Under federal law, most parts of a nonprofit organization's tax returns are a matter of public record.
Dexter Scott King, younger son of the late Rev. Martin Luther King Jr., is chief executive officer of IPM. The company was launched in 1994 to license King's words and images on behalf of the civil rights leader's estate, a for-profit business run by his family.
Since January 2004, Dexter King has also served as acting chief operating officer of the King Center. The Nobel Peace Prize winner's widow founded the center in 1968 to preserve her husband's legacy.
The tax return was the first to acknowledge that the center and IPM had officers in common. Tax returns for the three previous years reported payments to the company but did not disclose that the center was doing business with a company controlled by the same officers.
The Internal Revenue Service requires that nonprofit organizations report transactions with taxable organizations that have the same directors, officers or key employees. The requirement is meant to help the IRS monitor whether individuals are profiting from a charity or nonprofit organization's tax-exempt status.
Charity watchdog groups said the relationship between IPM and the King Center is dangerously cozy.
"A major element of nonprofit accountability is effective transparency," said Rick Cohen, executive director of the National Committee for Responsive Philanthropy. "The problem with putting most of the organizational management into an outside vendor is you don't know quite what the money is being used for. In this case, it is not only a problem of transparency, but creating a potential conflict of interest and the potential for self-dealing."
IRS rules do not bar transactions between a nonprofit group and a business that is owned or controlled by the same person, a practice known as self-dealing. But watchdogs say there are potential pitfalls.
"The risk is what could be driving the nonprofit is the business interests of the guy running it,'' said Daniel Borochoff, president of the American Institute of Philanthropy. ''It makes it harder for the nonprofit to be pure. It is better to transact business with disinterested parties."
Borochoff said a nonprofit's strongest safeguard against self-dealing is a strong, independent board of directors that w
atches out for problems. The King Center board is composed of eight members of the King family and former Atlanta Mayor Andrew Young.
"That is the problem," Borochoff said. "They need to expand their board and get outside participation."
The King Center reported paying Dexter King $181,913 in the 2003-04 tax year to serve as chairman and acting chief operating officer.
King Center officials have not disclosed the amount of Dexter King's compensation from IPM, if any. McGinnis has said that IPM does not pay him a salary, "as he is not an employee. He is a corporate officer of the company."
The center paid his older brother, Martin Luther King III, who was appointed the center's president and CEO in early 2004, $63,466 for about a half-year's work.
The center's year-end surplus sounded an encouraging note for an organization that had encountered a series of financial setbacks. It has borrowed money by mortgaging several properties, including the house in which King was born, and the National Park Service has estimated that the center's deteriorating infrastructure needs more than $11 million in repairs.
In the 2003-04 fiscal year, the center reported receiving more than 50 gifts of more than $5,000 each. Major donors, in addition to IMP, included:
• Target Corp. and the Catherine B. Reynolds Foundation, $50,000 each.
•America's Charities, $49,634.
• ExxonMobil Corp., McDonald's Corp. and the National Education Association, $30,000 each.
•Mercedes Benz USA, $20,000.
Entertainer Harry Belafonte, a longtime supporter and former King Center board member, donated $9,135, while Anne Cox Chambers, chairman of Atlanta Newspapers, owner of The Atlanta Journal-Constitution, donated $5,380.
Investigators from two federal agencies are conducting inquiries into the center's use of federal funds. The inspector general for the U.S. Department of Education is looking into its use of a $500,000 grant to develop a curriculum about King's principles of nonviolence. And the U.S. Interior Department, which has been providing the center with $500,000 to $1 million a year for maintenance and operations, is conducting its own inquiry into the center's spending.
The center, which includes King's tomb, an exhibit area and a historical archive, is located within the King National Historic Site, which is operated by the National Park Service, an arm of the Interior Department.
Copyright 2005 The Atlanta Journal-Constitution
