Results tagged “law” from Uncivil Society

Sit through one of my social enterprise classes & you'll hear me chat about co-ops, which in the U.S. seem to have been erased from the collective memory of folks who claim that blending social benefit and business is a revolutionary innovation. As I'm wont to say, folks outside the U.S. have made the connection--indeed, for some in Europe the term "social enterprise" is synonymous with co-ops--and this week The Guardian has a nifty article on the historical significance of the co-op/social enterprise link in light of the upcoming British elections:

Regardless of who wins on Thursday, it seems certain that Britain faces a revolutionary change in the way local services are run and delivered. The Conservative party has made mutualisation a central pillar of its election strategy, promising to "unleash a new culture of public-sector enterprise". Its manifesto, entitled An invitation to join the government of Britain, contains proposals for millions of public-sector workers to set up co-operatives and sell their services back to the state. Employee-owned co-operatives would be able to decide on management structures, innovate to cut costs and share out any financial surpluses among staff.

Labour is similarly enthusiastic about co-operatives. Its "mutual manifesto" puts the emphasis on people running many of their own services, from health and social care to council estates and Sure Start centres. The Liberal Democrats would go even further, introducing a new mutuals, co-operatives and social enterprises bill to bring the law up to date and give responsibility for mutuals to a specific minister.

But why the sudden enthusiasm for a mutual model – and will the plans work?

I just read the following in a recent appeals court opinion on the scope of the interstate commerce clause regarding civil commitment to a federal prison:

In 1937, Felix Frankfurter wrote: "If the Thames is 'liquid history,' the Constitution of the United States is most significantly not a document but a stream of history. And the Supreme Court has directed the stream." Felix Frankfurter, The Commerce Clause 2 (1937). With regard to the Commerce Clause, that stream has not been straight. Rather, it has been bending.

Above: a Latin quote on a converted prison in Amsterdam admonishes that "a wise person does not piss into the wind."

Last week on JustMeans I noted that the legal situation for nonprofits in Russia is more complex than the conventional wisdom would have us believe.

There was, of course, a method to my rhetorical madness. Here's an update on one important aspect of the Russian nonprofit world: reforms aimed at encouraging the formation of independent and financially sustainable nongovernmental NPOs.

A few months ago the Russian government formed a working group with a stated goal of facilitating the formation of nongovernmental nonprofit associations, which became a particularly pressing issue after restrictive measures enacted under Vladimir Putin a few years ago. Anyone familiar with Soviet rhetoric knows that sometimes words can have two meanings, and a leading governmental official promised that we'll soon see "many truly innovative proposals" for liberalizing current law, there was ample reason to be skeptical.

However, the first proposed set of amendments to the Russian law "On Nonprofit Organizations" finally went live a few hours ago, and it actually does lighten the regulatory burden in several significant ways.

A major focus of the proposed reforms is to rein in what some see as the unbridled authority of the Ministry of Justice--the state body that incorporates nonprofit organizations--to obstruct the formation and activity of nonprofit NGOs. The bill seeks to accomplish this in several ways, such as

• limiting the organizational documents the Ministry has the right to request,
• limiting the number of audits to once in a three years (as opposed to annually),
• limiting the grounds for the denial of registration,
• adding the option of suspending registration (as opposed to merely providing for denial), and
• requiring the government to explain reasons for refusal within a specific period of time.

The bill also has provides for the publication--in the mass media or online--of an annual report, with a simplified statement of ongoing activity for smaller organizations. This is also in keeping with the bill's announced purpose of "lightening but not eliminating accountability for NPOs."

Although the proposed reforms apply for the most part to Russian nonprofits--a subsequent bill is reported to be in the works in regard to foreign groups--the bill does include a welcome amendment in regard to branch offices of foreign NGOs: it would eliminate the current prohibition on foreign affiliates or representative offices deemed to be a "threat . . . to national uniqueness and identity [or] to [Russia's] cultural heritage."

