U.S. Pain Foundation Pockets $210,000 from Insys Therapeutics

By Pat Anson, PNN Editor

The U.S. Pain Foundation has decided to keep over $210,000 leftover from a controversial co-pay prescription drug program funded by Insys Therapeutics, a disgraced Arizona drug maker blamed for the overdose deaths of hundreds of pain patients.

The funds have been designated as “unrestricted grant revenue” by the Connecticut based-charity, which at one time claimed to be the nation’s largest non-profit advocacy group for pain patients. The decision to keep the money, which was being held in an escrow account, reverses a previous pledge by U.S. Pain in 2018 that it “will not accept funding from Insys going forward.”

“It has been determined that the funds may be used for charitable purposes consistent with the tax-exempt purpose of USPF in assisting people living with chronic pain. Going forward these funds will be allocated for such purposes,” U.S. Pain disclosed in a recent audit statement. “The escrow reserve of $210,974 was reversed in 2019 and the unrestricted funds were recorded as unrestricted grant revenue.”

Insys and U.S. Pain launched the “Gain Against Pain” program in 2016 with $2.5 million donated by the company. The stated goal of the co-pay program, which was administered by NeedyMeds, was to help patients obtain medication for breakthrough cancer pain.

But the program was apparently only used to generate prescriptions for Subsys, an expensive and potent fentanyl spray that was Insys’ flagship product. A four-day supply of Subsys can cost nearly $24,000.

The Gain Against Pain program was shut down in 2018 after Insys executives were charged with racketeering, fraud, bribery and other criminal charges over their marketing of Subsys. Insys filed for bankruptcy in 2019 and its founder sentenced to 66 months in prison.

Controversy over the co-pay program and other financial irregularities also led to the resignation of Paul Gileno, the founder and CEO of U.S. Pain. Gileno later pleaded guilty to charges of fraud and tax evasion, and served a few months in federal prison.

“We now know that Insys Therapeutics advanced this program using predatory practices and were assisted in doing so by U.S. Pain Foundation via access to the vulnerable populations served by that organization,” said Stefanie Lee Berardi, a patient advocate and grant writer who worked in nonprofit management.

“Nonprofits receiving large charitable donations have a duty to ensure the source of those funds is both legal and ethical before those funds are accepted. Once the funds are accepted, it is very difficult to give those funds back.”

The $210,000 in leftover co-pay funds would be a significant amount of money for most charities. U.S. Pain had over $1.4 million in revenue according to its 2019 tax return, about 30% less than the year before. The charity also disclosed in its audit statement that it received $92,805 this year from the federal government’s Payroll Protection Loan Program.

Questionable Spending

Under Gileno’s leadership, there was virtually no oversight of spending at U.S. Pain, which used donated funds to pay for highly questionable purposes, such as operating a money-losing bakery, loans to Gileno’s brothers and a family vacation to Universal Studios in Florida. The charity now has a chief financial officer and a new board of directors, and says it has other safeguards in place to prevent further fraud.

U.S. Pain CEO Nicole Hemmenway, who was vice-president and board chair under Gileno, did not respond to a request for comment for this story.

The charity’s audit statement indicates the $210,974 was received in two checks from NeedyMeds and had not been spent or earmarked for any program. Classifying the funds as unrestricted grant revenue means they can be used for any purpose – not just helping cancer patients.

“What I am really not understanding is why U.S. Pain chose to accept these as unrestricted funds, rather than to a restricted fund that would help individuals and families who were harmed by Insys’ co-pay program,” Berardi said in an email.

“Given that they haven’t yet done so, it is now imperative that they clearly define how those monies will be used. It is still possible for them to do the right thing. Should they choose to, they may find that they can mitigate the reputational harm sustained as a result of unethical and illegal business practices for which their CEO went to prison and an irresponsible board of directors who failed to meet their duty of care.”

Another critic believes U.S. Pain should donate the money to another charity.

“Given what has come out about both Insys and the U.S. Pain Foundation, the ethical thing to do would have been to give the money to a nonprofit organization that provides treatment for opioid use disorder,” said Adriane Fugh-Berman, MD, Director of PharmedOUT, a program at Georgetown University that seeks to expose deceptive marketing in the healthcare industry.

Co-pay prescription drug programs – also known as co-pay charities – are ostensibly designed to help needy patients pay for prescription drugs. But in recent years, several major pharmaceutical companies have paid heavy fines to settle fraud allegations that they used co-pay programs to steer Medicare patients to their high-priced drugs.

The assistance programs typically pay only a small amount for the prescriptions, with the rest of the cost picked up by Medicare. Federal anti-kickback laws prohibit drug companies from making any kind of payment to induce Medicare patients to purchase their drugs.

Former CEO of U.S. Pain Foundation Released Early from Prison

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation will spend the next six months in home confinement after being given “compassionate release” from a federal prison due to COVID-19 concerns. Paul Gileno suffers from asthma and other health issues, which puts him at high risk from the coronavirus.

Gileno abruptly resigned from U.S. Pain in 2018 and was later charged with embezzling millions of dollars from the Connecticut-based charity, which at one time claimed to be the largest advocacy group for pain patients. Gileno cut a deal with prosecutors, pleaded guilty to fraud and tax evasion, and in January began serving a one-year sentence at a minimum-security prison in Minersville, Pennsylvania.  

In correspondence with this reporter from prison, Gileno complained about conditions at the facility and said he was worried about becoming infected with COVID-19.

“Basically 100 of us are locked in one building, all sharing the same bathrooms and common areas. I sleep on a top bunk in a room of 30 people which is all open,” said Gileno.

“The CO's (correctional officers) and staff do not wear masks and they come from the outside world. They say they test them, but that consists of taking their temperature. They won’t let us out to get fresh air, only to go eat and come back which is less than 10 minutes.”

PAUL GILENO

In March, Gileno’s attorney filed a motion asking that the remainder of his sentence be modified to home confinement.  A judge rejected that request, but on April 17 a second motion was submitted and Gileno’s release was approved.

“Mr. Gileno has demonstrated that he suffers from asthma and respiratory conditions that place him at greater risk from COVID-19, and that he is unable to properly guard against infection while incarcerated,” Judge Victor Bolden said in his order. “Undue delay in his release could result in catastrophic health consequences for him.”

Prisons and jails around the country have become hot spots for COVID-19. Over 3,000 federal inmates and prison staff have been infected with the virus, with 51 inmate deaths to date. Last month, Attorney General William Barr ordered the federal Bureau of Prisons to identify low-risk inmates who could be released to home confinement. Over 2,500 have been released so far.

Gileno’s sentence has been reduced to time served and he was released from prison April 20. He will remain in home confinement until November 12, and then begin a two-year period of supervised parole. Under another court order, Gileno is required to pay over $3.1 million in restitution to the U.S. Pain Foundation.

Permanent CEO Named

This month U.S. Pain announced the appointment of two new members to its board of directors: Edward Bilsky, PhD, an academic administrator and professor at Pacific Northwest University of Health Sciences, and Jessica Begley, a marriage and family therapist from Texas.

They join board members Ellen Lenox Smith, a retired teacher; Marv Turner, a producer and filmmaker; and Shawn Dickens, a government defense contractor. Dickens was elected Chairman and Treasurer.

The revamped board also voted to appoint Nicole Hemmenway as permanent CEO. Hemmenway had been acting CEO of U.S. Pain in the two years since Gileno’s departure. She had previously served as vice-president and board chair while working with Gileno.

Gileno’s misuse of donated funds allegedly went undetected for three years due to poor oversight by the board, which apparently held no annual meetings or elections as required by Connecticut state law.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart wrote in her blog. Stewart resigned in frustration in 2018 because she felt the board was “left in the dark” about how money was being spent.

At one time, U.S. Pain claimed to have over 90,000 members and nearly a quarter of a million social media followers. The non-profit later admitted having only 15,000 people on an email subscriber list.  

According to an audit and U.S. Pain’s 2018 tax return, the charity spent over $1.2 million that year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery. The foundation’s 2019 tax return has not yet been filed.

Pain, Prison and a Pandemic: Life Behind Bars for Former CEO of U.S. Pain Foundation

By Pat Anson, PNN Editor

Self-isolation, social distancing and good hygiene may be the order of the day for most of us during the COVID-19 crisis. But they are next to impossible for Paul Gileno.

“Basically 100 of us are locked in one building, all sharing the same bathrooms and common areas. I sleep on a top bunk in a room of 30 people which is all open,” says Gileno.

Gileno is the founder and former CEO of the U.S. Pain Foundation, which once billed itself as the nation’s largest advocacy group for pain patients. Today he is better known as Inmate #26388014 at Federal Prison Camp Schuylkill, a minimum-security facility in Minersville, Pennsylvania.

