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AG Nessel Releases PSA for Boy Scouts of America Investigation

Michigan Attorney General Dana Nessel released a public service announcement (PSA) focused on the new joint investigation between the Michigan Department of Attorney General and Michigan State Police targeting the Boy Scouts of America (BSA).  

The agencies first asked the public to report instances of abuse at the beginning of June. 

The BSA investigation is similar to the Department’s ongoing clergy abuse investigation, which just secured its fourth conviction last week. 

In January, Nessel learned 1,700 sex-abuse claims filed in BSA’s ongoing bankruptcy case were in Michigan. The Department now believes there may be as many as 3,000 victims. 

Nessel released the PSA to urge victims of abuse at the hands of the Boy Scouts to report that abuse, as well as to remind people that this joint investigation with MSP is separate from the civil litigation. 

“I know speaking about these traumas is difficult,” Nessel says in the video. “That’s why I’m asking Michiganders to show their strength and courage by calling our trained victim advocates. It doesn’t matter if the abuse occurred last month or years ago-you deserve to be heard and we’re here to listen.” 

If you have information about the Boy Scouts of America that you think would help, please call the investigation hotline at 844-324-3374 between 8 a.m. and 5 p.m. Monday through Friday. Tips can be left anonymously.  

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Attorney General Bonta Announces Sponsorship of Legislation to Provide Oversight of Charitable Giving on Online Platforms

California Attorney General Rob Bonta today announced his sponsorship of AB 488, legislation that would provide critical oversight of charitable fundraising on internet platforms. The bill, authored by Assemblywoman Jacqui Irwin and sponsored by Attorney General Bonta, would authorize the California Department of Justice to exercise supervision over charitable fundraising occurring on internet platforms to protect donors and charities from deceptive or misleading solicitations.

“AB 488 would create the framework to oversee online charitable fundraising platforms by providing my office, which already oversees charitable organizations and fundraisers, the tools to match today’s virtual market,” said Attorney General Bonta. “Supervision of third-party online platforms is essential in order to make sure that donations go towards their intended purposes. This measure will give California’s generous donors and charities the peace of mind we all seek as we support one another amidst the COVID-19 pandemic.”

“Over the past year we have learned just how much our society relies on support from the non-profit sector. Whether it’s passing out food to hungry families or grants to the undocumented population, the pandemic shined a light on their tireless work. With online fundraising, there are more opportunities than ever to give to your favorite charity,” said Assemblymember Irwin. “However, it has also opened the possibility for fraudulent actors to operate. AB 488 will update California’s already strong charitable giving laws to provide clear rules for online fundraising.”

The California Department of Justice is responsible for regulatory supervision of charities, trustees, commercial fundraisers, and other legal entities that hold or solicit donations for charitable purposes. In recent years, charitable fundraising on internet platforms has changed the landscape of charitable giving. Internet companies have developed methods for individuals to donate to charities through websites and phone applications that serve as “charitable fundraising platforms.” California’s solicitation laws do not specifically reach these online platforms, resulting in instances of deceit and mistreatment of charitable donations that the Attorney General’s Office is not able to address through enforcement of existing charity oversight laws.

If signed into law, AB 488 would:

  • Create a level playing field for all charitable giving platforms, regardless of business model, by defining two new groups of entities, “charitable fundraising platforms” and “platform charities” that are subject to the Attorney General’s supervision;
  • Require covered entities to provide meaningful and transparent disclosures on their internet platforms, promptly distribute donations, and prohibit solicitations for charities not in good standing with the Attorney General’s Registry of Charitable Trusts;  
  • Permit some instances of soliciting for a charity without prior consent if certain criteria that safeguard against harm to charities and the public are met; and
  • Authorize the Attorney General’s Office to implement regulations to require donor notification and reporting requirements, and to encourage transparency and accountability.
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AG Racine Sues Failed Nonprofit Related to U.S. Pavilion at World’s Fair for Improperly Paying Founders More Than $360K in Charitable Funds

Attorney General Karl A. Racine today announced a lawsuit against a failed nonprofit that was founded to raise funds for the U.S. pavilion at the 2020 World’s Fair Exposition in Dubai and two of its founders, alleging that the founders improperly paid themselves more than $360,000.

In a lawsuit against Pavilion USA 2020, Inc. (Pavilion) and its founders and directors Frederick Bush and Alan Dunn, the Office of the Attorney General (OAG) alleges that Bush and Dunn worked together to advance their private financial interests at the expense of the organization’s goals. Their mismanagement and abandonment of their fiduciary duties contributed to the organization’s failure to fulfill its mission and ultimate dissolution. Through the lawsuit, OAG seeks to recover the unreasonable compensation provided to Bush and Dunn and to direct the funds to an appropriate nonprofit purpose.

