news director at the local ABC affiliate where Kells worked. The salary range was under $40,000, he said.

Covenant House invested half a million dollars in a later film about the institution, produced by Kells and shot in Houston, and tried to sell the film to HBO. Although Ritter talked about it as an HBO project, HBO never contracted for or aired it. The film was considered amateurish.

In 1986, Ritter's high priced team, led by Kells, hit upon an idea that might bring in more cash—maybe a lot more. He decided that the Catholic-run institution should “go evangelical.” Following in the footsteps of Jimmy Swaggart and Jim Bakker, Kells hired media consultants who specialized in working the fundamentalist broadcast circuit. Renn Vara, a Kells employee, started a Covenant House radio show, Off the Street, which was cohosted by a Baptist minister. But the whole scheme ran out of steam when the Bakker and Swaggart scandals broke.

While childcare

staffers were either

volunteers or paid

annual salaries

between $13,000

and $15,000, Father

Ritter’s inner circle of

advisers especially

in PR were paid

much better.

   Several years ago, staffers complained that Kells had created a no-show job for his friend and roommate.  Before he “resigned” two week ago,  Kells was earning $103,000 a year.

 - Jim Kelly: Once the head of the New Orleans program, he became Ritter’s vice-president for development and public affairs at the age of 27. Kelly was given a $95,000 salary and a loan for a home mort­gage from the Franciscan Charitable Trust, to start up a proposed Washington, D.C., shelter.

- Patrick Atkinson: Atkinson ran all of Covenant’s Latin American programs at the age of 23.  “No one could understand how Bruce could send him to run such a big operation,” says one former staffer.  Atkinson was recently named director of the Southeast Asia program.

- Steve Torkelsen:  Often referred to as Ritter’s “Foreign Minister” (his actual title is senior vice-president for external affairs), Torkelsen started as a volunteer, and eventually moved into the top ranks.  While finishing his Ph.D., Torkelsen lived on board member Robert Macauley’s Virginia estate, Mellbrook.  Macauley is chairman of Americares, a nonprofit group that lists Bruce Ritter as vice-president and founder.  Americares has been accused of providing non-military aid to the contras.

    “[Torkelsen] had access to Bruce at any hour,” says one former Covenant House staffer.  He set up the Covenant House operation in Guatemala, a flagship for Ritter’s Central American program; but former Covenant employees say Torkelsen, sometimes known as “the spy,” displayed a bizarre style.  “In our meeting notes, we had to use code names for people we wrote about, so no one would know who we were talking about,” says one staffer.  “He would constantly say that what we were talking about was entre nous.”  One former staffer says Torkelsen insisted that she let him take credit for work she had done.  If she didn’t, he reportedly said, she would be “crushed,” “destroyed.”

- Greg Loken: The Covenant House lawyer emerged from the volunteer “faith community” that lives in the Times Square building to become a key aide.  Loken arranged a false ID for Kevin Kite, one of the young men who has accused Ritter of luring him into a sexual relationship. Kite was given a no-show job with Loken in Covenant House’s Institute for Youth Advocacy.  Loken has come under criticism for sharing his Bronx home until recently with a 20-year-old Covenant House kid.

Many of Ritter’s close aides were youthful former seminarians. "One time when I went [to New York] I raised the question:  How come all these young men in the office of the president?” says MacNeil. “There were no women. It seemed to be all clean-cut young men. To me that seemed kind of strange. But the response. . . was that Bruce had an experience one time where one of his female staff admitted that she had had an abortion. That seems awfully ridiculous, that he would just have young men working in his office, when so much of the work was being carried on, very effectively, by women in other departments.”

Ritter paid for the higher education of staffers and program youths with Covenant House funds. Ritter sent members of the faith community, Covenant House’s lay volunteer body, to Rome to study at a Catholic theological institute; Covenant House paid for airfare and approximately eight months of food, lodging, and tuition.

    In return, Ritter required a two-year time commitment to the faith community. Staff accountant Derr, who had himself become involved with Covenant through the faith community, says he questioned the big travel bills and asked why the constant flights to and from New York were necessary; Father Bruce brushed him off.

Ironically, during the same period, Covenant House often found itself unable to take care of its childcare givers, those employees who actually work with Bruce’s kids. In 1987, it announced that it would be unable to pay medical insurance for staff anymore, due to a shortfall of $70,000 to $80,000 in receipts.

A Subsidy for Pimps?