Like other federal prisons, Schuylkill has been locked down in an attempt to limit the spread of the coronavirus. All visits have been suspended and inmates spend little time outside of their cells and dorm areas.

“The CO's (correctional officers) and staff do not wear masks and they come from the outside world. They say they test them, but that consists of taking their temperature. They won’t let us out to get fresh air, only to go eat and come back which is less than 10 minutes,” Gileno says. 

In January, Gileno began serving a one-year sentence at Schuylkill for embezzling over $1.5 million from U.S. Pain. He could have gotten up to 25 years, but federal prosecutors agreed to ask for a lesser sentence when Gileno pleaded guilty to fraud and tax evasion.

“I was horrified how pain patients are treated in the outside world. In prison it’s 100 times worse,” wrote Gileno, who recently began corresponding with this reporter by letter and email.

“I am treated terrible here, all of the inmates are treated horrible here. Food is either expired or almost inedible and they are constantly doing raids, shakedowns and lockdowns, sometimes making us stand in the freezing cold for hours while they search our cells.”

Gileno abruptly resigned from U.S. Pain in 2018, but it took nearly a year for the Connecticut-based charity to disclose the full extent of the “financial irregularities” that he was accused of.  

An audit revealed that Gileno used the foundation’s bank account as his own personal piggy bank, writing checks to pay expenses such as his mortgage, car payments and a visit to Universal Studios.

There were also questionable business decisions that were far outside the scope of U.S. Pain’s mission, such as a $100,000 loan to Gileno’s brothers and $165,000 spent on a failed bakery.

The brazen misuse of donated funds somehow went undetected for three years by U.S. Pain’s board of directors and vice-president Nicole Hemmenway, who has been “interim CEO” ever since Gileno’s departure. The non-profit’s board and office staff remain largely the same.

PAUL GILENO

“I don’t know what else I can say about U.S. Pain, except I certainly made mistakes and I mismanaged. But I took full responsibility and I am paying the ultimate price in many ways,” Gileno wrote.

“Sadly the people I loved and respected and who I trusted and hired totally disowned me, left me and refused to handle this in a way where I did not suffer as much as I am suffering. I owned up to my mistakes and never thought I would be treated as I was. With that said, I want U.S. Pain to succeed and I want it to flourish.”  

Gileno says he sleeps on a two-inch mattress that has aggravated his chronic back pain. His only relief comes from ibuprofen or Advil, which he buys at a prison commissary. A doctor visits once a week, but sees only a handful of inmates.

“They are overwhelmed and do not care,” Gileno wrote. “I have met men in so much pain it’s tragic. We have no options here, no physical therapy, no medical attention, no access to any sort of therapy that can relieve some of our pain.

“I must say I am suffering more now in pain than ever before and my anxiety is at an all time high. And they do not treat that either.”

The worst part of prison life for the 47-year old Gileno is that he can’t see his wife and two sons due to the coronavirus lockdown. Schuylkill is a three-and-a-half-hour drive from their home in New York state. Telephone calls are limited to 15 minutes and emails are restricted.

Because of the pandemic, Attorney General William Barr recently ordered the early release of inmates from three federal prisons where coronavirus outbreaks have occurred. But so far there’s no word of that happening at Schuylkill.

“There is a lot of talk about freeing federal inmates but we have not been told anything nor have they informed us if there is a procedure in place,” Gileno says. “I am hoping they are not waiting until it gets here. I am one of the high risk patients they should put on home confinement. Besides all of my pain conditions and RSD, I have chronic asthma and chronic bronchitis.”

Gileno is currently scheduled for release in November. When he gets out, Gileno would like to return to patient advocacy and perhaps run a support program for prisoners in pain.  

“I just hope people with pain know that I am always going to fight for them and all patients and that was always my goal when starting the foundation. I can’t wait to get out to be a patient advocate again and help who I can,” he wrote.

Former CEO of U.S. Pain Foundation Sentenced to Year in Prison

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation has been sentenced to a year in federal prison for embezzling $1.5 million from the Connecticut-based charity and failing to report the income on his tax returns.

U.S. District Judge Victor Bolden sentenced Paul Gileno to 12 months and one day of imprisonment, followed by two years of supervised release. Gileno pleaded guilty to wire fraud and tax evasion in June.

The 47-year old Gileno is also required to pay full restitution to the charity and the Internal Revenue Service, as well as tax penalties and interest.

"By engaging in wire fraud and tax fraud, the defendant committed very serious crimes over the course of several years,” U.S. Attorney John Durham said in court documents.  

“As the Court is well aware, tax fraud undermines the public’s confidence in the tax system and relies on taxpayers to correctly report all taxable income.  As to the wire fraud offense, the defendant stole money from his employer for his own personal gain.  As such, the defendant’s conduct is very serious."

PAUL GILENO

Gileno faced up to 25 years in prison, but as part of his plea agreement prosecutors agreed to ask for a lesser sentence. In a sentencing memo, prosecutors said Gileno was in “relatively good physical and mental health” and was a hard worker committed to his family.

"I cannot even express how sorry I am for what  have done, I made mistakes, I screwed up majorly, I mismanaged, I was careless and I took money that was not mine, I used it for personal use and I was selfish," Gileno wrote in a letter to the judge. "I took the money and, in my mind, justified it by saying to myself I deserved it at the time and US Pain had it. I justified it in multiple ways."

Gileno's defense attorney also presented numerous testimonies from pain patients and advocates about the help they received from Gileno and his work in patient advocacy.

Gileno will report to prison on January 6, 2020. Until then he is free on bond.

Fraud Went Undetected for Three Years

The money embezzled by Gileno was used to pay his mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years knew anything regarding the going out and coming in of money/funds,” former U.S. Pain board member Suzanne Stewart recently wrote in her blog. Stewart resigned from the board last year because she was concerned about how the charity was being run.

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2 million from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed for several months that financial irregularities were behind his departure.

Since Gileno’s resignation, U.S. Pain says it has taken steps to ensure there was more internal control and financial oversight of its expenses and cash flows.

According to U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses. That means less than half of the $2.1 million raised by the charity was spent on programs and services for the pain community.

Earlier this month, U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier. Dickens is the first U.S. Pain board member who was not appointed by Gileno.

Former Director of U.S. Pain Foundation Questions Misuse of Funds

By Pat Anson, PNN Editor

A former board member of the U.S. Pain Foundation is raising questions about how former CEO Paul Gileno was able to misappropriate over $2 million in funds from the Connecticut-based non-profit. 

Gileno pleaded guilty to fraud and tax evasion charges in June and is awaiting sentencing.  Federal prosecutors say Gileno used donated funds in the charity’s bank account to write checks to himself and other people for his own personal benefit. The money was used to pay Gileno’s mortgage, car payments, loans to his brothers, and a visit to Universal Studios in Orlando, Florida. The misuse of funds allegedly went undetected for three years.

“I still find it difficult to believe that nobody else who’d been in upper management of the foundation for several years, knew anything regarding the going out and coming in of money/funds,” former board member Suzanne Stewart recently wrote in her blog.

Stewart was a volunteer “ambassador” at U.S. Pain before she was appointed to the board in January, 2018 – a tumultuous time in the charity’s history, as the extent of the misuse of funds was just becoming known. Stewart resigned from the board 8 months later and has remained relatively silent about her board experience, until now.

Stewart wrote in her blog that she was initially excited to join the board, but soon realized something was amiss when she called another board member.

“I called to ask her a few questions, such as: ‘What was it like, being on the Board? What do we do as Board Members etc?’ She laughed & told me that ‘there was no real Board of Directors’. She added that they’d never even had a board meeting!” said Stewart, who lives with Complex Regional Pain Syndrome and other chronic pain conditions.

SUZANNE STEWART

“I was a bit disappointed at hearing this news. But it was soon confirmed. The Board of Directors of the US Pain Foundation, were actually just photographs on the USPF website, prior to January, 2018. There was no true Board of Directors. There had been no board meetings or elections.”

Gileno founded the Connecticut Pain Foundation in 2006 after he was disabled by a back injury. In 2011, he launched U.S. Pain and registered as a charity in the state. Connecticut state law requires non-profits to have annual board meetings and to elect their directors and officers.

“So I’m guessing there was there no secretary or treasurer? I’m guessing this means that nobody had to get permission to write checks?” Stewart asks. “Didn’t they have to answer to anyone about how or where to spend donation monies? How does the President, Vice President & Executive Director & other upper management, not know what & where money is coming in and/or going out?”

According to an audit and U.S. Pain’s tax returns, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018.  Nicole Hemmenway, the current acting CEO, was vice-president and board chair at the time. Two other longtime board members, Wendy Foster and Ellen Lennox Smith, still serve as directors. And Lori Monarca remains as Executive Office Manager, according to U.S. Pain’s website.

Only Gileno has been charged with a crime.

