SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF ALBANY

PEOPLE OF THE STATE OF NEW YORK, by

LETITIA JAMES, Attorney General of the
State of New York, STIPULATION AND
ORDER OF
Petitioner, SETTLEMENT

-against-

THE LUTHERAN CARE NETWORK, INC., FRANK Index No. 5590-16

R. TRIPODI, JOHN MESLOH, RICHARD OLSON,
CHRISTOPHER JONES, ANNA MAE KNOWLES,
PETER MAZER, BARBARA RACZAK, JOHN
RUTH, LYNETTE TAYLOR, ARTHUR UPRIGHT,
ALEC DAVIS, JOHN SHANE, ANNETTE BALL, FR.
BRIAN McWEENEY, REV. DWAYNE MAU, and
LARAINE FELLEGARA,

Respondents.

This Stipulation and Order (“Stipulation and Order”) is entered into by and between

the Petitioner, the People of the State of New York, by Letitia James, Attorney General of

the State of New York (“Petitioner” or the “Attorney General”), and Respondents T he

Lutheran Care Network, Inc., John Mesloh, Richard Olson, Christopher Jones, Anna Mae

Knowles, Peter Mazer, Barbara Raczak, John Ruth, Lynette Taylor, Arthur Upright, Alec

Davis, John Shane, Annette Ball, Fr. Brian McWeeney, Rev. Dwayne Mau, Frank R. Tri podi

and Laraine Fellegara (collectively, “Respondents”). The Attorney General and the

Respondents are referred to collectively as the “Parties.”

WHEREAS, the Parties desire to amicably resolve the above captioned action (the

“Action”) and avoid the expense of further litigation;

-1-
 WHEREAS, the Parties have concluded good faith negotiations and have reached a

resolution of the claims and defenses in the Action and desire to implement such agreement

in accordance with the terms and conditions of this Stipulation and Order;

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and

between the Parties as follows:

A. THE PARTIES

1. Petitioner the Attorney General is responsible for overseeing the activities of New

York not-for-profit corporations, including charitable organizations, and the conduct of their

officers and directors. The Attorney General is also responsible for ensuring that charitable

assets are properly administered in accordance with the New York Not-for-Profit Corporation

Law (“N-PCL”), the Estates Powers & Trusts Law (“EPTL”) and the Attorney General’s

common law parens patriae authority.

2. Respondent The Lutheran Care Network, Inc. (“TLCN”) is a New York charitable

corporation, which is the sole corporate member of a number of affiliated charitable

organizations.1 TLCN’s affiliated charitable organizations, not TLCN, deliver residential services

to senior citizens and others. TLCN is recognized by the Lutheran Church - Missouri Synod and

the Evangelical Lutheran Church in America (hereafter referred to collectively as “the Lutheran

Church”) as a church-related social services organization and views the operations of the

affiliated charitable organizations as a mission. At all times relevant to this action, TLCN’s

corporate mission was primarily concerned with promoting the health of the community by

1. Throughout this document, “TLCN” shall be used to refer to decisions or actions made
on behalf of the corporation acting through the TLCN Board, including its executive management, but
shall not apply to specific individual respondents unless identified with respect to a particular decision,
action or factual recitation. Further, it should be noted that the non-executive respondents served on the
TLCN Board at varying times over the period covered by this Stipulation and Order of Settlement.

-2-
serving as a member of and supporting affiliate organizations in their service to the aged. See

also Para. 21 below.

3. TLCN’s affiliated corporations include non-party Coburg Village, Inc.

(“Coburg”), a New York not-for-profit, charitable organization. Coburg was incorporated by

directors of what is now TLCN in 1993 for the purpose of “meet[ing] the special housing needs

of elderly persons…by planning, developing…owning, operating and maintaining safe, sanitary,

independent living facilities in Saratoga County for elderly individuals and families…” Coburg

owns and operates the Coburg facility in Rexford, New York, an independent, private-pay senior

living facility in the Town of Clifton Park.

4. TLCN’s other affiliated organizations include not-for-profit corporations that

operate subsidized housing for low income senior citizen residents located in Poughkeepsie,

Pawling, Brooklyn, Delmar, and Long Island; nursing homes located in Delmar and

Poughkeepsie; and assisted living residences in Delmar and Kingston.

5. Respondent Frank Tripodi (“Tripodi”) was, at all times relevant to the Attorney

General’s investigation, the President and Chief Executive Officer (“CEO”) of TLCN. In that

capacity, he was a member of the TLCN board and the boards of all affiliates, and served on all

committees of those boards. Respondent Tripodi resigned from his positions with TLCN and

affiliated charitable organizations in January 2018 during the course of this Action.

6. Respondent Laraine Fellegara (“Fellegara”) was, at all times relevant to the

Attorney General’s investigation, the Chief Financial Officer (“CFO”) of TLCN and each of the

affiliates. In that capacity, Ms. Fellegara was involved in all financial decisions relating to TLCN

and its affiliates. Ms. Fellegara was appointed CEO of the TLCN network, after a period of

service as interim CEO, following Tripodi’s resignation.

-3-
 7. Together, at all times relevant to this proceeding, Tripodi and Fellegara comprised

the executive management of TLCN and TLCN’s affiliated organizations (collectively,

“executive management”).

