Charity Governance

SHOULD I STAY, OR SHOULD I GO? NO RESPECT FOR DIRECTORS OR DONORS AT ACORN

Should I stay or should I go now?
If I go there will be trouble
And if I stay it will be double
       The Clash, Should I Stay or Should I Go

DATELINE: June 10, 2008, Chicago

Maude Hurd, the president of ACORN, a nonprofit group, certainly has a warped sense of what is right and what is wrong when she calls ACORN's response to an alleged near-million-dollar embezzlement a judgment call. According to Stephanie Strom's recent reporting in the New York Times last week, the brother of the organization's founder is alleged to have embezzled $948,607.50 from the organization. Funds Misappropriated at 2 Nonprofit Groups, June 9, 2008.  The alleged embezzler, Dale Rathke, apparently also was an Acorn employee. We would like to put that number in perspective by comparing it to ACORN's gross revenue, but we are unable to...

LEGISLATIVE EXTORTION IN CALIFORNIA: FOUNDATIONS SHOULD HAVE MOVED OUT OF THE STATE RATHER THAN SUBMIT

DATELINE: June 25, 2008, Chicago

Several California-based foundations just set a bad precedent. The California legislature was considering legislation—Assembly Bill 624—that would have required foundations with assets of $250 million or more to make certain disclosures regarding diversity. The focus of the disclosures was on board and staff diversity, as well on grant recipients. It had been established that the required disclosures would impose significant and costly compliance burdens on the affected foundations. See our previous post: The California Legislature Should Pass Assembly Bill 624: Then Private Entities Might Finally Teach Overzealous Regulators A Lesson or Two, Feb. 2, 2008.

In order to head off the legislation, ten foundations have agreed to make multiyear grants to charitable organizations that provide services to...

A VERY PRIVATE COLLECTION IS CORRECT: SO WHY WRITE THE ARTICLE?

DATELINE: June 12, 2008, Chicago

Angela Valdez's article on Mitchell Rales' private museum is fascinating, seemingly well-written, and completely misguided. A Very Private Collection: Billionaire Mitchell Rales Runs the Best Modern Museum You Can't Get Into, Washington City Paper, June 4, 2008. It aptly demonstrates one of the problems about how some members of the media...

WHAT'S THE MICHIGAN ATTORNEY GENERAL DOING TODAY?

DATELINE: May 29, 2008, Chicago

Ah sugar, ah honey honey
you are my candy girl
and you got me wanting you
Oh honey honey, sugar sugar
You are my candy girl
            The Archies, Sugar Sugar

The Michigan Attorney General must be busy today after reading Mary Williams Walsh's front page piece in today's New York Times, In Stock Plan Employees See Stacked Deck. The focus of this in-depth article is on U.S. Sugar and its employee stock ownership plan. In a nutshell, the employee participants who retire are cashed out of the ESOP based on an appraised value for their stock. But in a lawsuit, they contend that U.S. Sugar received two offers from third parties to acquire the company at significantly higher amounts. Walsh points out that offers were at $293 a share, but that at the same time, the ESOP was cashing employees out for as little as $194 a share.

In an apparent effort to demonstrate why it was not selling out for the $293 offer price, U.S. Sugar hired an appraiser that said the company was worth...

FAMILY FOUNDATIONS MAY BE THE BENEFICIARIES AS WELL AS THE VICTIMS OF INSIDER TRADING

DATELINE: March 4, 2008, Chicago

The securities laws prevent insiders from profiting from non-public information. These laws take two forms. The first is the rule against short-swing profits, with its focus on sales by insiders at a profit within six months of acquiring the stock. The second is the anti-fraud rule found in Section 10b-5 of the Securities and Exchange Act of 1934. These laws prevent insiders from profiting through sales and purchases of stock when they are deemed to or actually possess inside information, but a professor at New York University's Stern School of Business has just published a study suggesting that some chairmen and CEO's of publicly-traded companies may be maximizing the value of their contributions...

THE CALIFORNIA LEGISLATURE SHOULD PASS ASSEMBLY BILL 624: THEN PRIVATE ENTITIES MIGHT FINALLY TEACH OVERZEALOUS REGULATORS A LESSON OR TWO

DATELINE: February 2, 2008, Hong Kong

The California State Legislature is currently considering legislation that would require charitable foundations with more than $250 million in assets to disclose diversity information.  See California Assembly Bill 624

It seems that the government can be as intrusive as it wants when it comes to nonprofit institutions despite the fact that these are just as much...

SCHLINGER FOUNDATION MAY FORESHADOW WHAT IS COMING THIS SUMMER TO A COURT NEAR YOU: $29 MILLION JURY VERDICT AGAINST FOUNDATION INSIDERS

Dateline, April 12, 2007, Chicago

In recent years, a number of foundations have been subject to allegations of inappropriate insider self-dealing.  Both the Bielfeldt and Maddox foundations come to mind.  Woody Woodruff, the Nashville attorney representing the State of Tennessee in the Maddox proceedings, has slyly played his hand, taking on the appearance of a Venus-fly trap.  Woodruff knew that the Maddox Foundation’s president, in her capacity as a co-executrix of the Maddox estates and a fiduciary, would have to return to the Tennessee courts and account for her activities in those capacities.  Based on its most recent ruling—that Maddox Foundation President Robin Costa appear in court and show why she is not in contempt of the court order limiting transfers of Maddox Foundation assets—sets the stage for Woodruff’s enticing jaws to snap shut during an August trial that has been scheduled to resolve the dispute.  The Massachusetts court system also sent a signal, refusing to release funds to the Maddox Foundation held in a managed investment account. 

The Bielfeldt Foundation case has been off the radar screen for some time, seemingly lost deep in the Illinois court system, at least from the public’s viewpoint.  That may be about to change.  Last month, Mike Ramsey of the Copley News Service reported that Attorney General Lisa Madigan would be amending her original complaint.  Lawsuit Pursued Against Bielfeldts, March 17, 2007.   That was taken as an indication that parties have not been able to reach a settlement over  the conduct of certain family members vis-a-vis the foundation.  Madigan is seeking to recover $9 million in commissions and fees, as well as $32 million in depleted charitable assets from Bielfeldt family members.

Both the Maddox and Bielfeldt cases have moved at a glacial pace (at least before global warming became an issue), but both have received media attention, particularly the Maddox Foundation  Not so with Santa Barbara’s Schlinger Foundation.  There has not been a peep...