April 3, 2012; Source: Wall Street Journal

In Minnesota, legislators have passed a bill that protects nonprofits and religious organizations from “clawback” lawsuits that seek to recover cash lost by bilked victims. The bill is now awaiting the governor’s consideration. NPQ has reported on a similar case involving fraudster Scott Rothstein, who made generous donations from other people’s money to a number of nonprofits in Florida. A Girls Inc. chapter has been spearheading an effort to get a bill passed that would protect them from such a recovery.

The case that sparked the legislation in Minnesota involved Tom Petters, who defrauded investors out of $3.6 billion. Not only were a number of charitable organizations among his investors, but he also gave to nonprofits and religious groups. Doug Kelley, a trustee appointed by Minnesota’s U.S. Bankruptcy Court, has sued to recover $2.3 million from Minnesota Teen Challenge, which helps teens and adults who struggle with drug and alcohol addictions.

NPQ would love to know what readers think about the ethics of these types of bills. –Ruth McCambridge