As agency sank, heartsick clients left in the dark
Failing Calif. center only asked families in limbo to pay more
An adoption center headquartered in California knew its financial foundation was crumbling, but it continued to take money from clients up to the very week it abruptly closed its doors – devastating thousands of families across the country. USA TODAY investigates what went wrong. This is Part 2 of a three-part series.
July 8, 2016: 207 days to closure
Cary Virtue planned to let go of his animosity toward the Independent Adoption Center.
The Northern California man had signed with the California-based agency in late 2013, hoping to adopt as a single parent. More than two years later, he said, he had gotten one hit on his profile: from an adult in Ghana asking to be adopted.
In 2016, days after his 50th birthday, Virtue decided it was time to move on with his life. He canceled his contract with the IAC and asked for a partial refund. The agency denied his request. Virtue filed an appeal and grievance, arguing the agency had misrepresented its services, records pro
vided by Virtue show. The IAC denied that, too.
Tired and heartbroken, Virtue decided he didn’t want to spend thousands more on an attorney to fight the denial. He wrote a negative review on Yelp and closed the door on becoming a father.
Then he received messages from people through Yelp telling him that others were unhappy with the IAC. They told him the agency was under state investigation. They connected him to a group on Facebook and shared information, including 2015 survey results from Paul Chartrand and Daniel Gagen that showed clients were dissatisfied with the agency’s marketing, outreach and receptiveness to feedback.
Chartrand and Gagen, a California couple who signed up to adopt through the IAC in late 2013, also had analyzed the agency’s financials and warned leadership that if major changes weren’t made, the center was going to collapse.
Virtue decided he couldn’t let stand what the adoption agency had done.
“Given this new information, I decided they lied to me,” Virtue wrote in a timeline he created of his interactions with the IAC. “They knew all of this was happening.”
He filed a complaint with the Contra Costa County district attorney’s office on July 8, alleging fraudulent advertising and lack of services, records show. Several others submitted complaints as well. John Ortiz, a deputy district attorney assigned to the Consumer Fraud Unit, opened an investigation.
As another agency started scrutinizing the Independent Adoption Center, Gagen and Chartrand continued to check in on the status of the state’s investigation into their complaint that the agency was abusive to clients and not able to financially provide the services it offered. Little had changed.
In July, state Licensing Program Analyst Vaishali Singh-Sood told them she was getting too many calls about the adoption center because someone had posted her phone number on Yelp.
“I am working on some Other complaints but will work and complete yours next week I think,” she said in an email. When Chartrand checked in again in August, she responded, “Still working on it.”
The center’s financial crisis deepened. It had shifted five of its locations into smaller spaces to save money, according to federal court records. In May, it cashed $250,000 in investments – certificates of deposit – to cover expenses. The center also completed its 2015 year-end report in June, showing a nearly $900,000 loss.
Most clients knew none of this. They knew only what the center told them.
In August, the agency announced an aggressive plan to sign up new clients and generate additional revenue from existing ones. In an email to prospective clients, interim executive director Marcia Hodges warned the agency’s fees would be “going up significantly” beginning Sept. 1. “If you are still considering adopting through the Independent Adoption Center, we want to give you an opportunity to do so before the fees increase,” said Hodges, who declined USA TODAY’s requests for an interview.
An email to existing clients struck a grimmer tone. Hodges told them the join fees were rising to respond “to circumstances beyond IAC’s control.”
She said the center would be upgrading its website and had hired a San Francisco-based ad agency to implement a new online advertising strategy. Both were designed to reach more birth mothers interested in adoption.
Hodges said the agency also was launching a new “pay-per-click” program. For a $2,400 fee, the agency would advertise individual families waiting to adopt, with direct links to their profiles.
“While we expect the new approach will benefit all clients, the offer in this letter was specifically crafted to make sure you are given the same opportunity for increased individual exposure to birthmothers, as those who will pay our new higher fees,” she wrote.
Clients were given less than two weeks to decide.
Chara Powell and Andrew Rivera – the California couple who had so eagerly celebrated their adoption profile going live on the IAC’s website in December – had gotten nary a nibble from birth mothers in eight months.
Now the agency was asking for more money.
“There was this really deep sadness of, like, if we don’t do this, now we’re going to be behind all these other people that are paying this,” Powell said.
