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  • Article: AILA's Reincorporation. By Michael Owens

    AILA's Reincorporation: The Unaccountable, doing the Unnecessary, for the Uninformed, to achieve the Unworthy.

    by


    AILA’s Reincorporation: The Unaccountable, doing the Unnecessary, for the Uninformed, to achieve the Unworthy.

    Time for AILA to answer some real questions about its plan to reincorporate from New York to the District of Columbia, which seems to be mainly:

    “...we just want to operate the way we want to operate”....New York...
    has“rules that we don't want to be bound by”.
    (Marketa Lindt, Secretary, AILA)
    1. Who are “we”?
    2. How do “we” want to “operate”?
    3. What are the rules of New York that “we” “don’t want to be bound by”?

    I’ll come back to these in a moment at Part IV. But first a little bit of context.

    Quick Guide to this Article

    1. How We Got to Where We Are
    2. Another Orwellian Adventure in AILA Governance Escapades
    3. My Lawyer Says....
    4. Three Questions that AILA Leadership has to answer about Itself
    5. Three Questions that AILA leadership has to answer about its Reincorporation Plan

    ---------------------------------------------------------------

    I. How We Got to Where We Are

    The American Immigration Lawyers Association (“AILA”) was incorporated in 1946 in the State of New York as a not for profit corporation and has operated under this charter and New York law for 69 years. A group within AILA leadership now wants to leave New York and “reincorporate” in the District of Columbia under DC law. (Technically, they want to merge the NY corporation into a DC non-profit corporation and out of existence. A DC shell corporation has already been formed by and is run by a few of these leadership figures to fill this role. This merger process has been referred to within AILA as the “reincorporation”, and that term is used here.)

    To the extent there is a means to do so, I and others have vociferously challenged the reincorporation as being both entirely unnecessary and concocted mainly to achieve an


    improper objective that is contrary to the interests of the organization and its Members.

    On July 1, 2014 revisions of the New York Not for Profit Corporation Law (“NPCL”) came into effect. The law was actually passed in December of 2013. The revisions include new provisions requiring transparency in governance, finances, executive pay, insider transactions and

    conflict-of-interest and mandatory whistle blower protection. In the Spring of 2014, I began to suspect that AILA was planning to make a move out of New York to avoid having to comply

    with these provisions. It took until the Annual Meeting in Boston in June 2014 – after voting on a number of contentious bylaw amendments was out of the way – for AILA leadership to finally come clean on its intent to get out of New York.

    In Spring of 2014, I was also trying to explain to AILA leadership and the Members that AILA’s then existing scheme for electronic voting violated New York Law and that AILA could not knowingly use the system again for the upcoming election at the Annual Meeting in Boston. After a nasty struggle, AILA finally capitulated and conducted the electronic election for officers and directors on essentially the basis that I had proposed and that was blessed by new outside counsel, Caplin & Drysdale. The point-and-click, secure online voting used for that election is fully compliant with New York Law and could not have been more convenient for Members. As Ms. Lindt admits, “ . . . it looks and feels like electronic voting”. Not to mention, it’s how she

    was elected. There were other issues behind the voting dispute, principally AILA leadership’s ferocious opposition to and machinations to prevent electronic voting by Members on proposed bylaw amendments. But that’s a story for another day. The point is that at the Annual Meeting in June of 2014, convenient, lawfully compliant electronic voting became a reality for AILA.

    II. Another Orwellian Adventure in AILA Governance Escapades

    Then things got very weird. Since September 2014, AILA has brazenly, then doggedly, and finally sullenly, insisted that the number one reason, the “crucial” reason,for reincorporating to DC is to extend enfranchisement of Members by gaining access to DC’s “true” electronic voting capabilities. Having been at the heart of the revelation AILA’s electronic historic voting debacle and its solution in the Spring of 2014, I was astonished to read this proposition. Once I looked at the proposed bylaws of the DC corporation, I was completely flabbergasted to see that not only would the bylaws (and DC law) provide electronic voting opportunities that are actually inferior to what AILA currently has under New York Law, but that buried in the DC bylaws was a cynical Trojan Horse provision guaranteeing that effective electronic voting on proposed bylaw amendments would never happen in AILA’s new DC corporation. After I exposed this duplicitous provision, even the Board of Governors was revolted enough to require leadership to remove it . The disingenuousness of AILA’s leadership on this topic is so intricate and astounding that it cannot even be summarized here. It must suffice to state simply that the suggestion that electronic voting is in any way, shape of form a reason for reincorporating to DC is, as I have already said, THE BIG LIE. (The origin of The Big Lie strategy is addressed in detail in my posts on AILA’s Message Center, under the thread Reincorporation – THE BIG LIE, http://messages.aila.org/showthread....on-THE-BIG-LIE, at POSTS 1 & 2; AILA Member access only).

