Handling questionable money problems as the president of a study group
August 16, 2009 2:27 PM Subscribe
How do I extricate myself from an incorporated study group that is being run incompetently and possibly criminally?
Through a serious of poor judgments, I agreed to be president of a philatelic "study group". Taking on responsibilities for which I had no training, I wrote the constitution and by-laws of the organization, did the paperwork for incorporation in the State of California, and opened the PayPal account for the group.
I have had absolutely no contact with the finances of the group, because of my fierce refusal to handle any of this -- save for one person's paying one year's membership fees through PayPal. The PayPal history would show that I did not touch these funds. I no longer have access to the PayPal account.
The person who organized the formation of the group and enlisted me, who holds the (non-voting) position in the group as "Membership Secretary", has performed a number of mind-blowing faux pas up to and including "for convenience" depositing at least one check for membership into her own checking account. The board has been completely unwilling to perform its tasks, and I believe that the Treasurer has not filed tax returns for the organization in the two fiscal years that the group has existed.
The group had to be incorporated to be an adjunct to other philatelic organizations. It has been accepted into one, and at least one other is pending.
I have resigned as president, and have beseeched the board to take the affairs of the group -- a "legal entity," I wrote, "not an afternoon Scrabble tournament" -- seriously. I have had one board member viciously flame me for "libel and slander" against the person who formed the group, who deposited club monies into her own bank account. The other board members have pointedly ignored me.
I absolutely believe that everything questionable that has transpired financially has been performed out of ignorance or apathy and not malice. But I feel stuck.
1. Depositing the checks into her bank account was a crime, right? A felony, right?
2. What sort of exposure do I have as former president, as incorporator, and the author of the group's charter and other documents?
3. What do I do now?
I expect most responses to begin "IANAL". My question begins that way, too. And the rule of thumb on AskMeFi is "yes" to the answer "do I need a lawyer"? I cannot afford a lawyer, but also absolutely cannot afford an IRS investigation. Do I need to report the details of the handling of funds to the member organizations? To the State of California?
The obvious answer is "yes, of course," and is how I would respond if I saw this question. Everyone is going to hate me if I do this, of course, but while it is unpleasant to be the asshole in all of this, I don't know what to do otherwise.
Through a serious of poor judgments, I agreed to be president of a philatelic "study group". Taking on responsibilities for which I had no training, I wrote the constitution and by-laws of the organization, did the paperwork for incorporation in the State of California, and opened the PayPal account for the group.
I have had absolutely no contact with the finances of the group, because of my fierce refusal to handle any of this -- save for one person's paying one year's membership fees through PayPal. The PayPal history would show that I did not touch these funds. I no longer have access to the PayPal account.
The person who organized the formation of the group and enlisted me, who holds the (non-voting) position in the group as "Membership Secretary", has performed a number of mind-blowing faux pas up to and including "for convenience" depositing at least one check for membership into her own checking account. The board has been completely unwilling to perform its tasks, and I believe that the Treasurer has not filed tax returns for the organization in the two fiscal years that the group has existed.
The group had to be incorporated to be an adjunct to other philatelic organizations. It has been accepted into one, and at least one other is pending.
I have resigned as president, and have beseeched the board to take the affairs of the group -- a "legal entity," I wrote, "not an afternoon Scrabble tournament" -- seriously. I have had one board member viciously flame me for "libel and slander" against the person who formed the group, who deposited club monies into her own bank account. The other board members have pointedly ignored me.
I absolutely believe that everything questionable that has transpired financially has been performed out of ignorance or apathy and not malice. But I feel stuck.
1. Depositing the checks into her bank account was a crime, right? A felony, right?
2. What sort of exposure do I have as former president, as incorporator, and the author of the group's charter and other documents?
3. What do I do now?
I expect most responses to begin "IANAL". My question begins that way, too. And the rule of thumb on AskMeFi is "yes" to the answer "do I need a lawyer"? I cannot afford a lawyer, but also absolutely cannot afford an IRS investigation. Do I need to report the details of the handling of funds to the member organizations? To the State of California?
The obvious answer is "yes, of course," and is how I would respond if I saw this question. Everyone is going to hate me if I do this, of course, but while it is unpleasant to be the asshole in all of this, I don't know what to do otherwise.
