Not for Profit Conflict of Interest
Consider the following scenarios:
- A board member of a not-for-profit private school also owns a construction company. The school uses the board member’s construction company to build a new school building.
- A board member of a not-for-profit athletics organization also owns a sporting goods store. The athletic organization agrees to buy all of its equipment from the board member’s sporting goods store.
Can you see how each of these scenarios presents a potential conflict of interest? How?
Board members of not-for-profit corporations are not permitted to financially benefit from the corporation’s assets. Board members and other employees may receive reasonable compensation for their time – that is, they may receive a salary. In some instances, that salary may be considerable. But board members cannot otherwise personally benefit from the not-for-profit’s assets. How does this relate to the scenarios described above?
When a not-for-profit board member stands to personally benefit from a contract, the potential for self-dealing arises. If a board member directs a not-for-profit to deal exclusively with a business that the board member owns, it appears as if the not-for-profit’s assets are being used to benefit the board member. The profits of the deal will certainly benefit the business, which is owned by the board member. What, then, is to stop a board member from turning the not-for-profit into the business’s biggest, or even only, client? With enough influence, a board member may effectively liquidate the assets of the not-for-profit in purchases that will financially benefit the board member’s business, to the detriment of the not-for-profit. If that happens, all of the contributions individuals made to the not-for-profit’s stated purpose will be diverted to the private benefit of the board member, which is precisely what the not-for-profit structure is supposed to avoid.
Not-for-profit corporations can avoid this by enacting written conflict of interest policies. These policies may, for instance, require board members to abstain from voting in corporate decisions that stand to benefit them personally. The fact that a not-for-profit deals with a board member’s business does not, alone, mean that a conflict of interest has arisen. Nor does it necessarily mean that something unethical has happened. But it is important to be on guard for the possibility. If suspicion arises, it is best to consult an attorney.
Corporate Counsel
The attorneys at the Law Firm of Vaughn, Weber & Prakope, PLLC can help advise not-for-profits on these and other corporate governance matters. Call 516-858-2620 to schedule a free consultation today.
No-Fault Divorce and Maintenance
Our office has received numerous calls regarding the relationship between New York’s new No-Fault Divorce Maintenance. The March 12, 2012, Sunday edition of Newsday had an article written by Carol Polsky, which covered this very topic. Several prominent lawyers weighed in on the affects that this new statute has had in legal practice. It seems that everybody agrees that the No-Fault ground for divorce seems to make life easier in cases where the estranged couple has very little in the way of assets and does not have children. The statute seems to divide attorneys on the issue of maintenance however; especially temporary maintenance. The new formula has resulted in trial court decisions that are all over the map. Consistency does not appear to be coming any time soon either. With an escalating number of challenges to this statute coming before the Appellate Courts as we speak, there is much anticipation as to the direction New York will head with regards to shifting the so called “earnered spouse.”
If you are facing a divorce and have questions regarding maintenance or any other issue, feel free to call us at (516) 858-2620 to speak to a divorce attorney!
Same Sex Marriage in New York
As I am sure you have all heard that New York has become the most recent state to allow same sex marriage (which was long overdue). There may be some “old” concerns for “new” couples hoping to take advantage of the new law. Issues of pre nuptial and post nuptial agreements need to be considered. There will also be issues involving divorces and estate planning which need to be considered. With all of the excitement that is surrounding the passing of this new same sex marriage bill, it may benefit those effected to take a step back and plan accordingly. Pre nuptial agreements are an excellent way to protect assets and clarify the intentions of both spouses ahead of time (before the marriage) so that there are no surprises later. Post nuptial agreements are a way for couples to draw a line and add stabilization to a wavering marriage. Either way, with all of the excitement over the new same sex marriage bill, there are sure to be some questions on the horizon. As always, if you have any questions about how to design a pre or post nuptial agreement to meet your specific needs, feel free to call the Law Firm of Vaughn, Weber & Prakope, PLLC at (516) 858-2620!
Recently we have gotten several phone calls to our office regarding Prenuptial Agreements. There seems to be a growing desire for such agreements due to the rising divorce rates in our country. Surprisingly, we have also received some questions regarding Postnuptial Agreements. It has come to our attention that there seems to be some confusion out there regarding such agreements.
These agreements are necessary to provide protection for certain types of assets. They are not necessary to protect separate assets as defined by the NY DRL. Knowing the difference between separate and marital property will go along way towards helping you decide if you need one of these agreements.
Postuptial agreements serve the same purpose as prenuptial agreements. The difference is in the timing. Postnuptial agreements are executed after the parties are married. They are much more rare because it may be a daunting task to ask your spouse to sign something of that nature. However, it is something that can be presented as mutually beneficial.
These documents can be tedious and should be executed by an attorney. Problems can arise when these types of agreements are taken to task in litigation, and they are not artfully drafted. Proper wording is necessary to grasp the authority and protection of the law. As always, we are here to help you prepare these documents.
Feel free to call us at (516) 858-2620!
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