MLK Center pays son's firm - "Accountability Lapse" Embroils Troubled Memorial

Since 2000, the nonprofit Martin Luther King Jr. Center in Atlanta has paid at least $2.9 million to a for-profit business run by Dexter King, the younger son of the late civil rights leader. The payments to Intellectual Properties Management escalated sharply in that time, the center's tax records show. By 2003, more than 50 cents of every dollar donated to the center was passed on to IPM, making it the center's largest single contractor, records show. Dexter King served as chief executive of both organizations in 2002 and 2003. A company document obtained by The Atlanta Journal-Constitution says the firm is owned by the Estate of Martin Luther King Jr. Inc., a for-profit corporation controlled by the King family. The King Center disclosed the payments to IPM on its tax returns but did not report Dexter King's control of the business, as required by the Internal Revenue Service. The tax returns raise questions about whether the center complied with Internal Revenue Service regulations concerning so-called "self-dealing" by nonprofit groups. The accountant who prepared the center's tax returns said he made that decision, but did not know that King was CEO of the business. IPM has managed the King Center since 2000, providing almost all of the center's employees under a lease arrangement. The center has continued to pay IPM for those workers, but the amount of the payments since July 2003 could not be determined. The center would not disclose that sum, and it has not filed a more recent tax return that would itemize the amount. Officials of the King Center have said the payments are used only to pay salaries and benefits of its employees, who are on the IPM payroll but are leased back to the center. The arrangement keeps personnel costs down, and IPM charges no additional fees for the service, they said. Charity watchdogs say special precautions must be taken to make sure a business does not take advantage of a relationship with a nonprofit group that is run by the same person or persons. "It's very easy for money to get diverted away from the cause of the organization, if there is a potential for the related parties to benefit," said Daniel Borochoff, president of the American Institute of Philanthropy. Because of the opportunity for abuse, nonprofits must tell the IRS if they make payments to a taxable group that is affiliated with its officers, key employees or their relatives. [more]