“It seems to me that when upper management realized that things had somehow gotten out of hand and that the USPF might be slipping away, they decided to get lawyers and accountants involved in an attempt to ‘fix’ a situation that they’d created. It seemed to have finally become something larger that they could no longer handle alone,” Stewart wrote.

“Over the following months, I found out what a mess things were and I immediately wanted to resign. I was advised by one of the attorneys, that ‘it wouldn’t look good’ for USPF, if anyone on the Board resigned during that time.”

The board asked for and received Gileno’s resignation in May 2018, although it wasn’t publicly disclosed until December that “financial irregularities” were behind his sudden departure.

Gileno did not comment on Stewart’s post, but praised her work as a patient advocate.

“I can say that I have always admired Suzanne and she is an amazing advocate and I respect her dearly. She has an amazing and supportive husband and family,” Gileno said in an email.  

‘The Very Last Straw’

Stewart eventually resigned because she was unhappy with decisions being made by Hemmenway and the rest of the board. A redacted version of Stewart’s resignation letter was posted on her blog, in which she complained about being “left in the dark” and not knowing “where money is going or where it comes from.”

“The very last straw for me was when the Interim CEO & the rest of the Board, contemplated not telling the USPF ‘In-person’ support group leaders that they were no longer covered by insurance. I was the only Board member who said that I’d have no part of that,” wrote Stewart, who did not respond to a request for comment from PNN for this story.

Hemmenway also did not respond to a request for comment. In a statement last December, she said that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

Gileno maintains that he kept the board informed.

“They are trying to cover their asses for being (an) inadequate board I guess,” Gileno told PNN last year. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing.”

Whether the board knew about the misuse of funds or not, nonprofit experts say board members have a fiduciary responsibility to provide oversight and know how money is being spent. 

“U.S. Pain board members claim they did not know about their former CEO’s misuse of funds. This, however, does not change the fact that they should have known, and are, in fact, required by law to have controls in place to ensure those funds are used for the benefit of its stakeholders,” says Stefanie Lee Berardi, a patient advocate and grant writer who worked in nonprofit management.

“Serving on a board of directors is a great opportunity to contribute your time and talent to non-profit organizations who are doing great work. However, you should know that when you accept that position, you have a legal responsibility to use good judgement when making decisions on behalf of the organization, to put the organization’s interests before your own, and to ensure the organization is legally compliant.”

Gileno remains under investigation by the Connecticut Attorney General’s office, which may seek a court order to prevent him from ever serving again as a nonprofit officer or director.

Under state law, a Superior Court Judge could remove non-profit directors “engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion,” but no such action against U.S. Pain appears likely.

“As much as we would like to have seen their entire board ousted, the truth of the matter is that the only way that happens is if the state shuts them down. So far, with the completion of their audit, they have likely done enough to satisfy the state,” said Berardi, who thinks U.S. Pain should find new directors and officers to manage the organization. 

“If we are looking at best practices for board management, they absolutely should have a comprehensive plan for recruitment, induction, development, and succession. These board functions should be enumerated in the bylaws, updated at regular intervals, and formally adopted,” she said. “Recruiting ‘new blood’ should just be regular order.” 

(Update: On October 1, 2019 U.S. Pain announced the appointment of Shawn Dickens to its board of directors, filling the seat vacated by Suzanne Stewart nearly a year earlier.)

At one time, U.S. Pain claimed to be the nation’s largest pain patient advocacy group, with over 90,000 members and nearly a quarter of a million social media followers. It was a dubious claim, as the non-profit later admitted having only 15,000 people on an email subscriber list.  

According to the audit and U.S. Pain’s 2018 tax return (the organization’s 2016 and 2017 returns were delinquent and filed late), the charity spent over $1.2 million last year on salaries, employee benefits, lawyers, accountants, tax penalties and business losses – including a failed attempt to operate a bakery.

U.S. Pain Foundation Founder Pleads Guilty to Fraud and Tax Evasion

By Pat Anson, PNN Editor

Paul Gileno, the former CEO and founder of the U.S. Pain Foundation, has pleaded guilty to fraud and tax evasion charges stemming from his misuse of funds from the Connecticut-based non-profit.

Gileno, 46, waived his right to be indicted and pleaded guilty Monday before U.S. District Judge Victor Bolden in Bridgeport, Connecticut. He faces up to 25 years in prison, but as part of the plea agreement prosecutors agreed to ask for a lesser sentence because of Gileno’s “prompt recognition and affirmative acceptance of personal responsibility.” A sentencing date has not been set.

According to court documents, Gileno embezzled nearly $1.6 million from the foundation from 2015 to 2017 and failed to report the income on his personal tax returns. For that, he owes an unpaid federal tax of over $532,000. Gileno must also pay a fine and make full restitution to the foundation and Internal Revenue Service, as well as tax penalties and interest.

Prosecutors say Gileno used the foundation’s bank account to write checks to himself and issued payments to other people for his own benefit. The money was used to pay for personal expenses, such as Gileno’s mortgage, car payments and a $3,600 visit to Universal Studios in Orlando, Florida. The misuse of funds went undetected for three years.

“Gileno failed to maintain accurate books and records of the United States Pain Foundation and in a number of instances, made false and fraudulent representations to the Board regarding the expenditures,” prosecutors said.

PAUL GILENO

“I hope your readers realize I did make mistakes but that should not take away from all the good work I did and the organization I created,” Gileno said in an email to PNN. “The board has been the same for the past 9 years and I hope they continue to help people with pain and use the programs we created together."

As he awaits sentencing, Gileno said he was “trying to focus my life on my two boys who are 5 and 4 and need their dad."

Acting CEO Nicole Hemmenway did not respond to a request for comment on Gileno’s guilty plea, but the foundation released a statement.

“While the last year has been difficult, the organization has never lost sight of its guiding mission to educate, empower, support, and advocate for the 50 million Americans living with chronic pain,” the foundation said. “We are thankful that resolution of these issues is coming to an end, and are committed to continuing to serve people with pain, stronger than ever.”

As PNN has reported, Gileno was forced to resign in May, 2018 after “financial irregularities” were finally discovered by the board. A few months later, Gileno confessed in an email to misusing charitable funds.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this. I did take money and I will pay the ultimate price,” Gileno wrote.

According to an audit released last month and U.S. Pain’s 2018 tax return, Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for personal expenses, and payments to Gileno’s family members.

In addition to the $32,537 that Gileno was paid for roughly five months of work in 2018, he collected over $166,000 in excess benefits. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

Gileno’s wife, sister and step-daughter were paid nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave.

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid, according to the audit.  

Gileno disputes the auditor’s finding and says most of the money was paid back.

“U.S. Pain has failed to tell you that the investment that was made with my brothers have been mostly paid back and they were paid 4 years of interest at 6 percent a year which was paid monthly and was deposited by people from U.S. Pain. It was never a surprise U.S. Pain cashed all the checks,” Gileno wrote. 

The foundation at one time claimed to be the nation’s largest non-profit patient advocacy group. While it’s unclear how many members U.S. Pain actually has, it remains well-funded. Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

After Gileno’s departure, the board scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering.

U.S. Pain says it has implemented new policies, oversight measures and a system of checks and balances to ensure that only appropriate expenses are paid by the foundation.

Audit Details Misuse of Funds at U.S. Pain Foundation

By Pat Anson, PNN Editor

It’s been over a year since serious “financial irregularities” were uncovered at the U.S. Pain Foundation and former CEO Paul Gileno was forced to resign under pressure. But the Connecticut based non-profit is still dealing with legal and financial fallout from years of nepotism, self-dealing and lax oversight by its management and board of directors under Gileno’s leadership.

A newly released audit of U.S. Pain and its 2018 tax return indicate that Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The board did not discover the financial irregularities until April 2018, when it hired an auditor and attorney to investigate.

‘The findings were clear that the former president had engaged in unauthorized transactions involving the misuse of assets of the organization. The Board demanded and received the former CEO’s immediate resignation on May 29, 2018, and shortly thereafter reported the matter to federal authorities,” the audit states. “The criminal investigation is still ongoing into the former president’s activities.”

In addition to the federal investigation, PNN has learned that the Connecticut Attorney General’s office is planning to seek a court order to prohibit Gileno from ever handling charitable funds again.

U.S. Pain is providing few details on how Gileno was able to misappropriate over $2 million from the charity over a three year period. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for Gileno’s personal expenses, and payments to Gileno’s family members for unspecified work.

In addition to the $32,537 that Gileno received in wages for roughly five months of work in 2018, he collected over $166,000 in excess benefits last year. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

PAUL GILENO

Gileno’s wife, sister and step-daughter were also on the charity’s payroll, collecting nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave, according to the tax return.

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid.  

Poor Business Decisions

In addition to the questionable payments to Gileno and his family, the audit and tax return show that U.S. Pain entered into a series of poor business decisions.

