Millions raised for sheriff's animal shelter that was never built. Where did the money go?

Paul Penzone won the Maricopa County Sheriff’s Office in 2016 on the message that he was going to undo the legacy of Joe Arpaio.

But the agency's Animal Safe Haven — the MASH Unit, for short — was one aspect of Arpaio's legacy that Penzone decided was worth keeping. Expanding upon, even.

The MASH Unit was one of the PR-savvy Arpaio’s most inspired creations. A home inside a jail for animals seized during Sheriff’s Office investigations, Apraio used the unit as a backdrop for media stories that featured “America’s toughest sheriff” having a soft spot for animals.

Arpaio surrounded himself with dogs and cats while cameras rolled, directing attention away from his agency's unconstitutional policing practices. The Sheriff’s Office highlighted incarcerated people working with MASH Unit animals, programming pitched as rehabilitative for people and abused animals alike.

In 2018, Penzone set up a nonprofit organization with the intention of building a new home for seized animals. Corporate partners were brought on and more than $1.5 million was raised for the project.

But in the years since, the organization languished, getting so little attention that state records and federal tax filings listed Penzone as a director for years after he resigned from the board.

No new home for animals was built, the main corporate partner pulled out and no one seems to be able to account for what happened to more than $300,000 that had been raised.

After The Republic began inquiring about fundraising and recordkeeping related to the jail shelter, the MASH Unit's companion nonprofit stopped soliciting donations online and updated its business records with the state. The county also secured a future facility for the MASH Unit's animals that is not a jail.

Penzone stepped down as sheriff in January, a year before the end of his term. He is now chief community relations officer for Blue Cross Blue Shield of Arizona, according to a representative for the insurance provider.

Penzone, through the Sheriff's Office, declined an interview request to discuss the MASH Unit or the nonprofit entity he created to support it. Blue Cross Blue Shield of Arizona did not respond to interview requests.

Over five years, Penzone touts need to improve MASH Unit

At a news conference in 2017, Penzone's first year in office, he said he had always advocated for protecting animals and investigating crimes against them. He supported adopting out animals seized by the Sheriff's Office instead of euthanizing them, he said.

"I don't want animals that just have a life," Penzone said. "I want animals to have a quality of life."

Penzone vowed to improve upon the MASH Unit.

The next year, Penzone established a nonprofit called MCSO MASH "to provide financial support and consultation" to the MASH Unit "for purposes of ensuring a safe environment, health services, and relational training for abused and neglected animals," according to the articles of incorporation. Federal tax records for 2018 listed Penzone as one of the nonprofit's five officers.

Then, in 2019, the Sheriff's Office announced plans to build a new facility for the MASH Unit.

PetSmart Charities, the Arizona Cardinals and the Phoenix Suns "committed to support the Maricopa County Sheriff's Office in the design and construction costs," according to the Sheriff's Office website. The Phoenix Suns Charities held a news conference with Penzone in late 2019 and handed over a giant novelty check for $500,000. The Suns confirmed that the half-million dollar donation was made.

The new MASH Unit facility was to be located near the southwest corner of 27th Avenue and Lower Buckeye Road in Phoenix, according to the Sheriff's Office website.

IRS filings state the MCSO MASH nonprofit paid Phoenix-based design firm Orcutt Winslow $183,558 for "architectural" and $94,000 for an unnamed general contractor. Those expenses were incurred between mid-2019 and mid-2020, according to tax records.

"The facility plans included an intake area, lobby for visitors for adoption purposes, indoor and outdoor kennels, future veterinary clinic, food storage, grooming, classroom, offices and other miscellaneous support spaces," said Tara Grenier, a principal with Orcutt Winslow. She said the company got the job by responding to the Sheriff's Office's request for proposals for architectural and engineering services.

In a March 2021 Facebook video, Penzone said the new MASH Unit facility was expected to cost $8.5 million.

"As the sheriff, I made a commitment that it would not come from taxpayer dollars," Penzone said. "It will be private contributions, from people who are passionate about this issue."

In the video, published a year after the start of the COVID-19 pandemic, a Sheriff's Office employee described the conditions at the jail where the animals were being held.

"There's nothing about this environment that is good for animals, that helps animals recover," said Detention Sgt. Paul Taylor in the pitch for donations to support the construction of a new facility.

Penzone echoed Taylor's sentiment in the video: "A dog or a cat in a jail cell? I don't need to go any further than to say we understand why that's inappropriate."

Orcutt Winslow produced renderings of a new building, which were published on the MCSO MASH nonprofit's website. The renderings showed a main building with a peaked roof echoing the nearby mountains and a walking path in the shape of a dog's bone.

