The Nonprofit Has Taken in Tens of Thousands of Dollars–Mostly in Cash–But Promises Have Been Left Unfulfilled and Taxes Unpaid

By Steven T. Jones

Computers 4 Kids sounds like such a good idea. Take second-hand computers–those discarded in the race for faster and more powerful machines–and give them to low-income children and needy schools.

The donors get a tax break. The kids get a chance to join the cyber revolution. Everyone wins.

So it seemed. But a New Times investigation has revealed that the big winners appear to be Computers 4 Kids organizers Eric Brownlee and Pennie Hugo, who have raked in tens of thousands of dollars by selling the computers during yard sales out of their San Luis Obispo home.

Money from those sales and other revenue sources are supposed to be put toward opening computer learning centers in both San Luis Obispo and the North County, according to Brownlee, and to pay the expenses of running Computers 4 Kids, referred to by its founders as C4K.

Through aggressive solicitations and public relations efforts, Brownlee has generated substantial media coverage of Computers 4 Kids, and stories in the Telegram-Tribune, Five Cities Times-Press-Recorder, and New Times (in the Strokes & Plugs section) and on KSBY each triggered a surge of local donations.

But knowledgeable individuals close to Computers 4 Kids say Brownlee and Hugo have been using most of the organization's revenues as their personal income.

Despite state laws requiring nonprofits to keep detailed records of their finances and make financial disclosures public, Brownlee has refused to provide an accounting of Computers 4 Kids finances to New Times or the state of California.

Beyond the question of whether Brownlee and Hugo are misusing Computers 4 Kids funds, the New Times investigation revealed the organization is rife with questionable financial practices.

Computers 4 Kids pays no sales tax on its computer sales, something that is required even of nonprofits. City codes also prohibit home-based businesses from directly selling merchandise.

Brownlee requires most computer purchases to be in cash and receives cash payments from a computer recycling firm in Santa Ana called Recomp, making tracking of organizational revenue difficult at best.

There has never been financial oversight by a board of directors, as former board members attest, and there doesn't appear to be an active board anymore, despite requirements under state law.

There is no system of financial checks and balances, and Brownlee and Hugo do all of their own record keeping, despite laws requiring that financial statements be done by an independent accountant. But that's a moot point considering Computer 4 Kids has not filed required state and federal financial disclosure forms. Regulators say both are overdue, even as they admit enforcement is lax due to lack of regulatory resources.

Brownlee also has overcharged some customers for computers he claimed were more powerful or functional than they were, a fact shown in both small claims court cases against Brownlee and interviews by New Times.

Compounding evidence of financial irresponsibility is the fact that Brownlee refuses to pay many of his bills, including court-ordered judgments against him up to three years old. And some say he has made threats of violence against people who are persistent in trying to collect debts.

Questions about Brownlee's financial practices have circulated in the local computer community, but not made public, allowing Computers 4 Kids to enter the most prosperous period in its three-year history, bringing in computer donations by the truckload.

"We're jamming," Brownlee said. "We're definitely having our biggest year ever.... This thing has gotten so big in the last six months."

This is the story of how an unemployed couple was able to win the trust of the local business community and bring in a lot of tax-free money doing it.

Eric Meets Pennie

Brownlee was introduced to Hugo in 1995 by Bob Beevers, a convicted felon who was then Hugo's live-in boyfriend and a childhood friend of Brownlee.

Brownlee and Beevers grew up together in Orange County; their families were friends; and as teenagers both were members of the Orange County Sheriff's Department's Explorers program, which was established and run by Beevers’ father, Bob Beevers Sr., who now lives in Los Osos.

Brownlee came to San Luis Obispo County for a job that he says never materialized and, unemployed, turned to his old friend for a place to stay. The senior Beevers allowed Brownlee to use his trailer, and he lived in the driveway of the Caudill Street house.

A short time later, Beevers left the scene and Brownlee became Hugo’s new live-in boyfriend.

The new couple had money problems. Court records show Hugo had been trying to get more child support money out of her ex-husband, Gary Hugo, for their two sons.

Gary Hugo wrote in a court document that in mid-February of 1996, "she and Eric had used up all of her AFDC money and food stamps and asked me if I could take the boys because there was nothing for them to eat." Two weeks later, she demanded their return, and he complied.

