Madoff and Charities: The Lautenberg Foundation 2009 Form 990-PF – Part 1 – Installment 49

March 24, 2011Articles White Collar Defense & Compliance Blog

This is the forty-ninth in a series of installments on this blog that are discussing issues arising in the aftermath of the Ponzi scheme perpetrated by Bernard L. Madoff (“Madoff”). Many of the Installments in this series have focused on specific problems and concerns respecting public charities and private foundations that were victims of this and similar schemes.

Installment 40 and Installment 41, among others, of this series have discussed the fact that The Lautenberg Foundation, a private charitable foundation (the “Foundation”), which was formed by Senator Frank R. Lautenberg and had invested with Madoff, was one year past due in filing its 2008 Form 990-PF (the “2008 Form 990-PF”) with the Internal Revenue Service (the “IRS”).

Apparently the 2009 Form 990-PF (the “2009 Form 990-PF” and, collectively with the 2008 Form 990-PF, the “Foundation Forms 990-PF”) was also filed past due with the IRS, albeit 15 days after the final IRS due date of November 15, 2010 (after all available extensions). Both the 2008 Form 990-PF and the 2009 Form 990-PF are now available to the public on the charity information Web site GuideStar.

The availability of the 2009 Form 990-PF on GuideStar was surprising to me. As reported in the earlier Installments, I had been requesting by email from the Lautenberg Foundation a copy of the 2009 Form 990-PF virtually every time that I had requested the 2008 Form 990-PF, including a November 16, 2010 email thanking the Foundation for supplying me with the 2008 Form 990-PF. This thank-you email request of November 16, 2010 preceded the filing by the Foundation of its 2009 Form 990-PF by 14 days.

General Instruction Q entitled “Public Inspection Requirements” of the IRS instructionsfor completion of Form 990-PF (the “IRS Instructions”) requires a private foundation to mail a Form 990-PF within 30 days to a person who makes a request for such Form by electronic mail. General Instruction Q also refers to IRS Rules that provide for potential penalties for failure of a foundation to file timely or to comply with the public inspection rules. Obviously, since I never received the Foundation’s 2009 Form 990-PF in response to my numerous email requests, the Foundation did not comply in my case with the 30-day response requirement of General Instruction Q. Yet, perplexingly, in both the 2008 Form 990-PF and the 2009 Form 990-PF filed in November 2010, the Foundation answered “Yes” to the following question on line 13 in Part VII-A: “Did the foundation comply with the public inspection requirements for its annual returns and exemption application?”

It is my belief that in one or both years the Foundation’s answer should have been “No” for failure to deliver the Foundation Forms 990-PF on a timely basis in response to my requests.

In a related matter, Installment 41 discussed Statement 8 to the 2008 Form 990-PF provided to me by the accountant for the Foundation. Statement 8 stated the following as to the reason for the late filing and the potential for penalties for late filings:

This return is being filed late due to the uncertainty caused by the majority of the Foundations [sic] assets being loss [sic] to Bernard L. Maddoff [sic] in December 2008. We respectfully request that all late filing penalties be abated.

While the 2008 Form 990-PF supplied to me contained Statement 8 on page 16, for whatever reason, Statement 8 and page 16 of the 2008 Form 990-PF available to the public on GuideStar are missing, with page 17 immediately following page 15.

For the above reasons, the Foundation should consider filing amendments to the Foundation Forms 990-PF in order that the apparent deficiencies can be remedied. This blog series will provide a Part 2 that will discuss further the Foundation Forms 990-PF.

[To be continued in Installment 50]