     “It’s a revolving door, McDonald’s style, eat and run,” says John MacNeil, who ran the Toronto Covenant House in the mid-‘80s. “As if three days or three weeks at Covenant House was going to turn around a life that was in despair for 16, 17 years. It’s ridiculous."

 “The Covenant House approach doesn’t do any good—it just guarantees that they will be customers there the next day,” says MacNeil. “And it will look as if everything that can possibly be done is being done for these kids.”

Other programs may not rack up the impressive numbers, but they take better care of their charges. Covenant House enforces a strict time limit on shelter stays, considered harsh by other providers. “After 30 days, we would never kick a kid out of here,” says Vincent Manning, program director for Family Connection, a program of the Houston Metropolitan Ministry, which has been in existence since 1970. “We make sure that before a kid leaves, we have a place to stay other than the street."

One expert, who ran a homeless shelter for five years, says shelters are much easier to run than group homes, but far less effective at solving the youths’ needs. “There is no sound social work reason to run programs at anything near the scale Ritter runs programs,” he says. “You’ve got to know the kids by name, know their situation, be a realist.”

Besides, building a

runaway youth facility

near Times Square is

like building a

chicken coop in a fox

den...housing youths

there enables them to

return easily to

prostitution and crime

when they leave.

Besides, building a runaway youth facility near Times Square is like building a chicken coop in a fox den. While sending outreach vans into vice-ridden areas makes sense, housing youths there enables them to return easily to prostitution and crime when they leave.

Many experts say Ritter far exaggerated the number of missing children and runaways, and counted on fuzzy definitions to hype the cause. “What is a runaway?” asks one social worker. “Someone who leaves home in a dispute, but returns several days later?”

Ritter played heavily on the image of “the scared rural youth falls into prostitution.” Ritter’s letters and accompanying photos suggested that his clients were teenaged, fresh-faced blonds from the Midwest.

“The runaway poster child is not a blond kid with ringlets,” said Linda Glassman, Covenant House program director from 1987 to '89. “It’s a black or Latino person with a substance abuse problem. And that’s not terribly marketable.”

Image clashed with reality in Covenant House, where most of the youths are black and Hispanic, from the metropolitan area, and past adolescence; 70 per cent of the New York center’s clients are from 18 to 20 years old. Mixing suburban runaways with a tougher breed is a bad idea. “The worst thing you want to do is take your hardcore street kids, and put them in the same room with Johnny from rural Ohio,” says one social worker.

“We would hear from the parents, who were absolutely mortified to hear that their kids were there,” says MacNeil. “And they would say, ‘But was my kid involved in street prostitution?’ Well, how would we know? But Bruce would pretend that everybody was involved in that.”

For some kids, Covenant House was just a crash pad, says MacNeil. "A lot of kids in Toronto, especially in the early days, just missed the subway home and decided to use the facility,” he says. “A lot of them would turn their noses up when they were told they were to sleep on the floor.”

And all the “street kids” aren’t necessarily escaping abusive families, as Covenant House literature suggests. They’re merely seeking an escape from the poverty cycle. The problem for many is not that they are prostitutes, but’ that they cannot read or write. They lack the skills to find and hold a job, and to manage finances.

“The myth of this 13-year-old Johnny who got in a fight with his dad so he split.. . to New York City, that’s not as much of an issue,” says Glassman. “The real issue is poverty. . . You’re dealing with kids who were shunted from foster home to foster home, have substance abusing parents, may well be substance abusers themselves, have gotten third grade educations, and really cannot be on their own because they’ve never been given any kind of appropriate upbringing or support. So now they’re 19 years old, without any way to make a living. Most of the kids at Covenant House New York were just poor kids.”

In handing out volunteer awards to a group that included Father Ritter, George Bush talked last year about the “thousand points of light” and what they meant to him.

“America is great because America is good. . . We see that decency and compassion everywhere, in the childcare center, the Rotary, or the Little League; a synagogue or a church. It means lending a hand, tending a wound, and helping the less fortunate," said the Chief Executive.

Everyone agrees that helping kids is commendable. But when all the scandal of Covenant House dies down, the overwhelming problems of children reared in poverty will remain. So, too, will the question of accountability. In the ‘80s headlong rush away from yet one more pressing social ill, America embraced Covenant House as the one-stop shopping of youth services, a feel good solution, temporary and superficial, that seemed as genuine as the man who marketed it.