Southern Marin Lax Information
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The information on this page address the following questions and concerns...
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What is reasonable compensation for seasonal roles in a community service organization such as SMLC, with special IRS 501(c)(3) status?
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Open and transparent access to the organization's management, finances and rules of governance.
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Feedback from too many parents depicting unacceptable pressure on players in and out of season play.
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Adherence to organization bylaws and IRS 501(c)(3) rules.
The SMLC Governing Documents
SMLC is a 501(c)(3) not-for-profit tax-exempt organization. It is, in fact, a public charity under both California and IRS law. The governing authorities are the CA Attorney General and the IRS. SMLC does not belong to anyone, it belongs to our community. It belongs to all of us. I am familiar with the SMLC Articles and Bylaws, they were developed when I was president, and they bear my signature.
In the SMLC Articles of Incorporation, the organizing principles state that:
“This corporation is a nonprofit public benefit corporation and is not organized for the
private gain of any person. It is organized under the California Nonprofit Public Benefit
Corporation Law for charitable purposes.” (Article II, A)
“The specific purposes of this corporation are to educate, inspire and develop
enduring positive character qualities in youth through coaching in general athletic skills
and the skills specific to the game of lacrosse; … and to honor the game of lacrosse and
its unique tradition of high sportsmanship, respect and integrity.” (Article II, B)
“This corporation is organized exclusively for charitable and educational purposes within
the meaning of Section 501(c)(3) of the Internal Revenue Code.” (Article IV, A)
As you can see, the purpose of the club is quite clear, SMLC is a public charity established to
enable kids to play and learn through organized lacrosse.
The governing principles state that:
“No part of the net income or assets of this corporation shall ever inure to the benefit
of any of its directors or officers … except that this corporation shall be authorized … to
pay reasonable compensation … in furtherance of its charitable purposes.” (Article V, B)
As stated in the Articles quoted above, reasonable pay is fine, but the club’s money should be
going primarily to SMLC’s charitable purposes, to benefit the kids who are playing, not to selfdealing
excessive compensation for the staff.
From the SMLC Bylaws:
“A self-dealing transaction is a transaction to which this corporation is a party and in
which one or more of its directors has a material financial interest.” (Article VI, Section 2)
“This corporation may engage in a self-dealing transaction if the transaction is approved
by a court or by the Attorney General. This corporation may also engage in a self-dealing
transaction if the Board determines, before the transaction, that (a) this corporation is
entering into the transaction for its own benefit; (b) the transaction is fair and
reasonable to this corporation at the time; and (c) after reasonable investigation, the Board
determines that it could not have obtained a more advantageous arrangement with reasonable
effort under the circumstances. Such determinations must be made by the Board in good faith,
with knowledge of the material facts concerning the transaction and the director’s interest in
the transaction, and by a vote of the majority of the then directors in office, without counting
the vote of the interested director or directors.” (Article VI, Section 3) (Emphasis mine)
As a public charity, SMLC enjoys numerous privileges: Federal and State income tax exemption, the ability to receive tax-deductible contributions, volunteers, reduced postal rates, exemption from sales taxes, and exemption from Federal and State unemployment taxes.
In addition, SMLC benefits from our local city governments through field availability and cost discounts, that are not provided to for-profit organizations. With all these benefits, there are responsibilities as well, specifically, to follow the rules of nonprofit governance.
If the IRS was to find SMLC in violation, SMLC could lose its tax-exemption and thereby its membership in NCJLA, it could also lose its access to local fields and their discount pricing. It is the fiduciary duty of the board of directors to make sure that the money, from fees and donations, is used for the club’s programs and not for private inurement.
The Story
In the spring of 2016, Jon Porter, President of SMLC, and John Bell, Treasurer, requested a meeting with the SMLC Board of Advisors. The advisory board includes past leaders and meets when requested by current leadership. Three of us joined them for dinner to discuss the direction of the club and changes to club policy.
The invitation stated: “Currently we have extensive off season … activities which has generated income for the club…We wanted to talk through … how best we should proceed.” We met on May 10, 2016 with a follow up meeting on June 14th.
The first meeting was a wide ranging discussion, including how the club was expanding through natural growth and the introduction of “extensive off season” programs. We were informed that the plan was to pay 75% of the off season “net revenue” to the program directors, Jon Porter and Mary Beth Todd, and 25% to SMLC.
