Thursday, September 10, 2009

California AG Sues Founder and Five Directors of Research Charity

The Los Angeles Times reports that California Attorney General Jerry Brown filed a lawsuit yesterday against Dr. Gerald D. Buckberg and five directors of the L.B. Research & Education Foundation.  According to the AG's complaint, Dr. Buckberg was the founder of the Foundation and a substantial contributor to it.  In a broad based set of claims reminiscent of the types of cases pursued by then New York AG Eliot Spitzer against private foundations located in his state, the suit alleges that the defendants violated both federal and California law, including breaches of their duties of loyalty and care, and failure to exercise responsibility as required by Code section 4945. 

The specific allegations are that the defendants improperly used the Foundation's funds for their own benefit, including funding their own medical research and research that helped for-profit companies in which they had financial interests.  Examples of the alleged mis-use of charitable funds from the AG's complaint include:

  • Over $120,000 spent to fund the development of an educational DVD owned by a limited liability company that is in turn owned by Dr. Buckberg and a cousin of his.  The DVD also supported a medical patent owned by a separate company that was in turn owned by Dr. Buckberg and one of the directors.
  • $1 million given to UCLA for an endowed faculty chair which Dr. Buckberg than applied for himself.  When UCLA did not grant him the chair, the Foundation then sued UCLA at a cost of over $400,000 to date.
  • Tens of thousands of dollars spent to support research relating to a patented device owned by a company in turn owned by Dr. Buckberg and one of the directors.
  • Over $200,000 spent on research conducted in whole or in part by by Dr. Buckberg.

AG Brown seeks an accounting of the Foundation's funds, an order barring the defendants from running the Foundation until such an accounting has been provided, damages and civil penalties from the defendants, and dissolution of the Foundation.


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