Moreover, in a separate and equally significant legal development, a Russian appeals court recently held that grants made by foreign organizations to Russian nonprofits are exempt from the profits tax. This precedent could, if not overturned, put an end to questions as to whether tax exemption for foreign grants is limited to grants received from just a few charities specified on a list issued by the Russian government.

As Human Rights Watch indicated when the scope of the proposed liberalizations was initially announced, additional changes would be useful, but the proposed bill, if enacted, appears to be a welcome "first step for reform."

My Esteemed Colleague Susan Scafidi writes on Supreme Court fashion for The Huffington Post.

Over the weekend I posted my thoughts on the Wall St. Journal's lengthy article on Donald Duck in Germany. What struck me most: the stylistic contrast in relation to cultural identity:

The article ascribes the character’s popularity to the strip’s longtime translator, Erika Fuchs, an art history Ph.D. who rewrote Carl Barks’ dialogue to include references to German literature, myth and politics. . . .

Post-war Germany was in the process of restoring its identity after Nazi ideology raised serious questions as to the legitimacy of the country’s cultural heritage. A funny book provided a means for Fuchs to highlight the value of German traditions free from worrisome evocations of the Nazi’s use of German culture to establish ethnic supremacy.

Barks wrote in a radically different context. America’s literary heritage was not morally suspect; to have used Donald Duck to legitimize Melville or Dickinson would have seemed pretentious, if not bizarre. Barks’ visual and verbal rhetoric is instead far more pragmatic–Donald and his retinue are on a perpetual quest to succeed in a world full of baffling new tools and old ways.

As it happens, I'm in the middle of one of my periodic re-readings of Barks, so this stuff is fresh on my mind. Note particularly this observation

America’s literary heritage was not morally suspect; to have used Donald Duck to legitimize Melville or Dickinson would have seemed pretentious, if not bizarre. Barks’ visual and verbal rhetoric is instead far more pragmatic . . .

and compare it to the following scene from Barks' Snow Fun, a story in which Donald and his nephews raise money to buy one of the era's emblems of middle-class success, manufactured skis:

One of my pictures in the Barks post illustrates another dimension of Barks' examination of cultural identity. It's from Donald Duck and the Mummy's Ring, a brilliant (and funny) exploration of the question of whether the West should repatriate cultural objects to their country of origin. The kicker for me in the story is that it's more complex than a reductionistic tale of good natives and bad Americans--the Egyptians themselves are a blend of traditional believers and secular Westernizers, epitomized by a strategic nationalist educated at "Yarvard" in the States.

This may seem a bit goofy, but that's exactly why it works. As I concluded in my previous post,

What both the German and American versions of Barks’ work illustrate is the strategic value of junk media in remaking society. That so many people continue to view comics as little more than trash is not necessarily a bad thing–it frees the medium for creative expression outside the normative constraints of so-called high art, thereby retaining comics’ power as a cultural trojan horse.

A reminder of what started it all:

Law enforcement in Italy is cracking down on an industry reputed to be controlled by the mafia:

Windmills.

Turns out that La Cosa Nostra sees the eco-biz as a growth industry--tax breaks and government funding make it pretty much a sure-fire investment:

"Operation Wind" revealed Mafia promises to local officials in Mazara del Vallo of money and votes in exchange for help in approving wind farm projects.

The Mafia suspects were alleged to be linked to Matteo Messina "Diabolik" Denaro, a fugitive clan boss on ltaly's most wanted list.

Prosecutors suspect the hand of the Mafia in fixing permits and building wind farms that are then sold on to Italian and eventually foreign companies.

In an effort to assert its control over the sector, the Mafia is suspected of destroying two wind towers that were in storage in the port of Trapani after their delivery by ship from northern Europe, local officials told the FT.

"It is a refined system of connections to business and politicians. A handful of people control the wind sector. Many companies exist but it is the same people behind them," said Mr Scarpinato, whose investigations have focused on the evolution of the Mafia into a modern business organisation.

