Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

1

BREAKOUT SESSION A – ANATOMY OF A STATE AG INVESTIGATION

RESOURCE DOCUMENT

Presenters:

Eric Carriker: Assistant Attorney General, Non-Profit Organizations/Public Charities

Division, Massachusetts Attorney General’s Office

:

Janet Kleinfelter: Deputy Attorney General, Public Interest Division, Tennessee Office of

the Attorney General and President of the National Association of State

Charities Officials (NASCO)

This document is available on Columbia Law School’s Charities Regulation and Oversight Project website

at:

www.stateag.org/charities

NATIONAL ASSOCIATION OF STATE CHARITIES OFFICIALS (NASCO)

(http://www.nasconet.org/about/):

The National Association of State Charity Officials (NASCO) is an association of state offices charged

with oversight of charitable organizations and charitable solicitation in the United States. The requirements

and procedures for forming charitable organizations differ from state to state, as do the registration and

filing requirements for organizations that conduct charitable activities or solicit charitable contributions.

Please consult the US Charity Offices listed on NASCO’s website for links to state-specific information. In

addition, please consult Federal Government Information: IRS listed on the NASCO website for links to

information on obtaining and maintaining federal tax-exempt status.

NASCO does not provide legal advice, and we encourage you to consult your own legal counsel.

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

2

STATE ATTORNEYS GENERAL RESOURCES

- California -

California Office of the Attorney General, Frequently Asked Questions – Charities:

http://oag.ca.gov/charities/faq#c6

o Question 7 on this list asks: “What Does An Attorney General Investigate?”

- Connecticut -

Connecticut Office of the Attorney General, Nonprofit/Charitable Law and Information webpage

(last modified Sept. 11, 2014): http://www.ct.gov/ag/cwp/view.asp?a=4424&q=520630

- Indiana -

Office of the Indiana Attorney General, The Civil Investigative Demand webpage:

http://www.in.gov/attorneygeneral/3018.htm

o Under the Indiana Code, the attorney general has been given power to issue a “Civil

Investigation Demand.” The website looks at the investigative tool generally, including

confidentiality issues under the statute.

- Massachusetts -

Massachusetts Attorney General’s Office, The Nonprofit Organizations/Public Charities Division

webpage: http://www.mass.gov/ago/bureaus/business-and-labor/the-non-profit-organizations-

public-charities-division/

o Provides information on Massachusetts Attorney General’s jurisdiction to investigate

certain types of complaints.

- Minnesota -

The Office of Minnesota Attorney General Lori Swanson, Charities webpage:

http://www.ag.state.mn.us/Charity/Default.asp

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

3

- New York -

New York State Office of the Attorney General, Charities.com website:

http://www.charitiesnys.com/home.jsp

o Website provides a host of materials and information on nonprofits and charities,

including complaints filed with the attorney general’s office against nonprofit

organizations.

- Tennessee -

Tennessee Office of the Attorney General and Reporter, Reviewing Nonprofits and Charitable

Trusts/Gifts webpage: http://www.tn.gov/attorneygeneral/nonprofit/nonprofit.html

o Website provides a host of materials including a guidebook for charitable organizations.

- Texas -

s

The Attorney General of Texas, Charities and Nonprofit Enforcement webpage:

https://www.texasattorneygeneral.gov/cpd/charities-and-nonprofits-complaints-and-enforcement

RECENT CASES/SETTLEMENTS

Civil Misappropriation of Charitable Funds

- Connecticut -

Steven Goode and Jenna Carlesso, HART Use Of Grant Funds Subject Of Attorney General Probe,

HARTFORD COURANT, January 30, 2015, available at:

http://www.courant.com/news/connecticut/hc-hartford-hart-grants-0131-20150130-story.html

o An example of a joint investigation by the Connecticut Attorney General’s Office and the

state Department of Consumer Protection for possible misappropriation of charitable and

grant funds by a Connecticut nonprofit. The organization, Hartford Areas Rally Together

(“HART”) is alleged to have abused its role as a holding agent of funds for another

nonprofit organization by spending the funds earmarked for that organization. In addition,

asset irregularities led HART’s board of directors to conduct an internal investigation,

which led to the executive director admitting that she had used nonprofit funds for

personal reasons.