8. Respondents John Mesloh, Richard Olson, Christopher Jones, Anna Mae

Knowles, Peter Mazer, Barbara Raczak, John Ruth, Lynette Taylor, Arthur Upright, Alec Davis,

John Shane, Annette Ball, Fr. Brian McWeeney, Rev. Dwayne Mau (collectively “TLCN

Board”) were TLCN board members at all times relevant to the Attorney General’s investigation.

B. BACKGROUND OF PETITIONER’S INVESTIGATION AND ACTION

9. In December 2013, Coburg’s Board of Directors rejected the 2014 budget

proposed for the facility by TLCN’s management, citing concerns with the budgeted

management fees payable to TLCN, rising rents, and proposed cuts to resident services. In

response, the TLCN Board overrode the Coburg board and approved the budget.

10. In March 2014, the TLCN Board voted to remove the entire boards of directors

for Coburg and all other affiliates. Directors were invited to join an expanded TLCN board,

whose members would act as directors of TLCN and all affiliates.

11. Later, after residents sent a petition to the TLCN Board regarding proposed rent

increases and proposed cuts to key services, TLCN CEO Tripodi sent confrontational emails to

the resident association member who sent the petition, and to Coburg’s Executive Director

(“ED”). The ED, who had worked at the facility for many years, was terminated on July 21,

2014, nineteen days after a contentious town hall meeting between the Coburg residents and

Tripodi regarding the issues raised by the Residents’ Association. Shortly thereafter, the Coburg

resident, who was the volunteer president of the Resident’s Association and had officiated the

-4-
town hall meeting, was served with a notice that his lease would not be renewed; in effect, a de

facto eviction notice.

12. The Attorney General commenced an investigation of the governance and

operations of TLCN and its officers and directors as they related to Coburg during the period

2011 through 2014.

13. On September 22, 2016, by Order to Show Cause and pursuant to a verified

Petition supported by documents and testimony obtained in the course of the Attorney

General’s investigation, Petitioner instituted this special proceeding against Respondents

seeking to enjoin future unlawful conduct, rescind unlawful transactions and remove TLCN

and its leadership from their position of authority over Coburg. The petition asserted four

causes of action alleging violations of N-PCL §§508, 515(b), 715 and 717 and EPTL §8-1.4.

14. This Action was initially dismissed by the Supreme Court in a

Decision/Judgment, dated September 13, 2017. Following Petitioner’s appeal, the Appellate

Division, Third Department, affirmed dismissal of Petitioner’s first cause of action seeking

prospective injunctive relief, and reinstated the second, third and fourth causes of action i n

the Petition. In a Memorandum and Order, entered on December 20, 2018 (“Appellate

Decision”), the Appellate Division stated:

inasmuch as Coburg is an independent corporation, TLCN may not operate

Coburg in a manner inconsistent with Coburg’s purpose, nor engage in related
party transactions without complying with the relevant provisions of the [N-
PCL].

Appellate Decision at 4. The Appellate Division remanded the Action to the Supreme

Court for further proceedings, holding:

Genuine issues of material fact exist as to whether [R]espondents violated

their duty to Coburg by improperly utilizing [Coburg’s] surplus [assets] to

-5-
 benefit TLCN and its other affiliates and by engaging in related party
transactions that were not in Coburg’s best interest.

Appellate Decision at 6.

C. FACTUAL RECITATIONS

15. In consideration of making and executing this Stipulation and Order, Respondents

do not dispute the factual statements set forth in paragraphs 16 to 45.

The Corporate Structure and Governance of TLCN

Coburg and Other Affiliated Not-for-Profit Corporations

16. TLCN and its affiliated organizations were designed to follow a “passive

parent” corporate structure, with TLCN as the sole member of a network of not -for-profit

corporations. The TLCN network is structured such that each affiliate is a separate distinct

corporate entity, with its own board of directors. The affiliate boards are charged with

operating and managing their particular residential facilities and programs in accordance

with their stated charitable mission, individual organizational documents and, where

applicable, state licenses.

17. As the sole parent, TLCN was structured to exercise only limited reserved

powers over the affiliates – the authority to elect and remove board members, maintain

religious affiliation with the Lutheran Church, amend the bylaws of the affiliate

organizations, and approve certain financial decisions of the affiliate boards.

18. The “passive parent” corporate structure utilized by TLCN and its affiliates, if

properly realized, is not unique. The “passive parent” role is commonly used among related not-

for-profit health care organizations seeking to collaborate in support of a related mission.

19. System based networks are also common, and used to efficiently manage finances

and administrative affairs among affiliated organizations. By affiliating, the charitable

-6-
corporations in the network can benefit from streamlining operations, increasing purchasing

power, centralizing policies, and mitigating financial risks.

20. A network governance structure can be a useful and appropriate means of

organizing affiliated charitable corporations, but the member corporation owes its affiliates and

their charitable beneficiaries a fiduciary obligation to act in compliance with the affiliate

corporation’s governing documents and in the best interests of the charitable mission of the

organization affected by that action.

21. Given the relationship between TLCN and its affiliated corporations, and the

relationship between the TLCN network and the Lutheran Church, TLCN viewed the

network as having a unified mission, and further believed that, through a “Policy Statement”

created on or about 1995 in the former name of TLCN “Wartburg Lutheran Services,” it was

empowered to take certain actions with respect to the affiliates, and that the organizations

within the network were authorized to assist the financial stability of other organizations if

needed. The minutes of the affiliated corporations do not reflect the formal adoption of that

policy, and no corresponding amendments to the affiliates’ respective certificates of

incorporation were made to reflect it nor were submitted to and approved by the Attorney

General. Nonetheless the network persisted to operate under this understanding for more than

twenty years.

