Charity Governance

MISSOURI TAKES UPMIFA FOR A TEST DRIVE: DENIES STANDING TO A DONOR

Dateline: November 11, 2009, Chicago

Yesterday, the Missouri Court of Appeals (Western District, Division III) affirmed a trial court’s dismissal of lawsuit filed by a donor against a charity for lack of standing.  Hardt v. Vitae Foundation, WD 70525 (Nov. 10, 2009).  The case was properly decided.   It is worth noting because it required the court to interpret the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which has swept the country almost as fast as...

STATE ATTORNEYS GENERAL SHOULD INVESTIGATE KIVA.ORG AND CONSIDER ENFORCEMENT ACTION IF THE FINDINGS WARRANT

DATELINE: November 9, 2009, Chicago

Stephanie Strom of the New York Times reveals an apparent violation of the public trust by Kiva.org, a charity that Strom describes as “the country’s latest celebrated charity.”  Confusion on Where Money Lent Via Kiva Goes (Nov. 8, 2009).  Kiva.org raises funds to finance international micro-lending programs.  The gimmick:  In the past, Kiva.org has seemingly informed individual lenders that they are lending money to specific individuals--at least that has been the perception.  Nicholas D. Kristof, the New York Times columnist, wrote in a 2007 column that:

I lent $25 each to the owner of a TV repair shop in Afghanistan, a baker in Afghanistan, and a single mother running a clothing shop in the Dominican Republic... .

According David Roodman, a research fellow at the Center for Global Development:

The person-to-person donor-to-borrower connections created by Kiva are partly fictional.

According to Strom’s reporting, dollars being lent are not actually...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR--PART II

DATELINE: September 30, 2009, Chicago

Read Part I of New Jersey Attorney General Brings Lawsuit in What Could Turn Out To Be the Nonprofit Case of the Year

Train wrecks always make for great photographs, but train wrecks only serve a purpose if we learn from them.  If the allegations made by the New Jersey Attorney General against those running the Stevens Institute of Technology turn out to be true, Stevens will become one of the great train wrecks in nonprofit history.  Already the story offers...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR—PART I

DATELINE: September 29, 2009, Chicago

A little under two weeks ago, New Jersey Attorney General Anne Milgram filed sued against the trustees of the Stevens Institute of Technology, Harold J. Raveche, Lawrence Babbio, and unnamed John and Jane Does in what, if the allegations prove true, could prove to be the story of the year in the nonprofit world.  The 90-page complaint is sweeping in its allegations.  Raveche is the CEO and Babbio is the chairman of the board and a member of the executive committee.  While there have been incidents involving excess compensation, violations of the terms of restricted gifts, deception, failed investment management, and breach of the duty of care, we can't...

IT’S EVERYBODY ELSE’S FAULT: FEDS INVESTIGATE ALLEGATIONS OF CORRUPT ILLINOIS STATE FUNDED CHARITY

DATELINE: September 28, 2009, Chicago

The Illinois Legislature was persuaded several years ago to fund the Let’s Talk, Let’s Test Foundation (LTLTF) to the tune of $3 million a year.  LTLTF's mission is to fight HIV/AIDS in the African American community.   In Illinois, charges of corruption flow from almost any government involvement in any activity.  The halo of charity apparently may offer no immunity, as Chris Fusco of the Chicago Sun-Times reports today in Chicago Aids Charity Facing Scrutiny Over Spending.  Federal prosecutors have...

OPPOSITION GROWING TO SENATOR GRASSLEY’S EFFORTS TO USE THE COVER OF NIGHT

Hear the screams from Center 42

Loud enough to bust your brains out

The opposition's tongue is cut in two

Keep off the streets cause you're in danger

One hundred thousand disparos

Lost in the jails of South America

Cuddle up baby

Cuddle up tight

Cuddle up baby

Keep it all out of sight

Undercover

Keep it all out of sight

Undercover of the night 

The Rolling Stones, Undercover of the Night

DATELINE: September 25, 2009, Chicago

We wrote two days ago about Senator Grassley’s efforts to use the cover of health care reform to avoid a debate over two provisions that are unrelated to health care reform but that Senator Grassley is trying to insert into the Baucus proposal.  One would authorize the IRS to ask governance-related questions on the Form 990. The other would eliminate the rebuttable presumption from the intermediate sanctions.

We used strong language in our criticism.  Rightfully so.  Senator Grassley is obviously afraid that a full airing of the issues surrounding his proposals might result in their defeat.  Both are bad ideas.  By eliminating the rebuttable presumption, Grassley will assure that thousands of large colleges, hospitals, other charitable organizations, and their managements will be plunged into an abyss of tax disputes with the IRS.  Why?  Because Grassley wants to substitute the business judgment of an IRS agent for that of a board of directors charged with setting executive compensation.  Talk about a waste of charitable resources.

What Senator Grassley really wants is wage controls for nonprofit executives, but he doesn’t have the guts to make that proposal.  Senator Grassley is serving up a 21st century version of Robespierre's Law of Maximum, if not the ghost of Richard Nixon's wage and price controls.   

