State alleges Union Club used bingo money for non-charity purposes

Aug 04, 2017
The Union Club Inc. on High Street in Springfield. Bill Lackey/Staff

The Union Club of Springfield has agreed to a settlement with the Ohio Attorney General’s Office to make changes to its charitable arm — the second in the last five years — amid allegations it used charitable funds from instant bingo for non-charity purposes and wrote off nearly $1 million in donations in 2014.

The matter is also under investigation by the Ohio Bureau of Criminal Investigation, Clark County Prosecutor Andy Wilson said. He declined to comment because it is an ongoing investigation.

Springfield lawyer Dan Harkins, who represents several former Union Club trustees, also says the AG’s office failed to enforce the terms of the first agreement.

Located at 139 W. High St., the Union Club is a charitable institution established in Springfield in 1933. The tax-exempt club had more than 5,000 members at one point and annually gives thousands to Clark State Community College and others for scholarships.

In May, an assurance of discontinuance was filed by the Ohio Attorney General’s office against the Union Club of Springfield – the portion that runs the club’s charity arm – in the Franklin County Court of Common Pleas, according to court records. It included several allegations by the Attorney General regarding the club, including that it failed to use money raised for charity through instant bingo in accordance with state law.

The Attorney General’s office alleged the charity wrote off an accounts receivable of nearly $1 million dollars, according to its 2014 990 tax form. That money was due and owed to it from Union Club – Two, Inc., which operates the bar portion of the club, according to the filing. The write-off was recommended by its auditors, but was not approved by the charity’s Board of Trustees, the Attorney General’s office alleged.

“Other than to review and rely upon the advice of their accountants Union Club of Springfield, Ohio made no other attempt to ascertain the collectability of this debt or to value this charitable asset prior to disposing of it,” the Attorney General’s office found.

The filing also says the club did not have a checking account devoted exclusively for its bingo profits; rather, the club had one bank account where it deposited funds from both the bingo operation and other sources, the Attorney General’s office found.

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The club disputed the allegations, according to the filing.

“This assurance is the culmination of disputed claims and does not constitute an admission of wrongdoing by (the) Union Club of Springfield, Ohio,” it says.

Charitable organization Treasurer Brian Long would not comment because the case is still pending litigation, he said. Social club Secretary Eliot West also declined to comment.

The attorney general’s office charitable law section is responsible for investigating any misuse of charitable funds alleged against nonprofits in the state. It entered into an agreement with the Union Club in 2013 that split the club into two entities — one to oversee charitable giving and one to manage the social club and its bar.

The move was made to ensure that no money raised by the charity, through a bingo license and other games, was diverted to support the social club and bar, according to court records.

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As part of the new assurance, the charity must take steps to value the accounts receivable — essentially to find out how much is collectible — from the money owed to it from the social club, said Kate Hanson, public information officer for the Ohio Attorney General’s Office.

“If the charity determines that some of it is not collectible, it must notify the Attorney General’s Office,” she said. “At this time, we haven’t received such notice.”

The 2013 assurance says if the Union Club violated the conditions of the agreement, it would be held in contempt of court and must pay $150,000 in damages to the Ohio Attorney General’s office.

Harkins said he believes the 2017 assurance should trigger the clause in the previous assurance, a position the Ohio Attorney General’s office does not agree with. Harkins is representing several former Union Club trustees who have continued to question the club’s finances.

Harkins said he and his clients met with Pete Thomas, the chief of the charitable law section for the Ohio Attorney General’s Office and Associate Assistant Attorney General Joe Schmansky, on June 2.

The contempt of court provision of the 2013 assurance should be triggered by the criminal investigation, Harkins said. His clients also told the AG’s office it wants the damages to be forfeited to the Springfield Foundation for the support of financially distressed union members.

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“The criminal referral in and of itself is a sufficient violation to cause the forfeiture,” Harkins said. “Why is the AG’s office backpedaling on that?”

No enforcement has been triggered because the two settlement agreements dealt with separate issues, said Kate Hanson, a public information officer for the AG’s Office.

“The 2013 assurance primarily dealt with illegal gaming machines and required previous charity board members to resign,” Hanson said. “On the other hand, the 2017 assurance addressed matters such as the accounts receivable, lease rate, and the requirement to include two board members who are not members of the Union Club –Two, Inc. or the Union Club of Springfield.”

The charity’s nonprofit or tax-exempt status is issued by the IRS, not by the state, Hanson said. The Attorney General’s office has authority over the charity, but not the social club, she said.

As part of the new assurance, Union club officers and members of the board of trustees were expected to complete multiple training sessions, including the state’s bingo school, by July 31. The board requested and were granted an extension until the end of September, Hanson said, which was allowed as part of the assurance.

Hanson declined comment on the criminal investigation.

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