Former Southampton Pastor Linked To AG's Probe

A longtime Southampton pastor has been implicated in a state attorney general’s office investigation that claimed “shocking” fiscal mismanagement by the trustees of a foundation serving underprivileged children. One of the assets was a house at 182 Tuckahoe Lane in Southampton.This week, Attorney General Eric Schneiderman announced that his office had reached a settlement for just over $1 million with trustees of the Victor E. Perley Fund, whose leaders made “imprudent and improper investments” beginning in 2009—so much so that its portfolio shrank from $3.7 million to $1 million. The $1 million that was left represented the proceeds of last year’s sale of the two-bedroom, two-bathroom house on Tuckahoe Lane for about $100,000 less than what the foundation had paid for it in 2009.

“The breakdown in governance at the Perley Fund was shocking, bringing a longtime charity serving New York’s underprivileged children to the brink of financial ruin,” Mr. Schneiderman said in a press release.

The Victor E. Perley Fund was created in the 1950s upon the death of Mr. Perley, whose will specified that the trustees had to include at least one Jewish rabbi, one Catholic priest or layman, and one Protestant minister. Beginning in 2009, at the request of a new chairman, Richard Basini, the role of Protestant minister was filled by the Reverend Peter Larsen, who was the pastor at St. John’s Episcopal Church in Southampton for 25 years until his retirement in 2014. The priest and rabbi, also tapped in 2009 by Mr. Basini, had congregations in New York City.

With a whole new board of directors, Mr. Basini shifted the nonprofit’s focus from making grants for children in New York City settlement houses to establishing a children’s choir, whose members performed in blue blazers and khakis for audiences in Southampton on several occasions.

“We realized that the money we were donating to big charities was going into general funds,” Mr. Basini told The Press in 2012, in a story on the children’s choir, when explaining why the fund had shifted its attention. “When we asked the charities to tell us what they do with our donations, they couldn’t give us an answer. We said, ‘Let’s do something of our own.’”

This week, the attorney general’s office told a very different story. In that version, another trustee, James Cahill, was making “imprudent and self-interested transactions” with the foundation’s assets, beginning around 2009, even while Mr. Basini persuaded the trustees to buy the Southampton house as a retreat for the choir, and as an investment. Mr. Basini then went on to live there while paying below-market rent—less than the annual property taxes, according to a report in Crain’s—and at times no rent at all.

At the same time, Mr. Basini collected “an unapproved salary for an unnecessary job,” the attorney general’s office said—essentially, being paid to raise funds while bringing in very little money.

The attorney general’s office launched an investigation in 2012, after which Mr. Basini’s employment and his Southampton lease were terminated. Mr. Basini committed suicide in spring 2013 at age 72.

Mr. Cahill, an investment banker, resigned from the Perley Fund’s board of trustees in June 2013.

The investigation criticized the clergy trustees for failing to exercise reasonable care when delegating investment responsibility to Mr. Cahill and Mr. Basini, and they, along with Mr. Cahill, had to jointly pay a $1 million fine. In the case of the clergy members, the fines were covered by insurance, according to Crain’s—which also pointed out that the attorney general’s office collected nothing from the estate of Mr. Basini. Mr. Cahill was required to pay an additional $25,000.

The attorney general’s office said it turned over the payments, less expenses, to the Perley Fund, whose entire board of trustees will be replaced by new trustees who are acceptable to the attorney general’s Charities Bureau.

Asked to comment on behalf of Rev. Larsen, who moved to Alabama after retiring, his attorney, Pamela Mann of Carter, Ledyard & Milburn in Manhattan, read a statement on behalf of all three clergy trustees, Monsignor Michael Crimmins and Rabbi Jill Hausman, as well as Rev. Larsen.

“The current trustees of the Victor Perley Fund have worked very hard to address past challenges and to enable the organization to chart a positive course for the future,” the statement said. “This is an appropriate resolution that resolves a difficult period and gives the organization the ability to further its charitable mission.”