December 18, 2023
Settlements with DC Fraternal Order of Police Local, Coast Guard Auxiliary Association, and Delta Phi Epsilon, Inc. Build on OAG’s Work to Enforce DC Nonprofit Laws & Safeguard Nonprofit Assets
WASHINGTON, D.C. – Attorney General Brian L. Schwalb today announced the successful resolution of three separate enforcement actions that will safeguard nonprofit assets and ensure DC nonprofits comply with the law. To resolve allegations of nonprofit violations related to an illegal liquor sales scheme, the Fraternal Order of Police, Jerrard F. Young Lodge #1, will be required to implement extensive new financial compliance measures and appropriately train its personnel. To resolve allegations related to unauthorized use of nonprofit funds, the Coast Guard Auxiliary Association must adopt new compliance measures to ensure that nonprofit funds are not improperly diverted. Finally, to resolve allegations of misusing nonprofit funds for personal gain, Terrence Boyle—a former officer and director of the Delta Phi Epsilon, Inc. and the Delta Phi Epsilon Foundation for Foreign Service Education—must pay $100,000 in restitution and is permanently banned from participating in the governance of either organization.
“Nonprofits operating in the District are legally obligated to faithfully serve their stated charitable purposes, and to contribute to the public good – they are not permitted to enrich private interests,” said Attorney General Schwalb. “The Office of the Attorney General will continue to ensure that nonprofits fully comply with the law so that nonprofit assets are used in furtherance of a public benefit.”
About the District’s Nonprofit Corporation Act
Under the District’s Nonprofit Corporation Act (NCA), the Attorney General has the authority to oversee nonprofit activities and ensure that nonprofit entities operating in DC use their funds for the public purpose specified in their articles of incorporation and in accordance with rules designed to prevent conflicts of interest and private benefit. A nonprofit’s funds are a form of public trust and cannot be used to benefit a private individual or company—especially an individual who exercises control or influence over the organization.
Fraternal Order of Police, Jerrard F. Young Lodge #1
The Fraternal Order of Police, Jerrard F. Young Lodge #1 (FOP Lodge), is a nonprofit corporation whose membership includes active and retired officers of law enforcement agencies headquartered in the District. OAG opened an investigation into the FOP Lodge after the Washington Post reported on its “Jack Daniels Committee” which was running an extensive illegal off-premises liquor sales program. The Post’s reporting indicated that the liquor sales were intended to raise funds for the FOP Lodge, but that nearly a third of the hundreds of thousands of dollars taken in by the Committee were paid to Committee chair Michael Kruggel as “reimbursements” for travel and lodging expenses he allegedly incurred. OAG’s investigation uncovered that the Lodge violated numerous alcohol and beverage regulations and did not have sufficient oversight or procedures for credit card usage or reimbursements.
Under the terms of the settlement, the Lodge will be required to:
- Comply with the District’s alcohol and beverage code;
- Ensure key personnel take courses in nonprofit governance and financial accountability;
- Implement policies governing credit card use and reimbursements; and
- Cooperate with any continuing investigation into Mr. Kruggel.
A copy of the settlement agreement is available here.
This matter was handled by Assistant Attorneys General Leonor Miranda and Will Margrabe and former OAG attorney Arthur Durst.
The Coast Guard Auxiliary Association
The Coast Guard Auxiliary Association is a nonprofit organization that “provides the financial stability that the Coast Guard Auxiliary must have to ensure readiness to meet its mission to save lives.” In November 2021, OAG received a tip about improper payments from the Association to its Board President, Vincent Pica.
OAG’s investigation revealed that in 2017, 2018, and 2019, Pica donated a total of $315,000 to the Coast Guard Foundation (the Foundation)—a Connecticut nonprofit—to buy tables at the Foundation’s annual fundraising gala dinners. The Foundation then returned $302,716 of Mr. Pica’s donations to the Association. Rather than using these funds to support its charitable programs, the Association transferred the funds back to Mr. Pica. The Association’s board never approved or ratified these payments.
Under the terms of the settlement, the Association will be required to make ongoing compliance reports to OAG for two years. The Association also will report to OAG all meeting minutes regarding either the election or appointment of officers and directors, or the review and approval of conflicted transactions between the Association and an officer or director.
A copy of the settlement agreement is available here.
This matter was handled by Assistant Attorney General Cara Spencer and former OAG Attorney Geoffrey Comber.
