Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 4

March 21, 2019, 7:50 am

Image courtesy of Adobe Stock.

 

Introduction to this series of posts explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

The basis for his decision was that the charities’ expert witnesses were more persuasive than the government’s expert witness.

Yesterday’s post illustrated why attorneys quibble so vigorously and described the remaining issue of whether the charitable solicitations by the charities are misleading.

Today’s post mentions where the case is now and the remaining issue of allegedly misleading solicitations.

Is GAAP the real world?

The ALJ discusses his reasoning for continuing the hearing to address the allegedly mislead appeals, raising the entertaining question of whether this separate world with its rarefied atmosphere containing its own set of exquisitely detailed rules we call GAAP has an overlap with the real world where actual people actually reside and lead actual lives.

Additional testimony and a separate decision will resolve that issue for this case.

The ALJ’s comments:

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 3

March 20, 2019, 7:48 am

Image courtesy of Adobe Stock.

Introduction to this series of posts explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

The basis for his decision, as mentioned yesterday, was that the charities’ expert witnesses were more persuasive than the government’s expert witness.

Are the charities’ appeals misleading?

The remaining issue in the case is whether the charitable solicitations were misleading to donors.

The state alleged that the financial statements did not comply with GAAP and as a separate matter that solicitations to donors were misleading.

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 2

March 19, 2019, 7:19 am

Image courtesy of Adobe Stock.

Introduction to this series of posts yesterday explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

Preliminary ruling

The ALJ concluded that the testimony from the charities’ expert witnesses was more persuasive than that of the AG’s expert witness.  On that basis, the ALJ concluded the AG did not prove its case that the financial statements were in violation of GAAP.

I will summarize and quote some of the comments in the transcript and provide select quotes on the assumption many of my readers won’t download and read the transcript for the day. As a matter of my style choice, I will only use the first letter of the last name of witnesses and attorneys.

The basis for conclusion is whose arguments were more persuasive. The ALJ decided the charities had better expert witnesses.

He said:

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 1

March 18, 2019, 9:45 am

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On December 11, 2018, the administrative law judge (ALJ) hearing the case by the California Attorney General against Food for the Poor (FftP), MAP International (MAP), and Catholic Medical Mission Board (CMMB) announced his preliminary determination.

The ALJ concluded that the state did not prove its claim that the financial statements of the three charities violated GAAP.

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Recap of known state and federal interest in medical GIK

December 7, 2018, 9:29 am

Superior court facade in downtown Los Angeles, California. Image courtesy of Adobe Stock.

There are a number of state and federal actions visible for financial reporting by charities. Focus of the efforts currently is valuation of GIK and the impact of those valuations on fund raising appeals. Perhaps a recap of those efforts will provide some helpful context to the charity community.

Update: End of this post describes the change in accounting over the last seven years in terms of how to value meds that legally may not be distributed in the U.S.  Hint: a 180 degree change.

Today is the 9th day of out of 15 days scheduled for hearings on the California AG’s cease and desist order (C&DO) for MAP International (MAP), Food for the Poor (FftP), and Catholic Medical Mission Board (CMMB).

Here is the list of publicly visible Attorneys General who are focusing on financial statements of the large medical GIK charities:

California:

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Filings to seek depositions in the California AG’s cease and desist orders regarding three charities

December 4, 2018, 9:15 am

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The battle over the AG’s cease and desist order is in the appeal stage. Hearings are in day 6 out of 15 scheduled days.

The appeal is taking place in the state Office of Administrative Hearings (OAH). An Administrative Law Judge (ALJ) is overseeing the appeal.

This is the second in a series of posts describing some of the filings in the public record regarding the enforcement action and the appeals by the charities.

I have one stray follow-up comment to my previous post and then will dive into the filings about obtaining depositions from people living outside the state. Those individuals are not subject to an order to appear in person before the OAH.

Might want to get a fresh cup of coffee. This will be a long read. If you are at all interested in this case, you will find lots of interesting background info here.

Oh, everything I mention here is based on public documents available from the OAH.

Follow-up on Pro Hac Vice – FftP filed with OAH to get one of their attorneys granted Pro Hac Vice permission to practice in the state. This attorney is the lead litigator for the law firm on non-profit issues. Of note is the motion says it is unopposed by the AG. The OAH ruled they do not have authority to grant Pro Hac Vice. I don’t fully understand the reasoning, but I think it is essentially that the state bar or a court grants such status and the OAH is neither the state bar nor a trial court that can grant the permission. So, another motion, running 60 pages in length, was filed with the Superior Court of the county of Los Angeles. That court agreed it had authority and granted the attorney Pro Hac Vice status.

The docket shows a notice filed by MAP regarding Pro Hac Vice. I didn’t read it and assume it was announcing the same results for their counsel. I didn’t see anything on the docket from CMMB.

Protocol for naming individuals mentioned in filings

As I started this series of posts, I pondered how to name the individuals that are mentioned.

Full name? Initials? First name and initial of last name? No name?

Here is my conclusion:

For only the expert witnesses, my posts will list the person’s full name. Those individuals want to be in the public eye and want to be known as an expert. It looks like they usually speak in public on a regular basis. Thus I am comfortable listing their full name.

For everyone else in the case, such as management and staff of the charities along with partners and staff of CPA firms, it is different. They did not sign up to be in the public spotlight, so I’ll skip their last names. My posts will list their first name and first initial of the last name. I’ll also list job title or job description along with their employer when pertinent. Those in the know already know who has been dragged into the case.

Obtaining permission to obtain depositions

The AG wanted to depose a number of people who reside outside California but cannot be compelled to attend a hearing by the OAH. Thus the process the AG had to follow is request the ALJ to approve taking depositions.  The charities can file objections, which they did. (Charities unsuccessfully claimed these constitute discovery, which is not allowed under OAH regulations.). After addressing objections, the ALJ then issues orders allowing certain people to be deposed. The AG then goes to the Superior Court to request an enforceable order for those individuals to be deposed.

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Court filings in California AG’s cease and desist order against three charities

November 30, 2018, 3:03 pm

Image courtesy of Adobe Stock.

I’m reading through the filings for the AG’s cease and desist order against MAP International, Catholic Medical Mission Board, and Food for the Poor. The hearing on the order is underway this week. It will continue for the next two weeks, according to the schedule.

Although the filings are public information, they are not available on the Internet. Instead, they must be obtained directly from the state. It took several phone calls, and getting forwarded to another office, but I did reach the person responsible for responding to media requests. When I finally reached the right person, she was extremely helpful and very prompt.

So, I now have a huge amount of reading to do.

As time is available over the next few days and weeks I will comment on different things visible in the filings.

 

A few preliminary thoughts.

This is a major battle. The charities are responding accordingly.

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