In the latest high-profile case in the US, a charity in California is facing a lawsuit and possible closure over allegations that they misappropriated nearly $3 million of funds meant for charitable projects in the community.
The lawsuit against Monterey County AIDS Project (MCAP) has been filed by Attorney General Jerry Brown, who aims to recover the money and prevent those responsible from working for a charitable cause in the future.
Mr Brown has alleged that the charity’s directors illegally used money intended for housing AIDs patients to cover salaries, rent and personal expenses and luxuries. The Attorney General’s office claims that around $2.8 million in funding is unaccounted for.
The worst problem for the MCAP is that amongst the missing funds was a bequest for $1.8 million from local resident Douglas Madsen, who left his ranch to the charity on the condition that the proceeds of its sale could be used solely for housing AIDS patients. Whilst the cash portion of the bequest was placed in a housing endowment, the $1.55 million generated from the sale of the ranch was not.
In response to the allegations that directors wasted or misused funding, former MCAP board member Shanda LeBoeuf has said:
“I have no idea about misappropriation of funds. We’ve done everything by the book.”
These allegations could fall within the scope of Charity Trustee Indemnity insurance and Professional Indemnity insurance.