The couple didn’t have $2,400 in savings right then. Distraught, they debated charging the pay-per-click fee to a credit card. Powell’s parents, who lived with them, overheard the conversation and insisted on paying for it. Rivera and Powell reluctantly signed up.
Mark and Stacey Green, the Indiana couple who had joined the agency in January, read Hodges’ email in disbelief. Their adoption profile wasn’t even live on the IAC’s website yet.
Mark Green also was uncomfortable with the email’s tone. For the first time, he noticed the Independent Adoption Center talking about how much something cost before explaining what it was.
“Something’s off here,” he said. “Something’s not right.”
The Greens opted out of the fee.
Oct. 20, 2016: 103 days to closure
Powell and Rivera’s concerns with the Independent Adoption Center were growing.
More than a month in, the pay-perclick program seemed to be making no difference. No one from the agency could explain how many additional clicks they were getting on their profile. Then Powell learned the IAC hadn’t been sending out the glossy brochures they’d so carefully crafted – that the agency had required them to create and pay for – as their letter to birth mothers. Instead, the adoption coordinator told her officials often emailed birth mothers links to online profiles.
“I was enraged,” Powell said. “I was just like, ‘This is not OK.’”
She felt she and Rivera had been lied to. The couple demanded answers from their adoption coordinator, who scheduled an Oct. 20 conference call with Hodges, the interim executive director. Hodges did not respond to USA TODAY’s requests for comment.
The conversation did not inspire confidence. They said Hodges told them that she was “drinking from the firehose” and that the IAC was her first experience with adoption.
“It basically went nowhere,” Rivera said. “She was trying to placate us.”
Powell said she became so incensed that she left the call early. She checked the agency’s refund policy and found that none were available after one year. It was too late to get their money back. When she searched online, she found others with similar frustrations. We’re screwed, Powell thought.
“We’re too deep in this now to get out of it,” she remembers thinking.
And more expenses were coming. The couple were nearing their one-year anniversary and would soon need to renew their home study.
Powell and Rivera felt as if they were in quicksand, with no way out.
Dec. 5, 2016: 57 days to closure
The adoption center had weathered many storms in the past 30 years, but board president Gregory Kuhl wasn’t sure it could survive this one.
Kuhl had adopted a daughter through the IAC when the agency was still in its early days, he told USA TODAY. He’d served multiple terms on the board over the past three decades and had helped navigate the nonprofit agency through past financial challenges.
This time, he wasn’t sure the cuts, the layoffs would be enough.
Kuhl said the center had been losing business to the internet as birth mothers and families increasingly connected on their own. The departure of Executive Director Ann Wrixon and the associate executive director – and their collective decades of experience – dealt another blow.
“We’re fighting clients, we’ve lost our director and we’ve lost so much to the internet,” he said. “It’s just that perfect storm.”
Later, a bankruptcy trustee would offer a different perspective, arguing the board of directors had failed in its duty to understand and act on the organization’s precarious financial position.
In November, for the first time, Kuhl and the rest of the board discussed the possibility of bankruptcy. The adoption agency’s lawyer referred them to a bankruptcy attorney.
By that time, the agency had pulled a total of nearly $360,000 from certificates of deposit since May to cover expenses, according to federal court records. On Dec. 2, the board authorized Hodges to liquidate another $100,000 CD. And its American Express bill totaled more than $140,000 in December.
The agency continued to recruit new clients, but Kuhl said the board decided not to cash those clients’ checks while it figured out what to do.
“I didn’t want to take a person’s check in November and December when we were talking about what might befall us,” he said. “So we held those back.”
But that wasn’t true. The agency continued to take money from families, including cashing $14,619 in checks in November from James and Courtney Coleman, according to emails and statements provided by the family.
After 14 years of struggling with infertility and now in their mid-30s, the Colemans had decided to build their family another way. The Independent Adoption Center drew in the Alabama couple with heartwarming success stories, even showing them an episode of a TLC show featuring the agency.
“They make you really feel good,” James Coleman told USA TODAY. “You feel, ‘Wow, we’re going to be a family in a year, once we’re paying this money.’ ”
Courtney Coleman’s parents refinanced their house to help cover the cost. In late November, the Colemans handed their money and their trust to the IAC.
Interviews and records obtained by USA TODAY show that the agency also continued to invoice current clients and automatically withdraw money from their bank accounts in November, December and January.
