Carter Ledyard’s Tax-Exempt Organizations Litigation & Investigations team works seamlessly with the firm’s Tax-Exempt Organizations practice to help nonprofit organizations respond efficiently and effectively when disputes, investigations, governance crises, or other adversarial matters arise.
We represent public charities, private foundations, religious organizations, trade associations, cultural institutions, and other tax-exempt entities — as well as their directors, officers, members, or affiliated stakeholders — in litigation, pre-litigation disputes, internal investigations, regulatory inquiries, forensic audits, enforcement proceedings, and other sensitive matters.
Our lawyers bring a distinctive blend of tax-exempt organizations corporate expertise and litigation skills to this work. The team includes a former Chief of the Charities Bureau in the New York Attorney General’s office, who spent eleven years directing important enforcement matters and influencing the adoption of significant legislative reforms affecting tax-exempt organizations.
We have represented tax-exempt organizations and their directors and officers in investigations by state, city, and federal agencies, litigations challenging the diversion or misuse of charitable assets, governance and fiduciary disputes; and internal investigations involving directors, officers, executives, and members. Our firsthand understanding of the regulatory environment, combined with decades of private practice experience representing nonprofits and their leadership, enables us to anticipate issues, manage risk, and advocate effectively and efficiently in high stakes matters.
Because disputes involving nonprofits often implicate mission, reputation, donor confidence, governance, and operations, we approach each matter with sensitivity to the organization’s broader objectives as well as its legal position. When an investigation or lawsuit threatens an organization’s standing, operations, or leadership, we move quickly and strategically to protect our clients’ interests — in the boardroom, the courtroom, or before regulators.
Representative Experience and Capabilities
- Regulatory Investigations. Represented a national veterans’ organization in New York Attorney General investigation into charitable solicitation fraud, securing $13.8 million in debt relief from that organization’s outside professional fundraisers. Represented Fort Schuyler Alumni Foundation in Charities Bureau investigation, which resulted in an unprecedented formal acknowledgement by the State that the Foundation’s directors had not engaged in wrongdoing. Represented clients in investigations, inquiries and audits by or at the direction of the NYC Department of Investigation, NYC Human Resources Administration, NYC Department of Social Services, and U.S. Attorneys’ Offices (DOJ).
- Internal Investigations and Restructuring. Conducted internal investigations for a major national charity concerning allegations of impropriety by the Chief Executive Officer and advised the organization’s Executive Committee and Board of Directors on appropriate corrective action. Investigated whistleblower complaints against directors, defended directors in challenges to the propriety of their actions, and assisted boards of directors in establishing more robust internal controls and oversight. Guided boards through removal or suspension of directors or members and represented directors threatened with removal. Investigated whistleblower complaints against directors, defended directors in challenges to the propriety of board action, and represented boards in management separations and internal-control enhancements. Guided organizations through removal or suspension of directors and members and represented directors threatened with removal.
- Ownership of Property. Recovered artwork for an artist-established foundation following an unauthorized sale and gallery bankruptcy. Reis Family 1995 Trust v. The Lachaise Foundation et al., Index No. 155112/2018 (Sup. Ct. N.Y. County Jan. 8, 2020) (Nock, J.). For a foundation established by a major American artist, secured the recovery and destruction of infringing artwork that copied portions of the artist’s paintings. Ongoing representation of a private foundation in its $100 million undue influence and fraud claim against an attorney who drafted a revocable trust diverting an estate away from that foundation to a charitable trust providing the attorney-drafter with six-figure lifetime commissions, obtaining numerous favorable interim decisions.
- Fiduciary Duty and Governance Disputes. Advise boards and individual directors on fiduciary duty claims, restricted asset disputes, contested officer elections and removals, and challenges to board authority. Defeated a claim against nonprofit directors, securing a ruling that their actions in pursuing a claim on behalf of the nonprofit did not trigger an in terrorem clause in a will or expose their personal inheritances to clawback. Obtained the reinstatement of ousted officers of a prominent nonprofit after successfully contesting their removal in a landmark decision affirmed by the New York Appellate Division, First Department. Sealey v. Am. Soc. Of Hypertension, Inc., 10 Misc. 3d 572, 809 N.Y.S.2d 421 (Sup.Ct. 2005), aff’d 26 A.D.3d 254, 810 N.Y.S.2d 48 (2006) On behalf of a nonprofit hospital, achieved a favorable resolution of a physician’s claim to unilateral control over a $20 million charitable bequest. Litigated the removal of a wrongdoer from all governance roles and obtained a temporary restraining order and preliminary injunction protecting organizational assets. Represented the founding member of a nonprofit in contesting governance changes which threatened organization’s charitable mission and secured a favorable settlement to preserve the charitable assets and legacy.
- Regulatory Approvals and Asset Transactions. Represent clients in contentious or contested transactions. Advised the New York Genealogical and Biographical Society in the sale of its headquarters, obtaining approval of its membership, the Charities Bureau, and the New York Supreme Court, and thereafter negotiating a cooperation agreement with the New York Public Library and a related donation of the Society’s genealogical materials for digitization. Represented nonprofit in litigation to secure the purchase of architecturally significant real property on favorable terms in a judicial dissolution of another nonprofit.
- Cy Pres and Court Proceedings. Obtained cy pres relief for The Trustees of Sailors’ Snug Harbor in proceedings to modify the governance structure mandated by an 1801 will and to modernize the Trust’s endowment spending rules. Litigated the cy pres petition in In re Board of Trustees of the Museum of the American Indian, addressing the trustees’ obligation to maintain the museum within New York State, and negotiated the agreement that led to the creation of the National Museum of the American Indian within the Smithsonian Institution.
- IRS Audits and Tax Enforcement. Defend tax-exempt organizations and individuals in IRS examinations involving unrelated business income tax, self-dealing, excess benefit transactions, and challenges to tax-exempt status.
- Employment Disputes. Represented arts nonprofit in litigation of employee’s breach of separation agreement, obtaining judgment for the return of severance payment and for legal fees incurred in defending the lawsuit, defeating employee’s arguments that state whistleblower laws and the fact that defendants were assisting another nonprofit in litigation warranted a public policy exception to the severance agreement’s prohibition on assisting third parties in litigation against the nonprofit. Reversible Destiny Foundation v. Post, Index No. 657477/17 (1st Dep’t, June 27, 2019).
- Defense of Reputation. Assisted international charity in responding to malicious smear campaign, including by successfully obtaining the removal of multiple defamatory news articles.