This post was deleted for the following reason: poster's request -- jessamyn
I am not a lawyer, but I have been on the board of a small not-for-profit. How much money are we talking about annually? Because non-profits don't have to file a 990 unless the bring in over $25,000 per year. Dig around in here for the details.
I absolutely believe that everything questionable that has transpired financially has been performed out of ignorance or apathy and not malice. But I feel stuck.
Who do you think is going to come after you? Small, fucked up, legally-incorporated non-profits are a dime a dozen, unless there is some major financial malfeasance the IRS is not going to give a damn one way or the other.
posted by kimdog at 2:41 PM on August 16, 2009
I absolutely believe that everything questionable that has transpired financially has been performed out of ignorance or apathy and not malice. But I feel stuck.
Who do you think is going to come after you? Small, fucked up, legally-incorporated non-profits are a dime a dozen, unless there is some major financial malfeasance the IRS is not going to give a damn one way or the other.
posted by kimdog at 2:41 PM on August 16, 2009
I am not your lawyer.
Generally, one would be wise to ask questions anonymously when one is concerned about being party to a crime.
Nonetheless, what crime do you think was committed? Generally, crimes regarding theft and fraud require that the accused actually intended to deprive permanently the rightful owner of the use or enjoyment of the property (such as money). If the money was deposited into the secretary's personal account "for convenience's sake," she may have lacked the requisite level of intention to be guilty of a crime. Generally, when you have a corporate entity, you are concerned about "piercing the corporate veil" when you "commingle" personal and corporate funds--the result of which would be to render certain insiders personally liable for the corporation's debts. Whether this could result--and whether it could affect you, who presumably have clean hands--is a question for a California lawyer, which I am not.
What's your concern with the IRS? Is the entity intended to be exempt from federal tax?
Again, not a lawyer, not admitted to the Bar of the state of California, not legal advice, etc.
posted by Admiral Haddock at 2:46 PM on August 16, 2009
Generally, one would be wise to ask questions anonymously when one is concerned about being party to a crime.
Nonetheless, what crime do you think was committed? Generally, crimes regarding theft and fraud require that the accused actually intended to deprive permanently the rightful owner of the use or enjoyment of the property (such as money). If the money was deposited into the secretary's personal account "for convenience's sake," she may have lacked the requisite level of intention to be guilty of a crime. Generally, when you have a corporate entity, you are concerned about "piercing the corporate veil" when you "commingle" personal and corporate funds--the result of which would be to render certain insiders personally liable for the corporation's debts. Whether this could result--and whether it could affect you, who presumably have clean hands--is a question for a California lawyer, which I am not.
What's your concern with the IRS? Is the entity intended to be exempt from federal tax?
Again, not a lawyer, not admitted to the Bar of the state of California, not legal advice, etc.
posted by Admiral Haddock at 2:46 PM on August 16, 2009
Does "study group" have some other meaning you're using than e.g. a group of students getting together to cram for finals? Did you mean some kind of research group? I'm having a hard time wrapping my head around the idea that you needed to incorporate in the first place.
In any event, if you genuinely believe a crime to which you may have been party has been committed, you should ask the MeFi mods to delete this since it is not anonymous and contact a lawyer immediately. Lawyers will generally at least consult with you on the case (whether there is a case, whether they will take you on) for free initially and you can work out the payment for their services if needed once you've established whether you need to retain them.
posted by asciident at 2:49 PM on August 16, 2009
In any event, if you genuinely believe a crime to which you may have been party has been committed, you should ask the MeFi mods to delete this since it is not anonymous and contact a lawyer immediately. Lawyers will generally at least consult with you on the case (whether there is a case, whether they will take you on) for free initially and you can work out the payment for their services if needed once you've established whether you need to retain them.
posted by asciident at 2:49 PM on August 16, 2009
A google search turns up a bunch of links. This one has a good website; this must be the sort of group quarantine is talking about.
Lawyers will generally at least consult with you on the case
Surely quarantine is not thinking about hiring an attorney to start litigating over the financial activities of some two-bit stamp collectors' club. That would be silly.
posted by jayder at 3:03 PM on August 16, 2009
Lawyers will generally at least consult with you on the case
Surely quarantine is not thinking about hiring an attorney to start litigating over the financial activities of some two-bit stamp collectors' club. That would be silly.
posted by jayder at 3:03 PM on August 16, 2009
Lawyers will generally at least consult with you on the case
Surely quarantine is not thinking about hiring an attorney to start litigating over the financial activities of some two-bit stamp collectors' club. That would be silly.
