AG Racine Files Lawsuit to Resolve Presence of Dueling Boards at District Nonprofit Open Technology Fund

OAG Alleges USAGM’s Michael Pack Illegally Replaced OTF’s Board of Directors, Creating Leadership Crisis and Paralyzing Independent Organization

WASHINGTON, D.C. – Attorney General Karl A. Racine today filed a lawsuit to resolve a dispute between two dueling Boards of Directors that has paralyzed the Open Technology Fund (OTF), a District nonprofit. OTF, which supports encryption and anti-censorship tools for people living in repressive societies, is an independent nonprofit corporation organized and created under District law that receives grant funding from the United States Agency for Global Media (USAGM). In a lawsuit filed today in D.C. Superior Court, the Office of the Attorney General (OAG) alleges that the head of USAGM, Michael Pack, illegally sought to remove and replace OTF’s Board of Directors and certain officers. As a result, the original bipartisan Board of Directors and the new Board both claim authority over OTF, paralyzing the decision-making and mission of the organization. Under District law, the Attorney General is responsible for protecting District nonprofit organizations and their assets and can take action when a governance dispute prevents an organization from fulfilling its charitable purpose. With this lawsuit, the Attorney General is asking the court to resolve the dispute, declare the original Board valid, and declare any actions taken on behalf of OTF by Pack or the new Board invalid.

“The Office of the Attorney General filed suit to ensure District nonprofits are able to fulfill their charitable missions,” said AG Racine. “We will not hesitate to use our authority to step in when disputes prevent nonprofits from working effectively on behalf of the public interest.”

OTF is a 501(c)(3) charitable organization incorporated in the District of Columbia. Its mission is to “support open technologies and communities that increase free expression, circumvent censorship, and obstruct repressive surveillance as a way to promote human rights and open societies.” OTF funds the development of secure, open-source tools that allow activists, journalists, and ordinary citizens in repressive societies to circumvent online censorship and increase their digital security. Over two billion people rely on tools supported by the Fund, including Signal and Tor. OTF was formerly a program within a USAGM affiliate but became an independent District nonprofit organization in 2019 and receives grant funding from USAGM.

USAGM is a federal agency that operates various media networks, including the Voice of America, to "inform, engage, and connect people around the world in support of freedom and democracy.” Michael Pack was confirmed as the new CEO of USAGM on June 4, 2020.

Less than two weeks after assuming the position of CEO of USAGM, Pack claimed authority to remove OTF’s Board of Directors, appoint replacement Directors of his choosing, and appoint himself as Chairman. Pack also moved to fire OTF’s President and acting CEO. The original Board of Directors contested Pack’s actions and filed a lawsuit against him in the United States District Court in D.C. Despite the ongoing litigation, Pack attempted to appoint a new acting CEO of OTF and to have the newly constituted board ratify his actions. The original OTF Board passed resolutions rejecting Pack’s firing and replacement of the Board and CEO. The original Board notified the Attorney General of the governance dispute, as required by the District’s Nonprofit Corporations Act. The Act authorizes the Attorney General to ensure nonprofits are acting in the public interest, and to seek a court order to resolve disputes that interfere with an organization’s ability to function.

In this case, two groups are claiming control of the Board of OTF. In its lawsuit, OAG argues:

  • The USAGM CEO does not have authority over OTF’s Board or officers: OTF is an independent D.C. nonprofit corporation, which governs itself under local law and under its own bylaws. While USAGM provides grant funding for OTF’s work, it does not have authority over OTF’s governance. OAG asserts that OTF’s bylaws are clear and that only the organization’s Board of Directors—not USAGM, its leadership, or any other body—has the authority to appoint or remove OTF directors.
     
  • Dueling Boards have paralyzed OTF: Two Boards are currently claiming authority over OTF, and without clarity as to which Board is properly in place, the organization is effectively leaderless. It is also unable to authorize decisions necessary for carrying out its functions, including decisions to authorize funding partner organizations have already been promised, and decisions related to potential new partnership. The leadership crisis has also left employees of the organization at risk of losing their jobs.
     
  • The original Board of Directors is the valid Board: OAG asserts that because Pack did not have authority under either District law or OTF’s bylaws to dismiss OTF’s Board of Directors, the Court should recognize OTF’s original Board as valid.
     
  • Any actions taken on behalf of OTF by Michael Pack or his replacement Board should be voided: Michael Pack did not have authority as USAGM CEO to dismiss or appoint Directors on behalf of OTF. As a result, any actions Pack or the replacement Board have taken on behalf of OTF should be invalidated.

A copy of the complaint is available at: https://oag.dc.gov/sites/default/files/2020-07/Open-Technology-Fund-Complaint.pdf

OAG is asking the court to issue an order declaring that the removal of OTF’s Board by USAGM CEO Michael Pack was unauthorized, that the original Board is the valid operating Board, and that any actions taken on behalf of OTF by Michael Pack or his replacement Board of Directors are invalid.

OAG’s Nonprofit Enforcement Work
Under AG Racine’s leadership, OAG has invested resources to expand its nonprofit enforcement capacity. Already, OAG has litigated and resolved actions against several District charter schools, and the president of a nonprofit that owned an affordable housing building, for mismanagement of nonprofit funds. The office has also sued the 58th Presidential Inaugural Committee for misusing funds for private enrichment, and took action against Howard Theatre Restoration, Inc. for failing to properly obtain financial audits. Several additional investigations remain open.

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

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