As we proceeded, there was a dialogue about “percentage deals” not being allowed under nonprofit rules and the SMLC Bylaws, and about the IRS defined process for determining compensation. As the evening wound down, it was obvious that much remained to talk about.
The agenda for the second meeting Included:
1. Confirm Club’s mission – on season and off season activity
2. Discuss organization structure needs to support on and off season
3. Use of Club resources (website, financial resources, etc) for off season
4. Compensation
As you can see, the focus was on the club’s off season activities, including the use of club resources for programs that would primarily benefit the staff, not the club. We again discussed that percentage compensation is not permissible under IRS nonprofit laws, CA nonprofit laws, and the SMLC Bylaws.
While there is nothing new about SMLC running out-of-season programs, what was new was the percentage arrangement, as above, their plan was to pay 75% of the “net income” to the program directors (Jon Porter and Mary Beth Todd) and 25% to SMLC.
Percentage compensation is called private inurement. Under the rules of nonprofits: “no part of the net earnings of a 501(c)(3) organization may inure to the benefit of any private individual.” We discussed that in-season, or out-of-season, SMLC is a public charity with the same rules.
The staff of tax-exempt organizations are not required to work for free, but “the private inurement prohibition requires that the compensation paid by a charity to an insider be fair and reasonable” and not excessive.
How is fair and reasonable determined? The IRS states, that the process requires:
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“The compensation arrangement must be approved in advance by an authorized body of the applicable tax-exempt organization, which is comprised of individuals who do not have a conflict of interest concerning the transaction,
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“Prior to making its determination, the authorized body obtained and relied upon appropriate data as to comparability, and
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“The authorized body adequately and timely documented the basis for its determination concurrently with making that determination.” (See IRS Rebuttable Presumption)
“The documentation of the authorized body should include the terms of the transaction and the date of its approval, the members of the authorized body present during the debate and vote on the transaction, the comparability date obtained and relied upon, the actions of any members having a conflict of interest, and documentation of the basis for the determination.” (See IRS – Rebuttable Presumption)
I noted that the seven seat board had only five members, I offered to rejoin the board and work from the inside to help resolve these matters. Since the season had recently ended, we felt that we had plenty of time – that was two years ago.
As stated in the Articles of Incorporation reasonable pay is fine, but the club’s money should go primarily to SMLC’s charitable purposes, to benefit the kids who are playing, not to self-dealing and excessive compensation for the staff.
It was during those early discussions and subsequent investigation of club documents that malfeasance was discovered. The board declined my offer join and when I instead simply offered to talk with them, I was repeatedly denied an appointment. Remember that I was invited by club leaders to consider their plans and to offer my thoughts and observations. They just never expected me to uncover financial mismanagement and other wrong doing.
The Meeting with the SMLC Board of Directors on September 7, 2017
After a year and a half of requests, last September, the SMLC Board of Directors granted a meeting, but only if both sides brought their respective attorney. No wonder they insisted upon the presence of attorneys, they were, and still are, trying to shield themselves from accepting responsibility for the mismanagement of hundreds of thousands of dollars that belong to our children’s charity, along with other breaches of duty.
Any of you who wish to see the substantiating documents, may do so by examining them on the www.SMLaxinfo.com website.
Think about that, the board of SMLC, a local children’s charity, will only meet, if lawyers are present, with someone who is a SMLC past-president, a past president of NCJLA, and a member of the US Lacrosse NORCAL Chapter Hall of Fame.
What is the SMLC Board trying to hide? I paid my lawyer, who paid theirs? Is SMLC, a public charity, paying for the board to defend itself against its own financial mismanagement? The meeting with the lawyers was ugly, fairly brief, and ended abruptly when I raised the topic of the need for a financial accounting of SMLC’s books and records.
Let’s see the minutes of the board deliberations about lawyers and paying for lawyers. Let’s have an accounting of the books – I have already offered to pay for it
A few days after the September 7, 2017 meeting, John Bell, Treasurer, called and we met to continue the discussion. I showed him the club’s IRS Form 1023 and told him that I had intended to show it to the entire board. I reminded him that I was unable to so do because the meeting was abruptly cut short when I raised the topic of an audit.
