Posted on December 21, 2011

Houston Athletics Foundation Hurt by Ponzi Scheme

An alleged Ponzi scheme run by David Salinas may have cost the Houston Athletics Foundation, a nonprofit corporation dedicated to supporting student athletes at the University of Houston, to lose more than 40 percent, or about $2.2 million, of its assets, the Associated Press reports.

According to the AP, the financial losses suffered by the foundation in the scam may directly impact the university's sports program, athletic scholarships in particular. To help remedy the situation, the foundation has asked board members to help cover the roughly $250,000 it awards annually in scholarships.

An Securities and Exchange Commission investigation of Salinas, an investment advisor, and his associate Brian Bjork has exposed a number of conflicts of interests, leading the foundation's board to reorganize and revise its bylaws. Salinas, who committed suicide weeks before the SEC launched its investigation in July, was a founding member of the foundation's board and Bjork served as its treasurer. According to SEC documents, Salinas and Bjork's investment company Select Asset Management loaned nearly $1.6 million to one of their fellow board members.

"There are all sorts of best practices that it seems to me were not followed in this case," National Committee for Responsive Philanthropy executive director Aaron Dorfman told the AP. "Unfortunately, personal relationships often supplant good due diligence, and people just go along with a charismatic personality, which was certainly the case with Bernie Madoff."

University of Houston athletic director Mack Rhoades told the AP that he does not feel the foundation should be singled out and criticized for what it lost. "The Houston Athletics Foundation is like every other victim out there that invested money with David Salinas," said Rhoades, "and it's sad."