AG Racine Announces Victories in Three Nonprofit Enforcement Lawsuits, Including Against DC Nonprofit Public Media Lab, That Will Redirect Over $400K to Local Organizations

In Separate Resolution, Court Rules that the Officer and Director of Two Nonprofits Breached His Obligations as a Trustee

WASHINGTON, D.C. – Attorney General Karl A. Racine today announced victories in three lawsuits filed by the Office of the Attorney General (OAG) to stop misuse of nonprofit funds, including the resolution of lawsuits against Public Media Lab (PML) and Pavilion USA 2020, Inc., which will return over $400,000 in misused funds to District nonprofits. In a third case, a judge ruled that a fraternity, Delta Phi Epsilon, its associated foundation, and its long-standing director illegally diverted nonprofit funds for personal benefit.  

The funds from the first two lawsuits will be redirected to five local nonprofits that will use the resources to support and empower immigrants and DC youth. The nonprofits receiving the funds are Ayuda, Black Swan Academy, Boys & Girls Clubs of Greater Washington, College Bound, Inc., and Liberty’s Promise.

“Nonprofits receive substantial tax benefits because these organizations, and the people who manage them, are legally required to operate in a manner that is consistent with the organization’s public mission (the public good), not for private benefit. Bad actors, such as the Public Media Lab, its Executive Michael Pack, and its related companies illegally benefit from the preferred tax treatment granted to them, but use nonprofit funds for themselves or to improperly benefit a related entity. My colleagues at the Office of Attorney General and I will investigate, prosecute, and shut down scofflaws like Public Media Lab for violating the law and improperly lining their own pockets at the expense of D.C. taxpayers,” said AG Racine. “The silver lining is that we are redirecting the law breaker’s assets to five local nonprofits that will put the money to good use supporting District residents by educating, uplifting, and benefiting the community.”

"At College Bound, our goal is to make sure local students are accepted into college and we help give them the support and resources they need to get there—and succeed once they’re enrolled,” said Kenneth Ward, Executive Director of College Bound, Inc. “We’re honored to receive these funds and we plan to use them to sustain and relaunch our Academic Mentoring Program, which will serve over 200 public school students in the DC area. We’ll also use the funds to support our recently launched mental health initiatives. Thank you, AG Racine, for redirecting these funds to grassroots nonprofits doing good work in our community. On behalf of our students, we are incredibly grateful.”  

“We are extremely honored to receive support from Attorney General Racine,” said Gabrielle Webster, President & CEO, Boys & Girls Clubs of Greater Washington. “As a result of these redirected funds, our organization will continue to support more young people, providing safe spaces, positive mentors and life-enhancing experiences to help kids and teens thrive.” 

Under the District’s Nonprofit Corporation Act (NCA), the Attorney General has the authority to police nonprofit activities and ensure that nonprofit entities operating in D.C. spend their funds for the specific public purpose provided in their articles of incorporation. A nonprofit’s funds are a form of a public trust and cannot be spent to benefit a private individual or company—especially an individual who has influence over the organization.

In September 2022, OAG introduced the Nonprofit Enforcement Clarification Amendment Act of 2022. This legislation would give the Attorney General the authority to allow OAG to levy penalties of up to $10,000 per violation against nonprofit leaders or others who siphon charitable funds for impermissible purposes, clarify that the District’s nonprofit statutes do not limit OAG’s common law authority over domestic and foreign nonprofits, make clear that OAG may act to remedy both past and ongoing violations of nonprofit law, and require that OAG be alerted to any actions brought against nonprofit  corporations so that OAG can determine whether to intervene.

Public Media Lab and Manifold Productions, Inc.:
Over a 12-year period, Public Media Lab (PML), a District nonprofit corporation, funneled nearly all its funds to a for-profit film production company, Manifold Productions Inc. The nonprofit enabled Michael Pack, the owner of Manifold and Chief Executive Officer for PML, to line his for-profit company’s coffers with a stream of tax-exempt dollars without subjecting Manifold to a competitive bidding process, public scrutiny, or accounting requirements regarding its spending. In 2021, OAG sued PML and Manifold for using millions of dollars in nonprofit funds to enrich Mr. Pack.