    The other two reasons proffered for reincorporation are so feeble that they can be disposed of simply by saying them in plain words: (1) to rename the “Finance Committee” from an “advisory committee”, in the NY bylaws, to a “designated body” in the DC bylaws; and, (2) to “align” the AILA’s jurisdiction of incorporation with its current mailing address.

    III. My Lawyer Says....

    Apart from these three discredited marquee excuses for reincorporation to DC, AILA’s overarching argument is that the new NY law just imposes too many archaic, nit-picking rules, that hamstring their vision of power, and that when it comes to getting out of NY, everybody’s doing it. Leadership relies on its standard practice of invoking the purported advice of sage counsel, whose actual report is not released to the Members. Here’s how leadership characterizes counsel’s advice in its September 9, 2014 recommendation for reincorporation to AILA’s Board of Governors:

    “SUMMARY OF AILA'S OUTSIDE COUNSEL'S RECOMMENDATIONS
    AILA’s outside counsel in this matter is Caplin & Drysdale, a preeminent Washington, D.C. law firm specializing in tax, estate and nonprofit matters. Based on the advice of AILA’s outside counsel, and after analysis and discussion, the Bylaws Committee recommends that AILA amend its current Certificate of Incorporation and Bylaws to conform to current New York law, and to reorganize as a nonprofit member corporation under the laws of the District of Columbia.

    “WHY SHOULD AILA CEASE TO BE A NEW YORK NONPROFIT CORPORATION?
    In spite of (and sometimes because of) recent changes meant to modernize its regulatory regime for nonprofits, New York remains an inhospitable jurisdiction for the organization of nonprofits due to a nonprofit corporation law characterized by unusual and burdensome requirements. Today, practitioners with experience representing nonprofit organizations typically advise clients to avoid incorporating under New York law.” [Emphasis added.]

    That’s what AILA says.

    What does Caplin & Drysdale say? Well, here’s what they had to say in a December 20, 2013 presentation about the new New York revisions to the NFPC law:

    [NOTE: The possibly burdensome financial/audit/reporting restrictions and requirements applicable to charitable fund raising organizations are irrelevant to AILA, because AILA is not a charitable organization.]

    New York Adopts Substantial Changes to Laws Regulating Nonprofits

    “On December 18, 2013, New York Governor Andrew Cuomo signed the Nonprofit Revitalization Act of 2013 (the ‘Act’) into law. Aptly described by the New York Office of the Attorney General as 'sweeping reform legislation,’ the Act overhauls longstanding legal requirements that affect the operations, governance, and oversight of not-for-profit corporations and charitable trusts organized in New York and, to a lesser extent, other nonprofit organizations operating in the state. Most provisions of the Act will go into effect on July 1, 2014.

    “The Act makes the first significant revision to the Not-for-Profit Corporation Law (the ‘NPCL’) in over 40 years and includes updates to other laws affecting nonprofit organizations. * * * *

    “Although the Act removes many operational barriers currently plaguing nonprofit corporations, it also imposes new governance standards and requirements, some of which also apply to wholly charitable trusts. Some of the standards contained in the Act are similar but not identical to standards found in the Internal Revenue Code, which may create additional compliance challenges. [And which AILA should welcome. Perhaps these would have avoided the current IRS audit AILA is undergoing as a result of disclosures by a whistleblower — a ‘disgruntled member’, as AILA puts it.] New standards governing ‘related party transactions,’ prohibitions on employees serving as board chairs, and requirements pertaining to conflict-of-interest and whistleblower policies are likely to require amendments to bylaws and corporate policies. [Hallelujah!]

    “Notable reforms include:

    “Rules easing administrative burdens for all nonprofits doing business in New York:
    ....[discussion follows]

    “New standards for audit oversight and thresholds for financial report requirements for organizations that fundraise in New York:
    ...[irrelevant to AILA]

    “Rules streamlining the operations of not-for-profit corporations:
    ...[discussion follows]

    “A New Model?