In 2016, U.S. Pain launched an “unrelated bakery business” that Gileno, a former caterer, established to “further the general mission” of the charity. Nothing in U.S. Pain’s mission statement says anything about a bakery.

The bakery was unprofitable from the start, reporting a net loss of nearly $70,000 in 2017. The board voted to liquidate the business last year at a cost of over $72,000 and recently agreed to pay another $23,900 to settle lease obligations for the bakery. In all, over $165,000 in charitable funds were wasted on the failed enterprise.

After Gileno’s departure, the board agreed to forfeit a non-refundable deposit of $50,000 that Gileno authorized in a failed attempt to purchase PainPathways magazine.

The board also scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering. U.S. Pain said it would no longer accept funding from Insys, but rather than return leftover funds the board has kept $200,000 from the company in an escrow account.

Dealing with all of these legal and financial issues has been costly. According to its tax return, U.S. Pain paid nearly $514,000 for legal services, accounting and penalties in 2018 — nearly a quarter of its revenue for the year.

Gileno: “I Never Misled Them”

How could the self-dealing and financial irregularities go undetected for so long? Interim CEO and board chair Nicole Hemmenway said in a statement last December that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

But Gileno, who has admitted taking money from U.S. Pain for his own personal use, maintains that he kept the board informed. “I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing,” Gileno told PNN last year. 

Gileno did not respond to a request for comment for this story. Neither did Hemmenway. A spokesperson for U.S. Pain said in an email the tax return and audit “constitutes our public statements on these matters.”

The charity’s 2018 tax return was filed on time, but its 2016 and 2017 returns were delinquent and filed late in 2018. They indicate there was no real oversight of Gileno by the board until last year.

“The former President/CEO controlled the board process. The records maintained under his leadership list the officers and directors… but contain no evidence that election of officers and directors occurred,” the tax returns said.

The audit indicates that U.S Pain “rents its main office from the father in law of an employee” who is not identified. Public records for the city of Middletown, CT indicate the building is owned by Ottavio Monarca, who is the father-in-law of Lori Monarca, U.S. Pain’s Executive Office Manager. Rent of $25,000 was paid for the office in 2018 and the lease continues until 2020.

Hemmenway was paid a salary of $71,750 in 2018. The other two board members, Wendy Foster and Ellen Lenox Smith, a former PNN columnist, did not receive any compensation. Smith’s daughter-in-law, Shaina Smith, was paid a salary of $76,700 in 2018 as Director of State Advocacy for U.S. Pain.

Despite all of these expenses and business losses, U.S. Pain appears to be in fairly good financial shape compared to other charities. It received over $1.8 million in donations and grants in 2018, and ended the year with over $454,000 in cash — an enviable position for most non-profits, which often struggle to raise money.

Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

Sen. Ron Wyden (D-OR), the ranking member of the U.S. Senate Finance Committee, sent a letter last December to Hemmenway asking a series of detailed questions about the charity’s relationship with Insys  and other drug makers. According to the senator’s office, Wyden has still not received a full response.  

“A substantial amount of information that Senator Wyden requested from the U.S. Pain Foundation remains outstanding. Staff continues to communicate with the foundation in order to fully understand the financial relationship and contacts it has had with pharmaceutical manufacturers, including Insys, and its compliance with applicable federal laws,” a Wyden spokesman said in a statement to PNN.

CreakyJoints Under Scrutiny for Ties to Drug Makers

By Pat Anson, PNN Editor

Patient advocacy groups are coming under scrutiny again for their financial ties to drug companies. The latest is the Global Healthy Living Foundation (GHLF), a non-profit charity that created CreakyJoints, a website and social media platform that raises awareness about arthritis and other chronic illnesses. 

According to Bloomberg News reporter Ben Elgin, the foundation and CreakyJoints have long had a cozy relationship with Pfizer, Amgen, Johnson & Johnson and other corporate donors. Pfizer has donated nearly $1 million to the foundation over the past decade and one of its vice-presidents even serves on GHLF’s board of directors.

In a speech to drug makers in 2010, GHLF president Seth Ginsberg reportedly sought their donations -- while at the same time promising the companies “higher profits” and “sales rep participation in our programs.”

Ginsberg, who was diagnosed with spondyloarthritis as a teenager, co-founded GHLF in 1999 with marketing executive Louis Tharp.

In addition to CreakyJoints, GHLF has two other “grassroots” programs, Fail First Hurts and the 50-State Network, which advocate for healthcare policies that often align with the interests of its donors.  

According to GHLF’s 2017 tax return, the foundation had over $5 million in annual revenue. Ginsberg was paid a salary of $384,000, while Tharp received $220,000 as Executive Director.  Nearly $300,000 was also paid to a for-profit marketing company established by the two men, although it’s unclear what the payment was for.

Bloomberg reported that GHLF’s tax returns “reflect errors and unexplained entries that have obscured the amounts of money flowing to its cofounders.”

“Are they operating in a way that is extremely transparent? It’s safe to say they’re not,” Brian Mittendorf, a professor of accounting at Ohio State University told Bloomberg. “From looking at their disclosures, you have no idea how closely they’re related to some of the entities it pays.”

At least one GHLF board member and several patient volunteers reportedly left the organization because they were troubled by its relationships with donors.

GHLF did not grant an interview to Bloomberg, but replied to questions in writing.

“The only time we engage in advocacy is when it helps patients. If it doesn’t help patients, we don’t do it,” the foundation said in a statement. “Our mission is to engage in patient-centered research, provide advocacy for access-to-care, and to support people living with chronic disease by providing a supportive environment and accessible education.”

In a related story, Bloomberg reported that several other recently formed non-profits – such as the U.S. Rural Health Network --  appear to be little more than front organizations for the pharmaceutical industry.

“There are a number of groups created by pharma companies that look and act like patient organizations, but they’re 100 percent funded by industry,” said Marc Boutin, chief executive officer of the National Health Council. “They sound and look like patient organizations, but they take positions that industry wants.”

Drug Companies Fined for Co-Pay Programs

Last week two drug companies agreed to pay $125 million in fines to settle allegations that they used charitable foundations as front organizations to bilk Medicare.

Amgen and Japanese drug maker Astellas Pharma paid the foundations to establish co-pay prescription drug programs for Medicare patients. Federal prosecutors say the programs were primarily designed not to help patients, but to illegally pay their co-pays for Astellas and Amgen products.

Federal anti-kickback laws prohibit pharmaceutical companies from making any kind of payment to induce Medicare patients to purchase their drugs. The prohibition includes co-pays.

“The companies’ payments to the foundations were not ‘donations,’ but rather were kickbacks that undermined the structure of the Medicare program and illegally subsidized the high costs of the companies’ drugs at the expense of American taxpayers,” U.S. Attorney Andrew Lelling said in a statement.

“When pharmaceutical companies use foundations to create funds that are used improperly to subsidize the co-pays of only their own drugs, it violates the law and undercuts a key safeguard against rising drug costs,” said U.S. Assistant Attorney General Jody Hunt.

Last year, Pfizer paid nearly $24 million to settle allegations that it also used a co-pay program to pay Medicare for the company’s prescription drugs.

U.S. Pain Foundation Co-Pay

The U.S. Pain Foundation is under investigation by the U.S. Senate Finance Committee for a similar co-pay program established with Insys Therapeutics, a controversial Arizona drug company. Insys makes Subsys, an expensive and potent fentanyl spray blamed for hundreds of overdose deaths.

U.S. Pain received $2.5 million from Insys to launch the “Gain Against Pain” program, which ostensibly helped Medicare patients pay for drugs prescribed for breakthrough cancer pain. Critics say the program was primarily used to increase prescriptions for Subsys, which can cost $24,000 for just a four-day supply.

Former U.S. Pain CEO Paul Gileno initially defended the co-pay program, saying the money from Insys “does not influence our values,” but later resigned over allegations that he misappropriated $2 million from his own charity.

The Gain Against Pain program was subsequently shutdown in August 2018 and U.S. Pain said it would no longer accept funding from Insys.

Sen. Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, sent a lengthy letter last December to U.S. Pain interim CEO Nicole Hemmenway asking a series of questions about the Insys co-pay program. According to the senator’s office, Wyden has still not gotten a full response.  

“The U.S. Pain Foundation has yet to provide a substantial amount of the information that Senator Wyden requested in his letter. Staff is in communication with the organization in order to get to the bottom of the organization’s financial relationship with pharmaceutical manufacturers, including Insys, and its compliance with applicable federal laws,” a Wyden spokesperson said in a statement to PNN.

A federal jury in Boston is currently in its third week of deliberations in a criminal case against Insys founder John Kapoor and four former executives of the company, who are accused of bribing doctors to boost sales of Subsys. 

U.S. Pain also remains under investigation by the Connecticut Attorney General’s office for financial irregularities that led to Gileno’s resignation.