22. Thus, as discussed herein, TLCN exercised control over affiliates in excess of

that delineated in the relevant organizational documents, including having the same directors

set and approve management fees payable to TLCN beginning in and after December 2013

without considering and recording any resolution of any anticipated or actual conflicts of

obligations.

-7-
 Management Fees

23. TLCN attempted to leverage the benefits of an affiliated network by jointly

purchasing goods and services for its affiliate organizations through TLCN’s executive

management structure. This approach was initially adopted as a practical way to provide

financial benefits to the affiliate organizations. TLCN effectively operated as one unified entity

rather than a network of independent not-for-profit corporations with separate corporate

purposes, missions and by-laws, as required by the network’s structure.

24. TLCN had limited independent revenue sources other than the management fees

that it charged each affiliate annually. Tripodi and Fellegara, who served as executives of TLCN

and exercised approval authority for each of the affiliates, were responsible for setting the

amount of the management fees recommended as part of the annual budget process. They did so

by estimating TLCN’s yearly budget and then allocating TLCN’s revenue needs among the

affiliates in the form of the “management fees,” which they included in each affiliates’ yearly

budget. Tripodi and Fellegra also prepared proposed budgets for each affiliate. There was no

written methodology for executive management’s allocation of management fees between and

among the affiliates, and no record confirming receipt of services provided for the fee. Coburg’s

allocation amounted to approximately one-third of TLCN’s administrative operating expenses.

25. Prior to 2017, there were no management or services contracts with any of the

affiliate organizations. Instead, TLCN presented its management fees as a lump sum in the

affiliate’s budget for approval. The basis for the amount of TLCN’s management fees, the

allocation among the affiliates, or the services to be expected in return for payment was not

documented in corporate records, including minutes. The sole “agreement” to the fees is a

memorandum document, entitled the “Intercompany Management Fee Agreement,” which was

-8-
signed by Tripodi, Fellegara, and the executive director of the affiliate once the budget process

was completed.

26. TLCN did not formally document or account for the services it performed in

exchange for the management fees. In addition, the management fees Coburg actually paid to

TLCN during each fiscal year were not necessarily consistent with the memorandum agreement

or the yearly budgets. Further, TLCN provided no written explanation for increasing the fees

charged over time. There is an absence of corporate records establishing that either the TLCN or

Coburg board reviewed or approved TLCN’s imposition of management fees in excess of

budgeted amounts.

27. In 2012, TLCN’s executive management reclassified a $500,000.00 loan payment

by Coburg to TLCN as payment of management fees. While executive management testified

that the reclassification decision was made based in part on discussions with an outside auditor,

the decision to recast the loan payment was made without notice to, review or formal approval

by Coburg’s or TLCN’s board. However, executive management reported the reclassification to

the Board’s Finance Committee and thereafter, TLCN’s outside auditor, John Olson of The

Bonadio Group, reported the reclassification to the Board’s Audit Committee. At that time,

these Finance and Audit Committees were acting as committees of the unified TLCN/Coburg

Board, which is discussed in Paragraph 29 below. The result was a substantial increase in the

management fees paid by Coburg for that particular year (without a corresponding increase in

services provided) and the extension of Coburg’s obligations on the loan.

28. Corporate records do not reflect how the TLCN management fees placed on

Coburg served Coburg’s interests, its mission or otherwise inured to its benefit. For many years,

however, Coburg’s Board felt that TLCN ran the network efficiently and well, and that Coburg’s

-9-
residents, who are charitable beneficiaries of Coburg’s mission, were satisfied that the

management fees demanded were commensurate with the services provided by TLCN. When the

Coburg Board rejected the 2014 budget developed by TLCN and questioned the basis for this

action, there was a divergence of corporate interests. Rather than honor the Coburg Board’s

decision or submit to further negotiation to resolve it, the TLCN board simply overrode the

Coburg Board and approved a budget containing items rejected by the Coburg board without

further input from or communication with the Coburg board.

29. As noted above (Para. 10), in March 2014, the TLCN Board voted to consolidate

boards and directors. It removed all directors of the affiliate boards, including Coburg, and

invited directors of the affiliate boards to join the TLCN Board. The unified board then became

the sole board for the member and each affiliated organization. Following that decision, the

board minutes (which were no longer separated among the affiliates) reflect no discussion of

budgets for fiscal years 2015 and 2016. None of the corporate governing documents were

amended to reflect operations as a unified enterprise.

Conflicts of Interest/Related Party Transactions

30. TLCN relies on management fees paid by its affiliate organizations as a primary

source of income. The management fees payable by the affiliates to TLCN were initially set by

TLCN’s executive management, Tripodi and Fellegara, and approved by the TLCN Board as

described herein. Their salaries and fringe benefits represented approximately 40% of the total

TLCN yearly operating budget, but as contract employees, their remuneration was governed by

contract and was not contingent on receipt of management fees.

31. The TLCN and Coburg board minutes do not reference discussion of the conflict

of interest and potential related party concerns arising in connection with the management fees

-10-
transactions, nor assessment of the impact of the transaction to Coburg. There is no record that

the requirements of either version of the statute were met.