Under the terms of the settlement, PML, Manifold, and its founders will be required to:  

  • Dissolve organization: PML is forced to cease operations and fully dissolve.
     
  • Provide notice if he serves on any DC nonprofit in the next ten years: Before Mr. Pack assumes office, the prospective DC nonprofit will send a notice to the Attorney General in writing. The notice will include the prospective DC nonprofit’s articles of incorporation and bylaws; explain Mr. Pack’s position; state whether and to what extent Mr. Pack or any entity under his control will provide any goods or services to the corporation; and state any compensation he might receive as an officer or director.

A copy of the settlement agreement is available here.

Pavilion USA 2020, Inc.:
Pavilion was a District nonprofit corporation formed in April 2018 as part of a proposal to partner with the U.S. Department of State to operate a U.S. pavilion at the 2020 World’s Fair Exposition in Dubai. In 2021, OAG sued Pavilion and two of its founding directors, alleging that these founders improperly paid themselves more than $360,000 by working together to advance their private financial interests at the expense of the organization’s goals. 

Under the terms of the settlement, Pavilion and the two founding directors are required to: 

  • No longer serve as an officer or director of any D.C. nonprofit: For a period of five years unless they obtain permission from OAG.

A copy of the settlement agreement is available here.

Both Pavilion and Public Media Lab have been dissolved and will no longer exist.

Delta Phi Epsilon Foundation:
Today, OAG announced that the Superior Court granted the District partial summary judgment in its litigation against Delta Phi Epsilon, Inc. (Fraternity); Delta Phi Epsilon Foundation (Foundation); and Terrence Boyle. The Court ruled that Mr. Boyle, a long-standing officer and director of the organizations, improperly obtained a private benefit from the Foundation as a result of a 1990 joint purchase of a Georgetown residential property that Mr. Boyle has used continuously (and solely) as his private home. To facilitate Boyle’s purchase of his home, the Foundation contributed $150,000 toward the down payment for the home (Boyle contributed only $50,000) and lent its name and creditworthiness to an application for a mortgage to finance a portion of the purchase price. The Foundation never used the property for any nonprofit purpose.

The Court also ruled that the Fraternity improperly donated its primary nonprofit asset—a separate piece of Georgetown real estate known as the Alpha House—to the Foundation without first obtaining the Fraternity members’ approval as required by the Nonprofit Corporation Act. The Court further held that Mr. Boyle, who played a central role in both real estate transactions, breached his fiduciary obligations to the Foundation as a result of the Georgetown home purchase, and also breached his fiduciary obligations to the Fraternity as a result of the Alpha House transaction. 

The Court has not yet ruled on the potential remedies for these violations, and the District’s remaining claims against the Fraternity and Foundation, including failures in the entities’ governance in violation of the NCA, will be adjudicated at trial. 

A copy of the order is available here.  

This matter was handled by Assistant Attorney General Tabitha Bartholomew, with the assistance of Senior Trial Counsel Adam Teitelbaum and Investigators Renardra Brown and Willie Haynes, under the supervision Assistant Deputy Attorney General Will Stephens of the Public Integrity Section of the Public Advocacy Division of OAG. 

OAG’s Nonprofit Enforcement Work
Under AG Racine, OAG has invested resources to expand its capacity to enforce District laws governing nonprofits. OAG has litigated and resolved actions against several charter schools and the president of a nonprofit that owned an affordable housing building for mismanagement of nonprofit funds. In May 2022, AG Racine clawed back $750,000 in misspent nonprofit funds from the Trump Organization and Presidential Inaugural Committee. The office has also sued several organizations for misuse of charitable funds, including a local fraternity, and the NRA Foundation. Additionally, OAG has obtained an order that District nonprofit Howard Theatre Restoration, Inc. dissolve for failing to function in support of the District’s historic Howard Theatre, investigated the closure of Providence Hospital to ensure nonprofit assets were not improperly removed from the District, and intervened to resolve a board dispute at an internet freedom organization. 

If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact OAG at (202) 727-3400.