Does Naomi Campbell Have a Private Inurement/Excess Benefit Problem?

I had to think real hard to come up with a legitimate reason to post about Naomi Campbell.  There is plenty of motivation, trust me.  Just don’t tell my wife I said so.  You’ve heard already that the Charity Commission recently banned Campbell from serving as a nonprofit fiduciary for five years over what amounts to some fairly penny-ante private inurement and excess benefit.  I read The Commission’s Report.  There were no pictures so I picked one out. The Commission complained that of Fashion for Relief’s $5,000,000 in revenues during the examination period, Trustee Campbell spent maybe $25,000 on luxury hotels at the Cannes Film Festival and other swanky venues at which she enjoyed a spa, some smokes and “hotel products.” All while on FFR business, Campbell says.  And that the only other trustee received a salary of about $270,000, not previously approved but only justified after the fact by the assertion that she earned it by all the work she did. 

Obviously Campbell is not well-advised.  After-the-fact justifications don’t preclude private inurement or excess benefit.  That point might have been enough to justify a blog post.  But I also wondered whether the Charity Commission’s findings might suggest Campbell’s liability for excise taxes here in America.  Campbell and the other Fashion for Relief trustee run a U.S. counterpart called Fashion Relief USA.  Same trustees, same exact mission statement.  Fashion Relief USA’s latest available 990 shows it spent about $180,000, all on grants in Europe.  It’s a pretty good bet that the two  organizations are really one. 

Treasury Regulation 53.4958-4 covers excess benefit accomplished through a controlled or intermediary organization so it is not an entirely unreasonable line of inquiry.  We wouldn’t hesitate to ask if the circumstances involved two separate domestic charities operated by the same board and with the same (verbatim) charitable purpose.  On the other hand, Treasury Regulation 53.4958-2(b)(2) states that foreign organizations that receive substantially all their support from foreign sources are not subject to IRC 4958. 

Campbell denies any impropriety either way and I believe her.  You can just look at her and know she’s telling the truth.  And she’s even ordered a full-on investigation.  But if the Charity Commission is correct, maybe the Service should look into it on this side of the Atlantic. It’s penny-ante stuff, like I said, but it might be worth sending an examiner to sit a spell with the trustees. I’m available pro bono.

darryll k. jones