Attorney General Lockyer Seeks Dissolution of San Francisco Neighbors Resource Center

(SAN FRANCISCO) – Attorney General Bill Lockyer today filed a petition in San Francisco Superior Court seeking dissolution of the San Francisco Neighbors Resource Center (SFNRC) and alleging the nonprofit illegally diverted charitable funds for political purposes.

Lockyer took the action pursuant to his regulatory authority over charitable organizations because the SFNRC failed to take adequate steps on its own to formally dissolve and because the Attorney General wants the directors of the SFNRC to provide a thorough accounting of the money it received and distributed.

"It appears that substantial SFNRC assets were diverted and expended for improper purposes," the petition states. "If the directors diverted the SFNRC's charitable assets for improper purposes or negligently allowed such diversion to be accomplished, they breached their fiduciary duty to the corporation. The Attorney General continues to investigate the operations and activities of the SFNRC. In the meantime, the director of the SFNRC should not be trusted to wind up the affairs of the SFNRC and dissolve without court supervision."

The SFNRC was created in 1999 for the purpose of providing bilingual education programs and other services to benefit seniors and youth education. Lockyer's petition claims the dissolution is necessary because the SFNRC failed to properly pursue its charitable purposes. Instead, the petition alleges the SFNRC diverted at least $168,750 in charitable assets for the purpose of making $125,000 in political contributions in 2001 and 2002 to benefit Kevin Shelley's campaign for Secretary of State.

The SFNRC deposited a grant of $492,500 from the state Department of Parks and Recreation into a bank account that was used to fund or reimburse individuals and companies that made political contributions to Shelley's "Every Vote Counts" campaign committee, the petition alleges. Additionally, according to the petition, the SFNRC failed to properly acknowledge receipt of the state grant money, resulting in the filing of a false tax return in 2001 and a false report with the Attorney General's Registry of Charitable Trusts.

Although the SFNRC voted to voluntarily dissolve over a month ago, Lockyer filed the petition because of the alleged violations of the nonprofit's charitable purposes as well as its failure to formally shut down, and in order to obtain a thorough accounting and protect any charitable assets still under its control.

At Shelley's request, Lockyer initiated his charitable trust investigation into the SFNRC in August 2004. Shelley made the request after media reports disclosed the SFNRC received the $492,500 state grant in May 2001 to construct a community center that has not been built. It also was reported in August that the Federal Bureau of Investigation earlier had initiated its own investigation into the matter after being alerted to questionable transactions by the State Controller's Office.

Lockyer's petition states his investigation has sought to determine whether the SFNRC used the state grant monies for the intended charitable purposes. The investigation confirmed that in 2001 and 2002 the SFNRC disbursed checks totaling $168,750 to five individuals and businesses: Eric Zhu, $27,000 for "project management"; Steve Chen, $25,000 for "project management"; Gemini Advisors, Inc., $26,000 for "consultant services"; James Li, $60,750; and, Cabrillo Construction Co., $30,000 for "development fees."

Lockyer's petition states that, with the exception of Li, no subpoenaed recipient of SFNRC funds produced any documents "evidencing work performed or services provided to the SFNRC that would warrant any receipt of SFNRC funds." In contrast, Lockyer's investigation confirmed each of the five recipients of SFNRC funds made political contributions in similar amounts to Shelley's "Every Vote Counts" campaign committee soon after, or immediately prior to, receiving a check from the SFNRC.

A copy of the Attorney General's petition can be found at: www.ag.ca.gov/newsalerts/index.htm.