Why do states require charity registration prior to charitable solicitation? There are many good reasons for state charity registration to include informing donors, accountability, and transparency. Another reason? To catch unscrupulous and dishonest people hiding behind the screen of good works and charity. Read on to learn about a current case….
Ohio Attorney General Mike DeWine recently announced a lawsuit against Bobby J. Walker accusing Walker and his organization, Central Ohio Community Involvement Foundation (COCIF), of violating Ohio’s Charitable Organizations Act. COCIF runs a youth summer camp and an athletic league for charter-school students across the state. To read the Complaint see: http://www.ohioattorneygeneral.gov/Files/Briefing-Room/News-Releases/Charitable-Law/2017-Walker-Central-Ohio-Community-Involvement-Fou.aspx
According to the AG’s Complaint: “COCIF never registered with the Charitable Law Section of the Ohio AG’s Office, nor has it paid registration fees, filed financial reports, or filed copies of current charter, bylaws, articles of incorporation, agreement of association, instrument of trust, constitution, or other organizational instruments.” This led the AG to charge COCIF with Failing to Properly Register.
Additionally, according to the lawsuit, between January of 2012 and July of 2016 approximately $550,000 was deposited in COCIF’s checking accounts. Between 2012 and 2015 Walker withdrew $215,700 in cash from the bank account, another $41,500 from ATM machines, and wrote checks totaling more than $8,700. This led the AG to file additional charges including Breach of Fiduciary Duties, Conversion, False and Misleading Information in Filings, Nuisance and Abuse of a Charitable Trust.
The AG is asking the court to force the Reformation of a Charitable Trust. In essence, seize the assets of COCIF, shut down the entity, and set up an alternate nonprofit under the auspices of the AG’s office which will distribute the funds (along with any penalties and fines imposed by the court) to legitimate nonprofits within Ohio.
One bad apple does not spoil the whole bunch – but it does help us better understand why state charity registration requirements exist. Clearly Compliant will be following this case and keep you posted. Let me know if you have similar examples from your home state.