The IRS Form 1023 is used to apply for tax exempt status or to request reinstatement of lost tax exempt status. Due to its repeated failure to file tax returns, SMLC had lost its tax exempt status in 2015 and Jon Porter had signed and filed a Form 1023, on December 10, 2015, to request that SMLC’s tax exempt status be reinstated, which it was.
In the IRS Form 1023, Jon Porter made numerous flagrant misstatements regarding the club’s finances. Just as bad, attached to the Form are new Bylaws together with the comment: “These Bylaws were approved and adopted at a meeting of the Board of Directors on December 5, 2015.” Also attached is a Conflict of Interest policy with the comment that: “This Conflict of Interest Policy was adopted December 5, 2015 by resolution of the Board of Directors.” Note the December 5th meeting date as the Form 1023 was signed on the 10th.
Since I had the 2015 Board minutes, I decided to look up that December meeting and low and behold what did I find?
Signed by Secretary Shannon Nies, (in its entirety):
“SMLC Board Meeting"
“Dec, 2015. Evaluations take place in December. No official meeting as all the focus is on assigning rosters/coaches, creating teams, and scheduling.” (Emphasis mine)
Under “penalties of perjury,” Jon Porter signed and dated the Form 1023 on December 10, 2015 – five days after the phantom board meeting. The financial misstatements, and falsehoods about board approved governing documents, demonstrate a flagrant disregard for truth telling.
John Bell stated that he would share this information with the board. A few days later the titles of the board members began changing on the SMLC website. For example, Shannon Nies became President instead of Jon Porter. Later Shannon would change to Board Chair and today, no President is listed on the SMLC website. See a more complete discussion of changing titles as a separate commentary on the www.smlaxinfo.com website.
Because of the above described malfeasance, I am reaching out to you, the lacrosse community, to make you aware of what is going on, to broaden the conversation, and to open a dialogue. I am also asking those of you who are able to join with us, to help replace the board and to bring about the reforms that are necessary to restore SMLC to its proper governance.
My complaint with the club management is not exclusively or even primarily about the money. More importantly, I am appalled at how kids are being mistreated. In addition, parents are being bullied into making off-season financial choices, which directly benefit club management.
It has long been SMLC policy that families need to be given the flexibility to make off-season choices that are best for them. This recognizes that raising young children is difficult enough, without SMLC adding to the burden. This policy also considers that there are often various conflicts for time and resources within families.
The End of this Lacrosse Season
I have waited until the end of the season to write to you. I have been working behind the scenes for two years to bring needed reform to SMLC governance. I have submitted an extensive written report to the board, to no avail. I agreed to meet the board with lawyers, it was a disaster. I have tried to persuade through personal conversations with three board members. Two, Mary Beth Todd and Chris Danne, still refuse to even sit down individually and talk with me.
Although legal proceedings and a complaint with the District Attorney remain options, the people that I have spoken with say that a community resolution is best. Therefore, I am reaching out to all of you, in the greater SMLC community, to help push back against ongoing financial malfeasance and management abuse by supporting a change of leadership, administrative reform, and an accounting of the clubs books and records.
Coach Harris
The IRS Form 1023
The IRS Form 1023 is used to apply for tax exempt status or to request its reinstatement. Due to its repeated failure to file tax returns, SMLC lost its tax exempt status in 2015. Jon Porter filed a Form 1023, on December 10, 2015, to request reinstatement, it was granted. Form 1023, like the tax returns, are signed under “the penalties of perjury.”
In the SMLC’s IRS Form 1023, Jon Porter made numerous misstatements regarding the club’s finances, governing documents, and even representing that SMLC did not have a website. Let’s take some of the examples of Jon Porter’s misrepresentations each in turn:
On the cover letter, signed by Jon Porter:
“I, Jon Porter, President declare, under penalties of perjury, that I am authorized to sign this request for retroactive reinstatement on behalf of the Aquarium Club of Lancaster County …”
You read that right, Jon Porter on behalf of the “Aquarium Club of Lancaster County.”
Continuing from the cover letter:
“I further declare that I have examined this request for retroactive reinstatement, including the written explanation of all the facts and information … and to the best of my knowledge and belief, this request is true, correct, and complete.”
As we go through the document, you decide just how true and correct it is.
