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Where do we report illegality?

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Where do we report illegality?

I am on the board of our 501(c)(3) youth football nonprofit. Our president has harassed and physically raised a hand to a parent. He is also profiting from our organization in his printing business, and we suspect that he is taking money from our organization illegally. If we complain, he will kick us out. When I complained, after he was re-elected president, he refused to give me a badge and told me to leave the field. Can he legally do this? Where can we go for help?

This is much more of a political question for the board than a legal question for outside authorities.  The board has the power to outvote him and probably to remove him from office --  if it has the courage to do so.  It is very unlikely that he has the power to remove people from office unilaterally, although he may have the power to remove people from the playing field if he is in charge of it.

The IRS is unlikely to have much interest in this case.  The organization is still fielding a football team so it is not failing to fulfill its charitable purpose.  The printing deal could be an excess benefit transaction, but you would need to show that he was getting paid excessively to get the IRS’s attention. 

If the president is stealing from the team, the local prosecuting attorney or the state attorney general might be interested, but you would probably need to give them really good evidence to get them to act.  They usually don’t have the staff, or the inclination, to investigate complaints about volunteer organizations that are apparently doing good work in the community unless they have excellent evidence or there are significant dollar amounts involved.  If the president has actually assaulted a parent, the parent could theoretically prosecute, but that seems unlikely without a serious injury.

If your team is part of a state or national organization, you might get some help there.  But again, it will be important to have specific evidence of impropriety.

The kids deserve better than this, and the members of the board ought to band together to put a stop to any improper behavior.  Even if the majority is willing to go along with the president, as a director you have a right to get whatever information you need to fulfill your fiduciary duties. You could do an investigation yourself, along with whatever other directors you can get to join you.  Your independent auditor, if there is one, might help with some of the financial issues.

If you can prove wrongdoing, you should be able to get the board to change course, and may get the attention of one of the outside authorities.  You might bring your own lawsuit, but that would be very expensive and time-consuming.   If you prove wrongdoing and the majority of the board still goes along with it, you will probably want to consider whether this is an organization you want to be associated with.

Wednesday, June 9, 2010

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Comments

From my own experience, I have observed that the laws on bad behavior by the board are essentially non-existent or ineffective.  Short of massive stealing it doesn't seem as if much can be done.  Sometimes a board member doesn't want to just leave, for example because he/she is a founder.  Do we need stronger state laws?  What is the solution? -- B.M. via email

 

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