After The Republic asked questions about the project, the operator of the MCSO MASH website removed the renderings and all mentions of a new facility. A video posted by Orcutt Winslow on their Facebook page continued to include images of the project renderings.

But the new facility was never built. The lot at 27th and Lower Buckeye stands vacant, and the MASH Unit is still housed in a former jail on First Avenue between Jefferson and Jackson streets in downtown Phoenix. An open-air paddock southwest of downtown, adjacent to a jail, can be used for large animals.

In December 2023, according to the Sheriff's Office, the MASH Unit was home to one horse, two tortoises, 44 dogs and 54 cats. The unit was being operated by one supervisor, eight detention officers and four animal care technicians, according to Sheriff's Office spokesperson Norma Gutierrez-Deorta.

The current annual budget for the MASH Unit is about $1.4 million, which is paid for by fees charged to incarcerated people, Gutierrez-Deorta said. Most of that money is spent on personnel working in the shelter and supplies and services, like vet visits and food, she said.

The county appropriates funding to the MASH Unit from an inmate services fund each year, Gutierrez-Deorta said. State law requires that the fund be used "for the benefit and welfare of inmates."

The inmate services fund receives revenue from jail commissary sales and fees incurred on inmate computer tablets, she said. The computer tablets allow people in jail to communicate with family and friends and access educational and other media content.

The Sheriff's Office has also pursued tax-deductible donations to support the MASH Unit. A link on the Sheriff’s Office website directs people to a donations page where potential donors are asked to donate to support dogs and cats or horses or make a general donation. The page does not make clear what entity receives the money.

Until recently, the MCSO MASH charity's website encouraged users to donate to a “new facility fund.” After inquiries from The Arizona Republic, the wording was changed to "Donate to our building fund" and then the option to donate was removed.

Nonprofit plagued by muddled leadership, sloppy record-keeping

By the time Penzone was featured in the March 2021 fundraising video for the MCSO MASH nonprofit, he was no longer officially a leader of the organization, according to the Sheriff's Office.

He stepped down from the nonprofit's board of directors in 2020, just two years after he'd created the group. The Sheriff's Office provided The Republic with an electronic copy of a letter dated Nov. 19, 2020, addressed "To the MCSO MASH Board."

"I have been advised by counsel that as an Elected Official, I should not retain a position on the board in order to avoid the appearance of any conflicts of interest," the letter stated. "I thank you all for your commitment to help build this new facility and be part of a new MCSO legacy."

But Penzone's resignation went unnoticed, at least by the people in charge of the nonprofit's corporate filings.

Long after the Sheriff's Office said he left the board, he continued to be listed as a director on the nonprofit's federal tax records. IRS records for tax years 2021 and 2022 state he was still on the board. The 2022 tax year document was filed on Oct. 3, 2023, the day after Penzone announced he was leaving office early.

Similarly, the 2020 Arizona Corporation Commission annual report, which was signed on Oct. 29, 2021, by Robyn Anderson, Penzone's executive assistant at the Sheriff's Office, and received and filed by the commission on Nov. 3, 2021, listed Penzone as a director.

Gutierrez-Deorta, the MCSO spokesperson, said the continued identification of Penzone as a director on tax records was a "clerical error" and blamed the law firm acting as the nonprofit's statutory agent for the mistake.

"When the law firm failed to submit a new listing of directors, that led to the misrepresentation as though he held a role on the board," Gutierrez-Deorta said in a statement. Andy Abraham, the attorney listed as the nonprofit's statutory agent, did not respond to The Republic's inquiry about the inaccuracies.

Penzone wasn't the only director who continued to be erroneously listed as a leader of the MCSO MASH nonprofit.

Deb Turcott was the chief operating officer of PetSmart Charities when Penzone launched the nonprofit and was named as a director of the organization. But she parted ways with the nonprofit in January 2020 after leaving PetSmart Charities, according to Christina Grant-Backus, a spokesperson for PetSmart Charities.

"My service on MASH Board was only pursuant to the Grant Agreement between PetSmart Charities and MSCO MASH and it concluded when my time with PetSmart Charities concluded," Turcott said in an email.

By the time the most recent federal tax document for the MCSO MASH nonprofit was filed in October, only two of the five directors listed were actually still serving on the board.

Penzone and Turcott had both stepped away and Sue Glawe died in August. Glawe, until her retirement several years ago, was the vice president of community relations at Blue Cross Blue Shield of Arizona, a role similar to the one Penzone now holds for the insurer.