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

4

- Massachusetts -

Press Release, Massachusetts Attorney General’s Office, AG’s Office Sues Directors of Lynn

Community Access and Media for Misappropriation of Charitable Funds, (March 13, 2015):

http://www.mass.gov/ago/news-and-updates/press-releases/2015/2015-03-13-lynncam.html

Press Release, Massachusetts Attorney General’s Office, Former Treasurer of Figure Skating

Club Ordered to Pay $50,000 for Alleged Misappropriation of Charity’s Funds, (March 24, 2014):

http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-03-24-eavzan-consent-

judgment.html

Press Release, Massachusetts Attorney General’s Office, Former President of National Graduate

School Sued by AG’s Office for Excessive Compensation and Lavish Spending without Board

Approval, (2014): http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-04-23-

national-graduate-school-of-quality-management.html

o Former Massachusetts Attorney General Martha Coakley filed suit against the former head

of a nonprofit school for breach of fiduciary duty. AG Coakley alleges that Robert Gee,

the former president of a nonprofit educational institution based in Falmouth,

Massachusetts, received excessive compensation given the size and total assets maintained

by the school. AG Coakley also alleges Mr. Gee procured lavish benefits from the school

without the knowledge of its board of directors.

- New York -

Valerie Strauss, Pearson Foundation closing (after paying big fines for helping corporate parent),

WASHINGTON POST, November 19, 2014, available at:

http://www.washingtonpost.com/blogs/answer-sheet/wp/2014/11/19/pearson-foundation-closing-

after-paying-big-fines-for-helping-corporate-parent/

o The Washington Post reports that a year after settling with the New York Attorney

General’s Office for $7.7 million, the Pearson Charitable Foundation closed its doors at

the end of 2014. In December 2013, the Foundation reached a settlement with the New

York Attorney General’s Office after an investigation revealed the Foundation had

violated state law by using funds to help the for-profit parent company attract clients and

develop educational products.

o See Press Release, New York Office of the Attorney General, A.G. Schneiderman Secures

$7.7 Million Settlement With Pearson Charitable Foundation To Support Recruitment,

Training And Hiring Of K-12 Teachers (December 13, 2013):

http://www.ag.ny.gov/press-release/ag-schneiderman-secures-77-million-settlement-

pearson-charitable-foundation-support

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

5

Criminal Larceny, Embezzlement, Misapplication of Property

- Hawaii -

Press Release, Hawaii Department of the Attorney General, Former Director of Waianae Non-

Profit Charged With Diverting More Than $500,000 for Personal Use, (March 18, 2015):

http://ag.hawaii.gov/wp-content/uploads/2015/01/News-Release-2015-05.pdf

- Massachusetts -

Press Release, Massachusetts Attorney General’s Office, Former Corporate Officer of Cape Cod

Disabled Veterans Organization Indicted on Additional Larceny Charges (February 27, 2015):

http://www.mass.gov/ago/news-and-updates/press-releases/2015/2015-02-27-trott-indictment.html

Press Release, Massachusetts Office of the Attorney General, Maine Woman Arrested for

Allegedly Defrauding the One Fund Boston, (January 15, 2015): http://www.mass.gov/ago/news-

and-updates/press-releases/2015/2015-01-14-molloy-arrest.html

Press Release, Massachusetts Office of the Attorney General, Boston Brothers Sentenced to Three

Years in State Prison for Conspiring to Defraud One Fund Boston of $2.195 Million, Steal From

Real Victims of Bombing (June 23, 2014): http://www.mass.gov/ago/news-and-updates/press-

releases/2014/2014-06-23-mattier-grice-sentence.html

Press Release, Massachusetts Attorney General’s Office, New York Woman Pleads Guilty,

Sentenced to Prison for Defrauding One Fund Boston of $480,000, (May 20, 2014):

http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-05-20-gause-plea.html

- New Hampshire -

Press Release, New Hampshire Office of the Attorney General, Co-Owner of The Meat House

Pleads Guilty to Misapplication of Property for Non-Payment to Veterans' Charity - State v. Justin

Rosberg, (January 29, 2015): http://doj.nh.gov/media-center/press-releases/2015/20150129-justin-

rosberg.ht

o Justin Rosberg, the owner of a chain of butcher shops in New Hampshire, pled guilty for

failing to distribute funds that his business raised for military veterans’ charities in the

state. Mr. Rosberg was sentenced to twelve months in prison and ordered to make

installment restitution payments.

