Trustee Sues Nonprofit Board after Bankruptcy Leaves Clients in the Lurch

April 4, 2017; WSB-TV (Atlanta, GA)

The nonprofit Independent Adoption Center’s (IAC) bankruptcy isn’t going smoothly. The trustee hired by the organization that abruptly closed its doors is now planning to sue the agency’s board of directors for failure to properly handle the bankruptcy case.

Almost 2,000 families planning to adopt throughout the country were dealt a hard blow when IAC sent a letter out of the blue announcing their bankruptcy and the immediate closing of the agency in late January, as reported here at NPQ. Since then, families have been trying to find answers and help.

Clients in Georgia have since learned that they are exempt from an amended IAC bankruptcy filing, leaving them no legal option to file claims against the agency. The bankruptcy trustee’s attorney told them they were exempted from the bankruptcy proceeding because another nonprofit has taken over their adoption cases. However, the families have received no contact from the new nonprofit and no information about it. No one seems to know anything about the new nonprofit, including its name and contact information.

Even if IAC’s Georgia clients could file a bankruptcy claim, it’s unlikely they or any other families would be able to recoup their money; at the time of filing bankruptcy, IAC had just $57,000 left in their accounts, with $650,000 in debt. Trustee Marlene Weinstein said that’s not even enough to cover the remaining costs of bankruptcy proceedings.

Weinstein is the trustee whose attorneys filed a complaint in late March against the IAC’s board of directors and its insurance company in northern California. The complaint describes a chaotic bankruptcy case where it’s alleged the IAC was losing money every month with no apparent improvement and shut down without giving government regulators notice about confidential records.

The families still on the waiting list for babies not only lost thousands of dollars they entrusted the organization with, but also important personal documents like birth certificates and marriage licenses. One family in Raleigh, North Carolina, is having trouble buying a new house because mortgage companies are asking for their original tax returns, not copies, which IAC stuck in an undisclosed location.

IAC’s board president, Greg Kuhl, told creditors at a meeting in March that the organization first considered bankruptcy in November. IAC then developed a new marketing campaign aimed at recruiting new birth mothers, accompanied by a relaunch of its website. But it was too little, too late.

Some families are moving on despite all this. One family has connected with the birth mother that IAC originally matched them with and has taken out a loan to complete the adoption through a lawyer. Another family plans to have fundraisers to restart the process.

The unfortunate circumstances surrounding IAC may have made the adoption journey more difficult for thousands of people, but it’s a journey many will not give up on.—Angie Wierzbicki