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Attorney General Lockyer Asks Court to Place Nonprofit Pipevine under Receivership

Dissolution Complaint Seeks to Get Missing Donations To Charities
Wednesday, July 2, 2003
Contact: (415) 703-5837

(SAN FRANCISCO) – Attorney General Bill Lockyer today asked the San Francisco County Superior Court to dissolve PipeVine, and appoint a receiver to run the Bay Area nonprofit, secure its assets and compensate charities that did not obtain earmarked contributions from PipeVine before it collapsed.

"The trust of charities, their generous donors and those who depend on their important programs is prized and protected by our laws," said Lockyer. "That is what this case is about. That is why I have asked the court to take this step."

In a six-page complaint, Lockyer states PipeVine, and its directors, officers and employees, "breached their fiduciary obligations" in handling contributions designated for specific charitable organizations. "By improperly commingling and diverting charitable trust funds into general operating revenues, officers and employees in control of PipeVine have knowingly countenanced persistent and pervasive mismanagement and abuse of authority," the complaint adds.

Defendants in the action include: PipeVine; unnamed directors, officers, employees, agents, advisors or trustees of PipeVine; and unnamed entities or individuals who had business relationships with PipeVine.

The Attorney General's Office has launched an investigation of PipeVine to determine whether any laws were violated in PipeVine's handling of donations earmarked for specific charities and charitable purposes. Lockyer expressed gratitude for United Way's cooperation with the investigation, and its efforts on behalf of PipeVine's creditors. The complaint filed today does not formally allege violations of statutory or common law. However, Lockyer can amend the complaint to include such charges.

Lockyer stressed the importance of maintaining the public's confidence in charitable giving, and said he was committed to achieving that goal. "Through aggressive law enforcement and working with businesses and charities, my office will let the public know that when things go wrong, we will make them right," he said.

In taking the initial legal step toward compensating affected charities, Lockyer noted other moves have been made to minimize disruption to the charitable giving activities of PipeVine's customers. For example, information in PipeVine's database is being transferred to its customers to enable them to hire alternative vendors, or take other steps, to process donations.

PipeVine processed donations for United Way organizations and major corporations. In the Bay Area alone, PipeVine processed $40 million in contributions for the United Way, which serves some 6,000 charities. Saying it was broke, PipeVine ceased operations June 2, 2003. The closure left an undetermined amount of donations unaccounted for and an undetermined number of charities in the lurch. Shortly after the closure, Bank of America froze PipeVine's bank accounts.

Lockyer asked the court to dissolve PipeVine under a state law that allows the Attorney General to take such action when nonprofits cannot fulfill their charitable purposes, when they are afflicted by pervasive abuse of authority or mismanagement, or in cases involving serious violations of the law.

The court-appointed receiver would assume control of PipeVine and manage its affairs. Additionally, the receiver would:

Marshal and preserve PipeVine's assets – including frozen bank accounts – pending the court's decision on the complaint for dissolution.

Account for all the charitable trust assets received by PipeVine for the benefit of charitable organizations.

Provide charitable assets to the intended beneficiaries.

Pursue other means to compensate charities.

Lockyer will ask the court to appoint David Bradlow of San Francisco, a certified bankruptcy trustee, as the receiver. He has experience in administering nonprofit organizations.

Californians who have knowledge of unlawful conduct by charitable organizations, their officers or employees, or charitable fund-raisers, should contact the Registry of Charitable Trusts in the Attorney General's Office. Information or complaints can be filed online at http://justice.doj.ca.gov/charitysr/email.asp or my mail to P.O. Box 944255, Sacramento, CA 94244-2550.

"Information received from the public contributes greatly to our charitable trust enforcement activities," said Lockyer. "I urge donors, charities and others to let my office know when they have information about possible misconduct."

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