Update: The case was dismissed and the defendants were released without cause.
If you thought we’d heard the last about the Architecture for Humanity–the sprawling design nonprofit that suddenly declared bankruptcy in January, 2015, and subsequently closed–you thought wrong.
Because with bankruptcy comes a court-appointed trustee who is responsible for recovering as much money as possible. And as first reported Monday evening by Architectural Record, that trustee has now filed a lawsuit designed to do just that–by seeking $3 million in damages from its founders and board of directors.
That includes Architecture for Humanity cofounders Cameron Sinclair and Kate Stohr. It also includes a list of 10 former volunteer board members who, as you might expect of a design-focused nonprofit, hail from across the Silicon Valley and New York design and technology community.
The list includes Margaret Stewart, VP of product design at Facebook; the architect Toshiko Mori; Matthew Charney, now deputy director for new construction at New York City Housing Authority; Clark Manus, an architect and president of the American Institute of Architects from 2010-2011; Scott Mattoon, digital transformation director at Salesforce; Paul Gabie, managing director at the venture capital fund Saena Partners; Narry Singh, a managing director of growth at Accenture Digital; Cliff Curry, architect and founder of the Curry Stone Design Prize; Taylor Milsal, of Milsal + Partners, a San Francisco growth accelerator [Update: both Milsal and Curry have been removed from the lawsuit]; and Niama Jacobs, a former chair of the board.
So what, exactly, does the complaint entail? According to the filing from the Northern District of California, accessed by Co.Design through Pacer, it’s all about the way the nonprofit used (or misused) millions of dollars in donations. A lot of those donations came with specific restrictions on how they could be used–say, only 10% could go to overheard costs like salaries or events, while the rest was supposed to go directly to projects in the field. But as the nonprofit grew with incredible speed, so did overhead costs. Soon, it was using restricted funds for inappropriate things, the suit alleges. In fact, the lawsuit claims Architecture for Humanity was carrying out the “wholesale looting” of restricted donations to stay afloat.
Here’s the critical part. As the so-called “looting” was beginning, Architecture for Humanity was warned that it was doing something wrong by its legal counsel. If it had heeded those warnings and shut down in early 2014, it could have taken the $3 million it had left in its coffers and redistributed that money to the donors who gave it. Instead, AFH kept operating, even going after new donations, until it declared bankruptcy a year later. When it shuttered, it had only $200,000 left. That’s seemingly where the lawsuit gets its price tag–it’s the amount of money that the nonprofit had left when it was warned that it was committing “gross negligence.” If the suit is decided against them, that money will be distributed to a long list of 170 different creditors, including Nike and Amazon.
In short, Architecture for Humanity should have shut down a year before it actually did, as it grew too fast and took on too many projects to manage.
“From my time at Architecture for Humanity, I know there are many lessons to be learned from small problems and how they were or were not addressed,” said Garrett Jacobs, a former fellow and the current director of the Open Architecture Collaborative, the organization that grew out of the shuttered nonprofit. Jacobs, who was a design fellow during the period mentioned in the complaint, has made it his mission not to repeat the mistakes of AFH, focusing instead of minimizing overheard and staff while bolstering grassroots volunteer networks. He declined to talk about the details of the lawsuit, but added over email that he trusts “the legal process will bring them to light so we may continuously improve on delivering our mission.”
It’s still unclear how involved or knowledgable the volunteer board members were in the management of funds. One of them, Clifford Curry, has asked to be removed from the lawsuit because he was no longer on the board during this period, a representative said. According to a statement emailed to Co.Design, Curry “has, with some of the other board members, hired an attorney to represent them as a group.”