Working Partnerships Attorney: Chavez’s Health Foundation Votes Weren’t a Conflict

Working Partnerships USA has responded to a March 24, 2013 article that appeared on San Jose Inside alleging that its executive director, Cindy Chavez, in her capacity as a trustee of the non-profit Santa Clara Family Health Foundation, participated in two votes that facilitated large contracts with Chavez’s two employers.

Nonprofit law specialist David A. Levitt of the San Francisco-based Adler and Colvin law firm writes on WPUSA’s behalf that “no director financial interest was involved” because “Ms. Chavez’s compensation is not contingent on Working Partnerships receiving Foundation funding …Working Partnerships had sufficient resources to cover Ms. Chavez’s compensation, even if it had not received any funds from the Foundation.”

According to WPUSA’s 2011 Form 990, Working Partnerships paid Chavez $74,587 a year for working a 15-hour work week. The South Bay Labor Council concurrently employed her through the end of last year. If paid at the same rate by SBLC for her other 25 hours a week, Chavez’s aggregate compensation would be approximately $199,000.

The Family Health Foundation last year voted to pay $150,000 to Working Partnerships for “community outreach.” It also contributed $250,000 to a “Yes on A” sales tax campaign that was run by Chavez and two other SCFHF directors, who in turn hired SBLC to conduct campaign activities.

The Family Health Foundation is largely funded by the County of Santa Clara, which was the beneficiary of the $500 million Measure A sales tax increase, approved by voters in November.

Chavez is currently running for county supervisor.

The text of the letter follows, and a PDF appears here.

Recent articles published in the Metro/San Jose Inside assert that Cindy Chavez had a conflict of interest in connection with certain transactions between Santa Clara Family Health Foundation and Working Partnership USA, because Ms. Chavez is the Executive Director of Working Partnerships and also serves as a director of the Foundation. Serving in both capacities is not illegal; in fact, California nonprofit law specifically covers situations in which a director plays a role with both parties in a transaction.

Under Section 5233 of the California Nonprofit Corporation Law, a “self dealing transaction” involves a transaction in which the nonprofit corporation is a party and one or more of its directors has a material financial interest. The facts below indicate that no director financial interest was involved.

Working Partnerships is a nonprofit public benefit corporation that is recognized by the Internal Revenue Service as a Section 501(c)(3) charity. By law, the organization does not have any shareholders, and any increase in net assets as a result of increased revenue may not be paid out to private individuals, including Ms. Chavez.

In addition, Ms. Chavez’s compensation is not contingent on Working Partnerships receiving Foundation funding. The organization’s financial information, publicly available on its Form 990 filed annually with the Internal Revenue Service, shows that Working Partnerships had sufficient resources to cover Ms. Chavez’s compensation, even if it had not received any funds from the Foundation. (Working Partnership’s Form 990 for 2011 and earlier years is publicly available; its Form 990 for 2012 is not due until later this year.)

It also should be noted that Ms. Chavez, in her capacity as a Foundation director, did not vote on a decision to engage Working Partnerships or to approve a Foundation budget that included an earmark for Working Partnerships, as one article suggests. According to the Foundation board meeting minutes from June 8, 2012, the Foundation board approved a budget that included a general allocation for community outreach. The budget did not earmark any funding for, or even refer to, Working Partnerships.

Very truly yours,

David A. Levitt

 

6 Comments

  1. I went googling and found this on a Nonprofit Law Blog.  Illegal or not, it certainly fits this situation:

    It should be noted, however, that transactions involving even a perceived conflict of interest may subject the interested director and the corporation to a serious loss in reputation.  Accordingly, corporations should enter into such transactions cautiously where the directors believe that it could be viewed negatively if brought to light by the media.  For all these reasons, a conflict of interest policy is highly recommended.

    A conflict of interest may exist in the following situations:

    . Employment or independent contractor agreement between the corporation and a director or a member of the director’s family.
    . Provision of a good or service or use of a facility to a director, a member of the director’s family or an entity affiliated with a director.
    . Provision to the corporation of a good, service or use of a facility by a director, a member of director’s family or an entity affiliated with a director.
    . Decision to engage in a transaction or activity that may otherwise benefit or harm a director’s personal interests.
    . “Self-dealing transactions” as defined in state law.
    . “Excess benefit transactions” as defined in federal tax law.

    http://www.nonprofitlawblog.com/home/2006/06/duty_of_loyalty.html

    Working Partnership’s lawyer may be correct in his application of the law, but the above reference pretty much says that the public is the final arbiter of what is proper.  And what is not.

  2. “…shows that Working Partnerships had sufficient resources to cover Ms. Chavez’s compensation…” 

    A very simple minded analysis. Working Partnerships had more expenses and obligations than just Ms. Chavez’s compensation at the time of the deal.

  3. Case closed.  Next.

    You can disagree with Cindy, you can hate poor people, you can oppose a minimum wage, you can believe children should fend for themselves when it comes to health insurance, you can be antiunion, you can believe that the same people who negotiated public pensions are are now trying to take them away is good public policy even if it is unconstitutional, you can believe the sky is green and the grass is blue.

    But you cannot find any evidence that Cindy Chavez is unethical.  Can’t be done.

    She is among the most honest people in this Valley.  Tough—yes.  Intelligent—obvious.
    But not unethical.

    Disagreement is not dishonesty.  Give it up.