Tuesday, March 3, 2009

Angel Food Ministry Board Members File Suit; What Should a Faithful Board Member Do?

In another sad development in what promises to be a very sad story, two board members of Angel Food Ministries, about which we reported last week, have filed suit against three of the nonprofit's founders, Joe and Linda Wingo and their son.  According to the Atlanta Journal Constitution, "the suit by board members Craig Atnip from Texas and David “Tony” Prather of Georgia, attempts to remove Joe and Linda Wingo and their son Wesley from their controlling positions. Another son, Andy, is a former ministry officer. The suit alleges the Wingos enriched themselves by millions of dollars through sweetheart deals, kickbacks from grocery vendors and using company credit cards to buy personal items."  The Wingos called the suit a "power grab" motivated by money in this press release:

The lawsuit filed yesterday in Walton County, Georgia was initiated by two directors who are interested in removing the founders of the Ministry – Pastors Joe and Linda Wingo – only to install themselves in the founders place. This is a power grab plain and simple, and the people of Walton County and those who look to Angel Food Ministries for relief need to understand what and who are actually behind this effort. The essence of this lawsuit aims to wrest control of this $140 million organization that was the brainchild of Joe and Linda Wingo in the years prior to 1994. AFM, a staple in Walton County for 15 years, went from 34 boxes of food in its first month to the six million served across 39 states in 2008. It employs 300 people full time, and had a payroll exceeding $10 million in 2008. As one of the largest employers in the area, it serves as a vital revenue base for Walton County, Monroe and the State of Georgia.

The plaintiffs responded with their own press release, one that sheds light on the inner workings and conflicts that nonprofits -- especially those that experience sudden and staggering financial success -- must experience often.  For example, the plaintiffs state that there have been disputes on the board since 2006 over the Wingo's refusal to adopt "IRS recommended good governance practices."   One of the plaintiffs, who now serves as CEO but spends most of this time responding to the FBI and IRS according to the press release, reports that he resigned from the Board of Directors over that dispute but rejoined the board only after receivng assurances that "many of the bad practices of the past had been corrected."  Sadly, the case will provide fertile discussion of a nonprofit board member's obligations when faced with allegations of mismanagement.   Board members faced with these sorts of allegations find themselves in difficult situations.  Both state and federal tax law suggest they have an affirmative duty to act but, as this case demonstrates, acting upon that duty can make a bad situation worse, ultimately to the detriment of charitable beneficiaries.  Still, there are certain cases when board members must act even if doing so will shed some bad light on the nonprofit.  I suppose in really bad cases, a board member might just have to burn down the organization to save it (or him or herself).  IRC 4958, for example, seems to impose excise tax liability on board members who affirmatively fail in their obligation to prevent insider siphoning.  If nothing else, the record in this case might prevent the imposition of 4958 liability on the board members who complained, even if only quietly.   The lawsuit only adds to the record.

dkj

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