March 10, 2011
Hassan Nemazee pleaded guilty to leading a nearly $300-million fraud. He donated $1.1-million to charities that have now been asked to return the money.
Charities nationwide are facing an alarming demand from state and federal courts handling the clean-up of collapsed investment schemes: Give back donations.
In cases playing out across the country, hundreds of nonprofit organizations have been asked to return anywhere from a couple thousand dollars to millions of dollars each in response to government efforts to take back ill-gotten gains from financial frauds, like Ponzi schemes. A charity becomes a target of such recovery if it has received a gift from a donor who used illicit profits from a fraud scheme to make the charitable contribution.
The legal process, known as a clawback, is not new. But as the economic downturn has sped up the demise of big-time investment scams, more and more charities are learning that the gifts they received in good faith—and innocence—may not be theirs to keep if the donors turn out to be criminals. Some charity officials and legal experts say laws ought to be changed to better protect charitable gifts, but few such efforts are in the works.
“If it’s dirty money, I understand that you will be asked to give it back,” says Barbara-Ann Weinstein, chief executive of Family Central, a social-service provider, in Florida. “It’s just that this is something we never knew could happen and we are disgusted that anyone would take advantage of us and the children we serve by giving us this money. It is hurtful.”
Family Central returned a $25,000 gift it had planned to use to help secure a matching grant to subsidize child-care costs for low-income parents.
The money was a contribution from Scott Rothstein, a South Florida lawyer who pleaded guilty last year to running a $1.4-billion Ponzi scheme. Lawyers sorting out Mr. Rothstein’s case are seeking the return of more than $2-million he contributed to about 30 charities.
Malvern Preparatory School was asked to return a $1-million pledge for its new weight room after the donor, Joseph S. Forte, below, was found guilty of running a $35-million investment scam.
One of the biggest beneficiaries, Joe DiMaggio Children’s Hospital, in Hollywood, Fla., returned $800,000 to federal authorities and removed a sign in its emergency room bearing the name of Mr. Rothstein’s foundation, according to local press accounts.
Source: Philanthropy.com, March 6, 2011
Source: Philanthropy.com, March 6, 2011
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