"I believe that the reason she needed them back in her home was so she could qualify for AFDC. The next day, March 1, the petitioner and Eric called my home several times and left messages demanding that I come and pick up the children immediately and insisting that the children were to permanently live with me. The telephone messages were brutal and abusive," he wrote.

Hugo's sole source of income was welfare payments totaling less than $700 per month. Brownlee's income was even less, about $200 per month, according to a court document Hugo filed.

At that time, after a failed business venture involving a formula for a cleaning compound, Brownlee and Hugo came up with the idea of Computers 4 Kids.

They talked the idea up to people they knew, including the Rev. Mike Sparrow of Agape Christian Fellowship, where they attended church, and got nothing but positive feedback.

They needed nonprofit status to be able to give tax credits for computers and make the plan work, so they filed their articles of incorporation with the state–Brownlee, Hugo, and Sparrow were listed as initial directors–and they were in business.

"This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person," they wrote in the articles.

Selling Computers

Things started slowly for Computers 4 Kids, with Brownlee and Hugo soliciting computer donations from companies all over the state looking to get rid of obsolete computer equipment. They began selling the computers out of their home on weekends.

"SLO: Computer driveway sale. Lots of stuff! Complete systems, $100. Sat., 9am to 3pm. 623 Caudill," read a typical classified ad in the Telegram-Tribune, none of which mentioned Computers 4 Kids.

Eventually, they began to attract more support and to get more help by listing Computers 4 Kids as a place to do community service. That was how Johnny Spicer joined Computers 4 Kids last summer, by working off community service hours connected with a driving-under-the-influence-of-alcohol charge (Brownlee also worked off his own DUI community service time at C4K last year).

"After I had finished and Eric signed off my community service, I was still under the impression that lots of good things were being done. I just believed his stories because Eric's a very believable guy," Spicer said.

Spicer was offered a job with Computers 4 Kids, using his marketing knowledge and sales background to help promote Brownlee's latest idea: to begin soliciting cash donations to open a computer learning center for children.

Spicer and Brownlee last October began aggressively seeking donations and support and got "computers by the truckloads," Brownlee said, and $2,800 in cash donations (Spicer said it was closer to $5,000).

The biggest donation came from the Fix Network. Not only did Fix.Net President Cheryl Woodard give Computers 4 Kids $2,000, but Brownlee and Spicer also convinced her to join the C4K Board of Directors and lend her name to their efforts.

Strong local media coverage through the fall–much focused on the donation of 20 computers to Judkins Middle School in Pismo Beach and 41 computers to Atascadero Unified School District–helped increase the flow of used computers into the Caudill Street house, where the house, driveway, and garage was often filled with computers.

They seemed committed to the cause, and the Telegram-Tribune printed Brownlee and Hugo's claim that they had spent nearly $15,000 of their own money to get Computers 4 Kids up and running, generating even more good will.

Brownlee seems to have gone for the heart strings in deciding who would get the computers he collected. Children who are disabled, emotionally challenged, or living below the poverty line "are all entitled to free computers," he said.

"We have parents call us in tears saying what a big difference the computer has made in their lives," Brownlee said, seeming affected by his story. "That's what makes it worth it."

Dozens of people interviewed by New Times say Brownlee was convincing and seemed genuine, even those who now believe him to be a con man. In December, at the peak of Computers 4 Kids' success, problems began to emerge for Brownlee and Hugo.

Questions Arise

The first sign that something wasn't right at Computers 4 Kids–besides the fact there was no financial oversight of Brownlee and Hugo–was when Spicer left the organization.

When Spicer left town to live with his family in Texas, he tried to warn people that Brownlee was not to be trusted in an e-mail message he sent to all of the donors and would-be donors with whom he had dealt.

"I am no longer a representative or affiliated with Eric Brownlee/Pennie Hugo and Computers 4 Kids. Although C4K has had significant accomplishments during the past year, I have witnessed what I shall call Organizational, and Cash Flow problems, " wrote Spicer.

Spicer said he realized Brownlee was taking money from Computers 4 Kids when donation money brought in to start a learning center never went to that purpose and Brownlee's behavior became erratic at times.

"Out of the money that was raised, I was paid my commission, and nothing happened. None of the money got spent. We were right in the middle of raising some sizable donations. I think we raised four or five thousand dollars in a matter of days." Spicer said. "Slowly but surely, the pieces started to unravel."

