California AG Forces Fiscal Sponsor to Dissolve and Pay Over $460,000

Last week California Attorney General Rob Bonta announced a stipulated judgment against fiscal sponsor ZeroDivide and its directors and officers. According to the AG’s press release, ZeroDivide operated two program for which it received restricted donations. But when ZeroDivide had difficulty raising sufficient unrestricted funds to pay for its operating costs, it began to use the restricted funds for those expenses to the alleged tune of over $600,000 without informing the relevant donors, much less receiving their consent. ZeroDivide’s board of directors was aware of this misconduct and failed to stop it.

As a result of the stipulated judgment:

• ZeroDivid and its directors and officers are required to pay over $460,000 in damages, penalties, late filing fees, and attorney’s fees.

• ZeroDivide’s directors will dissolve the nonprofit and distribute its assets to pay the damages amount, with any remaining assets going to another fiscal sponsor currently hosting one of the projects.

• Two of ZeroDivide’s officers are prohibited for three years from leading a a charitable organization in California or engaging in certain other activities relating to charitable fundraising and assets in California.

Coverage: Chronicle of Philanthropy.

Hat tip: Nonprofit Law Blog

Lloyd Mayer