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.