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

6

- New York -

Press Release, New York Office of the Attorney General, A.G. Schneiderman Announces

Indictment Of Nonprofit Narco Freedom And Its Top Executives For Participating In An

Organized Crime Ring, (March 18, 2015): http://www.ag.ny.gov/press-release/ag-schneiderman-

announces-indictment-nonprofit-narco-freedom-and-its-top-executives

Press Release, New York Office of the Attorney General, A.G. Schneiderman Announces Prison

Sentence For Lawyer Charged With Stealing Almost $2 Million From Staten Island Nonprofit,

(February 4, 2015): http://www.ag.ny.gov/press-release/ag-schneiderman-announces-prison-

sentence-lawyer-charged-stealing-almost-2-million

o New York Attorney General’s office secured a guilty plea from a Westchester County

attorney on grand larceny charges, after an investigation by the Attorney General’s office

revealed the attorney embezzled almost $2 million from the United Hebrew Cemetery, a

nonprofit organization. Mr. Griffin also pled guilty to stealing from his client’s escrow

accounts. Mr. Griffin was arrested in September 2014 and served as acting president of the

cemetery.

Press Release, New York Office of the Attorney General, A.G Schneiderman And Comptroller

DiNapoli Announce Sentencing Of Former Met Council Director, (July 23, 2014):

http://www.ag.ny.gov/press-release/ag-schneiderman-and-comptroller-dinapoli-announce-

sentencing-former-met-council

o William Rapfogel, the former head of the Metropolitan Council on Jewish Poverty was

sentenced to 3 and ⅓ to 10 years in prison and ordered to pay $3 million in restitution,

after he and other co-conspirators pleaded guilty to grand larceny. An investigation by the

New York Attorney General’s Office and the State’s Comptroller’s Office revealed that

Mr. Rapfogel and others engaged in an insurance kickback scheme that resulted in the

theft of over $5 million.

Press Release, New York Office of the Attorney General, A.G. Schneiderman & Comptroller

DiNapoli Announce Indictment Of NYC Councilman Ruben Wills In Public Corruption Scheme,

(May 7, 2014): http://www.ag.ny.gov/press-release/ag-schneiderman-comptroller-dinapoli-

announce-indictment-nyc-councilman-ruben-wills

o In a joint investigation with the New York State Office of the Comptroller, the New York

Attorney General’s Office arrested New York City Councilman Ruben W. Wills, a

democrat representing the southeastern borough of Queens, on fraud and larceny charges.

Amongst the charges, the indictment alleges that Mr. Wills used state grant money,

earmarked for the Councilman's charity to combat obesity, for various shopping sprees.

o See Michael M. Grynbaum and Marc Santora, Councilman Is Accused of Stealing Public

Funds, NEW YORK TIMES, May 7, 2014, available at:

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

7

http://www.nytimes.com/2014/05/08/nyregion/city-councilman-ruben-wills-

arrested.html?partner=rss&emc=rss

- Ohio -

Eric Lyttle, 7 members of nonprofit EMS board indicted on theft charges, THE COLUMBUS

DISPATCH, June 13, 2014, available at:

http://www.dispatch.com/content/stories/local/2014/06/13/Muskingum-County-EMS-

indictments.html

o Ohio Attorney General Mike DeWine announced indictments of seven board members of

an emergency medical services nonprofit for theft and other charges. Investigators allege

that the seven members stole approximately $500,000 of the nonprofit’s money and

undertook other corrupt acts.

Fundraising Deception

- Arkansas -

Press Release, Arkansas Attorney General’s Office, McDaniel Reaches Settlement With National

Police Defense Foundation (July 15, 2014): http://arkansasag.gov/news-and-consumer-

alerts/details/mcdaniel-reaches-settlement-with-national-police-defense-fund

o Former Arkansas Attorney General Dustin McDaniel reached a settlement with a New

Jersey nonprofit organization, after the Attorney General’s office brought suit alleging the

organization misled state donors. The National Police Defense Foundation of New Jersey

agreed to pay $120,000 in restitution and cease all fundraising activities in Arkansas.

o See John Lyon, Arkansas AG Reaches Settlement With N.J. Fundraising Group, TIMES

RECORD, July 15, 2014, available at: http://swtimes.com/news/state-news/arkansas-ag-

reaches-settlement-nj-fundraising-group

- Indiana -

Press Release, Indiana Office of the Attorney General, AG Zoeller files complaint against Sandbox

Veterans, other Fort Wayne groups falsely posing as nonprofits benefiting veterans, (September

17, 2014):

http://www.in.gov/activecalendar/EventList.aspx?fromdate=1/1/2014&todate=12/31/2014&displa

y=Month&type=public&eventidn=184346&view=EventDetails&information_id=206149

o The Indiana Attorney General’s office filed suit against three charities that purport to help

military veterans. The office alleges that since 2011, the three charities – Sandbox

Veterans of America, Catholic Veterans of Indiana, and Iraq and Afghanistan Veterans of

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

8

America Inc. – sought donations on behalf of veterans, but no veterans ever received the

solicited funds.