On Dec. 5, Chara Powell noticed she’d missed a call and cued up her voicemail.
“This is Laura at the Independent Adoption Center,” a woman’s voice said. “Hope you and Andrew are well. I was just calling because I have a birth mom I’ve been working with for a couple months who let me know this morning she’s really interested in speaking with you guys.”
Powell was ecstatic. It was almost a year to the day that their profile had gone live on the IAC website – far sooner than they’d been told to expect a match. Maybe this process would work after all.
The birth mother, who was due in January, chose Powell and Rivera as her child’s parents. The birth father supported the match, too.
An IAC official congratulated the couple, then let them know the adoption agency’s staff would be going on vacation during the holidays and to call a 24-hour hotline if they needed anything. Powell and Rivera did hear from the IAC again in December, though. It emailed them another invoice, for a $2,500 birth parent services fee.
Every text between Powell and the birth mother felt high-stakes. “What if she thinks I’m a weirdo?” Powell worried. “What if I send her a gift, and she’s like, ‘Dude, that’s weird?’ ”
But their relationship only got stronger. When the birth mother couldn’t afford toilet paper, Powell and Rivera sent her rolls of it. They fed her cravings for Domino’s Pizza.
Her due date was less than a month away.
Jan. 5, 2017: 26 days to closure
Hodges began the new year with an acknowledgement, and a plea.
“We sincerely regret that it has become tougher to achieve placements since many of you originally signed up with IAC,” she wrote in an email Jan. 5, citing increased competition and a drop in unplanned births. “I can though, assure you that we are doing everything in our power to deal with this new reality.”
Hodges reminded clients of the fee increase the agency had implemented in the fall. Now, she said, the center would shift some of its marketing resources to advertise to new families interested in adoption, an effort it had stopped in early 2016. Doing so would ensure the agency’s sustainability, Hodges said.
And once again, Hodges pushed clients to consider paying an additional $2,400 for the individual pay-per-click program. She claimed participants in the program were seeing a 40% higher placement rate.
“Increased competition increases the need for outreach resources,” Hodges wrote, “and we, therefore, strongly suggest you consider the IPPC program as a means to achieve placement sooner.”
Quietly, other employees were more skeptical of the program’s success.
An IAC adoption coordinator warned one couple the data was “still fairly new.”
“I have been provided with no evidence that any of these matches were the direct result of the iPPC ads,” she told the couple in a Jan. 9 email obtained by USA TODAY.
Hodges left for a two-week vacation to Tanzania, according to federal court records. While she was out, other IAC employees ran the agency.
Clinical Director Jennifer Bliss, who had been with the agency for more than 12 years, was one of the employees who stepped in. She told USA TODAY she doesn’t remember making any significant financial decisions while Hodges was gone.
Bliss knew the IAC “was going through a tough time” in 2016 but assumed the agency would recover, as it had before.
On Jan. 21, Chara Powell and Andrew Rivera’s dream came true. Their son, Joshua, was born. The couple joined the birth parents at the hospital, and Powell remained there overnight, feeding her son and changing his diapers. She calls it “the most sacred, special time.”
On Jan. 25, the morning after the family was discharged, they met at the Independent Adoption Center’s Los Angeles office to sign the relinquishment paperwork.
Powell said she noticed Bliss acting strangely.
When Bliss came out to greet them, she shared little stories of the Christmas cards still decorating the lobby. This family adopted from us. This couple had a miracle baby. Powell said Bliss’ voice cracked when she pointed to a card from a couple who had adopted their first child through the agency and were waiting to adopt their second.
“Oh my God, how sweet,” Powell initially thought. “She just loves this family so much.”
But then Bliss walked away and shut herself in her office. Powell said she wondered if Bliss was upset with them for some reason. Powell shook it off. She and Rivera left with their son.
Hodges returned from Tanzania on Jan. 25.
The next day, according to federal court records, she met with the board of directors and walked them through the bankruptcy process. The board passed a resolution to file for bankruptcy.
After 34 years in business, the adoption agency would permanently close.
It used another $151,000 certificate of deposit to cover payroll one last time.
“We were out of money,” the IAC’s board president, Gregory Kuhl, explained later, according to court records.
One day later, on Jan. 27, the center pulled the $2,500 birth fee out of Powell and Rivera’s bank account. And records obtained by USA TODAY show that it continued to sign up new clients.