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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
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Experience:  30 years of corporate, litigation and international law
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Monday July 6th, 2009 Dear Lawyers, I have submitted this

Resolved Question:

Monday July 6th, 2009
Dear Lawyers,
I have submitted this question on 6/29/09 to Mr. Mechanic in the context of 501 (c) (3) non profit law. Mr. Mechanic provided an excellent answer as to how this situation applies to IRS non-profit tax law. Can you please offer the answer from a California Fraud Law perspective. Briefly here's the situation.
A board member on our non-profit group has been asking for donations (to our group) of specific items of used equipment from our community. The donations have been made with the understanding that 100% of the donation is for our group. After receiving the donated equipment the board member then "buys" the equipment from the group at 10 to 25% of its market value. He then sells the equipement and "pockets" the personal profit.
This simply can't be legal. What are the California laws that preclude this profit making scheme?
THANK YOU in advance for your time and answer.
BEST REGARDS,
                           Anton Remenih
Submitted: 5 years ago.
Category: Business Law
Expert:  Richard - Bizlaw replied 5 years ago.
What you describe involves both criminal and civil fraud. In one aspect what you have is a species of theft. This is the taking of the true value of the property for benefit of the individual. Under CA Penal code section 484 theft includes a fraud to deprice a person of money or personal property. So you have a crime.

You also have a fraud committed on the donors who gave money on the representation that the donation would be used exclusively for the benefit of the organization and its clients, not the personal benefit of a board member. To the extent this board member solicited donations with the intent to carry out this scheme the persons who made the donation have been defrauded.

The organization also has a civil claim for conversion and breach of fiduciary duty against the board member. Conversion is the taking of property owned by another. The taking of the property at the below market price constitutes the converssion. The actions of the board member which not only are illegal (criminal) and unlawful (civil conversion)but also jeopardize the status of the organization as a non profit by engaging in these acts that are for profit, albeit his own, constute a breach of fiduciary duty.

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This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8751
Experience: 30 years of corporate, litigation and international law
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