No, but it seems clear that quarantine is concerned about protecting him- or herself legally regarding possible criminal activities, and therefore should consult with a lawyer and not AskMeFi.
posted by asciident at 4:48 PM on August 16, 2009
Surely quarantine is not thinking about hiring an attorney to start litigating over the financial activities of some two-bit stamp collectors' club. That would be silly.
No, but it seems clear that quarantine is concerned about protecting him- or herself legally regarding possible criminal activities, and therefore should consult with a lawyer and not AskMeFi.
posted by asciident at 4:48 PM on August 16, 2009
No, but it seems clear that quarantine is concerned about protecting him- or herself legally regarding possible criminal activities, and therefore should consult with a lawyer and not AskMeFi.
Quoted for emphasis. Call a lawyer.
posted by dirtynumbangelboy at 4:52 PM on August 16, 2009
Quoted for emphasis. Call a lawyer.
posted by dirtynumbangelboy at 4:52 PM on August 16, 2009
It sounds like this is a club, NOT a 501(c)3. If they decided to become a 501(c) 3 - which is unlikely - the check thing would be an issue. However, I'm not getting the sense that's what's happening. Clearly, this is bothering you. Just politely resign - it's highly improbable that anyone is going to jail over this, least of all you.
posted by medea42 at 5:45 PM on August 16, 2009
posted by medea42 at 5:45 PM on August 16, 2009
Best answer: If there was any criminal activity here, it is on the level of Bessie thinking she saw Mildred take fifty cents out of the till at the church bake sale and go buy a cup of coffee with it.
I understand that, whenever anyone comes here with a question about potential legal liability, the default and expected answer is "see a lawyer." But we shouldn't encourage someone to lawyer up for what is, almost surely, a Chicken Little scenario.
posted by jayder at 6:10 PM on August 16, 2009
I understand that, whenever anyone comes here with a question about potential legal liability, the default and expected answer is "see a lawyer." But we shouldn't encourage someone to lawyer up for what is, almost surely, a Chicken Little scenario.
posted by jayder at 6:10 PM on August 16, 2009
Response by poster: It sounds like this is a club, NOT a 501(c)3.
Sorry to not be clear enough. Yes, this is a 501(c)(3) -- I forget the exact category, but something along the lines of "encouraging study and scholarship", hence the "study unit" name.
she may have lacked the requisite level of intention to be guilty of a crime
theft is generally a specific intent crime, and therefore depositing money into a personal account, taken alone, is not enough to establish theft
These are very useful. To clarify, I believe that theft has not taken place, just that this might look suspicious to an auditor/whatever and that I might be left holding the bag.
almost surely, a Chicken Little scenario.
Nobody would be happier than I if this is the case, and I'm overreacting. Again, though, I just can't afford repercussions if I was wrong.
posted by quarantine at 7:48 PM on August 16, 2009
Sorry to not be clear enough. Yes, this is a 501(c)(3) -- I forget the exact category, but something along the lines of "encouraging study and scholarship", hence the "study unit" name.
she may have lacked the requisite level of intention to be guilty of a crime
theft is generally a specific intent crime, and therefore depositing money into a personal account, taken alone, is not enough to establish theft
These are very useful. To clarify, I believe that theft has not taken place, just that this might look suspicious to an auditor/whatever and that I might be left holding the bag.
almost surely, a Chicken Little scenario.
Nobody would be happier than I if this is the case, and I'm overreacting. Again, though, I just can't afford repercussions if I was wrong.
posted by quarantine at 7:48 PM on August 16, 2009
Response by poster: look suspicious
And, of course, "be illegal", which was my original question.
posted by quarantine at 7:49 PM on August 16, 2009
And, of course, "be illegal", which was my original question.
posted by quarantine at 7:49 PM on August 16, 2009
Best answer: IANAL, and I don't know from California law, but am a former non-profit executive and consultant.
