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You can do more harm than good being nice responding to charity regulator requests and investigations

As a rule, it’s safe to say the overwhelming majority of people in the charitable sector have good intentions, right?

What about charity regulators? Well, even if we presume their good intentions (and I’ll defer to your judgment for today’s purposes), too many of them act as if the rule of law doesn’t fully apply to them, they act above the law, or they are ignorant of how the law applies to them especially when the rights of charities are involved.

Charities are sensitive about their good standing in the public, and for good reason. When charity regulators investigate charities, just the notion that an investigation is taking place can harm the reputation of a charity. Charities therefore don’t want to make waves.

Quite often, therefore, charities are willing to cooperate with informal requests for information or formal investigations initiated by charity regulators rather than challenging them. A recent decision out of the U.S. District Court for the District of Columbia shows why that is quite often the wrong approach.

A December 13, 2011 opinion in Bank of America v. Solis recognized that informal government inquiries and requests for documents under what are called “administrative searches” are subject to the Fourth Amendment requirements such as probable cause. In this case the government failed to abide by Fourth Amendment requirements placed on government requests for information, i.e., searches.

Bank of America, as a government contractor, must report to and comply with a special division within the Department of Labor.  The government agency is authorized to conduct systematic but “neutral” compliance evaluations of all federal contractors. These evaluations use a pre-set selection procedure required by law.

Unknown to Bank of America at the time of the inquiry, the government had violated the procedure required by law.

Bank of America, however, voluntarily consented to the administrative search and provided documents in response to the government’s request. When BoA later found out that the government had violated the law, it was too late. BoA waived its Fourth Amendment protections by voluntarily complying with the government’s request for documents.

The lessons?

1. Always, always require that charity regulators provide their specific statutory authority for any special requests or demands for information, or the actions they are telling you they want you to take; and

2. If a charity regulator is unilaterally (without a court order) issuing a formal or even an informal request for information or documents, investigating you, or issuing a subpoena, demand that they state their probable cause.

Charity regulators frequently violate the Fourth Amendment and other laws. They have as much of an obligation to follow the law as charities do.

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