Delta Phi Epsilon, Inc.; Delta Phi Epsilon Foundation for Foreign Service Education; and Terrence Boyle
Delta Phi Epsilon, Inc. (DPE) is a District nonprofit organization established to promote international trade and foreign service education. The Delta Phi Epsilon Foundation for Foreign Service Education (the Foundation) is a separate nonprofit organization established to serve as the charitable arm of DPE and to provide scholarship awards to individuals studying foreign service. Terrence Boyle is a former long-time officer and director of both DPE and the Foundation.
OAG sued DPE, the Foundation, and Boyle, alleging that Boyle violated DC law by using nonprofit funds for personal gain and disregarding the entities’ nonprofit purposes. The lawsuit also laid out numerous other violations, including failures to comply with nonprofit governance requirements and the improper sale of the DPE’s Alpha Chapter House (3401 Prospect St, NW).
The DC Superior Court granted partial summary judgment in favor of the District, ruling that Boyle illegally enriched himself by using Foundation funds to finance his private home in Georgetown, that the Alpha Chapter House was improperly transferred without the required approval of the DPE membership, and that Boyle had breached his fiduciary duties to both nonprofits.
Under the terms of the settlement, Terrence Boyle must:
- Pay $100,000 in restitution to the Foundation: Boyle must make a $100,000 payment to the Foundation as restitution for illegally using Foundation funds to subsidize the purchase of his private home. Boyle originally used $150,000 of Foundation funds as a downpayment on his home and used the Foundation as a co-signer on his mortgage. He later repaid only the original $150,000 to the Foundation, without any interest, and obtained sole ownership of the home.
- Never again participate in governance of the Fraternity or the Foundation: In August 2021, Boyle resigned as both an officer and a director of the Fraternity and as an officer of the Foundation. He is now permanently banned from serving as a manager, officer, director, or trustee of the DPE or the Foundation either in name or in practice. He may not participate in the governance of either organization in any way, including by acting on behalf of directors or officers, hosting or managing meetings, participating in the management of Foundation real estate, or controlling bank accounts. He is also permanently banned from being paid as a contractor or employee of either organization.
- Abstain from serving as an officer or director of any other DC nonprofit: Boyle is similarly banned from serving as the officer or director of any other District nonprofit for 10 years.
Under the terms of the settlement, DPE and the Foundation will be required to:
- Elect or appoint new, independent officers and directors: DPE must elect or appoint new officers and directors who are independent from Boyle and were not involved in previous governance failures. Anyone who served as an officer or director of DPE or a trustee or officer of the Foundation between January 1, 2017, and February 1, 2023, may not serve as a DPE officer or director for 10 years.
- Use the proceeds from the Alpha Chapter House sale for appropriate nonprofit purposes: The proceeds of the Alpha Chapter House sale must be used to support the organizations’ purposes. The Foundation has proposed a plan to purchase a new property to use as a library, meeting space, and historic and cultural center to benefit the organizations and the public. This plan must be approved by DPE members.
- Make significant changes and provide reports to OAG: The Foundation must begin issuing educational scholarships consistent with its purpose within one year and must provide documentation to OAG on scholarship announcements and disbursement of funds to recipients for three years. The Foundation must also provide annual reports to OAG on the use of the proceeds from the sale of the Alpha Chapter House for five years to ensure funds are used appropriately. Both the Foundation and DPE must comply with DC nonprofit laws governing regular meetings and financial reporting.
A copy of the settlement agreement is available here.
This matter was handled by Assistant Deputy Attorney General Will Stephens and former OAG Attorney Tabitha Bartholomew.
OAG’s Nonprofit Enforcement Work
Since 2015, OAG has steadily expanded its capacity to enforce District laws governing nonprofits. OAG has litigated and resolved actions against several charter schools and the president of a nonprofit that owned an affordable housing building for mismanagement of nonprofit funds. In May 2022, OAG clawed back $750,000 in misspent nonprofit funds from the Trump Organization and Presidential Inaugural Committee. The office has also sued several organizations for misuse of charitable funds, including Casa Ruby, a DC organization that misused funds intended to serve LGBTQ+ youth, and the NRA Foundation. Additionally, OAG has obtained an order that District nonprofit Howard Theatre Restoration, Inc. dissolve for failing to function in support of the District’s historic Howard Theatre, and intervened to resolve a board dispute at an internet freedom organization.
If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact OAG at (202) 727-3400.
