Nonprofits Sued for Return of $2.1 Million in Donations

Blog
April 14, 2016

More than two dozen local, state and national nonprofit agencies are being sued for the return of $2.1 million in donations in a Waco, Texas based lawsuit. A trustee for Life Partners Holdings claims the donations were made by the CEO from funds he fraudulently received from the company before it filed for bankruptcy last year. The alleged scheme appears to have been going on for seven years according to the claim.

The suit claims that donations from the CEO were fraudulent because the funds were obtained through an excessive fee structure that bilked investors out of returns.

Life Partners Holdings was recently investigated by the U.S. Securities and Exchange Commission for their practices involving the sale of investment contracts. According to the suit, Life Partners hid the amount it charged in fees and that only about 20% of the proceeds from investors were actually used to acquire policies while the remaining 80% was divided between future premiums and commissions to licensees and Life Partners. The Texas financial firm is accused of defrauding investors out of $1.3 billion according to the bankruptcy trustee representing creditors.

The attorney that filed the suit notes that no one believes the defendants were involved in the fraud, however, the CEO stands accused of evading taxes and steering millions of dollars to his alleged mistress, the founder of one of the local animal welfare groups in the list of defendants.  A lawyer for the CEO said the suits filed by the bankruptcy trustee have “little, if any, validity” according to the Chronicle of Philanthropy. The suit is seeking to recover as much of the funds as possible.

Several of the recipients are animal welfare organizations but funds were also donated to renovate a building on a college campus in East Waco. The issue, of course, is that the majority of the funds received have been spent and many of the organizations are not in a position to be able to pay back the donation.

Read more about it here: http://www.wacotrib.com/news/business/dozens-of-waco-nonprofits-sued-in-life-partners-bankruptcy-action/article_5267c4e4-8144-5955-82c4-d688e6acdbf7.html

And here: https://philanthropy.com/article/Dog-Rescue-Charity-Linked-to/235704