How to Check Out a Charity Before You Donate

By Stefanie Lee Berardi, Guest Columnist

Many of us have been following PNN’s reporting on the misuse of donated funds by the former CEO of the U.S. Pain Foundation. Paul Gileno allegedly misappropriated about $2 million for his own personal use from the non-profit from 2015 to 2017.

The acting CEO and chair of U.S. Pain’s board of directors has admitted that a lack of financial oversight enabled Gileno to commit his misdeeds. Nicole Hemmenway says the board has instituted “a robust system of checks and balances” to make sure it doesn’t happen again.

As the story continues to unfold, U.S. Pain has attempted to refocus the public’s view of this fraudulent activity by claiming that 2018 was “its most successful year of programs and services,” while also indicating that additional financial irregularities may be reported on its 2018 tax return.

Arguably, their claim of success does not comport with the facts and does not enumerate the numerous failings of the board and senior staff that enabled the fraud to continue for years. Until there is full disclosure of what happened and people are held accountable, the public cannot be sure that U.S. Pain’s resources are being utilized effectively going forward.

Choosing to support a non-profit organization is an investment. And those of us who give our limited time and money to a charity must protect that investment by learning all that we can about what the organization does, what senior staff they employ, where they get their money and how they spend it.

It is not always easy to find reliable information about a non-profit, but if you know where to look, a short online search can give you a wealth of information. Here are some tips that donors and volunteers may want to explore.

Search Their Website

Consider an organization’s website as the front door to its operations and core mission. A disease-related organization’s mission, for example, might be to provide support for those affected, education about the disease, and research to find a cure.

An organization must be accountable and transparent to its investors. Their website should provide an annual report of its accomplishments from the previous year and goals for the next. You will need to review several annual reports to evaluate if the organization is making progress on the previous years’ goals.

Look at Their Tax Returns

Examine the organization’s tax returns to learn about how they operate, where they get their funding, and what proportion of their money is spent on programs that actually help people versus overhead costs like administration, salaries and fundraising.

There are a few exceptions, but most non-profit organizations’ tax returns are public information, meaning anyone can inspect them. When you compare two or three years of the organization’s tax returns, you can get a sense of the organization’s financial stability over time.

I find ProPublica to be the easiest place to find these documents. You can also search an IRS database to see if an organization’s tax-exempt status is in good standing. If a non-profit misses a tax return filing deadline, as was the case with U.S. Pain, that could be a sign of trouble.

Identify Their Funding Sources

In order for a non-profit to remain financially healthy and compliant with IRS regulations, it must seek funding from different types of revenue streams, such as grants and corporate or individual donations. For example, an organization may accept donations from pharmaceutical companies or charge membership dues or fees to attend their events.

Investors need to know where the organization gets its money. If the organization is growing and thriving, you will see a steady increase in the money they bring in (revenue); the money they spend (expenses) will remain proportional to their revenue; and their bottom line (net assets) will remain stable from year to year.

Learn Where They Are Spending Their Money

There are well-established benchmarks for how much of a non-profit’s budget should be spent on programs versus administration and fundraising. Organizations should be spending at least 75% of their revenue on programs that raise awareness or directly benefit a cause and less than 25% of their revenue on overhead.

As a reference, Charity Navigator publishes an annual report on CEO pay that finds mid-sized non-profits pay their CEO’s in the low $100,000’s. And the Better Business Bureau’s accountability standards indicate that fundraising expenses should not exceed 10 to 25 cents of every dollar raised.

As an investor, we want to see these figures as low as possible and to ensure they are aligned with organizations of similar size and type.

Engage with a Non-Profit at All Levels

If an organization is worthy of receiving your financial support, it should also be worthy of receiving your time and talent. Volunteering for the organization is an important way for you to increase the value of your investment. Most non-profits depend on volunteers to help them run programs, raise funds and promote awareness.

When you find the right organization, consider pledging a monthly, rather than a one-time annual donation. Large foundations that offer grants to non-profits want to see repeat donations because it is an indication of a healthy, growing organization that is capable of using their grant money effectively. Staying involved with an organization helps ensure your investment is used to its fullest potential.

There is simply too little time and money to waste on an organization that lacks oversight and is not using its resources effectively. Many of us have made donations to organizations simply because they asked and believed they were doing good things. In the future, we must raise that benchmark.

When nonprofit organizations solicit for financial support, they are in a position of public trust. That money is not theirs to misuse and they should be held accountable if they lose that trust.

Each of us has the responsibility to learn everything we can about an organization before we offer our time, talent and money. We must advocate for each other and contribute to the body of knowledge about the organizations that we support. 

Stefanie Lee Berardi worked as an advancement and communications professional, grant writer and principal investigator of several multi-agency grant programs at Illinois State University. She has a graduate degree specializing in the management and administration of non-profit organizations.

Stefanie is an avid volunteer in her local community and has volunteered for organizations supporting individuals with Complex Regional Pain Syndrome, a disease she developed in 2008.

The information in this column should not be considered as professional medical advice, diagnosis or treatment. It is for informational purposes only and represents the author’s opinions alone. It does not inherently express or reflect the views, opinions and/or positions of Pain News Network.

$2 Million in Donations Misused at U.S. Pain Foundation

By Pat Anson, PNN Editor

Over $2 million in funds were misappropriated by former U.S. Pain Foundation CEO Paul Gileno or used in questionable transactions with his family, according to a statement and tax returns released Thursday by the Connecticut based non-profit. Some of the money was paid to Gileno’s wife, sister and brothers.

The misuse of donor funds by Gileno was discovered in April 2018, which led to his resignation the following month. Until now, the extent of the fraud has not been disclosed to U.S. Pain’s staff, volunteers and donors.

“The former CEO was widely respected and beloved in the pain community, and took advantage of that trust in him. He was able to do this by both withholding key information and providing dishonest information that deceived staff and volunteers in leadership positions,” interim CEO and board chair Nicole Hemmenway said in a statement that curiously avoided using Gileno’s name.

“He controlled the organization’s operations, finances, records and bank accounts, as well as the Board process. His mismanagement and dishonesty left the records in disarray.”

According to Hemmenway, Gileno misappropriated nearly $1.9 million from U.S. Pain from 2015 to 2017. The non-profit raised over $7 million in donations during that period, meaning almost a third of it was misused by its founder and CEO.

The misuse of funds was characterized as an “excess benefit transaction” on U.S. Pain’s delinquent tax returns for 2016 and 2017, which were filed late last month with the IRS. An excess benefit transaction is when a payment made by a tax-exempt organization exceeds the actual value of that benefit.

The tax returns indicate the misappropriated funds were spent on “related party vendors” and “personal expenses,” but disclosed no other details. Hemmenway said additional excess benefits would be reported on U.S. Pain’s 2018 tax return.

Gileno did not immediately respond to a request for comment, but has previously admitted misusing donor funds. “I made some big mistakes over the past few years and took money from US Pain for my personal use,” Gileno wrote in an email sent to U.S. Pain’s leadership last year.

Payments to Family Members

In addition to the nearly $1.9 million in misappropriated funds, U.S. Pain’s 2017 tax return indicates that about $160,000 was spent in transactions involving Gileno’s family.

Nearly $48,000 was paid to Gileno’s wife and nearly $12,000 to his sister. The tax return does not explain what those payments were for. Another $100,000 was spent on an investment in SMJ Homes Inc., a real estate investment company controlled by Gileno’s brothers. The tax return indicates the investment has already lost over half its value.  

There was apparently very little oversight or financial controls at U.S. Pain and Gileno was permitted by the board — which has legal and fiduciary responsibilities — to spend money as he wished.

“The former President/CEO controlled the board process. The records maintained under his leadership list the officers and directors… but contain no evidence that election of officers and directors occurred,” the tax returns said.

Gileno was paid a salary of $94,000 in 2017 and no salary in 2016. A $403,000 salary paid to Gileno in 2015 is now being characterized as an excess benefit.

PAUL GILENO

Hemmenway was paid a salary of $49,900 in 2017 for her work as vice-president. She has been a key member of U.S. Pain since its founding in 2011. So have board members Wendy Foster and Ellen Lenox Smith.

Smith’s daughter-in-law, Shaina Smith, was paid a salary of $76,700 in 2017 as director of state advocacy for the non-profit.

‘I Never Mislead Them’

Multiple sources familiar with U.S. Pain have questioned how Gileno was able to misappropriate funds for so long without Hemmenway or the board being aware.  Gileno himself has said they were kept informed.

“I never mislead them. They were part of US Pain for over 10 years and I talked with them daily,” Gileno wrote in an email to PNN last month. “Nicole and I were close like a brother and sister and I never hid one thing. I feel bad they are trying to use me as an excuse.”

Some insight into how U.S. Pain and its board operate is provided in a blog post by former board member Suzanne Stewart, who resigned last September after serving on the board for only a few months.    

