Alleged misuse of funds spells trouble for Meyer Charitable Foundation

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Alleged misuse of funds spells trouble for Meyer Charitable Foundation

CHAMPAIGN — When Elisabeth Kimmel allegedly paid bribes to get her kids into Georgetown and the University of Southern California, prosecutors say she did so with $525,000 from her family's Champaign-based Meyer Charitable Foundation.

By allegedly using the charity she serves on to benefit herself, she may have rendered the foundation vulnerable to punishments including fines and possibly put its tax-exempt status at risk, according to John Colombo, an emeritus law professor at the University of Illinois who has co-written two books on nonprofit tax exemption.

"This transaction probably violated half a dozen provisions of exempt-organization law. It's self-dealing. It's private inurement. It's private benefit," he said. "There's all sorts of things."

The Illinois Attorney General's office, which has supervisory authority over nonprofits in the state, is looking into the foundation, spokeswoman Annie Thompson said, though nothing's been determined.

"The Meyer Charitable Foundation is registered with our office, and we are reviewing records to determine whether additional action is warranted," she said.

And the Internal Revenue Service has been involved in the FBI investigation of the alleged college bribery scheme, though, so far, only one person has been charged by prosecutors with conspiracy to defraud the United States of federal income taxes.

Rick Singer pleaded guilty last week to the charge, which alleged he set up the Key Worldwide Foundation for parents to donate to, from which he would then pass the donations on to coaches at elite schools.

The coaches then allegedly told the admissions offices that they were recruiting the students as athletes, helping them get admitted.

Most parents charged last week allegedly made the donations themselves, and many filed personal income tax returns that allegedly reported the payments as charitable donations.

In these cases, the IRS could fine the individuals and try to recoup lost income tax.

In Kimmel's case, one of just a couple where the donations were made from a family foundation, the foundation could also face trouble, Colombo said.

"It's hard to tell what exactly the results would be if the IRS were to audit the foundation. I would certainly say they are in trouble," Colombo said. "The worst that could happen is the IRS takes away the foundation's tax exemption, which would essentially kill it."

But he said there's a range of potential penalties, "depending on how the decisions were made, who was calling the shots and how many people who manage it were involved."

The IRS could make Kimmel pay back the foundation some of what she allegedly used for her own benefit, Colombo said, and the foundation could be fined. The IRS could also say that the people involved in the payments can't make administrative decisions in the charity, he said.

"It depends on the structure of the charity," he said. "If everyone knew what was going on and approved it, then the IRS might say, 'You're beyond hope. Turn your assets over and then we'll talk.' But that's very unusual. I'm not predicting that in this case."

The Meyer Charitable Foundation, which lists an address in Champaign and about $27 million in assets, is run by the Meyer family: Kimmel is listed as its assistant secretary, her husband Greg Kimmel as the vice president, her father August "Chris" Meyer Jr. as the secretary and treasurer, and her mother Karen Meyer as the president.

Neither the Kimmels nor the Meyers could be reached for comment.

In her daughter's admission to Georgetown in 2013 as a purported tennis athlete, Kimmel allegedly signed three checks to KWF from the Meyer Charitable Foundation — one for $100,000, another for $170,000 and a final one for $5,000.

After the first check, Singer's accountant "sent a letter to the Meyer Charitable Foundation falsely confirming that 'no goods or services were exchanged' for the purported donation," prosecutors said.

The two larger donations show up on the Meyer Charitable Foundation's publicly available tax forms and are marked as charitable donations.

The form was signed "under penalty of perjury" to be true to the best of her knowledge by Karen Meyer.

The form was prepared by Busey Assistant Vice President for Compliance & Tax Specialist Diana Reed, who said she couldn't comment.

In Kimmel's son's admission to USC in 2018 as a purported track athlete, prosecutors said the Meyer Charitable Foundation made a $50,000 donation to the USC Women's Athletics Board with a check signed by Greg Kimmel, and a $200,000 payment to KWF with a check signed by Elisabeth Kimmel.

Last October, after Singer had become a cooperating witness, he allegedly told Kimmel his foundation was being audited by the IRS and talked with her about what he would say his foundation does.

"Essentially what I'm going to tell the IRS is that your donations were made to my foundation to fund underserved kids, which is the mission of our foundation," according to a transcript of the call. "So I just wanted to make sure that we were on the same page."

"Oh, well, as far as I know, I don't know what you've done with the money I gave your foundation," Kimmel allegedly said. "I mean, I— you never really told me."

"Okay, that's— that's perfect," he allegedly responded.

But it's not perfect, Colombo said.

"It wasn't a real donation," he said. "The foundation essentially gave money to a foundation manager."

The IRS can "basically say this wasn't a donation, it was just a payment out to Elisabeth Kimmel that she used for personal purposes," he said.

Under Section 501 of the Internal Revenue Code, the (c)3 part lists the requirements for a nonprofit to be exempt from taxes.

One of the main ones is that "no part of the net earnings ... inure to the benefit of any private shareholder."

"Usually the way these things happen is, the charity engages in some transaction not at the fair market value. For example, it buys a car from a manager of the charity and overpays by 300 percent," Colombo said.

Transactions like the ones Kimmel allegedly made aren't "really the common type of kind of transactions we run into, but it clearly is what happened," he said. "A private individual associated with managing a charity pulled out assets for personal purposes and the charity got nothing in return."

In the case of most parents involved in the alleged scheme, the tax benefit of donating to KWF would be obvious on their personal tax return.

In Kimmel's alleged case, Colombo said the tax benefit would have come in the past, when the Meyer family contributed to its foundation.

"But I suspect this particular transaction wasn't about taxes," he said. "It was about hiding what was going on."

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