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Post date: April 9 2015

A.G. Schneiderman Announces Lawsuit Against Board Of Directors Alleging Mismanagement Of Two Brooklyn-Based Nonprofits Serving Vulnerable Families

Lawsuit Accuses Board Members Of Trying To Illegally Sell Two Brooklyn Townhouses Operated By The Nonprofits As Housing For Single Mothers And Their Children

Board Members Also Allegedly Pilfered Thousands Of Dollars From Charitable Bank Account, Took Out $600,000 In High-Fee Loans, Forged Signatures And Failed To Pay Employees

Schneiderman: There Is No Excuse For A Charitable Board Using Organizations’ Valuable Assets For Personal Gain

NEW YORK – Attorney General Eric T. Schneiderman today announced a lawsuit against the board of directors of two Brooklyn-based nonprofits, Brooklyn Child & Family Services, Inc. and Project Teen Aid Housing Development Fund Corp., for alleged gross negligence and failed management of the organizations – and of two converted townhouses in the Bedford-Stuyvesant section of Brooklyn. The Rose F. Kennedy Family Center, located at 178 Halsey Street, and the Rosa Parks Apartments, located at 243 Hancock Street, have been owned by the jointly operated nonprofits since the 1990s. The charitable organizations were intended to provide housing and support services for pregnant women, young mothers and their children. As set forth in the lawsuit, an investigation by the Attorney General’s Charities Bureau found that several board members listed the townhouses for sale without necessary approval. Supreme Court Justice Genine D. Edwards granted the Attorney General’s Office a temporary restraining order earlier this week that freezes the organization’s assets.

“Lured by a lucrative real-estate market in Brooklyn, the board members of these two charitable organizations allegedly attempted to illegally sell two brownstones that belonged to the charities and were meant to serve as housing for single mothers – kicking out their vulnerable residents along the way,” said Attorney General Schneiderman. “There is simply no excuse for a charitable board using its organizations’ valuable assets for the personal gain of board members. We will continue to hold New York’s entire nonprofit sector to its responsibilities, especially when those obligations are to underprivileged families.”

According to a lawsuit filed in Brooklyn Supreme Court on Monday, the Attorney General’s investigation, which began in February, found that the board of directors of the two organizations ignored the long-standing charitable mission of the groups and led the organizations to financial ruin, resulting in their loss of public funding. The board members who are being sued by the Attorney General’s Office include directors and officers Thomas McKinney and Amuel Renard Hilliard; Gene Baynes, the organizations’ financial manager, whose certification as a financial planner was revoked in 2010 in California; Vivian Munsey-Thomasson, the vice-chair of both boards; and Reggie Wells, a resident of Chicago.

According to the Attorney General’s petition, in August 2013 and at the board’s direction, the organizations evicted the young women who resided at the Rose Kennedy Center and the Rosa Parks Apartments –who the nonprofits were supposed to serve. The board then allegedly attempted to profit personally by marketing the buildings for private sale: The Rose F. Kennedy Family Center was listed by Halstead for $3.6 million in December 2014, and Rosa Parks Apartments was listed by Halstead for $2.1 million in May 2014. According to the allegations, the board also enlisted Vice Chair Munsey-Thomasson’s son, who is a real estate broker, to market both properties, with the prospect of earning six percent commissions.

The complaint also details evidence of several other alleged improprieties by the organizations’ board and its officers, including:

  • pilfering $80,000 from a charitable bank account directly into the personal account of financial manager Gene Baynes;
  • taking out two high-fee loans totaling $600,000, secured by the Rose Kennedy Center’s property on Halsey Street, currently with an annual interest rate of 12 percent and a default rate of 24 percent;
  • forging the signature of the secretary of the board to authorize the high-fee loan on Rose Kennedy Center’s property, without the board member’s permission;
  • failing to pay the wages of their employees; and
  • neglecting corporate filings, including tax returns.

The Asset Management Division of the New York City Department of Housing Preservation and Development noticed suspicious behavior concerning the management of the properties and notified the appropriate authorities in the Attorney General’s Charities Bureau. Upon receiving complaints from the public and from the New York City Department of Housing Preservation and Development, the Attorney General’s Charities Bureau worked with Halstead in February 2015 to remove the listings of the two properties and put a stop to the organizations’ attempt to sell the buildings.

“I am grateful that through the diligence and initiative of HPD Assistant Commissioner Allred and his team in the Office of Asset Management and Property Management, this wrongdoing was brought to light,” said HPD Commissioner Vicki Been. “Our partnership with the Attorney General’s office is a great asset in the fight to protect tenants and preserve the stock of affordable housing. I am pleased to learn that this court order was put in place to protect these buildings and look forward to seeing them return to use as much-needed affordable housing.”

The sale of the charities’ two key assets without prior approval by the Charities Bureau or a state court is illegal under state law. New York’s Not-for-Profit Corporation Law requires that such sales include advance approval by either the appropriate court or the Attorney General’s Charities Bureau. In addition, proceeds of such sales must return to the nonprofit to further its charitable purposes or to another charity with similar purposes. The Attorney General’s lawsuit alleges that the attempted sales were intended to personally benefit the board members, and not the charities.

Both the Rose Kennedy Center and the Rosa Parks Apartments buildings accumulated numerous buildings code violations and fines, notwithstanding the millions of public dollars invested in them over the course of many years.

Under the temporary restraining order secured by the Attorney General’s Office on Monday, the court directed that certain bank accounts and other assets of the organizations be frozen. In addition, the Attorney General’s lawsuit is asking the court to remove the board of directors and put a temporary receiver in place to manage the organizations. The five directors must appear in Brooklyn Supreme Court on April 22 to explain why they should not permanently be removed from their positions as officers and directors of the organizations.

The Attorney General’s investigation into Brooklyn Child & Family Services, Inc. and Project Teen Aid Housing Development is continuing.

The Attorney General thanked the New York City Department of Housing Preservation and Development, in particular, Assistant Commissioner Christopher Allred of HPD’s Division of Asset Management, for assisting in the investigation.

The Charities Bureau’s civil case is being prosecuted by Assistant Attorney General Elizabeth Fitzwater. Assistance was provided by Legal Assistants Carolyn Fleishman and Jacqueline Sanchez. The Bureau’s Enforcement Section is led by Assistant Attorney General Sean Courtney. The Charities Bureau is led by Deputy Bureau Chief Karin Kunstler Goldman and Bureau Chief James G. Sheehan. The Attorney General’s Division of Social Justice, of which the Charities Bureau is a part, is led by Executive Deputy Attorney General Alvin Bragg.

The Attorney General’s Charities Bureau regulates nonprofit organizations, and is charged with protecting them and the public from unscrupulous practices in the management of charitable assets and in the solicitation of donations. The Charities Bureau also ensures that funds and other assets of charitable organizations are properly used in accordance with their charitable purposes.

The charges in this lawsuit are accusations and the defendants are presumed innocent until and unless proven guilty in a court of law.