“Nonprofits exist to benefit the public and their funds must support a charitable purpose, not enrich private individuals,” said AG Racine. “With this lawsuit, we’re seeking to recover hundreds of thousands of dollars in unreasonable compensation paid to Pavilion ’s founders. Their mismanagement and greed ultimately contributed to the organization’s failure. As we have repeatedly demonstrated through our nonprofit enforcement actions, our office will not tolerate this type of abuse of public trust.”

Pavilion USA 2020 was a District nonprofit corporation formed in April 2018 as part of a proposal to partner with the U.S. Department of State to operate a U.S. pavilion at the 2020 World’s Fair Exposition in Dubai. Defendants Bush and Dunn were founders of the organization, served on the organization’s board of directors, and also contracted with the organization to provide services: Bush as a fundraiser, and Dunn as general counsel through his own firm.

Under the District’s Nonprofit Corporation Act (NCA), the Attorney General has the authority to police nonprofit activities and ensure that nonprofit entities operating in D.C. spend their funds for the specific public purpose provided in their articles of incorporation. A nonprofit’s funds are a form of a public trust and cannot be spent to benefit a private individual or company—especially an individual who has influence over the organization.

An OAG investigation revealed that Pavilion and its founders acted contrary to the nonprofit’s charitable purpose. Specifically, OAG’s lawsuit alleges that Pavilion, Bush, and Dunn violated District law by:

  • Using nonprofit funds for personal enrichment: Bush and Dunn received unreasonable compensation amounting to more than $350,000 of the funds raised to support the organization’s mission. The board did not objectively review whether Pavilion could obtain similar services at better prices from others. Additionally, Bush and Dunn caused the Board to mistakenly classify Bush as an independent contractor, for his personal benefit and to the detriment of the nonprofit. Dunn inflated his compensation by including essentially a late fee that was not fully disclosed or approved by Pavilion management and was not available to other service providers. He also received compensation for legal services during several months in which his law license was suspended.
  • Failing to uphold their fiduciary duty: Bush and Dunn prioritized their own financial interests over the interests of the nonprofit. They misstated expert advice or pushed Pavilion to ignore it, and approved unreasonable contracts that did not benefit the organization and in fact created risk for it.  
      
  • Undermining independent oversight of the organization: Dunn and Bush undermined controls put in place to prevent the organization from being used for private benefit, including outside expert advice on compensation and procurement policies and independent board directors. Dunn and Bush withheld the expert advice and misled independent board members in order to push their own compensation agreements through.
     
  • Abandoning the organization’s charitable purpose: Pavilion raised just $1.5 million out of a projected $37 million to support the U.S. pavilion at the 2020 World’s Fair. Instead of ensuring the nonprofit obtained the best sponsorships and deals, Bush and Dunn ensured that they would get paid. In total, more than 23% of all of the money raised by the organization went directly to Bush and Dunn.

A copy of the District’s legal complaint against Pavilion USA 2020 is available here.

OAG is seeking to recover the funds improperly paid to Bush and Dunn and to direct them to an appropriate nonprofit purpose, as well as any other relief the court deems necessary.

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AG Yost Investigation of ‘Dogs 4 Warriors’ Leads to Settlement, Dissolution

Ohio Attorney General Dave Yost has reached a settlement with the operators of the nonprofit Dogs 4 Warriors after an investigation by his Charitable Law Section into allegations of abuse of funds and deceptive fundraising practices.

As part of the agreement, the charity’s operators, Sheila Slezak and Andrew Slezak, must pay $50,000 in damages and penalties. The couple, of Bowerston, must also permanently shutter the charity and remove its website and social media presence.

“Like a pile of dog waste on your nicely mown lawn, this charity belongs in a poop bag at the bottom of a trash can,” Yost said. “Thanks to complaints from the public we were able to shut it down.”

Dogs 4 Warriors was a registered nonprofit that trained services dogs for veterans, specializing in those with post-traumatic stress disorder or traumatic brain injuries. Its nonprofit status was revoked by the Internal Revenue Service in 2019.

Several complaints from the public led to an investigation that revealed Mr. and Mrs. Slezak breached their fiduciary duties while operating the charity and that they and the charity otherwise failed to comply with Ohio Revised Code Chapter 1716.

One complaint alleged that Mrs. Slezak’s daughter was living in a cabin, paid for by charitable donations for the benefit of veterans in the final stages of their training. Another complaint claimed that the Slezaks had misused charitable funds and that the organization had continued advertising itself as a 501(c)(3) after its tax exempt status was revoked.

In an effort to provide additional resources to charities, AG Yost has created a one-stop website for charities in Ohio to help them navigate good governance and establish proper protocols to prevent problems.

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AG Racine Sues Officer of Two Nonprofits for Abusing His Authority for Decades & Diverting Charitable Funds for Personal Benefit

Today, Attorney General Karl A. Racine announced he filed a complaint against two District nonprofit entities and a long-standing officer and director of those entities for disregarding the nonprofits’ governing requirements and diverting nonprofit funds for the officer’s personal benefit, instead of using those funds to further the nonprofits’ purpose of supporting education in the foreign services. 

