Legal Question in Business Law in California

Non repayment of loan

I run a small business in California and have also established a nonprofit foundation to help orphans in Africa. Part of the money earned in the store is used to fund the foundations activities. One of the members of the board of directors asked the store owner in Aug.2006 ,who is also the founder & exec.director of the foundation if he could borrow $10,000 dollars as he

needed to pay some bills.She

replied that she did not have that much. He said look at your bank statement as he pulled it out of a drawer in the store. She had about $6,000, all the money she had.

She agreed to lend him $6,000 on the condition he repay it within 2 weeks.She needed that money to continue sending support to Africa. He did not repay in 2 weeks but gave her a check for $3,000 which bounced.He has since not answered phone calls,e-mails or shown himself at the store. Of course he will be removed from the board of directors.

My question is has he committed any crime by essentially diverting funds from the foundation while he was a member of the board of directors, and not repaying it.He has no real assets to speal of.

Thank you for any help.


Asked on 10/27/06, 11:51 pm

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Non repayment of loan

It is not entirely clear from your facts who is who in this sad scenario. Was the money that was lent the store's, the charity's, or the personal funds of the store proprietor? Was the loan authorized by the store's management, or the charity's?

Although the borrower is blameworthy for not repaying the loan and is liable to the lender for damages, I would have to say that if the managers of the charity sanctioned and authorized this loan, they bear at least as much moral blame, and are probably liable to the charity for their careless lending of money they are supposed to shepherd with great care for the charity's purposes.

If the money lent were merely the store's, no such problem would exist, to be sure, but charity officers or directors who make the mistake of putting the charity's assets at risk by making a private loan to a private person without getting very, very good collateral are likely to be battered, skewered and deep-fried in court.

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Answered on 10/28/06, 12:13 am
Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Re: Non repayment of loan

More than one person may have committed a crime here. California-based charitable foundations are very tightly regulated under new laws that require an independent board, and that flatly prohibit these types of transactions. For more information see the Attorney General's website (accessible from www.ca.gov). Both the director who made the loan and the malfeasant receipient need to speak to separate criminal lawyers.

And for God's sake, and this is just my personal opinion and I realize it's your money to burn, why Africa? Can't you find any orphans or other worthy causes here at home?

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Answered on 10/28/06, 2:03 am


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