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Question
Is it possible for a non-profit organization to have one person alone in charge and answer to no one?
This is somewhat difficult to explain so I will try to be brief if I can.  I am a member of the Veterans of Foreign Wars (VFW).  We are in a building that we do not own but the building has our name on it and uses our name for the Licenses which include liquor and gambling.  This has come about because one person some years ago formed a non-profit organization (501-c3) with proper bylaws, trustees etc. under a different name. The trustees were officers of the VFW.
Over the years  as people have passed away and or resigned the trustee s and officers are gone
There are officers in the VFW but they are powerless over this other corporation which now consists of one person.  This person pays the employees, pays the bills etc.  Has an accountant which he will not let us meet.  He was appointed general manager by the board when there was a board some years ago.  Presently he controls all the money going through the organization which   is the one he formed.  He will not answer to anyone.  Ignores all bylaws that he signed in 2007 which clearly state how the board operates etc. and also that the VFW organization is to have all money other than expenses dispersed to it at the end of the year. The VFW is powerless to anything.  This guy controls all the money and most of it is cash.  This year it will be between 3 and 5 million dollars.  He is also ignoring the bylaws of the National VFW which state he has to report financials to them.   I also believe he is paying himself in cash.  His salary was determined by the board a few years ago we have no way to make him tell us what he is paying himself.  In addition there are large payouts of gambling to winners and no 1099s are ever provided to winners.
The place is a beautiful 2 million dollar building.  Very nice and clean.  A model place for other VFWs. This covers up a lot.
I do not want to have the place closed down because many employees depend on it for their livelihood.
How do you get someone like this guy to obey the laws when he has all the control because he has all the money. Anytime I question the fact that he is ignoring the bylaws he says he changed them verbally.
We do not have the financial resources to pursue this however this (his) corporation has a lot. He is listed on the non profit organization as Statutory Agent.  The VFW also has a 501c3.

Answer
There appear to be violations of both state law and IRS regulations. "Although control by ... a small group may not necessarily disqualify [an organization] for exemption, it provides an
obvious opportunity for abuse of the claimed tax-exempt status."
Church of Ethereal Joy, 83 T.C. 20 at 23 (1984). That case is
cited in the United States Fifth Circuit Court of Appeals case
St. David's Health Care System v. U.S., 349 F.3d 232 (2003)
http://pages.citebite.com/o1n5g1q6c0htj

I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations. But I will direct you to the Ohio Nonprofit Corporation law, revised as of 2010 at:
http://tinyurl.com/42dtog5
and you will read there that the state requires "(1) The number of directors as fixed by the articles or the regulations shall be not less than three "
http://law.justia.com/codes/ohio/2010/title17/chapter1702/1702_27.html

Complaints could go to your State's Attorney General's Office as
that office generally oversees charities within the state. If the
action is criminal then your local district attorney may be
interested in prosecuting as at:
https://docs.google.com/open?id=0B4xNuGSpiyzgT3BybmZKSGxNa1U
which is a pdf file of 4 different news stories.

Complaints to the IRS regarding Exempt Organizations are discussed
at
http://www.irs.gov/irs/article/0,,id=178241,00.html
A referral of an exempt organization may be made by submitting Form
13909, Tax-Exempt Organization Complaint
http://www.irs.gov/pub/irs-pdf/f13909.pdf

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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