March 4, 2011, 9:07 am
In rare instances following an investigation of a nonprofit, my office has decided it’s best for the target nonprofit to shut down. We then usually create an agreement with that nonprofit for it to dissolve its existence. This generally happens when the legal violations or futility of trying to continue are so stunningly obvious, it’s in everyone’s interest just to stop.
But once I had a nonprofit make an unsolicited offer to dissolve. I was surprised, since my office was still in the initial stages of review, but I agreed. The nonprofit’s conduct had been questionable, but I was not sure any state laws had been broken.
So what could a nonprofit do that was so bad that it voluntarily invoked one of the harsher penalties under Missouri law, even though it may not have broken any state laws? Simple: It completely failed to meet its constituents’ expectations for openness, and the…
February 8, 2011, 9:04 am
One of an attorney general’s main responsibilities is to step in when a nonprofit’s leadership fails.
We do whatever is needed to preserve the organization’s ability to serve its community. At times, we need to act aggressively to make sure an organization that is vital to its community continues to fulfill its mission. This happens more often than most nonprofit directors and executives probably realize.
What it often boils down to is this: Sometimes we need to clean house. My favorite example of what can happen involves a case I pursued awhile back against an animal shelter in Missouri.
This shelter was quite important to its community. It was the only shelter in town and one of only three in the four-county area it served. It also had a stunningly beautiful donated campus whose size was measured in acres. But a few years ago, it dissolved into chaos.
We first got…
January 28, 2011, 9:00 am
A few months ago, I made an offer to the founder and executive director of a nonprofit: Shut the nonprofit now or my office will seek serious financial penalties from you.
The nonprofit executive had worked for three years to build his organization and donated a significant chunk of his life savings to it. His wife had volunteered for it, as had several friends. His goal was to help domestic-abuse victims, and he thought his approach was different—and better—than others. He had great plans, such as building a ranch for kids harmed by domestic violence, running a 24-hour crisis hotline, and creating a fund to provide financial assistance to victims. He set up the organization, got tax-exempt status, and then proceeded to solicit donations.
So why did the attorney general’s office take such a harsh action and force the organization to close?
In short, his solicitations for…
January 19, 2011, 6:37 pm
My office—the Tennessee attorney general’s charity unit—recently received a call from a judge. She was adjudicating a foreclosure that had advanced to the stage in which the debtor’s assets would soon be sold at auction. The judge was concerned because the debtor in this case was a nonprofit, and she realized that the parties had not involved our office in the foreclosure process. As a result, the judge invited our office to attend the next meeting on the status of the foreclosure.
The only parties present at the meeting were the lender and the court-appointed receiver for the nonprofit’s assets.
When we asked about the status of the nonprofit, the lender told us that the board members had all resigned and that the nonprofit had no management.
Apparently, once the board of directors realized that the nonprofit was no longer financially viable, its members washed …
January 12, 2011, 6:48 pm
What should you do when a trusted employee takes the equivalent of 15 percent of your organization’s annual budget?
Embezzlement and other fraud are a huge drain on nonprofits’ ability to serve their communities. Yet I consistently see nonprofits doing less than the law requires them to do to punish thieves, and far less than the most they could do to recover the lost assets.
Over the past few years, my colleagues and I have consistently told numerous nonprofits they need to do more to penalize embezzlers. Executives and board members in charge of nonprofits have a fiduciary duty to protect their nonprofits’ assets and preserve their ability to provide services. If nonprofit leaders don’t do enough, they have breached their duty, and that could prompt their attorney general to take action.
Embezzlement happens. Before my presentations to nonprofit groups, I …
January 12, 2011, 3:36 pm
I work for the Missouri attorney general’s office, and for years I have coordinated its regulation of nonprofits. One day I was explaining to a group of nonprofit experts what regulators like me do, and I rattled off a list of cases from Missouri and from my neighbors in Arkansas, Illinois, Iowa, and elsewhere. When finished, they couldn’t believe the number —and those were just ones I knew off the top of the head.
At that moment, it occurred to me that most people running nonprofits don’t understand how active their attorneys general are, or even what those officials are supposed to do. Yet we have the power to dissolve whole organizations, require them to act in certain ways, remove their directors, and take numerous other actions.
A few high-profile cases handled by attorneys general do make the news, such as the state of Tennessee’s negotiations with Fisk…
May 27, 2010, 11:39 am
The oil spill in the Gulf of Mexico has been first and foremost a disaster for the environment as well as for those whose livelihood depends on the gulf – as I write this word comes that the “top kill” may have worked to finally put an end to this debacle.
Certainly BP’s public reputation is in terrible straits but another casualty is the reputation of the Nature Conservancy, which has embraced a working relationship with BP. See the first-rate reporting by Joe Stephens of the Washington Post, who broke this story. The Nature Conservancy-BP dustup has important lessons for all charities to bear in mind.
The simple reality is that at its core, the Nature Conservancy believes in having working relationships with corporations active in certain environmentally sensitive industries.
Yes, you can still hug a tree even if it’s covered in oil.
Readers can agree or disagree with the Nature…
April 13, 2010, 12:00 pm
Tomorrow in Washington, arguably the most important public discussion about charities and the charitable sector this year is scheduled to take place at the National Press Club. It is a symposium sponsored by Catholic Law School that will discuss “Philanthropy in the 21st Century: Should All Charities Be Equal?”
Anyone with an interest in the charitable sector and its future success should attend.
The discussion is focused exactly on the issue that is first in the minds of policymakers in Washington who are interested in the tax-exempt sector: whether there is merit to a broader review and consideration of what is a charity. More specifically, should there be an effort to distinguish between types of charities?
The symposium is moderated by Professor Roger Colinvaux. It is rare that I am more interested in what the moderator has to say than the speakers (although the speakers in this case…
March 23, 2010, 11:46 am
Another charity. Another letter from the U.S. Senate. And again, coast-to-coast press coverage raising significant questions, this time about the recent Senate inquiry into pay practices at Boys and Girls Clubs of America. Many charity executives will say a small prayer of thanks that the mailman didn’t stop at their doors with a Senate-franked envelope.
Notwithstanding the power of prayer, leaders in the charitable community seeking to avoid letters from senators would do well to take a hard look at their organizations and ask fundamental questions.
The paramount question for the leaders of a charity to ask: What is our organization’s charitable goal and mission and how do we accomplish that mission?
To go further, is the mission (and are the related accomplishments) of our organization something that can be understood by a grandmother, and do our accomplishments justify the tax breaks …
March 23, 2010, 9:19 am
Welcome to The Watchdog, a new Chronicle blog written by Dean Zerbe, a lawyer in the Washington office of alliant Group and the former senior counsel to Sen. Charles E. Grassley.
Mr. Zerbe is best known in the nonprofit world as a top adviser to Mr. Grassley when he chaired the powerful Senate Finance Committee. In that role, Mr. Zerbe was a key player in Congressional efforts to fight charity abuses.
In addition to helping to pass the Pension Protection Act in 2006 — which instituted new curbs on nonprofit activities as well as new giving incentives — Mr. Zerbe also helped Mr. Grassley undertake numerous investigations of charity abuses.
More recently, Mr. Zerbe has fought back attempts to weaken provisions in the Pension Protection Act that were designed to fight nonprofit abuses.
His new blog will discuss the intersection between the charity world and government — with a particular…