WASHINGTON, D.C. – Attorney General Karl A. Racine today filed suit against the Public Media Lab (PML), and Manifold Productions, Inc. (Manifold), for using millions of dollars in nonprofit funds to enrich Michael Pack, the founder of Manifold and Chief Executive Officer for PML. In its lawsuit, the Office of the Attorney General (OAG) alleges that for over 12 years, PML, a District nonprofit corporation, funneled nearly all its funds to Manifold, a for-profit film production company. The nonprofit enabled Pack to line his 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. OAG’s lawsuit seeks to recover the funds improperly granted to Manifold, to direct those funds to suitable nonprofit public-serving purposes, and to dissolve PML. In October, OAG won a lawsuit to resolve a dispute over control of the Open Technology Fund, an internet freedom nonprofit connected to Michael Pack.
“District law requires nonprofits to use their tax-exempt funds for their stated public purpose and not to benefit a private individual or company,” said AG Racine. “Our investigation revealed that, over a 12-year period, Michael Pack personally oversaw Public Media Lab as it unlawfully directed millions of dollars in charitable funds to his for-profit company. In effect, the Public Media Lab functioned to enrich Mr. Pack. We have filed suit to recover these funds and ensure they are properly spent.”
PML is a nonprofit, tax-exempt organization incorporated in the District of Columbia. Michael Pack serves as PML’s President, Chief Executive Officer, and Director. Manifold is a Maryland-based for-profit television and film production company. Michael Pack founded Manifold in 1977 and controlled the company until at least June 2020, when his wife assumed ownership. PML and Manifold share a business address.
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 laid out 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. Nonprofits are further required to avoid wasteful spending, use funds in a transparent manner, and properly oversee any grants.
An OAG investigation of PML and Manifold’s relationship revealed that the nonprofit effectively functioned to route money to Michael Pack’s for-profit company. Since PML’s inception in 2007, all but one grant issued by the nonprofit has gone to Manifold. Between 2008 and 2019, Manifold received $4,111,418 in funding from PML. PML also obscured to the Internal Revenue Service (IRS) that the nonprofit existed for little reason beyond funneling money to Pack through Manifold. Indeed, Pack was the only reported active member on the nonprofit’s Board of Directors. He was also the only officer and the nonprofit did not identify a designated officer to handle management or financial matters.
In its complaint, OAG alleges that PML and Manifold violated the District’s Nonprofit Corporations Act by:
- Abusing nonprofit funds to benefit Manifold and enrich Michael Pack: Since its inception, PML, a nonprofit, has served essentially no purpose other than to raise and illegally pass along tax-exempt funds to benefit Manifold, a for-profit entity. From 2008 to 2019, 60% of Manifold’s revenues derived from PML grants—and in 2019 alone, Manifold received over 99% of its income from PML. PML drained 94.8% of its own revenues over this period by delivering these grants to the company.
- Obscuring Michael Pack’s ownership of Manifold: Between 2008 and 2016, PML’s Board consistently failed to disclose Michael Pack’s connections to Manifold in its reporting to the IRS. This enabled the nonprofit to hide the fact that it was engaging in transactions with an organization owned by its own President, CEO, and Director. The NCA also requires nonprofit Boards of Directors to authorize any business transactions between the nonprofit and an entity connected to a current or former key figure within the organization. There is no evidence that PML’s board took any such action.
- Providing no oversight of Manifold’s use of PML’s nonprofit funds: PML did not maintain any documentation of Manifold’s use of its nonprofit funds, nor did it require Manifold to keep its own accounting.
- Shirking corporate governance requirements: District nonprofits are required to have a Board of Directors, and to keep permanent records of member and board of director meetings, along with any actions taken without such meetings. Four of the five directors on PML’s Board were essentially inactive. There is no indication that the Board has held any official meetings since 2008, and no evidence that the Board has kept record of any actions taken. Nonprofits in the District must also have a minimum of two separate officers—one charged with management, and one responsible for financial affairs. However, according to IRS filings, Michael Pack served as the only officer within the organization between 2008-2018.
A copy of the complaint is available at: https://oag.dc.gov/sites/default/files/2021-01/Public-Media-Lab-Complaint.pdf
OAG is asking the court to impose a constructive trust over the amount improperly paid to Manifold and order an accounting of the company’s use of these funds. OAG further requests that the court move to dissolve PML.
OAG’s Nonprofit Enforcement Work
Under AG Racine’s leadership, OAG has invested resources to expand its nonprofit enforcement capacity. Beyond OAG’s other nonprofit enforcement action involving Michael Pack, OAG has also 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 sued the 58th Presidential Inaugural Committee and the NRA Foundation for misusing charitable funds. 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, and investigated the closure of Providence Hospital to ensure nonprofit assets were not improperly removed from the District.
If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact OAG at (202) 727-3400.