32. Prior to the Attorney General’s investigation, TLCN’s conflict of interest policy

was not compliant with the N-PCL. TLCN’s conflict of interest policy included in the

organization’s bylaws specifically excluded inter-company transactions.

33. During the time-period covered by the Attorney General’s investigation, TLCN

retained conflict of interest disclosure forms that were incomplete and outdated due to changes in

the N-PCL.

34. For instance, Tripodi, as a TLCN director and member of executive management

and an overseer for all affiliate management, had a financial interest in multiple inter-company

transactions, including the management fee agreements. Tripodi could benefit financially from

decisions he made as executive management, which posed a risk that his decisions would be

based on his best interests rather than the interests of the organization he was serving.

35. One such instance occurred in 2014, when Tripodi and Fellegara were granted a

bonus contingent upon the sale of TLCN’s affiliates in Bethlehem, NY – a transaction that they

negotiated, presented to the board, and submitted to the Office of the Attorney General for

approval. The contingency interest was raised during the TLCN board meeting of June 12, 2014,

in which the board voted to award a 7.5% raise to Tripodi’s and Fellegara’s base compensation

upon closing the sale of the Good Samaritan Nursing Home,2 with the possibility of

reconsideration on an annual basis and adjusted upward or downward based on performance.

36. Terms of a proposed Good Samaritan sale were presented by Tripodi to the Board

during a meeting held on May 15, 2015, at which Fellegara was also present. The board minutes

2 The “Good Samaritan Nursing Home” refers to TLCN facilities in Delmar, New York,
including Bethlehem Commons, Kenwood Manor, and a low-income senior housing facility.

-11-
do not reflect discussion of a potential conflict of interest or that Tripodi and Fellegara were

asked to leave the meeting prior to the vote approving the sale or during consideration of the

terms. The executives’ contingency interest was similarly not disclosed to the Attorney General

when the organizations sought approval for the sale as required by the N-PCL. Neither the TLCN

Board nor TLCN’s executive management recognized the possibility of a conflict of interest in

this transaction. Ultimately, the sale of this facility was never completed, and no bonus was

paid. Moreover in the course of this proceeding, Tripodi and Fellegara gave up the bonus.

37. Three of TLCN’s directors and officers admitted in testimony to a practice of

making inter-company asset transfers between and among the affiliates in the network for

various reasons, including financial assistance to struggling affiliates. This practice, while not

uncommon among corporate networks, requires a commonality between the organizations of

permitting mission-supporting transactions, including to transfer funds for particular purposes.

Because TLCN and its affiliates were set up as separate corporate organizations, any such

transfers required consideration, with appropriate supporting documentation, of the potential

conflict of interest and the elements required by N-PCL §715. Such consideration was not

evidenced in board meeting minutes or other documents produced by TLCN pursuant to

subpoena.

Retaliation Against Charitable Beneficiaries

38. On July 1, 2014, N-PCL §715-h became effective and requires every corporation

with twenty or more employees and annual revenue in excess of one million dollars to adopt a

whistleblower policy that complies with the statute. Inherent in the requirement to adopt a

compliant policy is the requirement that an organization also abide by the minimum

requirements of the whistleblower statute, that provides:

-12-
 Such policy shall provide that no director, officer, employee or volunteer of a corporation
shall suffer intimidation, harassment, discrimination or other retaliation or, in the case of
employees, adverse employment consequence.

39. Prior to enactment of this statutory requirement, TLCN had adopted its own

policy, providing in relevant part that:

The Lutheran Care Network shall not permit retaliation against employees,
individuals or others for:

a) exercising any right under, or participating in, any process established by

federal, state or local law, regulations or policy;

b) filing a complaint with The Lutheran Care Network and/or any government
agency;

c) testifying, assisting or participating in a self-evaluation, audit, investigation,

compliance review, proceeding or hearing or reporting concerns to appropriate
officials;

d) opposing, in good faith, any act or practice made unlawful by federal, state or
local law, regulation or policy, provided that the manner of the opposition is
reasonable and does not itself violate law.

40. Tripodi failed to comply with TLCN’s policy and the law through his actions

towards the charitable beneficiaries of Coburg and its employees.

41. For instance, when Coburg’s Executive Director was unable to meet restrictions

placed on the dietary budget for Coburg’s residents under the 2014 TLCN approved budget.

TLCN’s executive management began to consider use of a new outside vendor to increase the

efficiency of the dietary operations. The residents learned of the proposed dietary changes,

which, along with the proposed 2% increase in rent, became a significant point of contention.

42. Subsequently, the Coburg Village Residents’ Association wrote to the TLCN

Board with their concerns, noting the impact of the two changes on the residents, and

-13-
questioning the need for what was perceived as austerity provisions given the substantial surplus

earned by Coburg. That letter ultimately led to a contentious town hall meeting between Tripodi

and the residents. Tripodi attributed responsibility for the hostile atmosphere to Coburg’s

Executive Director and the residents’ council in multiple communications.

43. Tripodi’s termination of Coburg’s Executive Director followed multiple emails in

which Tripodi articulated his perception that Coburg’s Executive Director was responsible for

the residents’ dissatisfaction with proposed dietary changes and rent increases. He chastised

Coburg’s Executive Director for providing residents with contact information for TLCN board

members, and expressed his belief that Coburg’s Executive Director’s allegiance should be to

executive management over Coburg’s residents, the charitable beneficiaries. The Executive

Director’s personnel file produced by TLCN failed to document performance issues that would

justify termination, instead demonstrating a long and favorable employment history, during

which the Executive Director received multiple commendations and promotions.

