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Commonwealth v. Citizens Alliance for Better Neighborhoods

November 23, 2009

COMMONWEALTH OF PENNSYLVANIA, BY THOMAS W. CORBETT, JR., ATTORNEY GENERAL, PLAINTIFF
v.
CITIZENS ALLIANCE FOR BETTER NEIGHBORHOODS, INC., A NONPROFIT CORP., VINCENT J. FUMO, INDIVIDUALLY, RUTH A. ARNAO, INDIVIDUALLY, JOSEPH A. RUSSO, INDIVIDUALLY, JOHN J. SFRISI, INDIVIDUALLY, ALBERT MEZZAROBA, INDIVIDUALLY, JEFFREY R. TRAVELINA, INDIVIDUALLY, JOHN P. TRAVELINA, INDIVIDUALLY, AMEL HAMMAD, INDIVIDUALLY, CHRISTIAN A. DICICCO, INDIVIDUALLY, TODD L. BARITZ, INDIVIDUALLY, PATRICIA A. EVERS, INDIVIDUALLY, KENNETH L. BARITZ, INDIVIDUALLY, AND REVEREND GARY T. PACITTI, INDIVIDUALLY, DEFENDANTS



The opinion of the court was delivered by: Judge Pellegrini

ORDER

AND NOW, this 23rd day of November, 2009, the opinion filed November 10, 2009, in the above-captioned matter shall be designated Opinion rather than Memorandum Opinion, and it shall be reported.

BEFORE: HONORABLE DAN PELLEGRINI, Judge

OPINION

FILED: November 10, 2009

Vincent J. Fumo*fn1 (Fumo) has filed preliminary objections pursuant to Pennsylvania Rule of Civil Procedure 1028(a)(1), (a)(4), (a)(5) and (a)(8)*fn2 seeking the dismissal of the complaint in equity brought by Attorney General Thomas W. Corbett, Jr. (Attorney General) alleging that Fumo breached a fiduciary duty to Citizens Alliance for Better Neighborhoods (Citizens),*fn3 a domestic, non-profit corporation created for charitable purposes.

The petition for review alleges that Fumo is a former Pennsylvania state senator who founded Citizens, a non-profit corporation organized on a non-stock, no-member basis with the stated purpose of promoting public health, housing, safety and education in Philadelphia. While Fumo never was an officer or director of Citizens and never had any formal role with the corporation, the petition alleges that Fumo was the power behind Citizens and that he controlled and dominated Citizens, its board of directors and its officers to the extent that it operated as his alter ego, agent and instrumentality. The petition further alleges that Fumo used Citizens to unlawfully advance his personal convenience, enrichment and political advantage through various expenditures that benefitted Fumo, including providing vehicles and office space and funding political activities totaling approximately $1,900,000. It also alleges that he directed Citizens to invest $9,000,000 with a financial advisor causing a loss of $1,400,000. Fumo was convicted on federal fraud charges for receiving non-profit funds and has been ordered to pay as part of his criminal penalty some of the funds that he received.

In his preliminary objections, Fumo contends that:

(1) the Attorney General lacks standing to bring a parens patriae action against him for his activities with regard to Citizens, a non-profit, charitable corporation;

(2) the Attorney General is barred by the statute of limitations from bringing this action; and

(3) he cannot be liable for a breach of fiduciary duty against Citizens because he was neither an officer, director, nor employee of the corporation.*fn4

I.

With regard to Fumo's first contention, it is the well-settled law of the Commonwealth that the Attorney General is responsible for the public supervision of charities through his parens patriae powers. In re Milton Hershey School Trust, 807 A.2d 324 (Pa. Cmwlth. 2002); In re Estate of Coleman, 456 Pa. 163, 317 A.2d 631 (1974). The Commonwealth has parens patriae standing whenever it asserts quasi-sovereign interests, which are interests that the Commonwealth has in the well-being of its populace. Commonwealth v. TAP Pharmaceutical Products, Inc., 885 A.2d 1127 (Pa. Cmwlth. 2005). Here, the Commonwealth's interest in the well-being of the public that Citizens was created to serve is a clear example of such a quasi-sovereign interest. In fact, "in every proceeding which affects a charitable trust, whether the action concerns invalidation, administration, termination or enforcement, the attorney general must be made a party of record because the public as the real party in interest in the trust is otherwise not properly represented." In re Pruner's Estate, 390 Pa. 529, 532-33, 136 A.2d 107, 110 (1957) (emphasis added). It is the duty of the Attorney General to ensure that the purpose of the charity remains charitable. Consequently, the Attorney ...


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