Attorney General's interest in Muhlenberg Foundation no guarantee funds are safe

Plainfielders concerned about the fate of Muhlenberg Foundation monies under the control of Solaris Health System (the former Muhlenberg RMC's corporate parent) owe a debt of gratitude to RESTORE MUHLENBERG activist Deborah Dowe for posting online a letter to Solaris from NJ Attorney General Paula Dow (see letter at bottom of this post, or visit the website here).

The amount at stake is considerable -- in excess of $24 million -- broken down by the AG's office (based on Muhlenberg's 990 reports to the IRS) as follows --

Funds cited by the Attorney General's office
based on Muhlenberg's 2008 filing with the IRS.

 

Making sure that these monies benefit the healthcare and health-related needs of Plainfield and the surrounding communities that depended on Muhlenberg as congruently as possible with the wishes of the original donors should be of compelling interest to residents and RESTORE MUHLENBERG activists.

The Attorney General asks for specific, detailed information on any restrictions placed on the funds, how they have been used to date and what uses are proposed for the future, actions taken by the board concerning each of the funds, and updated 990s for 2009 and 2010.

All of this would be useful information for RESTORE MUHLENBERG activists to have in hand.

However, the Attorney General's letter also opens the door to changes in the restrictions on the use of the funds, specifically by suggesting 'MRMC' (which essentially means Solaris, as the parent corporation) may want to turn to a 'cy pres' proceeding.

Cy-près (see here) is an appeal to the courts to have the restrictions on a trust or gift altered if they become impossible, impractical or illegal to carry out.

While this may seem reasonable on its face, Plainfielders have reason to be suspicious of how Solaris would propose that the funds be redirected.

New Jersey law does not offer much comfort on the matter, as a 2009 article in the New Jersey Law Journal pointed out (see full article here, PDF) --

...under sections 6.a., b. and c., donors are excluded from notice of an institution’s application to a court for modification of restrictions. Indeed, unlike existing law, the new statute does not clearly preserve resort to cy pres or deviation proceedings. Such proceedings normally require notice to donors or their representatives.

With Solaris in effective control of the funds, the interests and needs of the community can be effectively sidestepped, unless the Attorney General's office steps up to the plate as a defender of the interests of the community.

That seems to me highly unlikely as the AG would have to devote scarce resources to understanding the community's needs, which in the current budgetary climate seems out of the question.

One alternative that could preserve the interests of the communities in the original Muhlenberg service area, and from which most of the bequests and gifts were no doubt obtained, would be to divest Solaris of any interest in the funds and to establish the Muhlenberg Foundation as a standalone organization, able to decide on the practicality of implementing donor conditions and turning to the courts for a cy-près proceeding on its own initiative if necessary.

Wouldn't this be the fair and just way to resolve the matter of the Muhlenberg Foundation funds?

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AGTrustsand EndowmentsLetter2P

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• Scribd:  "AG: Trusts and Endowments Letter"
• Wikipedia:  "Cy-près doctrine"
  
• NJ Law Journal:  "New law governing charities a trap for unwary"
  

-- Dan Damon [follow]

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