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Picard v. Mets/Wilpon/Katz Settlement One Year Later – Part I: Why Were Certain Katz IRS Forms 990-PF so Delayed? – Installment 89

Posted in Bernard Madoff

Michael Kline writes:

This blog series has been monitoring the quality of disclosures being made by private charitable foundations of the Wilpon and Katz families in their IRS Forms 990-PF as to involvement with Madoff and the Settlement Agreement with Trustee Irving Picard approved on May 31, 2012.  Installment 87, which was posted in November 2012, and other prior Installments here and here, observed the relative scarcity of disclosures regarding Madoff in 2011 Forms 990-PF by the various Wilpon family private foundations (the “Wilpon Foundations”).   Such 2011 Forms 990-PF were then beginning to appear on GuideStar.  The Forms 990-PF provide not only a window into the internal operations of the foundations but also allow for analysis of the quality of the disclosures made as to a matter that has received wide and continuous publicity.  (Capitalized terms not otherwise defined herein shall have the meanings assigned to them in Installment 87.)   

The observations made in Installment 87 have proven to be generally applicable to all six of the Wilpon Schedule 1 Foundations that have now had their Wilpon Forms 990-PF posted on GuideStar. Each of them has reflected an “Estimated SIPC Recovery – Madoff Theft Loss,” while they inexplicably omitted any reference to having encumbered such estimated recoveries by entering the Settlement Agreement with Picard.

We have awaited with anticipation the posting of 2011 Forms 990-PF of the private foundations of  the family of Saul B. Katz, as will be discussed below, because they have very substantial financial interests in the Settlement Agreement.  Additionally, it was desired that a comparison be made with the 2011 Form 990-PF (the “Wilpon Form 990-PF”) of the Judy and Fred Wilpon Foundation, Inc. (the “Fred Foundation”), which was filed on or prior to May 15, 2012. Only recently, however, could GuideStar post the 2011 Forms 990-PF of the Iris J. Katz and Saul B. Katz Family Foundation, Inc. (the “Saul Foundation”) and The Dayle H. and Michael Katz Foundation Inc. (the “Michael Foundation” and, collectively with the Saul Foundation, the “Katz Foundations”). 

The reasons for the delay in posting of the Katz Foundation 2011 Forms 990-PF are of some interest and will be discussed in this post, but there are some other comparisons and contrasts that will be made regarding the 2011 Forms 990-PF filed by the Katz Foundations (the “Katz Forms 990-PF”) and the Fred Foundation, both as to technical aspects of Form 990-PF disclosure and the substance thereof.

The Effect of Hurricane Sandy on the Timing of the Katz Forms 990-PF.

There is a relatively simple but unusual explanation for the inordinate delay in the posting of the Katz Forms 990-PF on GuideStar.   Each of the Katz Forms 990-PF has the following banner heading at the top of the first page in the exact same format: “HURRICANE SANDY RELIEF – FILING DEADLINE EXTENDED TO FEB 1, 2013.”  The receipt stamp of the IRS for each of the Katz Forms 990-PF is dated February 6, 2013. 

The Katz Foundations apparently took full advantage of additional tax relief granted on November 2, 2012 by the IRS to individuals and businesses affected by Hurricane Sandy.  Such tax relief postponed until February 1, 2013 various tax filing and payment deadlines that occurred starting in late October 2012, for specified filers, including “tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period” (the “Extension Period”).  As each of the Katz Foundations was on its second and final extension until November 15, 2012 for filing its Katz Form 990-PF, it met the initial test for potential applicability of the Extension Period.

The other requirement for a Katz Foundation to qualify for the Extension Period was its geographical location.  The address on each of the Katz Forms 990-PF is Great Neck, NY (which happens to be the same address as that of the Wilpon Foundations).  Great Neck is in Nassau County, NY, which is one of the counties as to which the Extension Period was available.  Moreover, the individual address of Saul B. Katz, the signer for the Saul Foundation ("Saul"), is reflected in its 2011 Form 990-PF as Glen Cove, NY, and the individual address of Michael Katz, the brother of Saul and the signer for the Michael Foundation, is reflected as Old Westbury, NY.  Each of Glen Clove and Old Westbury is also located in Nassau County.  Therefore, the Katz Foundations appear to have been fully eligible for the Extension Period in filing their Katz Forms 990-PF.

Saul, who is a certified public accountant (“CPA”), appears to have exercised an abundance of caution about qualifying the Saul Foundation for the location requirement of the Extension Period. The word “Resident” was handwritten over the word “Member” as his title with the Saul Foundation on page 13 of the 2011 Form 990-PF signature block. Michael, also a CPA, did not insert the word “Resident” in his signature block on the 2011 Form 990-PF for the Michael Foundation. 

As an aside it is somewhat puzzling that each of Saul and Michael used the title “Member” for purposes of  executing his respective Katz Form 990-PF, when each was listed elsewhere in the Katz Form 990-PF as “President and Director.”  (Moreover, each of them had used the title “President” in the signature block in Forms 990-PF filed for earlier years.)

There is a final note about the Extension Period.  On February 1, 2013, the date of the Katz Forms 990-PF, which was also the original expiration date of the Extension Period, the IRS extended the Extension Period to April 1, 2013, for various localities, including Nassau County, NY.  Query: had the Katz Foundations not filed their Katz Forms 990-PF at virtually the same time as the IRS granted a further extension, would they have availed themselves of the additional two months? 

(Michael J. Kline, the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office, and is a past Chair of the firm’s Corporate Department. He concentrates his practice in the areas of corporate, securities, and health law, and frequently writes and speaks on topics such as corporate compliance, governance and business and nonprofit law and ethics.)

[Part II will be continued in Installment 90]