Which got me thinking. When I got into the social enterprise scene after years of bridging the worlds of nonprofit and for-profit law, my impression was that social enterprise offered a holistic vision with the potential to break down artificial walls between so-called sectors. However, in far too many ways social enterprise has become just another way for small groups of self-defined insiders to seize control of the market in virtue. This particularly hits home everytime I hear someone tell me that such-and-such group, person or area of activity is not really social entrepreneurship, as if excluding people from the movement were its real value added.

It's easy to condemn the criminal mafia, but often the more dangerous practice is what's legal.

I was looking through legal materials last night and noticed something that had been there all along but had not previously caught my attention:

DC Comics, Inc. does not exist. In fact, it died the same year as Superman.

Really. As noted in court filings in the Superman case, in the early 1990s DC Comics, Inc. was dissolved and converted into a general partnership co-owned by two Time Warner subsidiaries (see this court order, p.4, #20) . The Superman court documents state that this happened back in 1993, but contemporaneous SEC filings state that the restructuring actually took place back in 1992:

TWE and WBI each owns a 50% interest in DC Comics, a New York general partnership, formed effective June 30, 1992 to continue the business previously conducted by DC Comics Inc., a New York corporation.

A search of the New York Corporations registry confirms that the name "DC Comics, Inc." is no longer active.

I'm a bit time constricted right now, so I'll have to leave out much of the legal analysis I'd provide were I writing this on Blog@, to which I plan to return soon once I finish my current writing project. For all I know, this may have been a major topic of discussion back in 1992, a period of time when I was temporarily out of the loop in all things comics--when I have a bit more time, I'll do a bit more digging.

Meanwhile, a few quick notes:

*DC Comics still exists, just as a general partnership. That partnership is the entity that co-owns Superman and assigned the rights within Time Warner.

*Unlike a corporation, a partnership does not pay corporate tax. It is what is called in the biz a "flow-thru" entity. This tax status may have been at least partially a reason for the switch, though the enhanced organizational integration of DC's intellectual properties with Warner entertainment entities also may have been a factor.

*One trait a general partnership does not have is limited liability. What particularly struck me in regard to this is that Time Warner did not restructure EC Publications, Inc., which publishes Mad Magazine and could be more of a lightning rod for lawsuits.

*For reasons I *really* won't go into now re the history of corporate taxation, if the transaction had been being structured today I wonder if Time Warner would have set up DC Comics as a Limited Liability Company instead of a general partnership.

*Again, this is all off-the-cuff reflection, lacking the more intensive research & review I'd do for a post elsewhere. If anyone knows more re this, feel free to drop me a line.

Really. It may seem funny, but it's a ruling that, if emulated elsewhere, could be no laughing matter for churches & nonprofits with charismatic leaders.

Fans anxious to know whether Watchmen will be released in March as scheduled will have to wait a few weeks. The New York Times is reporting that the judge in the Watchmen case has decided to refrain from ruling on the injunction sought by Fox until after a hearing set for January 20, 2009.

For anyone who wants more details on the judge's 12/24 ruling, I've uploaded a set of documents that includes not just the Christmas Eve order, but both parties' motions for summary judgment as well as fascinating material filed by Fox just yesterday.

These three filings in particular provide detailed allegations as to how Warner Brothers got into this mess. In a nutshell, Fox claims that it has evidence that Warner Brothers initially relied on an inaccurate chain of title provided by Paramount. Once Warner Brothers was aware of Fox's documented claims, it nonetheless decided to proceed in a deliberate "business calculation" that it would be more profitable to deal with a court case than clear the rights before making Watchmen.

Fox's claim that Warner Bros. has an established "studio practice" of bad faith in clearing title is central to its argument that the court should enjoin Warner Bros. from releasing the film.

Besides these documents, I also recommend checking out Nikki Finke's Deadline Hollywood Daily and Rodney Perkins' Film Esq., which provide detailed analysis of the latest developments.

I'm in the midst of preparing the final exam + review for my nonprofit law class, but I couldn't help but get caught up in the Blagojevich criminal complaint. Nonprofit and tax-exempt organizations are central to the indictment, which alleges, based largely on taped conversations, that the Illinois governor sought to enrich himself and punish his critics through deals involving a campaign fund, state finance authority, a hospital expansion program, a union, a charity and a 501(c)(4) social welfare organization.

