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People to People Executive Sentenced to Prison

Financial Director Convicted of Embezzling $148,000

By Lisa Wade McCormick
ConsumerAffairs.com

May 16, 2007

People to People International An Investigative Report by Lisa Wade McCormick • Introduction • P2P: Ambassadors or Tourists? • P2P CEO "Mortified" • Parents Object to Student Lists • Not Everyone's Happy with People to People Trips • Fast Facts About People to People International • Update 12/06: It Happens Again • Deceased Cat Invited to be Student Ambassador --- News about P2P • People To People Leaders Allegedly Drank Beer While Student Was Dying • American Teens Go Missing on People to People Trips • People to People Parent Company Faces Securities Class Action • People to People Settles Wrongful Death Lawsuit • People to People Uses Dead Student's Name as Recruiting Tool • Feds Asked to Probe Student's Death on People to People Tour • Student 'Ambassador' Dies Neglected & Alone • People to People Invites Dead Girl ... Again • People to People Executive Sentenced to Prison • People to People "Clarifies" Its Invitation Policy • Student Travel Service Still Misleading Parents • Student Travel Service Agrees To Modify Marketing --- • Consumer Complaints • Consumer Compliments

A federal judge has sentenced the former financial director of People To People International to 20 months in prison for stealing $148,144 from the non-profit organization founded by President Dwight D. Eisenhower.

U.S. District Judge Dean Whipple also ordered David E. Schlotzhauer of Leawood, Kansas, to pay $128,144 in restitution.

In a plea agreement reached in February 2006 with the U.S. Attorney’s Office, Schlotzhauer admitted that he embezzled thousands of dollars from the organization’s checking account and used its credit card for personal use.

Prosecutors say the scheme lasted two years -- from 2001 to 2003.

One of those thefts occurred on August 13, 2003. In that case, Schlotzhauer admitted that he wrote an $18,125 check on People To People International’s checking account to his wife — identified in court records as Kathleen P. Zimmerman. Schlotzhauer then transported the money from Missouri to Kansas — action that led federal prosecutors to charge him with interstate transportation of stolen property.

“This check was fraudulently issued by defendant on his employer’s -- People International -- bank account as part of a scheme devised by defendant to defraud the employer,” according to the plea agreement.

“Specifically, defendant fraudulently caused checks to be issued on his employer’s account for his own personal purposes and fraudulently used the company credit card to pay personal expenses.”

Loss Amount Disputed

While federal prosecutors say People to People International lost $148,144, Schlotzhauer has contended the loss is much less — around $70,000.

That dispute surfaced again during Thursday’s hearing, according to The Kansas City Star.

Schlotzhauer and his accountant argued the loss to the Kansas City-based non-profit group is much less than the government’s calculations because some of the missing funds were loans approved by the organization’s president, Mary Eisenhower, President Eisenhower’s granddaughter.

Eisenhower testified her organization does not make loans to employees, according to The Kansas City Star.

The newspaper also reported that Schlotzhauer used the money he embezzled from People To People to pay the taxes on his Johnson County, Kansas, home and an attorney to represent him on a personnel matter. In addition, prosecutors said he used the organization’s credit card for such personal expenses as golf equipment, ski lessons, and a youth sports camp.

The attorney for People To People International, Don Lolli, declined to comment on the sentencing when contacted today by ConsumerAffairs.com.

Schlotzhauer’s attorney did not return our call today.

People to People International sponsors student exchange programs and other peace initiatives in 135 countries.

Marketing Tactics Questioned

The company that markets People to People’s Student Ambassador programs came under fire last year for sending letters to the parents of deceased children stating their teenagers were named for educational trip overseas.

In one case, that marketing company -- the Ambassador Group of Spokane, Washington -- sent a letter to parents in Florida stating “a teacher, former Student Ambassador, or national academic listing,” named their daughter for one of these expensive trips abroad.

Their daughter, however, died in 1992. She was 18 days old and suffered multiple birth defects.

The marketing company also sent a letter in September 2005 to an Iowa mother --whose infant son died in 1993 -- stating her child was named for a 20-day trip to Europe.

The Iowa Attorney General’s Office criticized that letter, saying it misled parents into “believing that their child was selected on merit when that is not the case, and that parents may be manipulated into making substantial expenditures they might otherwise decline to make.”

Assistant Attorney General Steve St. Clair added: “The letter raised concerns that parents were being led to believe that their child had been chosen for an honor based on recommendations or academic performance, criteria that could not possibly have applied to the infant who died years ago at seven weeks of age.”

Iowa officials did not take issue with the merits of the Student Ambassador trips, which cost an average of $5,000. That office’s investigation focused on the organization’s letter and its marketing tactics.

During an interview last year with ConsumerAffairs.com, Eisenhower said called the situation in Iowa “devastating.”

“I was mortified when that happened. I’ve lost a baby so I know how devastating that is.

“What happened in Iowa was an unfortunate mistake caused by a mailing list,” Eisenhower said. “It was human error, and it unfortunately caused people to doubt our mission. We are sincerely sorry people feel misled or hurt. Believe me, nobody wants to dupe anybody.”

Eisenhower said her organization donated $5,000 to the Iowa SIDS Foundation and $20,000 to Blank Children’s Hospital in honor of the baby who died.

After the Florida incident, Eisenhower told ConsumerAffairs.com: “We all feel very badly that this has happened. This was a matter of human error. It was a mistake and we’re trying to make it right. Our intent is to spread happiness--not to hurt people.”

When asked what action her organization will take in the wake of the Florida incident, Eisenhower referred questions to the president and chief executive officer of the for-profit company that markets the Student Ambassador programs.

That’s Jeffrey D. Thomas, president and CEO of the publicly-traded Ambassador Group, Inc. (EPAX). He also lists his title as CEO of People To People, which Eisenhower says he has contractual authority to do.

“We’re trying to work out a solution with the family in Florida,” Thomas told ConsumerAffairs.com last year. He declined to elaborate.

Thomas said a list service his company used provided the name of the Florida child. He also said People To People changed the wording of its letter.

“We’ve moved quickly to make sure this doesn’t happen again. We’ve changed the letter’s wording so that there will be no way people can misconstrue anything about how we came to get their child’s name. Our letter won’t say their child was named or nominated unless we can trace the source. The letter will talk about the benefits of the program.”

He added: “This is devastating. And we’re investigating how it happened. Our goal is to do the right thing and we’re working to get this fixed.”

Shortly after that interview, though, ConsumerAffairs.com learned the “parents” of a deceased cat received that same letter from People To People.

The “Parents of Earl Gray” received a letter--dated October 4, 2006--stating their “son” was eligible for a trip to Europe and “named for this honor by a teacher, former Student Ambassador or national academic listing.”

Earl was the couple’s all white, one-eyed, cat.

But he died ten years ago and is buried in the couple’s back yard. He was 14 years old, about the age at which students start getting letters from the organization.

“Earl was a smart cat,” joked his owner, Susan G. of Cabot, Arkansas. “And as an all white cat he might have fit right in going bobsledding in Austria.

“We’ve gotten a few laughs from this,” she said, adding this is second letter she and her husband have received from the organization in the past two years. “But then I thought of all the real people who are getting these letters and knew how excited their kids would be. And then I read about the parents who’d lost a child and received one of these letters. That just broke my heart.”

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