- Massachusetts -

Press Release, Massachusetts Attorney General’s Office, Judge Bars Veterans Charity From

Soliciting in Massachusetts Following AG’s Lawsuit, (August 15, 2014):

http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-08-15-focus-on-

veterans.html

o In August 2014, the Massachusetts Attorney General’s office brought suit against a

Connecticut veterans charity for using deceptive fundraising practices in soliciting

donations from Massachusetts residents. A Massachusetts judge granted the state’s

request for a preliminary injunction, barring the charity from soliciting donations in the

state.

o See Trisha Thadani, Charity Barred from Mass. Fund-raising After Deception Allegations,

BOSTON GLOBE, August 15, 2014, available at:

http://www.bostonglobe.com/metro/2014/08/15/conn-veterans-charity-barred-from-fund-

raising-mass-after-alleges-deception/eG80kRQrbUSvJbEctoPX0H/story.html

- New York -

Assurance of Discontinuance, Investigation by Eric T. Schneiderman, Attorney General of the

State of New York, of Disable Veterans National Foundation, et al., Assurance NO. 14-145 (June

2014), available at: http://web.law.columbia.edu/sites/default/files/microsites/attorneys-

general/dvnf-quadriga-convergence_aod_14-145_executed_final_6-30-14.pdf

o In what has been described as the largest settlement in the United States against a

deceptive charity, the New York Attorney General’s office secured a $25 million

settlement with Disabled Veterans Foundation and its direct mail companies Quadriga Art

and Convergence Direct Marketing. An investigation by CNN and the New York Attorney

General’s office revealed that the companies misled donors through false solicitation

practices, used money for overhead and executive compensation rather than for its

advertised purpose and failed to disclose glaring conflicts of interest. Other settlement

terms include an assurance by the direct mail companies to fully disclose all potential

conflicts and for the veterans charity to alter its business model and solicitation practices.

The companies are also precluded from working together for three years.

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

9

- Ohio -

Press Release, Ohio Attorney General’s Office, Attorney General DeWine Reaches $105,000

Settlement with Massachusetts Telemarketer Over Charity Calls, (February 9, 2015):

http://www.ohioattorneygeneral.gov/Media/News-Releases/February-2015/Attorney-General-

DeWine-Reaches-$105-000-Settlemen

o Ohio Attorney General Mike DeWine announced a $105,000 settlement with a

Massachusetts based phone solicitor over allegations that it misled Ohio residents into

believing that its representatives were volunteers from a charity. The company called on

behalf of numerous charities including Environmental Defense Fund and the Anti-

Defamation League of B’nai B’rith.

o See Assurance of Discontinuance: http://www.ohioattorneygeneral.gov/Files/Briefing-

Room/News-Releases/Charitable-Law/2015-02-06-Integral-file-stamped-AOD.aspx

Compliance Report

- Minnesota -

Minnesota Office of the Attorney General, Compliance Review of Charitable Solicitation

Contracts and Activities of Apogee Retail, LLC and Savers, LLC with True Friends Foundation,

Lupus Foundation of Minnesota, Courage Kenny Foundation, and Vietnam Veterans of America,

Inc. (Nov. 2014): https://philanthropy.com/items/biz/pdf/savers11252014.pdf

o Minnesota Attorney General Lori Swanson issued a compliance report in November 2014,

accusing Savers LLC - a national for-profit chain of thrift store outlets - and its subsidiary

Apogee of pocketing over one million dollars that should have gone to charities.