“I don’t feel safe being involved with voting on big decisions yet being left in the dark much of the time. I don’t really know where money is going or where it comes from in all honesty,” she wrote.

In Thursday’s statement, Hemmenway acknowledged that “the organization should have had stronger financial controls” and said a “robust system of checks and balances” now requires U.S. Pain’s chair and chief financial officer to approve all expenditures.

“With these checks and balances in place, the organization is stronger than ever before,” Hemmenway said. “U.S. Pain fills a vital gap in support for the pain community and refuses to let the actions of one individual impede its efforts to educate, connect, empower, and advocate for those living with chronic pain.”

The statement gave no indication if others were implicated in the misuse of funds or if Hemmenway and the remaining board members will resign or be replaced.

U.S. Pain Foundation Suspends Fundraising

By Pat Anson, PNN Editor

The U.S. Pain Foundation, which is under investigation for financial irregularities and the misuse of funds by its former CEO, has stopped soliciting donations.

In a statement posted on U.S. Pain’s website, interim CEO Nicole Hemmenway said the Connecticut-based non-profit has “ceased soliciting funds.” For many charities this is a key time of year for fundraising, but as PNN has reported, U.S. Pain’s registration with the Connecticut Department of Consumer Protection, which regulates charities in the state, has expired. Without an active registration, U.S. Pain cannot legally solicit donations in Connecticut.

(Update: U.S. Pain’s charitable solicitation registration was renewed by the Connecticut Department of Consumer Protection on January 4, 2019) 

In her statement, Hemmenway said U.S. Pain would renew its registration once its delinquent tax returns – known as 990 Returns – for 2016 and 2017 are filed.  She blamed former CEO Paul Gileno for the long delay in filing them.

“The delay in filing the 2016 and 2017 Returns can be attributed to inaccurate and incomplete financial records maintained by the former CEO. The delayed preparation of the 990 Returns in turn delayed the renewal of our charitable solicitation registration in the state of Connecticut, which expired as of November 30,” she said.

“We are cooperating with the Connecticut Department of Consumer Protection, which has not opened a formal investigation into U.S. Pain. Once the 990 Returns are available, we anticipate the registration will be renewed. In the interim, we have ceased soliciting funds. In addition to working with the Department of Consumer Protection, we initiated a meeting regarding the former CEO’s actions with the Office of the Connecticut Attorney General.”

NICOLE HEMMENWAY

To be clear, Hemmenway and U.S. Pain’s board of directors did not contact Connecticut Attorney General George Jepsen’s office until this month, when they became aware that PNN was planning to publish stories about the foundation’s delinquent tax returns and other questionable activities.

Hemmenway and the board have been aware of Gileno’s alleged embezzlement for some time. An internal audit found evidence of “financial irregularities” and possible criminal acts several months ago. The board requested and received Gileno’s resignation on May 29.

On September 5th, Gileno confessed in an email that he “took money from US Pain for my personal use.” The email was sent to over a dozen key leaders at U.S. Pain, including board members Ellen Lenox Smith, Wendy Foster and Suzanne Stewart. Stewart resigned from the board soon afterward, saying she felt “kept in the dark about many things.”

Only recently has any of this been brought to the attention of law enforcement, or U.S. Pain’s members, volunteers and donors.

(Update: In a December 20 press release, U.S. Pain said the financial irregularities were discovered in April and that “appropriate authorities” were notified in early June. Hemmenway has not responded to a request to identify who or what agency was contacted. PNN has been unable to verify any contact between U.S. Pain and law enforcement until early December.)

“It does seem like they will blame it all on me which makes me sad but I guess their legal counsel thought it was the best route for them to take no responsibility and to ignore all of the good I have done and the lives I have changed,” Gileno said in an email to PNN.

“I guess they don’t want to discuss that they all were part of US Pain for over 8 years and Nicole was Vice President since we changed from CT Pain Foundation to US Pain Foundation in January 2011. I took responsibility for any mistakes and worked to rectify it ASAP so the organization I created and founded could continue to help others. I did not hide this and it seems they only brought this out because you discovered it and pressed them.” 

PAUL GILENO

PNN has asked Hemmenway if the audit found evidence that others besides Gileno misused donated funds. She has not responded to that and other questions, such as how much money was misappropriated, what it was spent on, and for how long the misuse occurred.

“We did not previously comment on these matters on the advice of counsel, due to the ongoing investigation,” Hemmenway said in her statement.

U.S. Senator Wants Audit Details

U.S. Senator Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, also wants to know if others are involved.

In a letter sent to Hemmenway yesterday,  Wyden asked for a copy of the audit and a detailed accounting of whether “any other employees, contractors, board members, volunteers or people otherwise associated with the foundation (have) been implicated in the misuse of funds.”

Wyden also asked for an explanation of why U.S. Pain’s membership was grossly inflated and how a $2.5 million donation from Insys Therapeutics, a controversial drug maker under criminal investigation, was spent on a prescription co-pay program called Gain Against Pain. As PNN has reported, Gileno and Hemmenway — who is board chair — disagree on whether the board even authorized the co-pay program.

“There are conflicting accounts of when the foundation’s board of directors was made aware of Gain Against Pain. Please clarify when the foundation’s board learned of the program’s existence, and when it learned of funding from Insys,” Wyden asked. “Were there any conditions connected to any of the donations from Insys to the foundation or the Gain Against Pain program?”

As Stat News has reported, Wyden and other senators have questioned the relationship that Insys and other drug makers have with patient advocacy groups, saying their donations present a conflict of interest. Over the years healthcare companies have donated several million dollars to U.S. Pain.

In a letter sent yesterday to Health and Human Services Secretary Alex Azar, Wyden suggested that it may be inappropriate for Cindy Steinberg, U.S. Pain’s National Director of Policy and Advocacy, to continue serving on a federal pain management advisory board because of “the legal and financial control issues faced by the U.S. Pain Foundation.”

As PNN has reported, Wyden himself has accepted donations from industries that he helps regulate. According to OpenSecrets, Wyden has received over $2.5 million in campaign donations over the last five years from individuals or PACs affiliated with healthcare and insurance companies.

How U.S. Pain Foundation Inflated Its Membership

By Pat Anson, PNN Editor

The U.S. Pain Foundation has long claimed to be “the leading chronic pain advocacy organization in the country,” with volunteers in 50 states and nearly a quarter of a million social media followers.

“What started as a small grassroots group now has 90,000 members nationwide and a network of 1,000 volunteers,” a U.S. Pain press release said in 2017.  

Impressive numbers like that helped the Connecticut based non-profit rise to national prominence in the pain community and raise several million dollars in donations from major healthcare companies such as Pfizer, Lilly, AstraZeneca, Novartis and Johnson & Johnson.

But PNN has learned that the tabulation of U.S. Pain’s membership and followers is unreliable and misleading. At best, they’re a product of bad metrics and marketing hype. At worst, they’re evidence of consumer fraud.  

“If they’re talking about members, then they should have a verified roll of members. And if they’ve inflated that number and there’s no rational basis for coming up with the number that they’re telling the public, then that could potentially be considered consumer fraud,” says attorney Seth Perlman, who has represented non-profits for 30 years.

In recent months, U.S. Pain has announced it is “undergoing a complete revamp of its transparency policies and procedures.” One of the first things the organization did was significantly downsize its membership from 90,000 to 15,000.

U.S. PAIN FOUNDATION 2016 PROMOTION

What happened to the 75,000 missing members?

“We have changed the way we classify and report members,” interim CEO and board chair Nicole Hemmenway said in an email to PNN. “Previously, ‘members’ included mailing list subscribers, support group participants, INvisible Project readers, anyone who received our print materials, and people who attend our events. Now the term ‘member’ has been redefined as the number of individuals who have signed up for our mailing list.”

Hemmenway has been interim CEO since May, when U.S. Pain’s founder and longtime CEO Paul Gileno resigned at the request of the board of directors.  “As the new leader, I am heading up a review and revision of our governance and transparency policies,” Hemmenway said. 

But full transparency has been slow in coming. Not until last week did Hemmenway and the board disclose the reason behind Gileno’s forced resignation. An internal audit found evidence of “financial irregularities” and that Gileno embezzled an undisclosed amount of money from the non-profit.  

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this,” Gileno confessed in an email sent to U.S. Pain’s leadership.  

We asked Gileno why U.S. Pain’s membership numbers were so high while he was CEO. 

“Our stats were based on email sign ups, social media sign ups and in-person sign ups,” Gileno said. “I have no clue why they were reduced.” 

In addition to the steep drop in membership, U.S. Pain has also seen a decline in its social media following. At one time, the organization claimed to have 59,000 followers on Twitter.