On Line 9a, of the Form 1023, the club’s website is listed as n/a. (Page 1, Part I, 4th page overall)
In the Appendix, on Attachment 4, Page 11, it states that: “At the current time, we have not yet built our website.” (4th paragraph from bottom, 29th page overall)
The 2015 tax return, and back at least to the 2011 tax return, right on the top portion, it shows the SMLC website: www.smlax.com.
On Page 2, Part II, Line 5 asks if there are bylaws and to “attach a current copy showing date of adoption.” It shows the bylaws as Attachment 2 where it states:
“These bylaws were approved and adopted at a meeting of the Board of Directors on December 5, 2015.”
The problem is that there was No Board meeting at all in December 2015.
On the smlaxinfo.com website you can find the 2015 board minutes.
The December entry, Signed by Secretary Shannon Nies:
“SMLC Board Meeting
“Dec, 2015. Evaluations take place in December. No official meeting as all the focus is on assigning rosters/coaches, creating teams, and scheduling.” (Emphasis mine)
Furthermore, the bylaws attached are NOT the original bylaws. I know this because the original Articles of Incorporation, and the Bylaws, were developed while I was president - they bear my signature.
In Part V, Line 1a: “Compensation and Other Financial Arrangements With Your Officers, Directors, Trustees, Employees, and Independent Contractors”
The Form 1023 states: “For each person listed, state their total annual compensation, or proposed compensation, for all services to the organization, whether as an officer, employee, or other position.”
Jon Porter, on December 10, 2015, states that his 2015 compensation was: “None”
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The 2015 SMLC Tax Return states that Jon Porter earned over $110,000.00 in 2015
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The 2016 SMLC Tax Return states that Jon Porter earned over $112,700.00 in 2016
Jon Porter, on December 10, 2015, states that Mary Beth’s 2015 compensation was: “None”
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The 2015 SMLC Tax Return states that Mary Beth Todd earned over $38,800.00 in 2015
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The 2016 SMLC Tax Return states that Mary Beth Todd earned over $50,000.00 in 2016
Why would Jon Porter, signing the IRS Form 1023, intentionally misstate his, and Mary Beth Todd’s, earnings on the IRS document, signed under “the penalties of perjury”?
In Part V, Line 4 asks: “In establishing the compensation for your officers, directors, trustees, highest compensated employees, and highest compensated independent contractors…”
Yes was answered to:
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Will you approve compensation arrangements in advance of paying compensation?
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Will you record in writing both the information on which you relied to base your decision and its source?
When you review the board minutes, the board only began to approve some of the compensation after I had been complaining about it. Even then, most of the compensation for Jon Porter was not approved and recorded in either the 2015 or 2016 minutes of the SMLC Board of Directors.
In Part V, Line 6a asks: “Will you compensate … through non-fixed payments such as discretionary bonuses or revenue-based payments? If yes, describe … including how the amounts are determined, who is eligible … and how you will determine that you pay no more than reasonable compensation.”
Jon Porter answered that “no” such compensation will be paid.
According to information and belief, the majority of Jon Porter’s, and Mary Beth Todd’s, compensation is “revenue-based.” (An audit of the club’s books will make this clear.)
In Part V, Line 8a asks: “Will you have any leases … or other agreements with your officers … If “Yes,” provide the information: Describe … arrangements, with whom, explain arm’s length.”
Jon Porter answered that there will be “no” such purchases or leases.
In the 2015 SMLC Tax Return, on Schedule O it states that: “Jon was also compensated $400/month from 6/15 through 12/15 for use of his storage area.”
In the 2016 SMLC Tax Return, on Schedule L it states that: Jon Porter, Board President, paid $4,800, for Storage rent.
In fact, Jon Porter closed the club’s combined office and storage facility, where the open board meetings were held. At the time, he said that the club could not afford the facility, so instead he paid himself to supposedly store the club’s goals and other equipment while also paying himself $110,000 plus in compensation.
Part XI states: “I declare under the penalties of perjury that I am authorized to sign this application … and that I have examined this application, including the accompanying schedules and attachments, and to the best of my knowledge it is true, correct, and complete.”
Jon Porter signed his name, under his solemn oath, on December 10, 2015.
A recap of Jon Porter’s falsehoods in the main body of the SMLC IRS Form 1023:
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That none of the board members are compensated,
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That there are no “revenue-based payments”
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That SMLC has no website
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That there are no leases or goods purchased form board members
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That how compensation is determined will be documented
How many strikes is that?
