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Attorney General Can’t Cy Pres Assets Of One Volunteer Fire Company to Another

Pa. Court says AG can’t force transfer from an operating charity when it doesn’t prove the assets are held “in trust”
The Commonwealth Court of Pennsylvania has rejected an attempt by the state’s Attorney General to close down a volunteer fire company that had been prohibited from fighting fires in its community and to force the transfer of its assets to a different company continuing to serve the area. The Court rejected the AG’s claim that all of the assets of the decertified company were held “in trust” and should be transferred under the cy pres provisions of the state’s Trust Code when it became “impracticable” for it to pursue its mission. Until May, 2016, the Independent Fire Company No. 1 was one of three companies certified to fight fires in South Williamsport Borough (home of the Little League...

Private Foundation Manager Convicted For Failing to Pay Tax on Self-Dealing Income

Tax was imposed on payment of children’s scholarships even though manager had “corrected” some payments
The head of a private family foundation has been convicted of failing to pay federal income tax on the value of scholarships paid by the foundation for tuition for his children. The charges were among several that caused James L. Wright to be sentenced to 33 months in prison and ordered to make restitution of $146,404. Wright acquired control of B & P Company, a company started in 1889 by his great-grandmother, that sells beauty products under the brand name Frownies. He set up a business to manage the company and used the business to pay himself, his wife, and each of his children, even though the children were in school at the time. He used B & P funds to pay house rent for his...

Failure to Follow Corporate Practices Leads to Lengthy, Disruptive Litigation

Putting name of new directors on Facebook page does not comport with required procedures for election
“This is a classic case in which failed corporate governance led to distrust, dissention, and disorganization. With all the best intentions aside, had these two nonprofit entities followed corporate principles and practices likely no lawsuit would have been filed.” That is how the Court of Appeals of Iowa began its opinion attempting to resolve several years of litigation between two groups working to preserve an historic covered bridge. Its final decision essentially left the groups in the same position they were in before the fighting began, but still divided and liable for significant attorneys fees and costs. The situation began in August 2013 when an historic covered bridge near Kalona...

Directors Not Liable for Bad Decision In Rejecting Settlement of Lawsuit

Ohio Court cites doctrine of litigation privilege, but disclaims ability to provide indemnification
The Court of Appeals of Ohio has ruled that directors of a nonprofit trade association cannot be sued on behalf of the corporation for turning down a settlement offer in a defamation suit that would have saved the Association $43 million. But it has also ruled that it had no jurisdiction to force the Association to indemnify the directors who successfully defended the suit, saying that could be done only by a court in Delaware, the state of the Association’s incorporation. The unusual rulings arose in a case involving the Certified Steel Stud Association, which was sued for defamation after it released a report making allegedly derogatory assertions that products made by Clarkwestern...

Are Paintings Given for “Permanent Home” At College Considered Part of Endowment?

Court says common law doctrine of cy pres, UPMIFA are not relevant to the decision
Hotel magnate Eugene Eppley commissioned renowned American artist Grant Wood to paint a mural for the Hotel Montrose in Cedar Rapids, IA, in 1932. When the hotel was sold in 1957, Eppley had the mural, known as “The Fruits of Iowa,” taken down and separated into seven separate panels. He “loaned” the paintings to Coe College, where they remained on display for nearly 20 years. At some point the ownership of the paintings passed from Eppley to the Eppley Foundation. In 1976, while winding up its affairs, the Foundation gave the paintings to the College pursuant to a letter stating that the College “would be their permanent home, hanging on the walls of Stewart Memorial Library.” The letter...

Trump Must Pay $2 Million For Violation of Foundation Rules

Judge refuses to impose double damages because of agreement to avoid recurrence of wrongdoing
President Donald J. Trump has been ordered to pay $2 million in damages for improperly using the charitable assets of his private foundation to intervene in the 2016 Presidential election and further his political interests. A trial court judge has rejected a request by the New York Attorney General that he be ordered to pay double damages because he has stipulated to “a number of proactive conditions so that the conduct which engendered this petition should not occur in the future.” The judicial Order essentially winds up the case first brought by the Attorney General in June 2018, charging Trump and his children as the Foundation’s directors with breach of fiduciary duty in ignoring their...

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