44. Similarly, Tripodi explicitly expressed that the non-renewal of the lease of the

President of the Residents’ Association Executive Council was tied to that resident’s perceived

activism, including communication with the Attorney General. On July 31, 2014, Tripodi sent an

email stating:

Just today a resident shared with me a publication that [Coburg’s Executive Director] put
out in June. The article was written by . . . a resident here at Coburg Village. I wanted to
share with you so you are aware of some of the damage [Coburg’s Executive Director
and a resident] has [sic] done here.

That document has been shared with all the residents, staff and family members. [The
President of the Coburg Resident’s Association] is the main trouble maker and continues
to spew venom. He had a meeting here at the beginning of the week with his attorney
peers and recited to them chapter and verse what was going on here at Coburg. Our
marketing person was outside the room and tried to correct the statements but [the
President] over rode her.

-14-
 President of the Coburg Resident’s Association’s lease is coming due for renewal in
September and I have asked [a TLCN advisor] to review our lease to determine if we can
refuse to renew his lease. [The President of the Coburg Resident’s Association] is the one
bad apple who continues to spoil the barrel. I am making progress but it feels like two
steps ahead and three behind. [The President] is also letting it known [sic] that he
reported us to the Attorney General’s office. He is the president of the Resident’s
Association and his election was not a popular one.

45. The publication referenced was authored by the President of the Residents’

Association and documented his analysis of the Coburg IRS Form 990s, in which he referenced

concerns over the member’s motive to draw money from the Coburg facility’s revenues.

Attorney General’s Conclusions of Law

46. N-PCL §621(a) requires not-for-profit corporations to maintain “correct and

complete books and records of account and minutes of the proceedings of its members, board

and executive committee, if any.” The records and minutes maintained by the corporation are

prima facie evidence of the facts stated therein. N-PCL §621(g). TLCN’s minutes and other

corporate records failed to demonstrate that actions taken with respect to its affiliate

corporations, including Coburg, adhered to required fiduciary duties and the specific missions of

those affiliates.

47. TLCN’s mission, to support its affiliates, was affected by its own interest in

obtaining funds to support its operations. As a result, Coburg’s mission, to serve its residents,

was treated as subservient to TLCN’s needs. In particular, TLCN imposed management

decisions on Coburg that TLCN did not have the unilateral authority to make and which were not

in furtherance of Coburg’s mission. This conduct violated the provisions of N-PCL §§202, 508,

and 717 as well as EPTL §8-1.4, which govern the duty and authority of not-for-profit

corporations and their officers and directors concerning use of corporate assets to serve the

interest of the entity and its mission.

-15-
 48. N-PCL §715 governs related party transactions in not-for-profit corporations.

Prior to July 1, 2014, N-PCL §715(b) provided, in relevant part:

No contract or transaction between a corporation and one or more of its directors or

officers, or between a corporation and any other corporation, firm, association or other
entity in which one or more of its directors or officers are directors or officers…shall be
void or voidable for this reason alone…(1) If the material facts…are disclosed in good
faith or known to the board or committee, and the board or committee authorizes such
contract or transaction by a vote sufficient for such purpose… .

49. Section 715 of the N-PCL was amended by the Not-for-Profit Revitalization Act

on July 1, 2014.3 As amended, N-PCL § 715 imposes new express procedural requirements and

substantive standards for review and approval of related party transactions. The amended

version of N-PCL §715(a) provides:

No corporation shall enter into any related party transaction unless the transaction is
determined by the board to be fair, reasonable and in the corporation’s best interest at the
time of such determination. Any director, officer or key person who has an interest in a
related party transaction shall disclose in good faith to the board or an authorized
committee thereof, the material facts concerning such interest.

In making this determination, N-PCL §715(b) requires the board of a charitable corporation,

such as TLCN or Coburg, prior to entering into a transaction in which a related party has a

substantial financial interest, to:

1) Consider alternative transactions to the extent available;

2) Approve the transaction by not less than a majority vote of the directors or committee
members present at the meeting; and

3) Contemporaneously document in writing the basis for board approval, including

consideration of any alternate transactions.

3 The Attorney General’s investigation concerned conduct and events that occurred both before
and after the amendments to the law governing related party transactions in the Not-for-Profit
Revitalization Act in July 2014.

-16-
 50. Related party transactions are defined as transactions between the charitable

organization and any director, officer or key employee with a financial interest, or any entity

controlled by them. N-PCL §§102(23) and (24). This amended statutory definition is a shift from

the pre-2014 version of the N-PCL, which referred to interested transactions as those between “a

corporation and one or more of its directors or officers, or between a corporation and any other

corporation, firm, association or other entity in which one or more of its directors or officers are

directors or officers.”

51. TLCN had a substantial interest in management fees transactions with its

affiliates, including Coburg, because those fees are the primary source of revenue for the

member corporation. TLCN’s operating budget depends on the revenue generated from

management fees, and the salaries and fringe benefits earned by TLCN’s executive management

also depend on this transaction. Accordingly, the Attorney General concluded that the

management fee transactions between TLCN and its affiliates constituted related party

transactions under all versions of N-PCL § 715 in effect during the period investigated by the

Attorney General. TLCN’s minutes did not document consideration of the potential conflicts of

interest in these transactions. The minutes also do not document review of those transactions to

ensure that the transactions were fair, reasonable and in the best interests of Coburg at the time of

the determination, as required by the applicable law governing related party transactions.