But just as bad or far worse, is contained in the attachments:
Attached to the Form 1023 are Bylaws that I had never seen, with the comment:
“These bylaws were approved and adopted at a meeting of the Board of Directors on December 5, 2015.”
Note the date is a mere five days before Jon Porter signed the Form 1023.
We have the 2015 minutes, you can look up December and, lo and behold, what will you find?
Signed by Secretary Shannon Nies:
“SMLC Board Meeting"
“Dec, 2015. Evaluations take place in December. No official meeting as all the focus is on assigning rosters/coaches, creating teams, and scheduling.”
I would call that another strike!
Also attached is a conflict of interest policy that I had never seen. It too had a comment that:
“This Conflict of Interest Policy was adopted December 5, 2015 by resolution of the Board of Directors.”
Here again the December 2015 Board minutes.
Signed by Secretary Shannon Nies:
“SMLC Board Meeting"
“Dec, 2015. Evaluations take place in December. No official meeting as all the focus is on assigning rosters/coaches, creating teams, and scheduling.”
Remember that Jon Porter signed and dated the Form 1023 just five days after the phantom board meeting. Attesting under “the penalties of perjury,” that the changed governing documents were board approved, evidences a flagrant disregard for telling the truth.
Is this who we want leading the Southern Marin Lacrosse Club? Is this someone who we can trust with our children? I think not! It is time for a change of leadership.
My complaint with the club management is not exclusively or even primarily about the money.
Most important, I am appalled at how kids are being mistreated and parents are being bullied.
SMLC policy has long recognized that families have conflicts for time and resources. Raising young children is difficult enough without SMLC adding to the burden.
Coach Harris
Rearranging the titles of the SMLC board of directors
Since a September 7, 2017 meeting (more elsewhere) there have been changes in the titles of SMLC Board members, no people changes. It’s only the titles that have changed several times.
Consider all the following rearranging of the deck chairs:
Today, if you go to the SMLC website (smlax.com), under Contacts, you will see that there is no
President, here is what is shown in the screen shot:
Jon Porter Mary Beth Todd Shannon Nies
Executive Director Girls Director Board Chair
and Boys Director
Chris Danne John Bell
Secretary Treasurer
Except for Shannon, no one is listed as a board member.
Today, on the NCJLA website (ncjlax.org), under NCJLA Clubs, Club Profiles, you will see Jon Porter is President and Shannon Nies is the Club Administrator. Why did Jon Porter remove his name as president on the SMLC website and what is Shannon Nies’ actual position?
On 9/7/2017 (before the big meeting), the SMLC website listed:
Jon Porter John Bell Mary Beth Todd
President Board Member Board Member
and Treasurer
Shannon Nies Chris Danne Jon Porter
Board Member Board Member Boys Director
and Secretary
Mary Beth Todd
Girls Director
On 9/16/2017, just a few days later, titles changed to:
Shannon Nies Jon Porter Mary Beth Todd
President Executive Director Girls Director
and Boys Director
Chris Danne John Bell
Secretary Treasurer
As you see, Jon Porter is no longer the president on the SMLC website, but on the NCJLA website he still is.
On 11/22/2017, on the Federal Tax Return, Jon Porter, President; Shannon Nies, Secretary
Why did Jon Porter repeatedly change the titles?
On 12/23/2017, just as today, Shannon Nies is no longer the President, instead the Board Chair.
Is Shannon Nies leading the SMLC board meetings? I look forward to seeing the board minutes!
So how does all this stack up?
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Jon Porter: sometimes president or executive director; always boy’s program director
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Shannon Nies: sometimes president or board chair or secretary or club administrator
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John Bell: sometimes board member; always treasurer
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Mary Beth Todd: sometimes board member; always girl’s program director
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Chris Danne: sometimes secretary or board member
After all those changes, today the name of the SMLC President is not identified on the club website. (smlax.com)The identifying titles of the Contacts on the club website are different than those on the league website and both of those are different than the tax return. This is one example of mismanagement and lack of diligence for which Jon Porter is being excessively paid over $110,000 per year as Executive Director! This is all public record.
Folks, you can’t make this kind of Keystone Cops antics up.
Is this the kind of board and management that we want in positions of responsibility with respect to our children. I believe that it is time for a change of leadership.