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Settlement Agreement Results in Funding for Community Foundation for Southeast Michigan, Area Charities

A settlement agreement the Michigan Department of Attorney General helped negotiate will result in more than a million dollars going to the Community Foundation for Southeast Michigan for distribution to local charities. 

Last year, the Department’s Public Administrator became aware of a 2008 special needs trust that originally provided, after the beneficiary’s death, reimbursement of any Medicaid expenditures and remaining assets for the benefit of charities. A subsequent trust amendment approved by the court provided that individuals would benefit to the detriment of the charities. Charitable Trust law provides the Attorney General with the obligation to oversee charitable assets.   

Therefore, the Department helped negotiate the settlement providing that the remaining funds in the Estate of Wendy M. Cope will again go to charities. In total, the Community Foundation for Southeast Michigan will receive $1.2 million. 

About $800,000 will fund the Wendy Marie Cope Memorial Fund, an endowed fund established to provide annual donations to four identified charities that helped Wendy Marie Cope when she was alive. 

The charities identified are:  

About 4.5% of the fund balance will be donated annually and if one of the identified charities is no longer operational, the annual contribution will be equally divided among the remaining charities.  

The settlement’s remaining $400,000 will go to the Foundation for the Wendy Marie Cope Fund, which has no annual limit on yearly donations for nonprofit organizations that serve individuals with intellectual and developmental disabilities in southeast Michigan.   Ms. Cope’s relatives will advise the Foundation regarding distributions of this fund. 

“Thanks to the foresight and generosity of Wendy Marie Cope’s family, charities that support individuals with intellectual and developmental disabilities will receive additional funding to further their important work,” Attorney General Dana Nessel said. 

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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.