52. N-PCL § 715-a requires the board of a New York not-for-profit corporation to

“adopt a conflict of interest policy to ensure that its directors, officers and key employees act in

the corporation’s best interest and comply with applicable legal requirements, including but not

limited to the requirements set forth in section seven hundred fifteen of this article.”

-17-
 53. TLCN failed to maintain an appropriate conflict of interest policy and

documentation reflecting disclosure and consideration of conflicts in transactions between the

network and its directors and officers, as well as among the affiliated corporations. This conduct

constitutes a breach of the fiduciary duty of loyalty and violates N-PCL §§508, 515, 715, and

715-a.

54. The actions taken by Tripodi in connection with concerns relayed to him by

Coburg’s staff and its charitable beneficiaries were violative of TLCN’s policies, public policy,

and the provisions required by N-PCL §715-h. Charitable not-for-profit corporations operate to

serve the class of charitable beneficiaries defined by their organizing documents and must

conduct their business transparently, openly, and in the primary interest of the beneficiaries they

are obligated to serve. As an officer and director of TLCN and affiliates in the network, Tripodi

failed to meet these standards. Tripodi’s actions were intimidating and threatening to the

charitable beneficiaries he was required to serve and demonstrate a fundamental disconnect

between Tripodi and his obligations as a director and officer of a not-for-profit, charitable

corporation. As the CEO of TLCN, Tripodi was ultimately responsible for ensuring operational

compliance and should have been receptive to the concerns of the beneficiaries he was charged

to serve.

55. The actions outlined herein support an action for removal of officers and directors

pursuant to EPTL §8-1.4(m) and N-PCL §§706 and 714.

Actions Taken Subsequent to Investigation/Petition

56. Since the Attorney General commenced its investigation and during the course of

this proceeding, TLCN has taken actions in furtherance of achieving compliance with the N-PCL

and addressing concerns raised by the Attorney General.

-18-
 57. In 2016, TLCN began efforts to redraft its conflict of interest policies and update

corporate documents to reflect the common purposes of the network organizations and to come

into compliance with the law.

58. In 2017, independent directors were appointed for each affiliate, with each

affiliate maintaining a majority of independent, that is to say, non-TLCN, directors.

59. Also in 2017, TLCN revised its management fees policy by developing a

management services agreement reflecting the services to be provided to each affiliate

organization and providing for a reconciliation process at the end of the contract term. This

Stipulation and Order is intended to codify and expand upon those actions in full and final

resolution of the Attorney General’s investigation and the issues raised in the Petition. As a sign

of its good faith, TLCN has engaged in detailed and candid discussions with the OAG regarding

the issues and potential solutions, and enters into this Stipulation and Order, accepting its

responsibility for not operating in conformity with its obligations under the law.

D. STIPULATION

60. Respondents stipulate to the factual recitals outlined in paragraphs 16 through and

including 45, upon which the OAG reached certain legal conclusions outlined in paragraphs 46

through and including 55. TLCN has recognized that, while not intending to violate the law, its

actions, operations, documents and procedures did not remain current and did not reflect full

appreciation of the risks of conflict of interest and dominance of executive management. TLCN

focused on assuring service to the community under what was assumed was a broadly accepted

statement of common policy setting forth a broad mission for TLCN and a role for it to play with

the affiliates. As a consequence, its governing documents were not updated, policies were not

implemented and directors and officers were not educated on their legal duties in this not-for-

-19-
profit corporate structure. Unfortunately, this may be a common failing of smaller mission-

driven organizations, and ought to be an object lesson for the wider charitable community.

TLCN has begun taking steps, as outlined above, towards remedying the issues identified, and in

complete resolution of the pending action.

61. The Parties agree that:

A. Within 30 days of the date of this Order, with the approval of the OAG, TLCN

will amend the network’s certificates of incorporation to better reflect the mission of the

network, including commonalities of mission among the affiliates, in a manner acceptable to the

Attorney General, including:

i. Independent boards of directors for each affiliate organization, meaning that a

majority of the members must not be shared between TLCN and the affiliate;
ii. An addition to the Coburg Certificate of Incorporation that requires one board
member to be selected from the Coburg Village Residents’ Association Executive
Council to be on the Coburg Village, Inc. board of directors;
iii. Amendment of Paragraph 6 of the Coburg Certificate of Incorporation to
accurately reflect the current board and any changes required by the Attorney
General (including an Executive Council member); and
iv. A provision recognizing that all network organizations continue to be subject to
all provisions of the N-PCL and the EPTL, as well as the jurisdiction of the
Attorney General’s Charities Bureau

B. Attorney General approval of the amended certificates of incorporation will be

contingent on the following:

i. A proposal, acceptable to the Attorney General, for the selection and appointment
of board members, which must include a process for selecting board members that
reflects interests and experience in management, finance, health care, and other
expertise to advance the needs of the affiliate;
ii. Review and approval of Coburg’s current board members by the Attorney
General based on submission of a professional resume or equivalent information,
outlining the educational and work experience of the directors, including not-for-
profit experience;