His e-mail concluded: "My suggestion is that if you do continue to be a part of this project; that you proceed as you would with any charitable cause: ask a lot of questions, demand full accounting, and give in increments in proportions to your satisfaction upon seeing actual goals met."

Among those receiving Spicer's e-mail was Woodard, from whom Brownlee was trying to extract another $2,000 on top of the $2,000 she had already given.

"I was primarily supporting the program in order for them to locate a permanent facility to be used for training youth from the local community. Fix.Net was going to provide technical support, trainers, and discounted Internet packages to Comp 4 Kids members," Woodard wrote by e-mail. "Then in January, I found that the funds that I pledged were not used to acquire a facility as was discussed at the prior board meeting. In the January board meeting I resigned and sent a letter to Eric Brownlee stating that Fix.Net was no longer supporting Comp 4 Kids."

Brownlee’s practices have been the subject of four small claims cases filed against Brownlee, Computers 4 Kids, or both.

Brownlee's neighbor across the street, Joseph Codispoti, had lent him $1,300 in October of 1995, supposedly to help with short-term funding shortfalls. In March of 1996, a judge ordered Brownlee to repay the money, but nearly three years later he still hasn't done so.

Computers 4 Kids also began having conflicts with some of its customers. Two small claims cases were filed against Brownlee for overcharging for defective or low-power computers, and New Times has interviewed two others with similar tales.

In the case of Thomas Kuhle, last April Brownlee charged him $600 for a computer purported to be a 120 MHz Pentium, but which Kuhle later discovered was a 66 MHz, 80486-class machine, which is far less powerful and valuable. Kuhle called Brownlee demanding a remedy.

"When the defendant returned my call he told me that he didn't care what Compaq said (the disputed computer is a Compaq and I had been in contact with Compaq) he insisted that the computer was a 120 MHz Pentium, he told me to stop bothering him, then he (paradoxically) invited me to sue him (if I disagreed) and hung up," Kuhle wrote in his complaint.

Judge Steve Sefton ruled in Kuhle's favor, but Computers 4 Kids didn't pay, so Kuhle took him back to court. This time, Brownlee pleaded for more time to pay.

"Here is our situation, a $5,000 State Educational Grant has been delayed until after the November election, this is creating a hardship! We are a strict nonprofit and depend on this type of funding," Brownlee wrote to the judge in September.

That grant still hasn't been awarded, and Brownlee hasn’t provided proof that it ever existed. If there wasn’t a grant, Brownlee could be prosecuted. Lying to a judge in an official proceeding can get someone charged with perjury and/or contempt of court.

Faced with a potential return to court in the Kuhle matter, Brownlee said he will start paying Kuhle $100 per month starting next month. Kuhle said he wasn't aware of Brownlee's nonprofit status until after his purchase and said he finds Brownlee's behavior reprehensible.

"He speaks in almost religious terms about the children," Kuhle said. "But that goes against how he acts in private."

Still, even with indications of problems and rumors about Brownlee's trustworthiness, Computers 4 Kids has continued to thrive.

"You should have been here last week," Brownlee said two weeks ago. "I had a 12-foot-high, 70-foot-long stack of computers."

The Need for Cash

The main reason cited by Brownlee for his computer sales and other cash-generating enterprises is the desire to open a computer learning center that would be free for low-income users, while fees to other users would pay operational costs.

Brownlee has been saying C4K is on the verge of opening a computer learning center for children for three months, but despite significant revenue and offers of office space, there doesn't appear to be any progress made during that time.

Spicer and others don't believe Brownlee is really committed to opening the center but is merely using the idea as bait for more cash donations.

Brownlee's actions reinforce that idea. The landlord of the Fix Network, Warren Dolezal, had offered Brownlee a good deal on office space he owned, but Brownlee never showed up for either of the appointments they set to discuss the matter.

But Brownlee is still playing up the need for a center and has now become much more ambitious in his plans and the amount of money he says he needs.

"We need $5,000 or $10,000 just to get in the door. And that is a small amount of money," Brownlee said. "If we had the computer learning center we'd be much better off."

He said all the equipment for the center has been pledged by Toshiba (something Spicer doesn't believe, and which Brownlee refuses to document), but that it will cost at least $5,000 to open the center in order to cover expenses for the first few months until it becomes self-sustaining. Of that, Brownlee said C4K has about $2,500 in the bank.