According to the Report, Savers LLC partners with charities, such as the Vietnam

Veterans of America, to solicit clothing which it then sells at its retail outlets throughout

the United States. Savers pays the charities a varying fee based on the amount of donated

items it receives on behalf of the charity. The store issues a tax deduction receipt to

individuals who donate clothing to benefit a partner charity. The Attorney General's Office

identified several problems with this scheme and asked the charities to file a report with

the office detailing the steps they have taken to correct the issues described in the report.

o See Press Release, Minnesota Attorney General’s Office, Compliance Report Questions

Financial Relationship Between Savers' Retail Stores and Local Charities (November 24,

2014): http://www.ag.state.mn.us/Office/PressRelease/20141124saversRetail.asp

o See Michael Anft, Report Slamming Savers LLC Prompts Pivot in Handling of Donated

Goods, THE CHRONICLE OF PHILANTHROPY, December 12, 2014, available at:

https://philanthropy.com/article/Report-Slamming-Savers-LLC/152079

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

10

o See Rachel Abrams, Savers, a Thrift Chain, Said to Pocket Money Meant for Charity,

NEW YORK TIMES, November 24, 2014, available at:

http://www.nytimes.com/2014/11/25/business/thrift-chain-said-to-pocket-money-meant-

for-charity.html?_r=2

Breakdown of Internal Controls and Governance Issues

- Massachusetts -

Martha Coakley v. Mandela Residents Cooperative Association, et al Complaint (Mass. Super. Ct.

2008), available at: http://web.law.columbia.edu/sites/default/files/microsites/attorneys-

general/files/Mandela_Complaint.pdf

- Minnesota -

Jon Collins, Wildcat Sanctuary restructures after fund abuse, MPR News, (April 23, 2014):

http://www.mprnews.org/story/2014/04/22/misuse-of-funds-sparks-investigation-at-the-wildcat-

sanctuary-

- Montana -

Montana Attorney General’s Investigative Report of Greg Mortenson and Central Asia Institute,

(April 2012): https://dojmt.gov/wp-content/uploads/2012_0405_FINAL-REPORT-FOR-

DISTRIBUTION.pdf

o In 2012, former Montana Attorney General and current Governor Steve Bullock

commenced an investigation of Greg Mortenson’s Central Asia Institute (CAI), which led

to important changes at the nonprofit. The famed author began the institute in 1996 to

foster and develop educational and service projects in the north-western region of

Pakistan. The investigation began as a result media reports detailing various issues at the

nonprofit. The investigation focused specifically on various breakdowns of the institute’s

internal controls. The Attorney General’s report notes that CAI and its officials, including

Mr. Mortenson, fully cooperated with Attorney General’s investigation. The parties

reached a settlement to address the irregularities, which included implementing

organizational changes to ensure that the institute fulfills its mission.

- New Jersey -

Anne Milgram v. Stevens Institute of Technology, Complaint (N.J. Super. Ct. Chan. Div, 2009),

available at: http://web.law.columbia.edu/sites/default/files/microsites/attorneys-

general/files/Stevens-Institute-Complaint_091709.pdf

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

11

- New York -

Nidhi Prakash, As FEGS Sinks, Experts Question Oversight, Structure, CAPITAL NEW YORK

(Albany), February 24, 2015, available at:

http://www.capitalnewyork.com/article/albany/2015/02/8562809/fegs-sinks-experts-question-

oversight-structure

o The New York Attorney General's office is conducting a joint investigation with the

Manhattan District Attorney's office into the financial collapse of the Federation for

Employment & Guidance Services. The nonprofit served over 100,000 indigent New

Yorkers by providing various services, including job counseling/placement and housing.

In December, the nonprofit announced that it was $20 million in debt as a result of lost

state and federal grant funding. Now, investigators want to know why the nonprofit

accrued such a dramatic shortfall in light of its once significant operating budget

- Vermont -

Settlement Agreement, State of Vermont v. Emerge Family Advocates Inc. et al. Docket No. 544-

10-14 Wrev (Vt. Sup. Ct. 2014) available at:

http://ago.vermont.gov/assets/files/Consumer/Emerge%20Settlement%20Agreement%2010-20-

14.pdf

o Vermont Attorney General William Sorrell filed suit against Emerge Family Advocates, a

Vermont nonprofit, after an investigation revealed breakdowns in financial oversight and

poor governance at the organization. The investigation was prompted by two board

members of the organization who alerted the attorney general’s office about the various

breakdowns. According to the attorney general's complaint, the executive director of the

nonprofit wrote and authorized her own paychecks on an irregular basis for the last two

years “(1) paying herself several times during the same two-week pay period (2) paying

herself weeks or months in advance of a pay period and (3) paying herself multiple times

for the same pay period.” Amidst demands from the Attorney General’s office, the board

of Emerge Advocates agreed to resign as part of a settlement deal. In addition, an

independent auditor will be hired by the Attorney General’s office to review the

organization’s finances and a new board will be appointed by the Attorney General from a

group of candidates to be nominated by the nonprofit community in the affected area.

