Sunday, May 25, 2008

California AG's Webpage as Resource on AG Investigations

In many states, though unfortunately not all, a strong charities section operates in the office of the Attorney General.  Assistant Attorneys General and others use their too-limited resources both to investigate charities and to help charities that may have slipped up get back on track.  Much of the work, and the resolution of the investigations, remains invisible.  Except in a few instances, incidents involving the enforcement of charitable rules rarely end up as reported cases.  That makes analyzing the way enforcement happens difficult for those of us who study it and for the lawyers who advise clients about the rules.

Although not a new resource, I thought it might be helpful to note that the California AG posts information about cases that have required AG involvement but end with a settlement and not a reported case.  The website provides a brief description of three cases currently, and includes links to some documents.

The AG investigated Noah's Wish, an organization created to help animals affected by disasters.  Under the settlement a substantial amount of the money Noah's Wish had raised was to be contributed to a fund based in New Orleans, to assist with rescuing and caring for animals affected by Hurricane Katrina.  The settlement agreement also required Noah's Wish to add board members, provide board training and exclude its founder from any further participation in the organization.  No date is provided in the description.  The information suggests failure to use contributed funds in a manner in keeping with the charitable purposes of the organization, and the amount raised by the organization, $8,000,000, was large enough to warrant AG involvement.

The second reported settlement involved the Red Cross.  In the settlement agreement posted on the website, the American Red Cross agreed to reform fundraising disclosure and executive compensation practices in California.  The investigation, begun in 2002, found the use of misleading solicitation practices following the Alpine-Viejas fire in 2001.  The investigation also determined that the funds received were not earmarked for disaster relief.  The AG further determined that the American Red Cross did not adequately monitor executive compensation in local chapters, leading to overpayment of an executive in one of the California chapters.

The third case involved an organization called Sensory Integration International.  The AG filed a civil complaint in this case after finding that substantial charitable assets had been diverted from the charitable purposes.  On  June 22, 2007 the AG obtained a preliminary injunction preventing further activities by the organization and preventing any further control by the directors and officers named in the complaint.  The description of the case does not explain what decisions were made about any charitable assets remaining in the organization.

These cases aren't "news", but I thought it would be helpful to point out this useful resource on on the California AG's website.  Posting creates adverse publicity for the charities, but the information about how the AG addresses misdeeds in the charitable sector is useful.


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