The Michigan Department of Attorney General has put together a team of staff to review two proposed transactions that not-for-profit Beaumont Health recently announced. Due to the important role the Attorney General plays in preserving charitable assets across the state of Michigan, the office intends to closely scrutinize these proposed deals before they are finalized.
In June, the boards of directors for Advocate Aurora Health and Beaumont Health gave approval to move forward with a non-binding letter of intent to join their health care operations and serve residents in Michigan, Wisconsin and Illinois. Beaumont Health recently approached Michigan Attorney General Dana Nessel’s office to outline some of the basic terms of the proposed arrangement and has agreed to provide additional materials to the office for review.
Nessel is also reviewing a second transaction involving Beaumont Health subsidiaries and Superior Air Ground Ambulance Inc. that it received notice of in April. This deal appears to involve the sale of certain nonprofit assets to a for-profit entity.
While materials related to each of the transactions are being submitted to the Attorney General’s Office confidentially, it is hoped that additional details or comments will be provided to the public at a later date.
“My department serves an important role in protecting charitable assets in Michigan under broad common law and statutory authority,” Nessel said. “Institutions like nonprofit hospitals and health care providers play a very unique role in the communities they serve, and my job as Attorney General during transactions involving these entities is to ensure those charitable assets are not used for private gain.”
At this point, it is unclear whether charitable assets will be impacted by the proposed transactions. If they are, the attorney general’s review of such transactions generally takes between six and nine months.
Charitable asset transactions also generally require a third-party valuation expert to review the materials and a public forum to allow residents the opportunity to express any concerns. In addition, the Attorney General’s Office may conduct interviews with employees and board members at nonprofit organizations, inspect facilities and ultimately issue a final report. In addition, if warranted, the attorney general may also work to appoint a monitor to ensure that promises made during the transaction process are kept.
Additional information about the attorney general’s review process and past transactions scrutinized by the office can be found on the attorney general’s Charitable Asset Sales website.
Some of the largest and most significant nonprofit asset sales involve hospitals, and the attorney general has a strong interest in the preservation of those charitable assets. The attorney general’s role is not to administer, govern or oversee the day-to-day activities of a nonprofit entity or charitable organization, as those duties fall to the entity’s officers and director. However, under certain Michigan laws, the Attorney General’s Office has authority to review and approve sales and asset transactions that involve charitable entities, such as nonprofit hospitals, and remain involved in the post-transaction monitoring to ensure agreements are enforced.
Certain laws that restrict the use of charitable assets for private use and provide the Attorney General oversight authority for transactions involving nonprofit entities include:
• The Supervision of Trustees for Charitable Purposes Act provides the Attorney General authority to protect charitable interests within the state which include supervisory, investigative and enforcement powers.
• The Dissolution of Charitable Purposes Corporations Act requires dissolving charities to notify the Attorney General before filing their dissolution paperwork with any other state agency or court. This allows the Attorney General to ensure that any residual charitable assets are properly disposed to other charitable purposes and not used for private benefit.
• The Michigan Nonprofit Corporation Act prohibits the use of charitable assets for non-charitable purposes.
More information will be released at a later date.
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