o See Attorney General’s Petition to Remove the Board and Appointment of Special

Trustee, State of Vermont v. Emerge Family Advocates Inc. et al. Docket No. 544-10-14

Wrev (Vt. Sup. Ct. 2014), available at:

http://ago.vermont.gov/assets/files/Consumer/PLF%20Pet%20to%20Remove%20Board%

2010-6-14.pdf

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

12

o See Laura Krantz, AG accuses Upper Valley nonprofit of failing to oversee finances, VT

DIGGER.org, (October 7, 2014): http://vtdigger.org/2014/10/07/ag-accuses-upper-valley-

nonprofit-failing-oversee-finances/

Receivership

- Connecticut -

Press Release, Connecticut Office of the Attorney General, State Granted Court-appointed

Receiver for Amistad America, Inc., (August 21, 2014):

http://www.ct.gov/ag/cwp/view.asp?Q=551742&A=2341

o Legislators in Connecticut asked Attorney General George Jepsen to investigate audit

reports and other issues involving Amistad America Inc., the entity responsible for

operating the replica of the famous ship overtaken by Mende captives in 1839. In 2012,

Amistad America lost its nonprofit status for failure to file tax returns. Recently released

audits from 2009-2012 revealed various financial weaknesses, including a lack of

sufficient operating money. In a letter addressed to Attorney General Jepsen, State

legislators asked his office to investigate the audits and the closing of Ocean Classroom

Foundation, a Maine foundation which had an agreement with Amistad America to jointly

operate the ship. In August of last year, Attorney General George Jepsen sought and

received a court order to place Amistad America – with the consent and support of its

board of trustees – in receivership.

o See Matthew Kauffman and Jenny Wilson, Amistad America Put Into Receivership,

HARTFORD COURANT, August 21, 2014, available at:

http://articles.courant.com/2014-08-21/community/hc-amistad-receiver-

20140821_1_amistad-america-inc-tall-sailing-ship-court-order

o See Johanna Sommers, State releases audit; legislators ask attorney general for Amistad

investigation, THE DAY (New London, CT), August 8, 2014, available at:

http://www.theday.com/article/20140808/NWS12/140809756/1047

o See Letter from Connecticut State Representatives of General Assembly to Connecticut

Attorney General George Jepsen Regarding Amistad America (August 8, 2014):

http://www.theday.com/assets/pdf/NL15897288.PDF

- North Dakota -

Mike Chausee, Extension Given to DSU Foundation, KX News, (January 5, 2015):

http://www.kxnet.com/story/27765951/extension-given-to-dsu-foundation

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

13

o In November, a court granted North Dakota Attorney General Wayne Stenehjem’s request

to place the Dickinson State University Foundation in receivership. According to reports,

the Foundation has been in a perilous financial situation for some time. By requesting a

receivership, Attorney General Stenehjem may be saving the Foundation from ultimate

demise. An attorney general investigation and an independent audit uncovered various

financial irregularities. For example, millions of dollars of donations earmarked for

scholarships and other related expenditures may have been used to cover operating

expenses. In addition, missing records complicated an audit of the Foundation’s finances.

Interim Chancellor of the North Dakota University System, Dr. Larry Skogen, told

the Bismarck Tribune that although receivership may be difficult for the Foundation,

ultimately it will "restore the Foundation on solid grounds.

o See Nick Smith, Foundation Financial Issues Could Hurt DSU, THE BISMARCK TRIBUNE,

November 20, 2014, available at:

http://bismarcktribune.com/news/local/education/foundation-financial-issues-could-hurt-

dsu/article_327d49f4-7110-11e4-8cb8-f74ad778d18a.html

- Oklahoma -

Press Release, Oklahoma Attorney General’s Office, AG's Office Asks Court to Appoint Tulsa

Community Foundation as Receiver for Greater Cornerstone, (February 5, 2015):

http://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=258&article_id=15400

o In an effort to protect charitable assets and save a nonprofit organization and its

community center, Oklahoma Attorney General Scott Pruitt petitioned a state district court

to appoint a local foundation, the Tulsa Community Foundation, as receiver for the

Greater Cornerstone Development Project, a nonprofit organization created to fund and

operate the Greater Cornerstone Community Center in Tulsa. In January, the founder of

the center and project, Reverend Willard Jones, was sentenced to a three-year one-month

prison term after pleading guilty to federal wire fraud and false tax return charges. Rev.

