Monday, May 24, 2010
Attorney General Jerry Brown announced today that he has filed a lawsuit to shut down the Monterey County AIDS Project, alleging that the nonprofit illegally diverted more than $2.8 million intended for people with HIV/AIDS to other uses, including a personal mortgage payment and carpet steam cleaning.
According to Brown, former MCAP officers and directors "took some of the money for personal use and for-profit ventures, in violation of state law and a May 2000 court order specifying that at least $1.8 million be used 'solely for the purpose of providing housing for people with the HIV disease.'"
"The duty of these officers and directors was to protect the charity's assets so the funds could be used for the support of very sick people," Brown said in a prepared statement. "Instead, they violated their trust and spent the money any way they wanted."
In a lawsuit filed Friday that names 16 former officers and directors of the Seaside-based charity, Brown "seeks to dissolve MCAP, obtain a complete accounting of its finances, and recover any remaining assets" plus "return of assets that were illegally diverted."
According to the Attorney General's Office: "The complaint describes a scheme in which the MCAP officials, over nearly a decade, drained the organization's coffers of money earmarked for HIV/AIDS patients.
"The organization's record-keeping was so sloppy and incomplete that it's hard to determine exactly where all the money went. MCAP continued to provide housing and services for AIDS patients, but at a lesser level than its overall expenditures would suggest.
"Some of the charity's money was spent on unauthorized expenditures, such as meals at expensive restaurants, personal expenses on credit cards, purchasing items for personal use at auctions, personal moving and storage expenses, a personal mortgage payment, and steam-cleaning a carpet in a private residence.
"MCAP was created in 1985 to provide support, resources and services, including housing assistance and hospice care, for HIV/AIDS patients in Seaside, north of Monterey.
"Eleven years ago, MCAP received $1.8 million in cash and property from the estate of Douglas E. Madsen, a Monterey County resident, with the restriction that the bequest be used for the sole purpose of housing active AIDS patients.
"But, according to Brown's complaint, more than $2.8 million of charitable assets, including the Madsen money, was 'misappropriated, misapplied or wasted.' In 1999, MCAP listed assets of $2.1 million. By 2004, that had dwindled to $1.4 million, and by 2007, only $205,000 was left."