-20-
 iii. Notification to and approval by the Attorney General to any changes to the
Coburg board of directors made within three years of the date of the Stipulation
and Order;
iv. Approval by the Coburg board (as constituted and approved pursuant to this
Stipulation and Order) of the amendments to the Coburg Certificate of
Incorporation;
v. Retention of the primary mission of Coburg Village, Inc. (as set forth in Coburg’s
Certificate of Incorporation, ¶3(a))
vi. Provision of notice to the Coburg residents, acceptable to the Attorney General, of
the amendments and that funds paid by those residents may be used to support
other affiliated organizations;
vii. Primary use of Coburg Village assets for Coburg Village operational and capital
improvement costs as outlined in N-PCL §508; and
viii. Provision of financial information on an annual basis to the Coburg Village
Resident’s Council, including proposed budgets, board meeting minutes, and
year- end financial statements. Copies of this information will be provided to the
Attorney General for three years from the date of the Stipulation and Order.
C. The amended purposes will not take effect until the amendment is filed with the

New York State Department of State, and further agrees that any charitable assets held by the

corporation prior to the effective date of the amendment must be used solely for the pre-

amendment purposes of the corporation;

D. Within 30 days of the date of this Stipulation and Order, TLCN shall amend its

bylaws and those of the affiliate corporations in a manner acceptable to the Attorney General,

including:

i. Removal of any exemption of inter-company transactions from the conflict of

interest policies governing TLCN and the affiliates;
ii. Capping the number of TLCN board members who may be on the board of an
affiliate;
iii. An express requirement that each organization retain a majority of directors
independent of TLCN;
iv. An express requirement, relative to Coburg only, that at least one member of the
Coburg Board of Directors be a member of the Residents’ Association Executive
Council as consistent with the Certificate of Incorporation;
v. An express requirement that, in exercising its reserved powers, the Member must
act in accordance with its fiduciary duties to the affiliate; and

-21-
 vi. Removal of any mission statements except as consistent with the Amended
Certificates of Incorporation.
E. Within 45 days of the date of this Stipulation and Order, TLCN shall amend its

procedures for related party transactions, including inter-company transfers and the assessment

of management fees, in a manner acceptable to the Attorney General, including:

i. Communication, in the form of a contract, to each affiliate organization of the

services to be provided in exchange for management fees assessed;
ii. Approval by each affiliate board of inter-company transfers, including
management fee contracts;
iii. Maintenance by each affiliate of minutes that comply with N-PCL §715 for inter-
company transfers, including management fee contracts;
iv. Clear procedures, acceptable to the Attorney General, by which TLCN will
account for the time spent on the tasks for which management fees have been
assessed for each affiliate; and
v. A requirement that each affiliate board is provided with the TLCN budget,
including salary information, prior to each yearly board meeting at which the
management fees are approved.
F. Partial return of management fees paid by Coburg from 2014-2016, as well as the

$500,000.00 reclassified in 2012, shall be made by the Respondents as detailed below:

i. There shall be no increases in the rents due from Coburg residents on

any rental units for five years beginning [fiscal year] 2017 and ending
in [fiscal year] 2022, regardless of when the resident took possession
of the unit. Upon receipt of documentation verifying that no rent
increases were imposed for [fiscal years] 2017 and 2018, credit for
these years will be granted. No rent increases shall be imposed for
fiscal years 2020, 2021 and 2022; and
ii. Pursuant to this Stipulation and Order, TLCN assumes responsibility
for ensuring compliance with the agreement to freeze Coburg rents
and Coburg, a non-party to this proceeding, has entered into a
separate Letter Agreement, dated November __, 2019, memorializing
its agreement to freeze Coburg rents as set forth herein. In the event
that Coburg, without approval from the OAG, fails to comply with the
agreement not to raise rents at Coburg during the agreed upon period,
TLCN bears responsibility for making full restitution to Coburg,
including without limitation by reimbursing Coburg residents for any
increases in rent and any related damages.;
iii. For a period of five years from when this Stipulation and Order is

-22-
 signed, all intercompany transfers from Coburg to any other affiliate
in the TLCN network, including donations, with the exception of
transfers made pursuant to management fee agreements, require
thirty-day advance notice to the OAG with an explanation of the
terms of and purpose of the transfer. TLCN will ensure that such
notice if provided to the OAG;
iv. Within 30 days of execution of this Stipulation and Order, Laraine Fellegara
shall pay the amount of $25,000 to Coburg Village; and
v. Within 30 days of execution of this Stipulation and Order, Frank Tripodi
shall pay the amount of $100,000 to Coburg Village.
G. Tripodi is permanently barred from serving in any capacity as a director or officer

of TLCN or any TLCN affiliate, and shall be permanently barred from serving as an officer,

director, trustee or in any position where he has any fiduciary responsibilities in New York State,

including but not limited to responsibility for financial and/or management oversight over: 1)

any not-for-profit or charitable organization incorporated, registered, operating or soliciting

contributions in New York; 2) any funds or other assets solicited or donated in furtherance of any

charitable cause; or 3) any other person (individual or entity) holding charitable assets or

soliciting charitable contributions in the State of New York.

H. Respondents agree that all policies and procedures adopted or amended by the

organization at any time following the effective date of this Stipulation and Order shall be

consistent with its terms. To the extent that any conflict arises between the terms of this

Stipulation and Order and any law governing New York State not-for-profit corporations, the law

shall take precedence.

I. The Attorney General agrees to the retention of Fellegara as CEO of TLCN, and

in consideration thereof Fellegara agrees to continue to act in good faith and full compliance

with this Stipulation and Order and the requirements of the N-PCL and EPTL in her conduct as

CEO.