Jones was also ordered to repay approximately $1 million of misappropriated funds back

to the nonprofit organization. Attorney General Pruitt worked with the Tulsa Community

Foundation and the Tulsa Area United Way to help keep the community center open.

Health Care Misapplication

- Massachusetts -

Press Release, Massachusetts Attorney General’s Office, Steward Agrees to Keep Quincy

Emergency Services Open for Up to Two Years, (January 14, 2015):

http://www.mass.gov/ago/news-and-updates/press-releases/2015/2015-01-14-steward-

settlement.html

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

14

Press Release, Massachusetts Attorney General’s Office, Statement from AG Coakley on Sale of

North Adams Regional Hospital (July 31, 2014): http://www.mass.gov/ago/news-and-

updates/press-releases/2014/2014-07-31-narh-sale-statement.html

STATE ATTORNEY GENERAL REPORTS

- California -

Summary of Results of Charitable Solicitation Campaigns Conducted by Commercial

Fundraisers in Calendar Year 2013 (November 2014):

https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/publications/2013cfr/cfr2013.pdf?

o See Eden Stiffman, Calif. Attorney General Backs Tougher Transparency Law for

Fundraisers, THE CHRONICLE OF PHILANTHROPY, March 5, 2015, available at:

https://philanthropy.com/article/Calif-Attorney-General-Backs/228237

- Massachusetts -

The Report on Professional Solicitations for Charity in 2013: http://www.mass.gov/ago/news-

and-updates/press-releases/2014/2014-12-02-solicitation-report.html

o The Massachusetts Attorney General's Office released its annual report detailing the total

amount of proceeds raised by professional solicitors on behalf of charities in 2013, and the

percentage of those proceeds charities actually received. According to the report,

professional solicitors registered with the Attorney General’s Office raised over $388

million, an increase of $122 million from 2012. Of the money raised, for-profit solicitors

received $204 million, or approximately 53% of money raised.

- New York -

Pennies for Charity: Where Your Money Goes (March 2015): http://www.charitiesnys.com/pdfs/2014_Pennies.pdf

- Oregon -

2014 Oregon Attorney General Worst Charity List: http://web.law.columbia.edu/attorneys-

general/ags-news/ags-and-charitable-sector-news

o The Oregon Attorney General's Office released its annual report of the twenty worst

charities. Charities that qualify for this unfortunate distinction spend the vast majority of

donation money on administrative costs and professional fundraisers as opposed to the

charitable purpose. Five new charities made this year’s list.

Georgetown CLE Conference 2015

Representing and Managing Tax-Exempt Organizations

Breakout Session A: Anatomy of a State AG Investigation

15

COLUMBIA LAW SCHOOL’s NATIONAL STATE ATTORNEYS GENERAL

CHARITIES REGULATION AND OVERSIGHT PROJECT RESOURCES

The National State Attorneys General Program at Columbia Law School is a legal research, education-and-

policy center that examines the implications of the jurisprudence of state attorneys general. Working

closely with attorneys general, their staff, students, academics and other members of the legal community,

the Program is active in the development and dissemination of legal information that state prosecutors are

able to use in the carrying out of their civil and criminal responsibilities.

The Charities Regulation and Oversight Project is the oldest and most comprehensive initiative of the

National State Attorney General Program at Columbia Law School. Developed and led by Senior Counsel

Cindy M. Lott, the Charities Regulation and Oversight Project’s mission is to foster a comprehensive

approach by state attorneys general to protect charitable assets and ensure their lawful, highest and

intended use in the public interest.

For more information on the Project and for a full list of its resources, please go to:

www.stateag.org/charities

2010 Charities Regulation Conference: Anatomy of an Investigation:

http://web.law.columbia.edu/attorneys-general/policy-areas/charities-law-

project/conferences/2010-charities-regulation-anatomy-investigation

Charities Regulation and Oversight Project Webinars:

http://www.law.columbia.edu/center_program/ag/policy/CharitiesProj/webinars

Resources Including State Reports:

http://www.law.columbia.edu/center_program/ag/policy/CharitiesProj/resources

Searchable Database: http://www.law.columbia.edu/center_program/ag/resources/ag