    “The Act is the product of a innovative collaboration between the Office of the Attorney General and the nonprofit sector....reforms included in the Act echo changes to governance standards adopted by California in its Nonprofit Integrity Act of 2004, raising the question of whether such changes might be on the horizon in other states.

    (http://www.capdale.com/new-york-adopts-substantial-changes-to-laws-regulating-nonprofits)
    (Emphasis and comments added.)

    Hardly sounds like the Apocalypse or a call for AILA to abandon ship. To the contrary, more like a prescription for cutting edge age 21st century governance. Exactly the transparency and accountability that many AILA Members yearn for.

    IV.Three Questions that AILA has to answer about Itself

    On February 17, AILA leadership conducted a conference telephone “Town Hall Meeing” at which they spent about 40 minutes taking questions from Members about the reincorporation plan prior to the Board of Governors approving the plan 48 hours later. That Town Hall Meeting was essentially a last minute bit of pro forma marketing and transparency performance art. But one very interesting revelation emerged. During a contentious exchange with a notorious dissident Member about the real reasons for the reincorporation, AILA Secretary Market Lindt let drop, in what sounded to some ears like exasperation, the response that is the title of this article:

    “...we just want to operate the way we want to operate”....New York...has “rules that we don't want to be bound by”.

    So now that the truth is out, what does it mean? Here are three questions that AILA has to answer regarding this comment:

    1. Who are “we”?
    2. How do “we” want to “operate”?
    3. What are the rules of New York that “we” “don’t want to be bound by”?

    Let’s forget for a moment about exactly who “we” are. We know it’s not “us”, the Members.

    How “we” want to “operate” is a more compelling question. If past is prologue, methods that come to mind are high-handed, unaccountable, arbitrary and capricious, vindictive, insular, sclerotic, secretive, uninformed, paranoid, intellectually dishonest.

    But that’s not the worst of it.

    How do they want to operate, and what are the New York rules that “they” don’t want to be bound by? AILA has been incorporated in New York for nearly 70 years, and until July of 2014, its worst encounter with NY NFPC Law was AILA leadership’s running a stupidly embarrassing unlawful electronic voting system for years. And that’s been fixed. So what’s the problem? All that’s really changed in 70 years is that in July of 2014 New York’s robust new provisions requiring transparency in governance came into force –– and suddenly AILA leadership wants out. (As mentioned above, truly burdensome new financial/audit/reporting restrictions and requirements for charitable fund raising organizations are inapplicable to AILA.)

    Members will vote on the reincorporation plan on April 17. Not later than 50 days prior to the vote, AILA is required to present to the Membership the formal reincorporation plan and all of its constituent voting issues (there are several) with meaningful explanations of them. New York law requires that in connection with the reincorporation plan AILA must file affidavits with the Attorney General accurately describing “the objects and purposes of each such corporation to be promoted by the merger or consolidation”. NY NFPCL Articles 907-b, (b), (i) and 907-a,(a),(3). And that’s exactly the right standard for disclosures that must be made to the Members who are being asked to approve the merger.

    V.Three Questions that AILA Leadership has to answer about its Reincorporation Plan

    By February 26th AILA must explain to Membership exactly why they should vote in favor of the reincorporation, and that explanation should include:

    1. A listing of all the provisions of pre-2014 New York Law that impeded or currently impede AILA leadership in its governance functions, and a description of how they do so.
    2. A listing of all the provisions of New York Law that came into effect in July 2014 that will impede AILA in its governance functions in the future, and description of how they will do so.
    3. A comprehensive and coherent description of how reincorporating to DC will alleviate the existing and prospective threats to AILA’s governance functions described in answer to 1 and 2.

    There are many reasons to oppose AILA leadership’s reincorporation scheme. But until AILA comes up with convincing answers to the questions posed above, it’s enough simply to know that there is no real, legitimate need or reason for reincorporation, and that to let it happen on the basis of this “plan” will be to give license to AILA leadership to invent a new AILA with new bylaws that allow them to operate however they choose and will provide less, rather than more, transparency for, enfranchisement of and accountability to the Members.

    This reincorporation plan is simply not ready for prime time and should be put into the shredder. The Membership should vote NO on reincorporation on April 17.

    Reprinted with permission.


    About The Author

    Michael Owens has been an attorney since 1977 and an AILA member since 1996. He has maintained a general practice as an American attorney in Cologne, Germany since 1991. He was employed for 10 years by the US Department of Justice as an Assistant US Attorney and Special Attorney prosecuting organized crime.


    The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.

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