In Massachusetts and New York (the states with whose laws on this stuff I am familiar) there is a VERY different level of scrutiny for private individuals commingling funds and attorneys and licensed financial representatives (brokers, etc.) commingling funds.
If a non-profit's officer, out of ignorance, unwittingly deposits a membership check in their private bank account, that's not good, but it's not a violation in the same way that it would be if an attorney deposited a settlement check in her bank account or if a broker deposited the proceeds of a sale in his bank account.
Unless CA law is very different from MA and NY law, I don't think it's "illegal" at all, and certainly it isn't a felony in this situation (whereas it would be if the attorney, broker, etc. did it). It might be a civil tort, or a violation of state regulations, but that's not same thing.
The likelihood that you have any legal exposure whatsoever here is minimal now that you have resigned; if CA law is like MA law, you can't be held liable for things that happen after your term of office ended, and you certainly aren't liable because you wrote the incorporating documents or bylaws or whatever.
There is zero possibility of you facing any criminal charges. The state of CA is not going to bring fraud charges against this group. The only question is if you would be liable in a civil suit brought jointly against all officers of the organization for malfeasance committed during the time you were an officer. Do you think any of the members of this group are likely to sue?
If you're concerned enough about this, the best idea is to see a lawyer. But don't panic: nobody committed any felonies here, and your resignation ends your responsibilities to the organization going forward.
posted by Sidhedevil at 11:48 PM on August 16, 2009 [1 favorite]
In Massachusetts and New York (the states with whose laws on this stuff I am familiar) there is a VERY different level of scrutiny for private individuals commingling funds and attorneys and licensed financial representatives (brokers, etc.) commingling funds.
If a non-profit's officer, out of ignorance, unwittingly deposits a membership check in their private bank account, that's not good, but it's not a violation in the same way that it would be if an attorney deposited a settlement check in her bank account or if a broker deposited the proceeds of a sale in his bank account.
Unless CA law is very different from MA and NY law, I don't think it's "illegal" at all, and certainly it isn't a felony in this situation (whereas it would be if the attorney, broker, etc. did it). It might be a civil tort, or a violation of state regulations, but that's not same thing.
The likelihood that you have any legal exposure whatsoever here is minimal now that you have resigned; if CA law is like MA law, you can't be held liable for things that happen after your term of office ended, and you certainly aren't liable because you wrote the incorporating documents or bylaws or whatever.
There is zero possibility of you facing any criminal charges. The state of CA is not going to bring fraud charges against this group. The only question is if you would be liable in a civil suit brought jointly against all officers of the organization for malfeasance committed during the time you were an officer. Do you think any of the members of this group are likely to sue?
If you're concerned enough about this, the best idea is to see a lawyer. But don't panic: nobody committed any felonies here, and your resignation ends your responsibilities to the organization going forward.
posted by Sidhedevil at 11:48 PM on August 16, 2009 [1 favorite]
Response by poster: Thank you, Sidhedevil -- your knowledge and helpfulness are yet another credit to AskMeFi.
posted by quarantine at 2:37 AM on August 17, 2009
posted by quarantine at 2:37 AM on August 17, 2009
This thread is closed to new comments.
Just from the information you've posted here, I think there's a decent chance that you are taking this group way too seriously, and misinterpreting actions that are completely innocent.
I absolutely believe that everything questionable that has transpired financially has been performed out of ignorance or apathy and not malice ... Depositing the checks into her bank account was a crime, right? A felony, right?
Stopping short of giving you legal advice, theft is generally a specific intent crime, and therefore depositing money into a personal account, taken alone, is not enough to establish theft.
Do I need to report the details of the handling of funds to the member organizations? To the State of California?
The obvious answer is "yes, of course," and is how I would respond if I saw this question. Everyone is going to hate me if I do this, of course, but while it is unpleasant to be the asshole in all of this, I don't know what to do otherwise.
Whoa, you need to pull back, big time. I suggest resigning from your position without explanation and letting this "problem," if it is indeed a problem, fall to someone else. I think you're in way over your head.
You're in danger of being tagged as a self-righteous, self-aggrandizing blowhard by your peers ... and you should be careful, for your own good and for the good of others, to avoid accusing people of theft who are doing nothing of the sort.
posted by jayder at 2:40 PM on August 16, 2009 [2 favorites]