Beaufort County Black Chamber’s tax-exempt status is in danger, court filings say
The tax-exempt status of a downtown Beaufort organization that promotes economic empowerment of Black communities and small businesses is in jeopardy, court records say. The organization, under fire from a lawsuit alleging misuse of money, also is accused of operating a restaurant without a business license.
As Beaufort County’s local governments decide whether to halt payments to the Beaufort County Black Chamber of Commerce based on the lawsuit’s allegations that the chamber president misused money and hid financial documents, recent court filings show the chamber’s internal turmoil — along with multiple complaints of the president’s unchecked power.
The court documents allege that chamber president and CEO Larry Holman unilaterally gave himself raises; granted himself sole authority to hire and fire board members, including appointing his wife as chair; and refused to provide board members with accounting of the organization’s finances.
Federal tax forms sent to the Internal Revenue Service include false information, the documents say. And Holman, who’s served as president since 2001, is accused of operating the chamber, a tax-exempt nonprofit, as his own family-run private business.
In its lawsuit against Holman, filed on Nov. 18, three former board members — who argue they are still part of the board — ask the court to require Holman to turn over financial and tax records, dismantle his new board and not use chamber money to defend the suit.
If the injunction isn’t granted, the former board members fear the chamber will lose its tax-exempt status, according to the suit.
Holman, in a response filed in court last week, “strongly denies that any of his actions have put the tax-exempt status of the organization in jeopardy.”
Holman says his actions “have only strengthened the work the organization has done and continues to do as a tax-exempt entity.”
He argues that the three plaintiffs — Bernard McIntyre, John McCoy and Leroy Gilliard — are no longer part of the chamber’s board of directors and do not have legal standing to file the suit.
McIntyre, however, in an Oct. 2 letter to Holman, wrote “it may be necessary to suspend the tax exempt status of the Chamber until the irregularities and violations can be remedied.”
McIntyre ends the letter by threatening to send “this very correspondence” to U.S. Department of Agriculture regulators, the S.C. Secretary of State’s Office and the U.S. Black Chamber of Commerce.
“Then the public charity which is the Chamber can be returned to the people and try to build back better,” it says.
Form 990
In court documents filed in Beaufort County last week, the former board members claim the chamber’s federal Form 990 includes false statements.
This month, The Island Packet and Beaufort Gazette reported that the Black Chamber’s IRS Form 990 from 2018 (the most recent available online), listed Holman and his wife as “individual trustee or director” and “officer” in the organization. However, in the same form, the organization answered “no” to the question: “Did any officer, director, trustee or key employee have a family relationship or business relationship with any officer, director, trustee or key employee?”
The court documents allege there were numerous times the forms were incorrect.
In the same form, the organization responded “yes” to a question asking whether all members of the board received a copy of the Form 990.
The court filings say this is “false (because Board members were not provided a copy).”
According to the Internal Revenue Service, if an organization does not file a return by the prescribed due date, it must pay $20 a day for each day the return is late. The same penalty applies if an organization does not give correct information.
The maximum penalty for any return, according to the IRS, is either $10,000 or 5% of the organization’s gross receipts for the year — whichever is less.
Salary increases
Among the accusations against Holman is that he gave himself an excessive salary without the board’s knowledge.
Holman was paid $127,000 as president and executive director in 2018, according to the most recent available IRS Form 990. He earned $190,500 in 2017, $193,000 in 2016 and $96,000 in 2015, federal 990 forms show.
In his affidavit filed in the former board members’ lawsuit, McIntyre claims that the board last increased Holman’s salary from $3,500 a month, or $42,000 a year, to $5,000 a month, or $60,000 a year, in 2014. Since then, “there have been no increases in his compensation … nor has there even been any discussion or a vote on a salary increase.”
“The only way Larry Holman could make this size salary is by his usurping the authority of the Board,” he said in the affidavit.
Affidavits from other former board members reiterate that the board had not voted to raise Holman’s salary since 2014.
A copy of the Black Chamber’s bylaws from 2016, attached in the lawsuit, states that “the Board of Directors shall employ a President/CEO (or appropriate title) and fix his/her salary and considerations of employment.”
“Anyone in a position to make decisions about spending the BCBCC’s resources ... who also stands to benefit from that decision has a duty to disclose that conflict as soon as it arises. ... She/he should not participate in any final decisions,” the bylaws attached in the suit say.
Nepotism
Nepotism is a problem at the chamber, the former board members say. Holman’s wife recently became board chair, and his son oversees programs and events.
In his letter attached to the lawsuit, McIntyre said Holman “disregarded the existing Board and solely and singularly empaneled and anointed [his] own Board in complete violation of the Chamber’s By-Laws and state and federal law governing public charities.”
The chamber’s bylaws attached in the suit say the nominating committee for directors shall nominate officers each year at its regular November meeting.
“At this meeting, the Board shall elect the Chairperson, Secretary, and Treasurer,” the bylaws say.
McIntyre’s letter claims that Holman “self-appointed” his wife, Wilma Holman as chair of the board.
“For you to be the President/CEO of the Chamber and your wife to be the Chairperson of the Board is in direct contravention of state and federal regulations and the Chamber’s By-Laws,” the letter said.
Business license
As the former board accuses Holman of misusing money, usurping his authority and nepotism, the chamber also faces violations from the City of Beaufort.
On Nov. 24, according to a letter from city business license inspector Justin Rose, Holman is accused of operating the Gullah Jazz Cafe, located inside the chamber’s building on Bladen Street, without a business license.
“They have never had a business license,” Rose said Thursday. “To my knowledge, they are still operating.”
The letter claims that Holman was notified of the violation on Oct. 8, but “disregarded it,” saying that he was operating the business under the chamber, which is tax-exempt.
Rose’s letter notes that tax-exempt organizations “are still liable for tax” on “unrelated business income.”
“A business license would be required to include the collection of state sales tax and local hospitality tax,” the letter said.
Rose told The Island Packet and Beaufort Gazette that the chamber responded to the letter and is in the process of obtaining a business license.
“That restaurant is open to the public, and there is direct competition with other businesses,” he said. “It does not fall under 501(c)(3).”
If the chamber fails to comply, the city can issue a summons, and the chamber would be charged with a misdemeanor if found guilty, Rose said.
Cutting funding?
After The Island Packet and Beaufort Gazette reported on the former board’s lawsuit against Holman, interim Beaufort County Administrator Greenway wrote to county leaders, advising them that due to the lawsuit, “which involved the possible mismanagement of funds,” he had asked the county to cease all payments to the organization until council members can discuss the issue at their next meeting on Dec. 14.
Called Thursday, Beaufort Mayor-elect Stephen Murray said he spoke with City Manager Bill Prokop, and the city has not decided whether it will cut funding to the chamber.
Murray said the city doesn’t “just cut the money loose” when it provides accommodations and hospitality tax funding to organizations. The groups have to prove to the city the money was spent properly and then are reimbursed.
As for the lawsuit against Holman, Murray wouldn’t “speak specifically to the chamber” or the lawsuit. However, he said, in his 10 years working with nonprofits, the groups’ bylaws generally explain how a board of directors is supposed to interact with its executive director. He said there’s usually “separation between the governing body and the staff side of things.”
“It’s unfortunate,” he said. “I’m sad to see board members sue the organization. I think the entity is needed in Beaufort County, and I hope they can resolve their issues.”
This story was originally published December 14, 2020 at 4:40 AM.