That was reduced to about 13,000 followers after Twitter purged from its system millions of fake and inactive accounts. 

from US Pain foundation 2018 promotion

“The (Twitter) reform takes aim at a pervasive form of social media fraud,” The New York Times reported. “Many users have inflated their followers on Twitter or other services with automated or fake accounts, buying the appearance of social influence to bolster their political activism, business endeavors or entertainment careers.”  

Some of the followers that U.S. Pain has on Twitter were apparently bought and paid for in a promotional scheme to sign up new followers. Hemmenway says the board never authorized such an expenditure. 

“Based on records, in 2016, $515 was spent on a Twitter digital marketing initiative under previous leadership. This is not something the Board or others within the organization were aware of or approved,” Hemmenway said. 

Hemmenway has been a key member of U.S. Pain since it was founded in 2011, serving as vice-president until Gileno’s departure. According to Gileno, she oversaw the non-profit’s social media efforts. “Nicole and the board have always been in charge of that, as was director of communications,” Gileno told PNN. 

Even after the Twitter purge, U.S. Pain still appears to have an unusual number of suspicious followers. StatusPeople.com, a website that analyzes Twitter data, estimates that only a third of @US_Pain’s 13,000 followers are legitimate. The rest are either fake or inactive.

SOURCE: STATUSPEOPLE.COM

There is no similar way to analyze the legitimacy of U.S. Pain’s 216,000 followers on Facebook, a social media platform where you can also buy followers.

Consumer Fraud Issue

Marketing that misleads or exaggerates may be all too common in the for-profit world, but it’s risky business for a charity dependent on donations and public goodwill. Taken too far, it could lead to allegations of civil or even criminal misconduct, according to attorney Seth Perlman. 

“That’s only an issue if they use those numbers to impress upon the donating public or their supporters about how widespread their message is. And how much awareness the organization has with the public. If they’re using it as a way to inducing people to support the organization, it’s a potential consumer fraud issue,” said Perlman. “If you mislead the public and present information that is incorrect and is purposely inflated, the regulators take an extremely dim view of that.  

“It’s almost always a civil matter, unless it rises to the level of an absolute egregious fraud where there is absolutely no basis for making the claims that they did and it was simply a rip off.  Then that could turn into criminal (fraud). But the civil remedies are significant, including removal of the board of directors.” 

As PNN has reported, U.S. Pain is now under investigation by the Connecticut Attorney General’s office and the Connecticut Department of Consumer Protection, which regulates charities in the state.  Because its registration as a charity recently expired, U.S. Pain at this time cannot legally solicit donations in Connecticut. 

Federal prosecutors at the U.S. Attorney’s Office would neither confirm or deny if they were investigating U.S. Pain and its former CEO, although Gileno anticipates going to prison for fraud or tax evasion.  

“I will have to go to jail maybe as long as 3 years for taking the money from US Pain,” Gileno said in his confession. 

U.S. Pain is also in danger of losing its tax-exempt status.  The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent.  Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. Hemmenway blames Gileno for the long delay in filing, but expects the tax returns to be completed in coming weeks. 

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” she said. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”

U.S. Pain Foundation Under Investigation

By Pat Anson, PNN Editor

The Connecticut Attorney General’s office has opened an investigation into allegations of financial irregularities and embezzlement at the U.S. Pain Foundation, PNN has learned.

“I can confirm that our office has had contact with a representative from the U.S. Pain Foundation and that our office has opened an investigation into this matter. We’re unable to comment further,” said Jaclyn Severance, a spokesperson for Connecticut Attorney General George Jepsen.

U.S. Pain released a statement late Friday accusing former CEO Paul Gileno of misusing funds. Gileno resigned at the request of the non-profit’s board of directors in May and later sent an email to U.S. Pain leadership confessing to the crime.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this,” Gileno wrote.

Until last week no explanation was made to U.S. Pain’s members, volunteers or donors about the reasons behind Gileno’s resignation. The Connecticut-based non-profit has still not disclosed the amount of money stolen, when the thefts occurred, or if others were involved.

“We have been working diligently to rectify the situation. Steps that we’ve taken include alerting the appropriate legal authorities and cooperating fully in the investigation; seeking restitution of the misused funds; implementing a more robust system of checks and balances; and hiring a new interim chief financial officer, new counsel, and a new tax accountant,” U.S. Pain said.

PNN has confirmed the state Attorney General’s Office was recently contact by U.S. Pain, but lawyers there say the non-profit probably should have acted sooner.

“There is no requirement under the law to report embezzlement, but it is typically in their best interest to do so,” said Severance.

U.S. Pain was founded by Gileno in 2011 and has received several million dollars in mostly corporate donations to fund programs that raise awareness about chronic pain.

Lapsed Registration

The Connecticut Department of Consumer Protection, which regulates charities in the state, recently opened a second investigation of U.S. Pain after its registration lapsed on December 1. Without an active registration, U.S. Pain cannot legally solicit charitable donations in Connecticut. 

“They have not submitted renewal paperwork. So technically they’re not supposed to be soliciting in Connecticut,” said spokesperson Lora Rae Anderson. “They can’t make phone calls or put ads in Connecticut newspapers. They cannot actively solicit in the state.” 

In addition to U.S. Pain’s legal problems, it is in danger of losing its tax-exempt status. The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent.  Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. U.S. Pain’s 2015 tax return was filed in October 2017, over a year overdue.

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” interm CEO and board chair Nicole Hemmenway said in an email to PNN last week.

Hemmenway has been a key member of U.S. Pain since its founding and sources say it is unlikely she was unaware of the financial irregularities that Gileno is accused of.

Tax returns open a rare window into how much money a non-profit has raised and how it was spent. Non-profits are not required by law to disclose who their donors are or the size of their donations, but their tax returns need to provide a detailed account of what was spent on salaries, travel, office supplies, accounting and other expenses. According to U.S. Pain’s 2015 tax return, Gileno was paid a salary of $403,000.  

Ex-CEO Admits ‘I Took Money From U.S. Pain’

By Pat Anson, PNN Editor

The founder and former CEO of the U.S. Pain Foundation admitted over three months ago that he “made some big mistakes” and took money from the non-profit for his own personal use.

Paul Gileno resigned at the request of U.S. Pain’s board of directors in May, but the reasons behind his departure have only emerged in the last few days. In a statement posted Friday on the non-profit’s website, interim CEO and board chair Nicole Hemmenway publicly acknowledged for the first time that an internal audit six months ago had uncovered “financial irregularities” involving Gileno.

“The findings were clear that this individual had misused funds from the U.S. Pain Foundation,” Hemmenway wrote.

That Gileno had embezzled money from the non-profit has been known to the leadership of U.S. Pain for some time. He confessed to it in an email on September 5th. PNN has obtained a copy of the email and Gileno has acknowledged writing it.

“I am sad to say that I made some big mistakes over the past few years and took money from US Pain for my personal use. I make no excuses for this. I did take money and I will pay the ultimate price,” Gileno wrote.

“I did mismanage money and wasn’t as strict on budgets as I should have been, but it never effected what we did (nor) did it hurt our growth.”

PAUL GILENO

Gileno sent the email to over a dozen key people at U.S. Pain, including board members Wendy Foster, Ellen Lenox Smith and Suzanne Stewart – who resigned from the board a few weeks later. Other recipients include Cindy Steinberg, National Director of Policy and Advocacy; Shaina Smith, Director of State Advocacy;  Lori Monarca, Executive Office Manager; Casey Cashman, Director of Fundraising and Emily Lemiska, Director of Communications.

U.S. Pain’s volunteers, ambassadors, and donors were left in the dark and never informed about the audit or Gileno’s confession. And the non-profit continued to solicit and accept donations as if nothing was wrong.

Only after inquiries from PNN about Gileno’s resignation and the lengthy delay in filing U.S. Pain’s tax returns did the organization release Friday’s statement. The statement offered no specifics on the financial irregularities that were found, the amount of money stolen, when the thefts occurred, or if others were involved.

‘I Never Took a Salary’

Gileno founded U.S. Pain in 2011 and it quickly grew into a nationwide patient advocacy group that received millions of dollars in mostly corporate donations.

Gileno claimed in his email that “I never took a salary… nor did I receive any benefits." But U.S. Pain’s 2015 tax return indicates Gileno was paid a salary of $403,000. The non-profit’s tax returns for 2016 and 2017 have not been filed and are delinquent, which could potentially jeopardize U.S. Pain’s tax exempt status.

In February, U.S. Pain was criticized in a congressional report for participating in a $2.5 million prescription co-pay program funded by Insys Therapeutics, an Arizona drug maker accused of bribery, fraud and other criminal charges. The co-pay program was scrapped soon after Gileno’s departure.

In his email, Gileno said he never took kickbacks from Insys or other drug makers.

“I always put the person with pain first and never accepted money from pharmaceuticals to do their bidding not once. If you are questioning this then that makes me sad because it never happened and you don't really know me,” Gileno wrote.

