Nonprofit Mergers and Acquisitions

New Jersey hospital closings have exposed a mergers and acquisitions strategy, popularized by rogue nonprofits, who remove social services and endowments accumulated over decades, while robbing all levels of government of tax revenue, as they enrich themselves personally.

Muhlenberg was started 131 years ago after a train accident, beginning a tradition of bequests and endowments long before government was expected to provide for charity care. Residents upheld a long tradition of leaving bequests and endowments they expected to compensate for charity care. The Muhlenberg Independents are researchers that believe the salvation of Muhlenberg lies in the protection of those assets that include an astonishing amount of real estate outside of Plainfield.  Muhlenberg exposes a fatal flaw in the protection given to endowments, after the benefactor’s death.

Wall Street tactics of mergers and acquisitions have spread and redefined the practices of a new generation of profiteers. Utilizing the barely scrutinized and rarely regulated structures of nonprofit corporations, the plundering of old richly endowed facilities, like Muhlenberg Hospital, is turning into a tragic loss of history and multiple generations of philanthropy. We must honor the sacrifice of people who made provisions to care for the poor and disenfranchised or return those assets to the appropriate heirs.

The Muhlenberg Independents are in possession of a small mountain of financial documents that prove the violation of donor intent and the failure of the State of New Jersey to protect the substantial donated assets of old hospitals that the state is closing. 

Muhlenberg remains an asset even in its current state. It does not matter if the hospital has been gutted and the cost of keeping such an old building functional is high. The only thing that cannot be replaced is the land.  The community deserves a fair price and an uncompromised sale with Solaris relinquishing all control over the assets of Muhlenberg.

Solaris/JFK Healthcare Systems was voted control of Muhlenberg’s substantial assets without payment or promises to continue to serve the community. Is their refusal to participate in a good faith effort to find a buyer indicative of their alternative agenda or the legal lack of standing to sell a facility that they control, but do not own?  Did Solaris/JFK Healthcare Systems even have the legal standing to apply for a certificate of need to close Muhlenberg?

Deborah Dowe

908-756-7273  DNV.Dowe@verizon.net                     www.TheMuhlenbergIndependents.blogspot.com

Virtually no media coverage of this change in financial law.

December 15, 2010

Position Paper on Uniform Prudent Management of Institutional Funds Act

New legislation is dismantling century old trusts and endowments that were supposed to
continue in perpetuity. This is the raiding and plundering of historic endowments to
compensate for property mortgages, pet projects, failed investments and expanded
personal compensation packages, which are not for the benefit of the Public and
certainly not the donors' intent. Unfortunately, new legislation is dismantling century old
trusts and endowments that were supposed to continue in perpetuity.

In 2006, The Uniform Law Commission (ULC) released Bush era guidelines
deregulating a substantial portion of nonprofit funds. More than 40 States have adopted
versions of these guidelines with very little debate and even less publicity. On June 10,
2009, NJ Governor Jon Corzine signed into law the Uniform Prudent Management of
Institutional Funds Act. This law creates troubling changes in the way that charitable
trusts and endowments are managed and regulated.

The use of the term "prudent" in dealing with "small funds" has resulted in an expansion
of the affected funds from the ULC suggested amount of $25,000 to a high of $250,000
in New Jersey and in a number of other States. These funds become "old" after the
suggested 20 years in NJ, and at least one State has shortened the time to 10 years.
Language on retroactivity is strategically vague and neglects public notification and
transparency.

Liquidating the principal in countless smaller endowments that support charitable work
in good times and bad will do irreparable harm to the public good that will eventually
achieve infamy as a crime against the living as well as the dead.

Most significant is the transfer of oversight from the jurisdiction of the States' Courts to a
political appointee - the State Attorney General - making nonprofits more vulnerable to
pay-to-play and unregulated asset transfers. Ethical assumptions about prudence,
motives, and human nature have subsequently been changed with lessons learned by
the banking crisis, predatory lending practices, bonuses amidst bailouts and the failure
of the SEC to regulate the exploitation of foundations and nonprofts by Madoff.

The dismantling of New Jersey hospitals, specifically Muhlenberg Regional Medical
Center, Plainfield, NJ, was facilitated of and by a corporate, nonprofit parent company
with related for-profit holdings and overlapping interests. The transfer of over a century's
accumulation of assets: endowments, gifts, real estate, facilities, and equipment was
done under the approval of the NJ State Government, and the NJ Attorney General's
Office. The cy pres doctrine was essentially ignored.

Citizens have raised the endowment issue at State hearings, in letters to the editor, and
various other venues, but all of this has fallen on deaf ears. The citizens are paying in
tax dollars the same State government employees who are not protecting their interests.

Unless the Muhlenberg Regional Medical Center private citizen's can muster enough
money to initiate a court action, all of the historic endowments will be lost forever, over a
century of charity and sacrifice will been squandered and lost to future generations. In
this case, the NJ UPMIFA of 2009 had not been passed, yet the raiding and plundering
of endowments happened anyway.