Insight into the infiltration of the Presidents Club

5 March 2018 | Applicable law: US

The Financial Times' infiltration and reporting of the Presidents Club Charitable Trust men-only fundraising dinner has raised a number of questions for other charities which either organise or benefit from fundraising occasions.

The details of the event, at which female workers were harassed and propositioned by attending guests, have been widely reported and created debate in Parliament. In its wake, the Presidents Club, a registered charity and the occasion's organiser, has said it will close and the Charity Commission has launched an urgent investigation. Several charities which otherwise would have received funds from the occasion are now in consultation with the Charity Commission to decline or return funds from the occasion.

Even for charities not directly affected by this event, there are a number of lessons and action points:

Charities should consider the circumstances in which they accept or, perhaps more importantly, refuse donations and set this out, together with the relevant internal procedures to be followed, in a policy approved by the trustees and reviewed from time to time. Ultimately, responsibility rests with a charity's trustees (even where specific decision-making has been delegated to executive staff) and so it falls to trustees to consider when the acceptance or refusal of donations will be 'in the best interests of the charity'. Once accepted, donations become charitable funds and there may be limited circumstances in which it is possible to return funds without the approval of the Charity Commission. It is likely that charities will now want to revisit their due diligence and policies with regard to collaborations with third parties, the terms of event management or organising contracts and the detailed specifications for events. Indeed, the Charity Commission and the Fundraising Regulator published a joint alert in November 2016 reminding trustees of their legal duties and the need in particular (in the commission's own words) to have 'effective systems in place to keep control of the fundraising , and taking steps to properly protect the charity's interests , assets and reputation'.

In the Presidents Club case, the position may be complicated by the fact that funds were being raised by one registered charity (the Presidents Club) for onwards disbursement to other registered charities. In those circumstances, the prima facie duty for trustees of the recipient charities is to accept. However, their trustees also have a duty to exercise an appropriate degree of care in administering the charity. In respect of both donations and fundraising activity, this demands that they carry out reasonable and proportionate 'due diligence' on either fundraising activities or proposed donations. Clearly, either accepting or declining major donations in controversial circumstances carries potential reputational risk for a charity (the risk, on the one hand, that acceptance is seen to be compromising the charity's integrity and reputation, which may itself have wider consequences for long-term fundraising, as against the risk that refusal deprives the charity of much-needed funds). In those circumstances, charities can consider seeking guidance from the Charity Commission which protects trustees (under s110 of the Charities Act 2011, the Commission has a statutory power to give advice) or applying for an Order from the Commission authorising a refusal (s105 Charities Act 2011, provides the Commission with a broad statutory power to authorise dealings with charity property) or more rarely, applying for an Order from the Charity Commission using the ex gratia procedure (s106 Charities Act 2011).

If the source or circumstances surrounding a particular donation risk controversy or potential reputational damage, trustees should consider whether there is a need to seek further guidance or authority from the Charity Commission, and whether the acceptance of the donation constitutes or would constitute a ‘serious incident’ to be reported.

One of the many troubling aspects of the Presidents Club case is the requirement that workers at the event were asked to sign a 5-page 'non-disclosure agreement'. It's debatable whether such NDAs would be enforceable in this particular case (given that the individuals were not given an opportunity to read or retain the agreement), but it raises a wider point for charities. The Fundraising Code requires that organisations have a complaints procedure, which must also apply to third parties fundraising on their behalf. Further, they must have a clear internal 'whistleblowing' policy, allowing staff and volunteers to report any concerns they may have regarding fundraising practice.

Thinking more broadly about obligations to workers, charities owe a duty of care to their employees and volunteers. They are also subject to the provisions of the Equality Act 2010, which includes a range of protections for a broadly-drawn category of 'employee' which includes workers supplied by an agency. Employment status has once again become a major source of litigation (including in the Pimlico Plumbers case, which came in front of the Supreme Court in late February, and the Uber litigation, which comes before the Court of Appeal in November). Employment status is a highly fact sensitive issue and the removal of employment tribunal fees in the summer of 2017 has already resulted in a sharp increase in the number of individuals willing to take steps to investigate and enforce their rights.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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