The financially distressed University Park Alliance is looking to its members for money to pay operating expenses as a third lawsuit has been filed against the neighborhood economic development group.
The 15 organizations represented on the UPA board have been asked for $1,500 each to help with expenses through the end of the year. A secretary is the only staffer who remains as an employee.
“The $1,500 is just for the operation of the one person and light office support,” said David James, UPA board chair, who is also Akron Public Schools superintendent.
UPA is reorganizing itself after former executive director Eric Anthony Johnson resigned in April. Board members have said Johnson overpromised or was overconfident in the planning and execution of development projects related to its major funding grant.
The nonprofit is working on redevelopment of 50 city blocks around the University of Akron. It has no cash flow after a $7.8 million grant and loan from its major funder, the John S. and James L. Knight Foundation, was canceled.
The reason was that UPA projects no longer matched terms of the original grant. The Knight Foundation invited UPA to re-apply for a new grant and gave UPA $500,000 this summer in an attempt to get it through the end of the year.
However, after some bills were paid, some funds on deposit at Valley Savings Bank were put on an “administrative hold” because of what it said were unpaid notes and lines of credit.
UPA has sued Valley Savings Bank of Cuyahoga Falls to try to get access to $391,243.89. Summit County Common Pleas Judge Jane Davis last week denied UPA’s motion for a preliminary injunction. UPA had put up several of its rental properties as collateral on those loans and the taxes and mortgages have not been paid, Valley Savings said in court documents.
So without access to its cash, UPA needs new funds, said James. Board members agreed orally at a Sept. 24 retreat to ask each member organization to pay $1,500.
James said the board did its best estimate of operational expenses, though he is not sure which organizations intend to pay the assessment. The letters requesting the funds went out this week.
The UPA board includes CEOs and heads of major companies, government entities and institutions such as the University of Akron, Summit County, the Greater Akron Chamber, the Akron Beacon Journal and the city’s three hospitals.
Meanwhile, a third lawsuit has been filed against UPA, citing breach of contract.
Roger Carter of Akron on Tuesday filed suit against UPA and University Park Village, a nonprofit that Carter and UPA members formed to create a housing development off Brown Street.
Carter alleges three contracts were breached. The suit says Carter’s capital contribution was to be two student rental properties with addresses of 443 and 445 Brown St.
UPA failed to contribute a contribution of $2.85 million, plus a fee of $7,800 and there is a project delay payment due of $268,785, the complaint says.
Carter was told the homes would be demolished by mid-February, so he vacated them of renters, losing income, said his attorney, Bradley Le Boeuf.
“The properties are still standing, so it’s our position he could have still been renting the houses out to tenants,” Le Bouef said.
James declined comment, saying he could not discuss pending litigation.
The suit names as defendants former and current board members of UPA, including Jennifer Thomas, the Akron program director of the Knight Foundation who resigned from the board in late August.
James said Thomas was leaving on good terms and that the Knight Foundation as a funder was not comfortable having Thomas on the board.
Asked whether volunteer board directors could be sued individually, Le Boeuf said Ohio laws can hold such individuals personally liable.
Matthew Rossman, a Case Western Reserve law professor who specializes in nonprofit organizations and economic development and is not familiar with UPA, said
“the general rule is those who sit on boards of directors are not individually liable for the actions of the corporation. Usually someone suing a nonprofit corporation could not ‘pierce the corporate veil.’ ’’
He added, “But these types of claims depend heavily on the facts of the case; as a general rule the directors are not liable.”
James said he is not surprised that another lawsuit has been filed and said there will probably be more.