Really, I could have used the complaint as a springboard for half my course.

As someone who practiced law in Chicago, I find several aspects of the complaint sadly familiar--let's just say Gov. Blagojevich is not the first Illinois public official to cultivate a quid-pro-quo culture for getting permission for nonprofit projects. (See the complaint pages 21-23 and 36 for some killer stuff on this score.)

Also interesting from the perspective of charity history is Blagojevich's attempt to trade his Senate appointment replacing Obama for a well-paid position as head of what Blagojevich calls a "private foundation," but in context meant a nongovernmental charity. (see pp. 57ff). Historians of philanthropy will no doubt recall that the alleged use of charities as lucrative way-stations for politicians between posts was a factor in the enactment of the extensive tax reforms in 1969 that gave us much of the present law regarding so-called private foundations and public charities.

DC may be looking to preserve the brutalist architecture of a prominent religious congregation, but here in NYC we're knocking 'em down like bowling pins. Even if charitable landmarking issues aren't your scene, check out the NY Times article just for the cool slidey-picture-widget-thing enabling you to compare the brutalist Jewish Child Care Association with its replacement, a new but traditional LDS meeting house.

That pretty much says it all, doesn't it? The above video promotes a seminar on the new Form 990, and as the host, Greg Bader, dryly observes it is about as exciting as the above pull quote indicates. Still, it's free--unlike a lot of other web video on the 990--and it explains why the IRS decided to expand the form, about which you can find a handy detailed breakdown here.

If it's no-holds-barred fun you're after, watch Greg Bader's Holiday Party, in which Mr. B provides a rather handy & detailed guide to the legal and management issues throwing a nonprofit shindig for your staff. Click through the video below for Part II. Pretty much the only issue not covered-- the intellectual property implications of indiscrete use of the photocopy machine!

The above ad, in which a bunch of supporters say "Thank you, Sarah Palin!", has been making the political rounds.

Naturally, my first thought on seeing it went to tax law. Y'see, a political action committee is exempt from taxation to the extent that receives contributions and makes expenditures for exempt functions. An exempt function, sayeth Section 527(e)(2) of the Internal Revenue Code, means

the function of influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed.

All of which is to say, this ad isn't about thanking Sarah Palin at all. It's looking forward, not backward. You've just seen the first candidate campaign ad for the 2012 presidential election.

Today's Wall Street Journal casts a critical eye at an issue faced by several nonprofits recently: attempts to landmark a structure they want to replace.

In the WSJ story about the landmarking of the above church, described as an icon of Brutalism, this identity conflict stood out:

J. Darrow Kirkpatrick, the congregation's first lay reader, acknowledges that "what we have in this building is inwardness, brutalism, roughness," but he sees this as inimical to Christian Science. "Ours is not an inward-looking, secretive religion," he says. "This building does not represent our theology or our beliefs." As church member and George Washington University historian David Alan Grier says, "The building's bunker look suggests a congregation not trying to reach the outside."

Sure, it's not the most popular photo on Flickr, but it's interesting to me. For more on the Social Finance Forum in Toronto, click through or check out the conference site.

And for more Canadian goodness, What is the (Next) Message offers informative write-ups from the recent SustainabilityCamp.

The scene above: Marianne Lydon, Patient Coordinator, at the opening of the Brain Tumor Foundation's new mobile MRI.

UPDATE: My brain scans from the mobile MRI.

Marianne, Jason Dolger of Alliance Imaging and the Foundation's Dmitry Shimelfarb were nice enough to include me in the press event this morning outside City Hall. They offered a number of interesting details about the Foundation and this new project, which provides free MRIs at various places throughout New York City.

A couple things particularly stand out. Providing the service costs about 1.5 million dollars a year, and while there are some major donors most of the amount is covered by small individual donors. With regard to legal issues, it turns out that providing MRI services is a relative piece of cake. What's really difficult: getting permits to park the truck!