But then, during his first interview with New Times, Brownlee announced that he actually wants to open two centers and will need much more money to do that.

"But we're hoping to raise at least $10,000 because we'd like to open North County and San Luis Obispo centers simultaneously," he says.

That's why C4K is in such need of cash donations, a point he returned to again and again during the interview.

"One of the things that has set us back is we have not done enough fund raising," Brownlee said, noting that he is seeking to get an educational nonprofit status in order to apply for education grant money. "Then we'll be able to go out nationally and get some real money in here."

Hugo also sounded their theme: "If the financial contributions would be more steady we'd be better off."

"The bottom line is we are doing a lot of good for a lot of kids, but we're running out of bucks," Brownlee said.

He dangled the idea that without significant cash donations C4K might have to close it doors, leaving all those needy kids without computers.

"It's got to the point where it's got to be better funded, or we're going to have to close down," Brownlee said with a tone of bitter resignation.

"We've had no shortage of support in San Luis Obispo," Brownlee said. "Everyone up here has been receptive and said how can we help. Now if they would just open their checkbooks."

Community Support

Brownlee explained how Computers 4 Kids could never have become as successful as it has in a large community, and they have thrived because of the trust and generosity of San Luis Obispo County businesses and individuals.

"We're on a first-name basis with the IRS, with City Hall, with the county," Brownlee said. "We have the best accounting firm in the city working pro bono."

Brownlee was referring to Barbich Longcrier Hooper & King Accountancy Corp. While it is true that Andy Cone of that firm has "advised and consulted" Brownlee on setting up Computers 4 Kids, Cone denied C4K is a client of the company, or that the company has been at all involved in Brownlee's record keeping.

"We never have done their books," said Cone, who also said he has never done any accounting, tax returns, or other work on C4K's finances, despite working with the organization for the last two years.

"Eric and Pennie basically run the show," he said.

In fact, Cone said he knows nothing about Brownlee's finances except what he has been told by Brownlee. Yet he reiterated Brownlee's comment about "putting his time and money into the organization" while admitting he has seen no evidence of a financial contribution.

Sparrow also said he was unaware of the potential for financial irregularities at C4K and said he resigned from the board last fall simply because of time commitments at Agape Christian Fellowship.

"The times we would meet and talk about finances, we were always really short of money," said Sparrow, who said he gave $500 of his own money to help out at one point, a loan that was never paid back.

While he trusted Brownlee and has doubts about whether he was taking money from the organization, he said, "If there are problems, they ought to be held accountable."

Sparrow also believes Brownlee should open his books.

"We're a 501(c)(3) here too, and anyone who wants to see our finances, we'll put them on the table," Sparrow said. "I believed in the vision, but I'm not sure about the administration."

Another individual who lent his name and support to C4K is Rudy Lucero, a teacher a Judkins Middle School whose class received donated computers from C4K. Brownlee said Lucero recently joined him and Hugo on the Board of Directors, although Lucero didn't return New Times phone calls seeking confirmation and comment.

Among the local companies that have supported Computer 4 Kids are Computerland, Mac Services, GST Call America, Ryder Trucks, True Link, Marian Medical Center, Oddworld Inhabitants, Atascadero Ford, and Meridian Insurance.

"We thought it was a great cause and a great organization," said GST spokesperson Marina Chang, who wasn't told of any of the financial concerns raised in this article.

Other businesses did ask questions and didn't donate.

"I wanted to see financial information: how much came in, how much went to the kids, and how much went into his pocket. He wasn't able to provide that, so we didn't donate," said Pete Gannon, owner of Computer Stuff in San Luis Obispo.

While Computers 4 Kids has enjoyed substantial support in the community, that support has never been as substantial as Brownlee has claimed.

For example, C4K for a long time made a point with potential donors about how they had the full support of Congresswoman Lois Capps–until they were contacted by Capps' office and told to stop using her name.

But while some had their suspicions, they never went public, leaving others vulnerable to Brownlee's charms.

In fact, Brownlee has such a good reputation on the surface that he is able to get free computer tech work. Brownlee said most of the tech work done on donated computers is by San Luis Obispo High School students, who volunteer their time to meet the school's community service requirements.