-23-
 MISCELLANEOUS TERMS

62. Should the Attorney General find evidence that one or more respondents have

willfully failed to comply with applicable laws or any provision of this Stipulation and Order, the

Attorney General will give the respondent thirty (30) days to present a plan for curing the

deficiency. Thereafter, if no cure has been made, the violating party or parties shall, upon

reasonable opportunity to be heard by the Court and the Court making a finding of

noncompliance, pay penalties to the Attorney General of $5,000 for each instance of

noncompliance, and an additional $500.00 per day where instances of noncompliance after

notice by the Attorney General are not rectified. Upon such a finding by the Court, the

respondent shall also pay to the Attorney General the reasonable cost, if any, of obtaining such

determination and of enforcing this Stipulation and Order, including without limitation legal

fees, expenses, and court costs.

63. The Court shall retain jurisdiction over the parties and this matter for the term of

five (5) years after the Effective Date. The Court shall retain all equitable powers necessary to

enforce the terms of this Stipulation and Order and remedy any violations thereof, including, but

not limited to, the power to hold any party in contempt and to award damages, restitution, or

monetary penalties, as well as the power to extend the duration of this Stipulation and Order

upon a finding of noncompliance.

64. This Stipulation and Order shall become effective upon its execution by all

parties, satisfaction of all pre-conditions set forth in Section D, Stipulation, paragraph 62 above,

and entry by the Court, which date shall become the Effective Date of this Stipulation and Order.

-24-
 65. Each of the signatories to this Stipulation and Order warrants and represents that

he or she will take all appropriate action required or permitted to be taken pursuant to this

Stipulation and Order to effect its terms. Facsimile signatures shall be deemed originals.

66. Any failure by the Attorney General to enforce this entire Stipulation and Order

or any provision thereof with respect to any deadline or any other provision herein shall not be

construed as a waiver of the Attorney General's right to enforce other deadlines and provisions of

this Stipulation and Order.

67. If any provision, term, or clause in this Stipulation and Order is declared illegal,

unenforceable, or ineffective in a legal forum, such provision, term, or clause shall be deemed

severable, such that all other provisions, terms and clauses of this Stipulation of Settlement shall

remain valid and binding on the parties.

68. Nothing in this Stipulation and Order is intended to confer any right, remedy,

obligation, or liability upon any person or entity other than the parties hereto.

69. Nothing in this Stipulation and Order is intended to, nor shall, limit the Attorney

General's investigatory or compliance review powers otherwise provided by law or this

Stipulation and Order. The stipulated factual recitals and legal conclusions herein shall not be

deemed established in any action or proceeding as between any of the Respondents or as

between any Respondent and any non-party to this Stipulation and Order (including any other

agency, department or division of the State of New York).

70. This Stipulation and Order may be executed in multiple counterparts, each of

which shall be deemed a duplicate original.

71. This Stipulation and Order is final and binding on the parties hereto, including

principals, agents, representatives, successors in interest, assigns, "d/b/a companies," "a/k/a

-25-
companies,'' and legal representatives thereof. No assignment by any party thereto shall operate

to relieve such party of its obligations herewith.

72. If, for any reason, this Stipulation and Order is voided or breached, the

Respondents agree that: any statute of limitations or other time-related defenses applicable to the

subject of this Stipulation and Order and any claims arising from or related thereto are tolled

from the date on which the petition was originally filed and forward for any of the respondents

responsible for such breach or against whom the Stipulation and Order is deemed to be void.

73. Respondents agree not to take any action or to make any public statement

denying, directly or indirectly, any of the factual recitations in this Stipulation and Order or

creating the impression that this Stipulation and Order is without factual basis.

74. All communications and notices regarding this Order shall be sent by first-class

mail and by email to:

If to Attorney General:

Office of the Attorney General

Charities Bureau
The Capitol
Albany, NY 12224
Attn: James Sheehan
Tel. (518) 776-215849

If to TLCN:

[insert]

If to the TLCN Board:

[insert]

If to Tripodi:

Dreyer Boyajian LLP

75 Columbia Street
Albany, New York 12210

-26-
 Attn: Joshua R. Friedman, Esq.
Tel. (518) 463-7784

If to Fellegara:

Capezza Hill, LLP

30 South Pearl Street P-110
Albany, NY 12207
Attn: Benjamin W. Hill, Esq.
Tel. (518) 478-6065

75. Advance notice of any changes concerning the person who has been designated to

receive all communication must be made in writing prior to the change.

76. In exchange and consideration for entering into this Stipulation and Order,

Petitioner agrees and acknowledges that no further action or proceeding will be brought against

Respondents based on the allegations contained in the pleadings or the findings made in the

Petitioner’s investigation as outlined in this Stipulation and Order.

77. The claims and allegations asserted by the Attorney General in this Action against

respondents are discontinued with prejudice upon the Effective Date of this Stipulation and

Order.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound thereby, have

executed this Stipulation and Order:

TLCN/Board Members

By:____________________________________

By:____________________________________

By:____________________________________

-27-
 Frank Tripodi

By:_______________________________________

Laraine Fellegara

By:_____________________________________

NEW YORK STATE ATTORNEY GENERAL

LETITIA JAMES

By:___________________________________
James G. Sheehan
Charities Bureau Chief

SO ORDERED:

Hon.____________________________________
Justice of the Supreme Court

Date:_________________________________

-28-