Only Leslie Rachels, who has worked as a health care industry professional, and Anderson were serving as directors in October.

Current Arizona Corporation Commission filings show Rachels as president and Anderson as "other officer." On most state corporation and federal tax filings, the mailing address for the directors is MCSO's administrative building.

Anderson, Penzone's assistant, has been a director from the nonprofit's beginning, continuing after Penzone stepped down from the board due to a conflict of interest. The Sheriff's Office declined to make Anderson available for an interview.

Robert Ashcraft, executive director of the Lodestar Center for Philanthropy and Nonprofit Innovation at Arizona State University, said the tax-exempt status enjoyed by nonprofits is a privilege and that nonprofit entities should aspire to be transparent, communicative and open.

He said it's especially important for nonprofits to have accurate descriptions of current board members included in their annual federal IRS filing, called Form 990.

"That way the public can see who is stewarding and shepherding the mission of the organization," he said. "Because at the end of the day, the board is the legal fiduciary agent."

Nonprofit at risk of dissolution because of failure to file documents

The MCSO MASH nonprofit has been playing catchup on government paperwork from the start.

The organization did not file required federal tax forms until 2020, submitting documents for tax years 2018 and 2019 on the same day: Nov. 9, 2020. According to the 2018 tax year filing, the lateness was attributed to drawn-out processes with the Maricopa County's Board of Supervisors for accepting PetSmart Charities' contribution and developing operating procedures.

In addition to being behind on federal filings, the nonprofit was at risk of dissolution in 2023 because it had not filed the required documents with the Arizona Corporation Commission for several years. In Arizona, nonprofit corporations are required to submit an annual report with basic information such as their headquarters location and the names of the people who run them.

A search of the commission's online database in early November showed MCSO MASH hadn't filed annual reports since 2021. Inquiries about the missing paperwork from The Republic prompted the commission, which said "intermittent issues" with its system resulted in not properly updating entity statuses, to say it would send a notice of dissolution to the nonprofit.

"It appears that this corporation has failed to file its last few annual reports," said commission spokesperson JP Martin on Nov. 9. "As this information has now come to our attention, we will immediately commence the process for administrative dissolution."

Before The Republic reached out to the commission, its website listed MCSO MASH as an “active” entity "in good standing." But a document history on the website showed the nonprofit had not filed an annual report since submitting the 2020 report in 2021. The years 2021 and 2022 were listed as “years due” on the commission’s website.

The commission had filed two notices of delinquent annual reports against MCSO MASH in July and September 2021, according to the commission website. The first stated that because of the past due reports, the nonprofit's entity status had been changed to "pending inactive." The commission then instructed MCSO MASH to file an annual report “to return your corporation to good standing.” The second notice said the entity was at risk of being dissolved.

After The Republic contacted the commission for clarification, MCSO MASH's status was changed to "Pending Inactive." The reason for the status was listed as "Pending Administration Dissolution — Annual Report Past Due."

After receiving questions from The Republic about the missing reports, MCSO spokesperson Norma Gutierrez-Deorta said "all pertinent documents" had been updated, and the commission returned the nonprofit's status to "Active" and "In Good Standing."

Abraham, the attorney serving as the organization's statutory agent, called the untimely filing of the commission reports "an administrative oversight."

"It was addressed immediately and the filings updated with no resulting consequences," he said.

Ashcraft said Arizona Corporation Commission requirements are not onerous. Indeed, after The Republic notified the Sheriff's Office of the delinquent filings, they were updated within hours, bringing the nonprofit into compliance.

"You should file annually," he said. "It just substantiates that you are a going concern, and identifies if there are any changes to your statutory agent, your contact information, that kind of stuff."

Where did the money go?

The 2022 IRS 990 for MCSO MASH shows the nonprofit raised a total of $1,566,611 since it was incorporated in 2018. The bulk of that fundraising, $925,000 was raised in 2018, with another $530,409 reported raised in 2019.

The $925,000 came from PetSmart Charities. It was supposed to be part of a larger $2 million donation, but according to Grant-Backus, the PetSmart Charities spokesperson, the Sheriff's Office and MCSO MASH didn't meet the benchmarks for continued funding.

"In 2019, PetSmart Charities entered into a grant agreement with the Maricopa County Sheriff’s Office ... with grant funds supporting design and construction of the new MASH Safe Haven Unit facility," Grant-Backus said. "After our initial disbursement of $1M, MCSO failed to meet subsequent project milestones that would have triggered additional payments. MSCO ultimately returned the unspent funds from our initial disbursement — a total of $642K was expended on this project."

