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.
Self-Help Eviction
What is “Self-Help” Eviction?
“Self-help” evictions occur when landlords lock tenants out of their apartments because they haven’t paid rent. Landlords may also attempt to force tenants out by moving tenants’ property, shutting off utilities, harassing tenants, or otherwise allowing rental property to become uninhabitable in retaliation for unpaid rent.
Self-help eviction is illegal in New York. The only legal way landlords can evict tenants is by going to court. Any other strategy may open the landlord up to liability.
Only evictions ordered by Judges are legal. Evictions are major events, and could render entire families homeless. While the legal eviction process might seem lengthy from the perspective of a landlord whose tenant isn’t paying rent, allowing landlords to evict tenants without court approval would leave too much room for abuse.
Nassau County Landlord Tenant Attorneys
The Law Firm of Vaughn, Weber & Prakope, PLLC has handled many landlord-tenant disputes. Call 526-858-2620 today to schedule a free consultation.
What You Can(‘t) Do With a Nonprofit
A Senator was recently accused of stealing $30,000 from what’s being called a “sham nonprofit.” Apparently, the nonprofit received money for a “parent workshop.” The senator allegedly took the money herself, and lied about educating community members. If these allegations are true, it’s pretty obvious that this behavior was dishonest, and wrong. You definitely can’t do that with a nonprofit. But some activities that might seem innocent can also open a nonprofit up to liability.
Like other corporations, nonprofits are governed by bylaws. Bylaws are a list of procedures or rules that directors must follow when making decisions. For example, bylaws might require directors to present certain proposed actions to the membership. If the directors take certain actions without member approval, the directors may be sued. A court might issue an injunction, stopping the directors from taking those actions. That could tie up the nonprofit’s assets, or cause the nonprofit to miss out on contracts, grants, or other opportunities.
For this reason, it is always advisable to speak with an attorney if bylaws seem ambiguous. A qualified attorney can help directors decide what, exactly, they must do before they take action.
The Law Firm of Vaughn, Weber & Prakope, PLLC can advise you on nonprofit bylaws, or other aspects of nonprofit decision-making and governance. Call 516-858-2620 today for a free consultation.
Debt Collectors Misled Borrowers
Court Finds that Debt Collectors Misled Borrowers
A debt collection agency recently sent a letter to borrowers telling them that their student loan debts could not be discharged in bankruptcy, and must be paid. The truth is, student loans CAN sometimes be discharged in bankruptcy, although it is uncommon. Read more about this topic here.
Debt collectors misled borrowers often, judging from the number of successful Fair Debt Collection Practices lawsuits against them. If you have been harassed, lied to, contacted at unusual hours, or otherwise abused by debt collectors, you may be entitled to compensation.
Long Island Litigation Attorneys
The attorneys at The Law Firm of Vaughn, Weber & Prakope, PLLC can help in these matters. Call (516) 858-2620 today for a free consultation!
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