If you're in NYC and are eager to get your free scan, you might want to register now--based on response to the word-of-mouth so far, folks were predicting that a flood of calls will follow an upcoming feature on The Today Show.

Facing pressure from state attorneys general, Craigslist has announced that it will no longer allow escorts to place ads for free. The company has responded to criticism that it would be profiting from sex by announcing that all the proceeds will go to charity.

Because as every professional do-gooder knows, giving the profits to charity makes everything OK.

I'd say more to say about this, but I have to go check out some property for my new social enterprise brothel!

UPDATE: Melissa Gira raises a key point about the ethics of charities accepting the money from these ads.  Government crackdowns on sex work tend to have serious negative consequences for the health and safety of workers forced underground; enforcement efforts also tend to be discriminatory. 

Should good causes benefit from harmful acts?  The question is important, yet far less discussed than it should be, especially in social enterprise circles.  Though occasionally it does bubble up, as in the EPA's recent decision to withdraw a proposal to allow cause marketing on pesticides.  

I guess the issue is a lot more clear cut when we're dealing with insects and animals, as opposed to women who have sex with innocent men.

The current financial crisis understandably has some do-gooders concerned. Organizations that relied on hefty returns from cutting-edge investments can no longer rely on Wall Street to fund existing programs. News reporters and nonprofit leaders are bleeding barrels of digital ink assessing the potential impact on donations, and charities that relied on debt financing are likely to face some difficult times.

These are no doubt important issues, but the effects of the crisis do not stop with money. It also shapes how people think. Capital markets morph from safe bets to slot machines. Investment bankers become villains. Entrepreneurship seems too risky for hard times, while government grants replace earned income as the symbol of sustainability.

Whether these responses are wise is open to debate, but the unavoidable fact is that they exist. People think about business one way during a bubble and another after it bursts--a response with deep roots in the way we're coded to see success and danger.

While this response may have a measurable impact on cash flow, it has even greater implications for how people perceive social enterprise. The movement has yet to grasp the extent to which it is as much a product of the bubble as subprime loans and credit-default swaps--it's not just a coincidence that do-gooders started talking business when business was good. At the peak of the bubble this gave the movement a rhetorical advantage, but as the economy tanks, this same language can make the social entrepreneur seem untrustworthy, defined by profit, self-interest and the very business practices that created the problems charity now has to solve.

For social enterprise to be more than a passing fad, we must re-think what it means and why it matters. Is Social Enterprise Sustainable? provides my own answers to these questions. I've put it online in both the print version and a director's cut series of blog posts with illustrative pictures and video. It's the first in a series of related projects, so if you read even just a part of it please feel free to share your own thoughts!

Today's WWD has a killer article on the liquidation of Mervyns', a budget department store that served a number of communities. The most revealing part of the story comes in the description of the transactions that led to the bankruptcy. The key paragraph:

A consortium that included Sun Capital Partners Inc., Cerberus Capital Management L.P. and Lubert-Adler/Klaff Partners LP acquired Mervyns from Target for $1.65 billion in September 2004. Afterward, the owners spun off the real estate portfolio into a series of separate companies and Mervyns began paying rent.

If you've ever worked with a receivables rich but cash poor charity that has substantial real estate holdings, you've no doubt made the connection. Over the past couple decades, nonprofits have sought cash infusions through various sale-and-leaseback transactions. In fact, they became so common that you can actually buy fill-in-the-blank deal forms online. Such deals seemed like a good idea when times were flush, but as the Mervyns' collapse illustrates, they can have disastrous consequences for an organization's long-term viability.

There's also a broader lesson here for social enterprise. Just because a transaction is from the business world and seems innovative in a nonprofit context does not necessarily mean it is wise. Social enterprise has fetishized a commercial world it barely understands. Years from now, we'll look back on much of what the movement has said, done and advised the way we look at old ads with images of suburban families eating aluminum foil TV dinners and bizarre Jello molds. Sure the technology was nifty and new and time-saving, but anyone who is honest about the 1960s will tell you that they tasted like $#!%.