Grant-Backus said PetSmart Charities is no longer affiliated with the MCSO MASH Unit.

The most recent MCSO MASH IRS 990 shows the nonprofit's net balance at $407,737, but the nonprofit has not listed any major spending other than the nearly $280,000 spent on "architectural" and "general contractor" in 2019.

To explain where the rest of the money had gone, Gutierrez-Deorta said donations collected by MCSO MASH are "periodically transferred to the MCSO MASH Donation Fund" kept by Maricopa County via a Board of Supervisors agenda item.

"Expenditures for project manager, architecture, engineering, construction manager/builder have all been paid through this account at the County," Gutierrez-Deorta said. "Accordingly, all purchase orders for the project management, design and construction were issued through County Procurement and invoices paid through the standard County accounts payable process. The County has paid all the expenses for the Architectural, Engineering, Project Management, Construction Management/Builder fees. The only expenses paid through 501(c)(3) have been Accounting, Marketing and Fundraising expenses.”

But Fields Moseley, a spokesperson for the county, said the county's board was only aware of an unspent, one-time transfer of $250,000 from MCSO MASH in 2020.

"That money is sitting in the account at this time," Moseley said.

Beginning with a total raised amount of $1,566,611 and subtracting the current net balance of $407,737, the expenses of $283,142 for architectural work, a general contractor and legal services, the 2020 $250,000 transfer to the county, and the $283,000 repayment to PetSmart leaves more than $340,000 for which The Republic could not find receipts.

Representatives for the Sheriff's Office and the MCSO MASH nonprofit did not respond to repeated requests for clarification on how the rest of the funds were used.

Leslie Rachels, president and director of MCSO MASH, said in an interview that she was "never really involved on the financial side" of the nonprofit. She said Glawe, the former Blue Cross Blue Shield of Arizona executive who died in August, "was the keeper of the finances." Rachels said she didn't know where the money raised for a new MASH Unit facility had gone.

"As far as I know, what's left is sitting in a fund, but I don't know," she said.

Ashcraft, the leader of the ASU center focused on nonprofits, said charitable organizations are required to make financial disclosures to the IRS so that they can keep the confidence of the public and their donors.

"The idea here is to shine a light on details of an organization to inspire trust and advance good stewardship," he said.

What will happen to the MASH Unit?

Rachels said getting a new facility built is still the number one priority for the MCSO MASH nonprofit, but she expected a new sheriff coming into office could cause more delays for the project. The office of sheriff is up for election in November.

"We are starting to build partnerships, again, getting the focus back," Rachels said. "The main thing is we don't want the animals living in the jail."

After more than a month of questions about the future of the MASH Unit from The Republic, the Sheriff's Office announced in December that the unit would be relocated from the First Avenue Jail to the Maricopa County Animal Care and Control facility on 27th Avenue, known as the Durango Facility.

An interdepartmental agreement between the agencies states that when the county eventually constructs a new West Valley animal shelter, space will be freed up at the existing facility for the MASH Unit to move in. Earlier this year, the county supervisors appropriated $5.3 million to find a location for a new West Valley shelter and begin its design, said Moseley, the county spokesperson. It was expected to open in a few years, he said.

The money made from incarcerated people off jail commissary sales and fees incurred on inmate computer tablets could be used for capital upgrades "related to programming, education and other allowable uses," according to the agreement. Other building improvements to the Durango Facility will come from MASH donations and other dollars secured by MCSO, the agreement states. The agreement between MCSO and Animal Care and Control estimates the current cost of staffing, utilities and maintenance of the current MASH facility to be $1.55 million annually.

Sheriff Russ Skinner, who was appointed in February to replace Penzone and is seeking election, supports the new interdepartmental agreement, said MCSO spokesperson Gutierrez-Deorta.

"While relocation and occupancy for both entities to transition to new facilities may take some time, we are looking forward to a more functional space for expanding inmate programs while providing a more welcoming environment to care for and adopt animals from our facility," Gutierrez-Deorta said.

Skinner is "committed to the future improvements and expanded benefits" of the MASH program, she said.

Have a news tip on the justice system? Reach the reporter at jjenkins@arizonarepublic.com or 812-243-5582. Follow him on X @JimmyJenkins.

This article was reported through a fellowship supported by the Lilly Endowment and administered by the Chronicle of Philanthropy to expand coverage of philanthropy and nonprofits. The Arizona Republic is solely responsible for all content.

This article originally appeared on Arizona Republic: Paul Penzone's failed plan to expand an Arpaio-era PR project