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Post date: November 21 2005

State Settles With Former Officers And Counsel Of Nyc Hiv/aids Non-profit

Attorney General Spitzer today announced a $790,000 settlement with three former officials of a Praxis Housing Initiative (Praxis), a Manhattan-based not-for-profit that provides housing and services to people living with AIDS/HIV. The settlement funds will be returned to Praxis so that the agency can continue providing housing and services at its facilities in New York City.

The settlement ends an investigation that found that former Executive Director Gordon Duggins and President G. Sterling Zinsmeyer used Praxis funds to create and manage separate and competing for-profit homeless shelters. The first for-profit shelter operated by Duggins and Zinsmeyer under a lease of the Dawn Hotel in Harlem, was a project initially offered to Praxis. Duggins and Zinsmeyer took over the lease of the Dawn even though Praxis paid the project’s start-up and operating expenses. The pair also converted the Park Overlook, a Praxis facility in the Bronx, to their own for-profit facility just months after funds from Praxis were used to rehabilitate the property. Using Praxis’ staff and reputation as well as seed money from the Dawn, the pair expanded their portfolio of properties into Brooklyn and Manhattan.

"Officers and directors of not-for-profits cannot be allowed to put their own financial interests above the interests of the charity and the beneficiaries to whom they owe the highest degree of loyalty and care" said Attorney General Spitzer. "This conduct by fiduciaries will not be tolerated."

The Attorney General’s settlement with Dwight Kinsey, who served as a director and corporate counsel of Praxis, alleges that Kinsey knew of and allowed the pair’s advance of funds to the Dawn, and failed to institute appropriate conflict of interest procedures which would have required them to disclose potential opportunities to the Praxis Board of Directors prior to undertaking such projects. Kinsey will pay $90,000 in the settlement.

"Attorneys who serve in the dual capacity as director and counsel to a not-for-profit have a heightened duty of care as their fellow board members rely on them for advice and legal guidance," Spitzer said. "Fiduciary lawyers who take on the added responsibility of counsel to a charity must fulfill their obligation to render sound and unbiased advice in service to the charity."

This matter was handled by Assistant Attorneys General Carolyn T. Ellis and Sally G. Blinken of the Charities Bureau under the supervision by Gerald Rosenberg, Attorney General in Charge of the Charities Bureau.