Summerhill non-profit sues founder after IRS audit
By JIM WALLS
Sept. 6, 2010 — Infighting and tax troubles are threatening the future of a citizens’ group founded to improve the Summerhill community near Turner Field.
Non-profits everywhere are having a tough time making ends meet. But this ruckus also involves allegations of fraud and raises questions about oversight of $1.6 million in Braves parking fees that have been redirected to the neighborhood since 1997.
The Summerhill Neighborhood Development Corp. sued its founder, former state Rep. Douglas Dean, in May, alleging he secretly pledged the nonprofit’s property to back $2.4 million in bank loans — now in default — to benefit a private developer.
The non-profit, according to the suit, “now faces the very real possibility of losing substantially all of its real property assets.” It asks that a judge declare the real estate to be Summerhill’s, free and clear of any other claim, plus punitive damages from Dean and other defendants.
In addition, federal tax records list $470,000 in unsecured, interest-free loans from the non-profit to Dean and his wife, and $50,000 to the group’s new CEO. Summerhill reported the loans as “excess benefit transactions,” a term the IRS uses when a tax-exempt filer has paid someone more than it should. A non-profit must pay income tax on the money unless it can recover the loss.
Summerhill already had a problem with its property taxes, which Fulton County says have not been paid for three years. The total bill is nearly $56,000.
Dean denied wrongdoing in a telephone interview. The “loans,” he said, were actually reimbursements for money that Summerhill had borrowed from him over a number of years.
But he acknowledged that IRS auditors, who looked at the books back through 2003, questioned those debts when they could find little or no documentation.
“The debate is this: If you loan somebody some money, it should have been in a loan document,” Dean said. “Well, we didn’t operate that way.”
Dean, who took a leave of absence in February, said he had no idea of the total amount of reimbursements to himself and his wife. He said he hopes Summerhill’s part-time accountant can come up with receipts and other documents to support the reimbursements.
Summerhill was one of three neighborhoods that signed off on building the Olympic stadium, now known as Turner Field, in 1993. In return, the Atlanta Braves promised to put money back into the community to mitigate the effect of traffic, crowds and noise.
Under the arrangement, the Braves dedicate about 8 percent of parking revenue to three neighborhood groups. But the money first passes through the Atlanta-Fulton County Recreation Authority and then the SMP Community Fund, a non-profit whose board is appointed by the authority.
These are not exactly arms-length transactions. Dean serves on the recreation authority and votes on each appointment to the community fund’s board. Mattie Jackson, who sits on the Summerhill non-profit’s board, is also on the fund’s board, as are two members of the recreation authority.
Dean’s appointment, incidentally, expired in 2001 but he’s still serving because no one was ever named to replace him. He doesn’t see any conflict with his multiple roles.
“Me being on the recreation authority has benefited Summerhill,” he said. “I’ve represented Summerhill well. I’ve protected their interests.”
The Summerhill board, in tax filings, said it didn’t approve the “excess” payments to Dean and the others. Similarly, the lawsuit alleges Dean traded on a “special relationship of trust” when he pledged the non-profit’s property to back the developer’s debts without the board’s knowledge.
Summerhill’s income derives primarily from the Braves, but it’s channeled through the recreation authority and a non-profit board under its control.
So who was supposed to make sure Summerhill spent the money responsibly?
Not the authority, said its chairman, Fulton County Commissioner Nancy Boxill. The deal for the Olympic stadium, she said, gave the neighborhood groups virtual autonomy in spending decisions.
“If in charting their own destiny they have taken some actions … that neither you nor I would support, it doesn’t matter,” Boxill said. “Because the design was for the neighborhood to be in control of that.”