State Files Suit To Oust Directors Of Dewar Foundation
Chief Judge Kaye has presented a sound proposal for meeting a critical challenge to the court system.
Attorney General Spitzer today announced a lawsuit against the board of directors of a private foundation in Oneonta for mismanaging the organization's assets. Those actions led to the loss of more than $1.5 million.
Spitzer's Charities Bureau filed the suit today in Manhattan Supreme Court against three directors of the Dewar Foundation — President Frank W. Getman, his son Michael and Nancy Lynch. The complaint seeks monetary damages from the defendants and their removal from the Board.
"It is the responsibility of my office to protect the assets of charities which are created to do good deeds in our communities," said Spitzer. "Because these individuals acted irresponsibly, they do not deserve, nor can they be trusted to oversee the millions of dollars still left in the care of this Foundation."
The civil suit alleges that the defendants violated their fiduciary duties to the Foundation because as directors they mismanaged the Foundation's assets or allowed them to be mismanaged in a way that harmed the not-for-profit corporation.
The A.G.'s action primarily concerns a decision in 1993 by Frank Getman to make an imprudent loan to a risky start-up mineral water business in California — Wheeler Springs Resorts.
Without any knowledge or approval from the Board, Frank Getman invested $1.5 million of the Foundation's assets in the company, along with $100,000 of his own money.
The loan entitled Getman to a number of personal benefits including a position on Wheeler's Board of Directors, $10,000 in annual director fees, and common stock and warrants.
After just a few payments, the company defaulted on the loan in November 1993. The loan, plus accrued interest, remain unpaid.
The State alleges that directors Michael Getman and Nancy Lynch breached their fiduciary duties when they failed to oversee the Foundation's financial activities and instead, allowed Frank Getman to make most of the Board's decisions.
They also failed to evaluate or question any of his investments, even after learning about the risky loan.
In addition, Frank and Michael Getman improperly collected rent money totaling more than $50,000 from the Foundation. The Dewar Foundation rented office space from the Getmans which subjected the Foundation to penalty under federal tax laws.
The Attorney General also seeks the appointment of a receiver who would be in charge of the Board while it re-organizes.
The Dewar Foundation was incorporated in 1947 and is well known in the Oneonta area as the legacy of Jessie Smith Dewar, a local resident who inherited a fortune amassed by her father from early stock investments in a company that was the predecessor to IBM.
The Foundation makes grants to a variety of local charitable organizations such as A.O. Fox Memorial Hospital and the SUNY College at Oneonta Foundation.
In 1997, the Foundation reported having assets with a fair market value in excess of $13 million and the distribution of grants totaling $564,800.
The investigation was handled by Assistant Attorney General Tynia Richard of Spitzer's Charities Bureau under the supervision of Section Chief Robert Pigott.