Charity accused of fraud
by Marty Racine, Kay Moore
Houston Chronicle; Houston, Tex.; Mar 22, 1986

The state attorney general's office is investigating allegations of misappropriation of funds and mismanagement by the Houston-based Action into Research for Multiple Sclerosis (ARMS) of America, Ltd.

Ron Dusek, spokesman for the attorney general's office in Austin, said Friday his office is reviewing allegations that ARMS-America officials were involved in ``self-dealing.'' One course of action would be for his office to appoint a receiver to ``completely take over the corporation.''

The investigation was requested by Dr. Phillip James, the Scottish physician for British rock star Ronnie Lane. Lane, an MS victim, organized a rock tour in 1983 in which he raised the more than $1 million seed money needed to establish the public, non-profit organization, modeled after ARMS-UK in Britain.

The accusations center on Houston attorney Mae Nacol, who has been involved with ARMS of America since its inception in December 1984.

In his complaint to John Vasquez, head of the attorney general's charitable trust division, James said that Nacol incorporated her law practice into the offices of the charity and has taken salary and fees for her staff from the charity funds.

A statement furnished to the attorney's office shows that ARMS paid Nacol at least $206,202 for legal fees, salary and reimbursements for expenses and entertainment since December 1984. Her associate, Barbara Leigh Hunt Nacol, received $71,557 while serving as president of ARMS.

In the past, Mae Nacol has represented Barbara Nacol to be her sister. However, Friday she said they are not related. Mae Nacol also denied any wrongdoing.

Lane, co-founder of the early 1970s British group The Small Faces, and Nacol became acquainted in the summer of 1984 when James telephoned Nacol asking her to help Lane. Nacol, who is also an MS victim and is currently in a local hospital, had founded a hyperbaric oxygen treatment center in Houston to aid herself and other MS sufferers.

Lane came to Houston for treatment at Nacol's HBO Medical Center on Travis. Afterward, Lane, who was involved with ARMS of England, started ARMS of America in Houston. He asked Nacol to direct the nationwide, non-profit group.

The celebrated 1983 four-city ARMS concert tour of America also starred Lane's British rock star contemporaries Jeff Beck, Jimmy Page, Charlie Watts, Bill Wyman, Eric Clapton and Joe Cocker.

Lane said he began questioning ARMS of America spending practices last November when ``an old Lincoln limousine that Mae had that was really a piece of trash - a crate - was sold to USA-ARMS for nearly $7,000.''

``All the (ARMS) cars seemed to be sadly lacking in upkeep,'' he said. Lane also said he was concerned about the ARMS purchase of a Cherokee Chief Jeep for nearly $9,000.

``I wouldn't have given you $9 for the pair of 'em,'' he said. ``That's what first got me to thinking. That made me sit up. Before that I'd been sort of asleep.

ARMS funds were also used to pay $3,150 to the Texas State Bar Insurance Trust, which provides insurance only for attorneys and their employees, records obtained by the Chronicle show. Of that amount, $864 was paid in behalf of legal secretary Georgia Swearingen, who at the same time was paid a salary of $14,772.74 by the non-profit ARMS. Also, attorney Carol J. Kent was paid a salary from ARMS while she was associated with Mae Nacol's law firm. Kent's State Bar Insurance Trust was also paid by ARMS.

The records show that N.R. ``Ray'' Ashley, a member of the executive membership committee, was paid $23,213 for services on five separate invoices from May through August last year. Other members of the board allege that the fees were paid for repairs to Nacol's Memorial home and farm near Houston.

Lane, who frequently uses a wheelchair, also received money from ARMS, including rent and the salary for O. W. Leatherwood to help with his care.

Nacol says she resigned from the board in November when the allegations first began to surface. But Lane noted that the board Nacol appointed continues to operate the non-profit group.

She said three audits of the funds - one by an independent firm and two by board members - found no wrongdoing.

She said she paid some operating expenses out of her own pocket before the group was formally incorporated. She says she was later was reimbursed.

``He (Lane) wanted things done immediately,'' she said. ``We had attempted to hire an administrator to handle it. It was such a mammoth task, we couldn't find anyone to do it that was familiar with MS.

``It became very evident that the only way it would be accomplished was that if I devoted my full time to the organization. I gave up my law practice and agreed to dedicate myself to ARMS, and that was what I did.''

Nacol, a criminal lawyer, is a member of Houston's Nacol jewelry family.

Lane was notified by letter last week of his dismissal - effective Feb. 10 - as a board director by the ARMS-America Executive Committee. James was also removed from the board. Lane subsequently founded his own non-profit organization, the Ronnie Lane Foundation.

``I don't know exactly what's in the (ARMS) bank account now, but I'm guesstimating it's down to probably $150,000. And most of it has gone straight into the pockets of those who run it. The irregularities are blatantly there,'' said Larry Hysinger, attorney for Lane.