The Office of the Attorney General (OAG) alleges Delta Phi Epsilon, Inc. (Fraternity); Delta Phi Epsilon Foundation (Foundation); and Terrence Boyle used nonprofit funds for personal gain and failed to meet the entities’ nonprofit purposes, including the award of educational scholarships, in violation of  District law. Mr. Boyle has maintained control over the governance and finances of the two nonprofits for decades and used this control to enrich himself while failing to take any action in support of a nonprofit purpose.   

“Nonprofit funds are legally required to serve the public good and may not be used for personal gain. My office will not allow the misuse of nonprofit funds to stand, nor will we allow those who hold power to illegally use money to enrich themselves,” said AG Racine. “With this lawsuit, we are holding bad actors accountable, just as we have successfully done with other nonprofits that misuse funds. This illegal behavior will not be tolerated.”

Specifically, Mr. Boyle and the Foundation diverted hundreds of thousands of dollars in nonprofit funds to subsidize Mr. Boyle’s purchase of a personal home in Georgetown in 1990 that provided no benefit to the Foundation. Meanwhile, the Foundation’s board of trustees has never used its nonprofit funds to award educational scholarships as required by its articles of incorporation. And, since at least 2015, the Foundation has failed to conduct any business at all, such as holding regular board meetings required by District law and the Foundation’s bylaws. Under Mr. Boyle’s control, the Foundation operated merely as a repository for donations from Fraternity members. More recently, Mr. Boyle caused the Fraternity to donate its ownership interest in a different Georgetown house to the Foundation without the requisite authorization of Fraternity members, and further caused the Foundation to sell that property—thus depriving the Fraternity of any benefit from the sale of its primary asset. 

OAG’s lawsuit seeks to ensure the entities’ funds are used for charitable purposes, remove Mr. Boyle from any official role in the organizations, and reform the governance of these organizations so they function legally and in furtherance of their nonprofit purposes.

Delta Phi Epsilon, Inc. is a District non-profit organization established to promote international trade and foreign service education and was, until recently, affiliated with Georgetown University. The Foundation is a separate nonprofit organization established to serve as the charitable arm of the Fraternity and provide scholarship awards to individuals studying foreign services or other related areas. 

Since at least 1980, Mr. Boyle has been an officer or director of both entities. In those positions, he governed and managed both organizations’ assets, including the Foundation’s nonprofit assets, which he used largely for his own benefit. Under Mr. Boyle’s control, the Foundation has ceased functioning. The Foundation’s board of trustees has failed to conduct any business furthering the Foundation’s stated charitable purposes since at least 1984. And the Foundation has failed to award educational scholarships as required by its governing documents. 

Under the District’s Nonprofit Corporation Act, the Attorney General is responsible for protecting charitable organizations and their assets, and for ensuring nonprofits are acting and using their funds in the public interest. OAG also has broad powers under the common law to police the activities of nonprofit entities within the District to ensure that their use of nonprofit assets meets their public nonprofit purposes.

In its complaint, OAG alleges that Mr. Boyle and the nonprofit entities violated the District’s Nonprofit Corporation Act and common law by: 

  • Illegally diverting nonprofit funds to personally benefit Mr. Boyle: As officer or director of the Fraternity and Foundation since at least 1980, Mr. Boyle maintained control over the entities’ assets, including the Foundation’s nonprofit assets, and directed them to personally benefit himself. Specifically, he used Foundation funds to subsidize his purchase of a personal home in Georgetown. Mr. Boyle has retained, and continues to receive and retain, private financial and other benefits from this transaction.
     
  • Abusing authority over both entities: Mr. Boyle has abused his authority over and disregarded his fiduciary duty to both entities by causing them to engage in transactions that benefitted him personally to the detriment of the nonprofits and their public purposes. Instead of nonprofit funds being used to provide educational scholarships as required by the Foundation’s by-laws, those funds were used to subsidize Mr. Boyle’s purchase and ultimate sole ownership of a house in Georgetown. Mr. Boyle also caused the Fraternity to donate its Georgetown house to the Foundation without legally required authorization, and he has failed to use the proceeds of the sale of that house in the manner he represented to other Fraternity members. Mr. Boyle’s actions divested the Fraternity of its principal asset and base of operations, while shifting control over the sales proceeds to Mr. Boyle through the Foundation.   

OAG is asking the court for a constructive trust over funds that Mr. Boyle improperly received from the Foundation and the sales proceeds of the Fraternity’s house and the removal of Mr. Boyle from leadership over the two entities. OAG also seeks to ensure that the two nonprofit entities are properly governed and functioning in support of their nonprofit purposes going forward.   

A copy of the complaint against Delta Phi Epsilon, Inc.; Delta Phi Epsilon Foundation; and Terrence Boyle is available here.