LAWFUEL – Press Release Service – Spitzer’s Office Secures Reforms and Independent Board Oversight
Attorney General Eliot Spitzer today announced an agreement with a Utica-area not-for-profit to reform its corporate structure and enhance board oversight.
The Business Training Institute, Inc. (BTI), a not-for-profit corporation with a mission to provide job training for youth and displaced workers in the Utica area, entered into the settlement after an investigation revealed that its board failed to exercise independent oversight over the activities of its executive director. “Officers and directors of not-for-profits cannot put their personal financial interests above the interests of the organization to whom they owe a fiduciary duty,” Spitzer said.
In the summer of 2003, BTI received a $500,000 grant from the State Department of Education to fund after-school programs for the Utica City School District. The Attorney General’s investigation revealed that this funding was used to finance a consulting arrangement with Laino Entrepreneurial Opportunities (LEO), a company 95 percent owned by BTI’s Executive Director, Patricia Laino, and five percent owned by a member of the BTI board of directors, to administer the programs.
The consulting arrangement was not disclosed to the BTI board and BTI did not obtain bids from entities other than LEO to perform the services provided by LEO. The BTI board’s failure to adequately oversee the program allowed Laino to collect compensation from BTI and LEO for much of the same work.
The investigation further revealed that the BTI board was not independent from BTI. Two of the three board members were Laino’s brother and her business partner in LEO. The officers of the board, who were not members of the board, were Laino, Laino’s daughter and Laino’s daughter-in-law, who also were the key employees of BTI.
The settlement requires Laino to return $100,000 to BTI by the end of this year. It also requires the resignation and replacement of the two non-independent board members, and an expansion of the board. In addition, BTI will restructure its board so that its members are neither employed by BTI nor related to Laino. Under the agreement, the BTI board of directors shall institute various internal controls, participate in annual board training sessions, and report to the Attorney General’s Office for three years.
This matter was handled by Sally G. Blinken, Assistant Attorney General, Charities Bureau under the supervision of Gerald Rosenberg, Attorney in Charge of the Charities Bureau and by Carrie H. Cohen, Chief of the Public Integrity Unit.