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dan harkham

Dan Harkham: Sole member L to R: Hadrian Belove, Dan Harkham, Sammy Harkham           Source: Getty Images

According to Cinefamily's website, Dan Harkham was the nonprofit's co-founder and board treasurer.  The L.A. Times and L.A. Weekly have reported Harkham owns the Silent Movie Theater with his brother Sammy, though Cinefamily's 2014 tax filing (the most recent available) says the Harkhams' parents own the building.  (Cinefamily paid the Harkhams $114,000 in rent that year.)

Public records indicate that in addition to (maybe?) being Cinefamily's landlord and one of 16 board members, Harkham had additional legal rights effectively making him Cinefamily's sole decision-maker.

As we get into the weeds, I should remind you I'm not an attorney.  But I wanted to know who was asleep at the switch; I looked to the board for the final word on Cinefamily responsibility, accountability, and oversight. Excerpt from Cinefamily's 2014 IRS Form 990

At the time of this filing there were 18 members on the board, 16 of whom were classified as "independent."  (Belove and Harkham have been described as founders as well as directors.)  A little farther down things get more interesting, with question 6 confirming Cinefamily had "members or stockholders."  A reply of "yes" requires additional disclosures in a separate Schedule O, shown below. Excerpt from Cinefamily's 2014 IRS Form 990 Schedule O

So there's 18 (16 at the August 2017 closing) board members, but only one member "with such rights and privileges" to require an extra disclosure.  This sole member (as opposed to board member) is akin to a shareholder in a for-profit company.  (At the risk of further confusion, none of this has anything to do with Black Card members, as Cinefamily donors are called.)

A nonprofit with a member is not the norm; one legal site described how a similar structure at the Cato Institute had "people across the country scratching their heads."  At Cato it was not about financial enrichment: "the structure is just a means by which to control the organization" (emphasis added).  In November 2017, a lawyer with expertise in nonprofit board governance reviewed Cinefamily's legal filings and told me this sort of structure was "sketchy."

So what are these extra rights and privileges?  The Amended and Restated Articles of Incorporation don't shed too much light: Excerpt from Cinefamily's 2008 Second Amended and Restated Articles of Incorporation.  (The original 2007 Articles of Incorporation list no members.)

The Amended and Restated Bylaws are a bit more clear: Excerpt from Article VI of Cinefamily's Amended and Restated Bylaws

Or as stated more succinctly in a filing with the California Franchise Tax Board: Excerpt from Cinefamily filings with the CA FTB and accessed via CA AG.

If I were a nonprofit director—even if I enjoyed the position and its trappings, and even if continuing to hold my position relied on pleasing one individual—I'd like to think I'd ground myself in the mission of the organization.  But I also imagine true independence would be hard and that I might defer to my "boss"—the person with the power to hire and fire me.

There is one final wrinkle related to Dan Harkham's special status.  Checking that "member or shareholder" box on the annual tax form required an additional disclosure on Schedule O, but most people interested in Cinefamily's governance likely never saw any disclosure.

Guidestar is "the world's largest source of information on nonprofit organizations," and is typically the first stop for most people seeking a nonprofit's 990s.  Guidestar explains they get 990s from the IRS but that "Any organization in the database can also post PDF files of its 990s;" Guidestar provides no additional details on oversight or quality control covering voluntary uploads from individual nonprofits.

I accessed the same filing through Guidestar (seen on the left) as through the California Attorney General's office (seen on the right).  One would expect the documents to be identical, but one key disclosure appears to have been redacted from the Guidestar version in 2014: 2014 990 Schedule O (Source: Guidestar) 2014 990 Schedule O (Source: California Attorney General)

And for 2013: 2013 990 Schedule O (Source: Guidestar) 2013 990 Schedule O (Source: California Attorney General)

I have asked Guidestar for clarification and will update if I hear back.  There is no reason to assume this discrepancy was improper, deliberate, or any attempt to obfuscate.  Regardless of intent, crucial governance information was unavailable to Cinefamily stakeholders.

NB: I have not altered these documents in any way (other than the obvious yellow highlighting in select documents).  Note that "2013" is printed on the 2014 filings and "2012" is printed on the 2013 filings.  If images appear cropped weird, clicking on them should help.

UPDATE 1/11/18: The good folks at Guidestar were gracious enough to make some time to talk with me about this.  According to Guidestar's Director of Data Operations Holly Ivel, the 990 accessed through Guidestar was directly submitted to the IRS electronically, while the version accessed through the AG's office was submitted directly to the AG.  Ms. Ivel believes the missing information in the Schedule O accessed via Guidestar is the result of an accidental bug in the IRS's data-population system, and (while perhaps unfortunate) is not in any way improper.

Ms. Ivel also notes that the deadline to file the annual 990 is 5 months and 15 days after the end of the fiscal year—which for Cinefamily is October 31—but that organizations may request up to six months of extensions.  Even assuming the full allowable extensions, Ms. Ivel believes the IRS would have processed and released the 2015 990 in around December 2016 or January 2017.  She said there is likely to way to know now if Cinefamily filed late or if they have still not filed.