“I have also worked with the US Attorney in MA (Massachusetts) to deal with US Pain’s relationship with INSYS.  I cooperated with the FBI and HHS (Health and Human Services). Once again so you can feel better not one time did I take or accept money from a pharmaceutical to push a drug. They are using me to help them deal with INSYS and build whatever case they are building.” 

Last month a former Insys vice-president pleaded guilty in federal court in Boston to charges of bribing doctors to prescribe Subsys, a potent fentanyl spray made by Insys that has been blamed for the overdose deaths of hundreds of pain patients.

A spokesperson for the U.S. Attorney’s Office would not say if Gileno is a co-operating witness in the Insys case or if U.S. Pain is under investigation. “Per Department of Justice policy, we can neither confirm nor deny investigations,” said Liz McCarthy, U.S. Attorney’s Office – District of Massachusetts.

Gileno, who has two young sons, was remorseful in the email and asked for forgiveness. He anticipates serving jail time.

“My life is ruined right now because of my mistakes,” he wrote. “I am deeply truly sorry. It was selfish to take money from US Pain.

“When they finally give me charges to plead guilty to, either tax evasion or fraud or whatever they come up with, there will be a sentencing and they will need character letters or testimony of the person I am besides the taking of the money. If you reach out to me privately that you would like to stay in contact, it would mean the world to my boys and myself if you would send one in.”

‘Financial Irregularities’ Found at U.S. Pain Foundation

By Pat Anson, PNN Editor

The U.S. Pain Foundation released a statement late today accusing former CEO Paul Gileno of misusing funds and other unspecified “financial irregularities.” Gileno resigned at the request of the non-profit’s board of directors in May.

U.S. Pain is a 501 (c) (3) non-profit that claims to be the leading advocacy group representing chronic pain patients. Founded by Gileno in 2011, U.S. Pain has received several million dollars in grants and donations to raise awareness about chronic pain.

Until now, no explanation was ever made to U.S. Pain’s members, volunteers or donors about the reasons behind Gileno’s forced departure. The statement admitting funds were misused was released only after weeks of questioning by Pain News Network about Gileno’s resignation and the long delay in filing U.S. Pain’s 2016-2017 tax returns.

“As a result of an internal audit, we were dismayed to discover financial irregularities involving the former CEO of U.S. Pain Foundation. The Board of Directors immediately hired an independent attorney and a forensic accountant to investigate,” Nicole Hemmenway, interim CEO and chair of the board, said in the statement.

“The findings were clear that this individual had misused funds from the U.S. Pain Foundation. The Board concluded that the former CEO repeatedly misled and concealed information from the Board of Directors and staff. The Board demanded and received the former CEO’s immediate resignation.”

U.S. Pain’s statement – which notably doesn’t even use Gileno’s name – offered no specifics about how funds were misused or the amount of money involved.

Gileno said in an email to PNN that he, not the board, hired an attorney and accountant to review the organization’s financial records. His email did not specifically address the allegation of misusing funds.

(Update: In an email sent to his former colleagues three months ago, Gileno admitted embezzling funds from U.S. Pain. See “Ex-CEO Admits ‘I Took Money From U.S. Pain’)

“I am the one who hired the attorney and accountant back in February 2017. The board did not. I hired them to fix any issues we may have had so we can grow,” Gileno wrote. “They are trying to cover their asses for being (an) inadequate board I guess.

“Also, I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing. I feel bad they are trying to use me as an excuse.” 

Missing Tax Returns

U.S. Pain’s failure to file tax returns for 2016 and 2017 could potentially put its tax-exempt status at risk. Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. U.S. Pain’s 2015 tax return was filed in October 2017, over a year overdue.

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” Hemmenway said in an email to PNN. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”

Tax returns open a window into how much money a non-profit has raised and how it was spent. Non-profit organizations like U.S. Pain are not required by law to disclose who their donors are or the size of their donations, but their tax returns need to provide a detailed account of what was spent on salaries, travel, office supplies, accounting and other expenses.   

According to U.S. Pain’s 2015 tax return, Gileno was paid a salary of $403,000, a hefty share of the $1.35 million in revenue the non-profit reported that year. Gileno says part of his salary was “back pay” for prior years when he was paid little or nothing at all.

paul gileno

The missing returns from 2016-2017 cover what appears to have been the most successful fundraising period in the non-profit’s history, when it received millions of dollars in donations, primarily from healthcare companies. The money funded a variety of U.S. Pain programs such as the Invisible Project, which raises awareness about chronic pain, and the Advocacy Network, which helps volunteers become patient advocates.

Insys Co-Pay Program

One program caught the attention of congressional investigators. “Gain Against Pain” was a $2.5 million prescription drug co-pay program funded by Insys Therapeutics, an Arizona drug maker that faces racketeering, fraud and other criminal charges over its marketing of Subsys, an expensive and potent fentanyl spray. Although Subsys is only approved for cancer patients in severe pain, Insys allegedly bribed doctors to prescribe it off-label for back pain and other chronic pain conditions, which resulted in the overdose deaths of hundreds of patients.

“It’s appalling that this organization partnered with Insys, which has a history of criminal behavior,” says Adriane Fugh-Berman, director of PharmedOUT, which seeks to expose unethical healthcare marketing. “It seems to fly in the face of their stated mission and seems like a betrayal of the patients they claim to represent.”

A report released by Sen. Clair McCaskill (D-MO) in February portrayed Insys donations to U.S. Pain and other non-profits as little more than marketing and public relations schemes aimed at getting more Subsys prescribed.

“These financial relationships were insidious, lacked transparency, and are one of the many factors that have resulted in arguably the most deadly drug epidemic in American history,” the McCaskill report found.

Gileno defended U.S. Pain’s acceptance of money from Insys. "This funding, like any funding we receive, does not influence our values,” he said in a statement in response to the McCaskill report.

Three months later, Gileno was gone from U.S. Pain and the organization moved quickly to disassociate itself from Insys. The co-pay program was shut down and U.S. Pain said it would no longer accept funding from Insys.

The first reports about the aggressive marketing and off-label use of Subsys began in 2014. By 2015, overdoses were so common that the Southern Investigative Reporting Foundation referred to Insys as “Murder Incorporated.”

When PNN asked Hemmenway if the board of directors was aware of the criminal investigation of Insys at the time the co-pay program was established in late 2016, she claimed the board was “misled” about the program and never adequately infomed. “The Board was not aware of this program before it started, nor did the Board approve it,” Hemmenway wrote in an email.

Gileno disagrees, saying Hemmenway and the board were kept informed.

“Nicole and board knew in December 2016. Not sure why they are lying. Everyone who worked at U.S. Pain knew about it. Nicole certainly has emails from me about it. I don't know what games they are playing but of course they knew,” Gileno said. “The board of directors have always been a part of every decision and (was) excited about having a co pay program to help people with pain.” 

“It seems highly unlikely that a board would be unaware of a $2.5 million dollar program or that a president would be able to okay something like that without informing the board,” says Fugh-Berman, who co-authored an article critical of U.S. Pain’s “cozy relationship with its funders.”  

“Where did that money go? And the fact that it was used to make it easier for patients to get a highly addictive fentanyl drug that was made by the sponsor of that program is highly unethical.”

A non-profit expert told PNN it is unusual for a board to be unaware of a major program. 

“If a president initiates a program without the board’s approval, that’s a major problem. The board must decide what kind of program an organization conducts. It’s a board’s fiduciary responsibility and it’s important that the board meets its responsibility,” said Seth Perlman, an attorney who has represented non-profits for 30 years.

U.S. Pain board member Ellen Lenox Smith declined a request to comment for this story. Board member Wendy Foster did not respond to a request for comment.

‘Help Clean Up This Mess’

Some insight into how U.S. Pain and its board operate is provided in a blog post by former board member Suzanne Stewart, who resigned in September. In her partially redacted resignation letter, Stewart said she initially felt “it was my duty to stick by Nicole & the other Board members & our legal team, to help clean up this mess.”

But Stewart grew frustrated because she was “kept in the dark about many things” and decided it was time to leave.   

“I don’t feel safe being involved with voting on big decisions yet being left in the dark much of the time. I don’t really know where money is going or where it comes from in all honesty,” wrote Stewart, who also declined to comment for this story.

“It's sad to see the organization I started from nothing, in my bed on my lap top change so much and almost seem not to care about people with pain,” says Gileno. “I can’t believe after all of the things I have done and all of the work I have done to help the pain community I am being vilified.”

“We are determined not to let the actions of one individual interfere with or diminish our efforts to serve people with pain,” said Hemmenway. “As the new leader, I am heading up a review and revision of our governance and transparency policies. Due to our leadership changes over the past year, we feel this is an important step for the organization’s continued growth.”

One such “revision” was to significantly downsize U.S. Pain’s membership, from 90,000 to 15,000 members. More about that next week.