February 22, 2019; Penn Live
The Pennsylvania Supreme Court has agreed to hear arguments from Beverly Steffey that she should not pay restitution after being convicted of embezzling more than $200,000 from three nonprofits. Steffey’s position is based on the Pennsylvania Supreme Court’s controversial 2016 decision in Commonwealth of Pennsylvania v. Michael Veon. The Veon decision allowed state Rep. Michael Veon to avoid paying back the money he stole from a state-funded nonprofit because the nonprofit was not human and therefore could not be a victim as outlined in Pennsylvania’s restitution law.
The Supreme Court stated in its decision, “Every relevant noun unequivocally describes a human being, not a government agency, and nowhere else is there a relevant definition that persuades us to broaden the common understanding of these words.” This decision has drawn a great deal of criticism, especially as several individuals in high-profile embezzlement cases successfully used the it to avoid restitution to local towns and municipalities.
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While the Veon decision appears to be broadly applicable to just about any organization, Law360 notes, “The Superior Court of Pennsylvania upheld Steffey’s restitution order in August 2018 on the grounds that while the Supreme Court in Veon’s case had said the government was not a person eligible for restitution, the Pennsylvania law the higher court cited in its decision defines corporations and nonprofits as ‘private, non-natural persons.’” Existing law appears to undercut Steffey’s arguments by providing specific protection to nonprofits, especially those not connected to the government.
In October 2018, the Pennsylvania Legislature passed Act 145, a direct response to the Veon decision. The new law seeks to clarify the legislature’s intent for the use of restitution as well as addressing the shortcomings identified by the Supreme Court in the law’s original language. Victims, nonprofits, government agencies, businesses, and estates are now clearly defined as restitution eligible. Governor Tom Wolfe signed the legislation into law on October 24, 2018.
Between Act 145 and the Superior Court ruling, Steffey’s case appears to face long odds for success. What Steffey’s case does do is highlight the need for nonprofits to have robust financial control measures in place. Organizations should have policies to control and monitor income and expenses. The executive director and board should review these policies regularly. An independent, third-party auditor should evaluate a nonprofit’s financial systems and books annually. Also, management and the board of directors should determine adequate insurance coverage to protect against losses due to employee/officer/board member wrongdoing. Good financial systems help protect a nonprofit from financial losses, positively impact standing among rating agencies and build confidence with donors and partners.—Skip Lockwood