We aren’t the only ones who are raising objections to Senator Grassley’s “undercover of night” tactics.  The American Society of Association Executives (ASAE) has weighed in, voicing its opposition to Grassley’s efforts.  ASAE is more diplomatic than we are, but it nevertheless has written a strong letter in opposition to Grassley’s efforts.  We hope others in the exempt organization community will voice their opposition to Senator Grassley’s efforts.  

Let Senator Max Baucus, the Chairman of the Senate Finance Committee, know what you think of Senator Grassley's proposal and tactics.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL. If you liked this post, please visit http://www.charitygovernance.com for a description of our training and consulting services. You will also want to acquire a copy of Jack Siegel's book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good." Copyright 2009, Charity Governance Consulting LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for re-posting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "A Guide for Non-Profit Directors, Officers and Advisors: Avoiding Trouble While Doing Good" and this web blog. For additional information call 773-325-2124

PROVENA HOSPITAL CASE MAY BE DECIDED BY ILLINOIS SUPREME COURT’S RULES RATHER THAN ON THE MERITS

DATELINE: September 24, 2009, Chicago

Yesterday the Illinois Supreme Court heard 55 minutes of oral arguments in the Provena Covenant Hospital property-tax exemption case.  The Illinois Attorney General is contesting the claimed exemption, arguing that Provena did not provide adequate charity care.

Bruce Japsen of the Chicago Tribune is reporting that the AG argued that providing charity care to 302 people at a cost in revenue that amounted to just .7% of the Provena’s total revenues does not amount is an insufficient level of charity care for purposes of qualification for property tax exemption.  Illinois Supreme Court: Provena Covenant Medical Center, Illinois Department of Revenue Square Off Over Tax-Exempt Status.  Not surprisingly, Provena’s counsel pointed out that charity care is not the only benefit Provena provides to the community.

A decision by the court is not imminent.  Whether the decision will be handed down in a matter of weeks or months is unknown.  What is of note is that two of the seven justices recused themselves.  This may stack the deck in the AG’s favor.  Under the court’s rules, four of the five justices must vote to overturn the lower court’s decision in favor of the AG.  Otherwise the lower court’s decision denying property tax exemption stands.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL. If you liked this post, please visit http://www.charitygovernance.com for a description of our training and consulting services. You will also want to acquire a copy of Jack Siegel's book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good." Copyright 2009, Charity Governance Consulting LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for re-posting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "A Guide for Non-Profit Directors, Officers and Advisors: Avoiding Trouble While Doing Good" and this web blog. For additional information call 773-325-2124

SENATOR GRASSLEY AND HIS STAFF SHOULD BUTT OUT OF HEALTH CARE REFORM

DATELINE: September 23, 2009, Chicago

There is a time and place for everything.  Now is not the time or place for Senator Grassley’s crusade against what he claims to be excessive executive compensation in the nonprofit sector.  Grassley has used his power and influence to submit two amendments to the health care reform bill currently working its way through the Senate Finance Committee.

Whether you are a Republican or Democrat, you have to acknowledge that our health care system is in need of reform, if for no other reason than ever escalating costs that continue to outstrip the overall rate of inflation.  Unfortunately this August brought little light to what has become a typical ideological debate pitting the far Left against the far Right in a circus, with Glenn...

STEVE MILLER CREATES NEW JOB OPPORTUNITIES FOR EXEMPT ORGANIZATION LAWYERS AND ACCOUNTANTS

DATELINE: September 23, 2009, Chicago

Steve Miller, Director of the IRS’s Large and Midsize Business Division, not so long ago headed the IRS’s Tax-Exempt and Government Entities Division.  Many EO lawyers and accountants associate Miller with the recently completed Form 990 redesign project.  One of the controversial aspects of the Form 990 project was the addition of Part VI to the Core Form.  That part focuses on governance issues, like the existence of the conflicts-of-interest, whistleblower, and record retention policies, board independence, and methodology for determining compensation.  Many in the EO community are still troubled by this line of questioning because they believe the IRS should not be involved in nonprofit governance.

Miller has been a staunch defender of the governance questions, which is why an article in today’s Tax Notes Today...

CALIFORNIA ATTORNEY GENERAL ON THE ATTACK

DATELINE: September 14, 2009, Chicago

The California Attorney General has brought suit against individuals associated with the L.B. Research and Education Foundation (Foundation).  Raja Abdulrahim, UCLA Surgeon Sued for Benefiting From His Own Charity, L.A. Times (Sept. 10, 2009).  Given the allegations in the AG's complaint and the newspaper coverage, we are willing to bet that the IRS will join the fray, if it hasn't already.

The suit names Dr. Gerald D. Buckberg,five others who are or were Foundation officers or directors, and 50 unnamed individuals.  At the heart of the suit are allegations over self-dealing, but the AG has thrown just about everything imaginable at the defendants.  If the facts are anywhere close to the alleged ones, we’d recommend that the defendants...