Bob Malm and Possible Self-Dealing

By | December 19, 2018

One of the biggest concerns I have about governance at Grace Episcopal are the multiple instances of what may be self-dealing on Bob Malm’s part. Such conduct, if it has occurred, is unethical, possibly illegal, and may jeopardize the church’s tax exempt status.

So what is self-dealing? Simply put, it is the legal notion that fiduciaries must act in the best interests of the nonprofit, versus in their own self-interest. For example, a fiduciary who uses her role in an organization to hire a family member has engaged in self-dealing. Similarly, when a nonprofit acts to benefit a specific individual versus the organization’s intended beneficiaries, illegal self-dealing may have occurred.
Such conflicts can be indirect. For instance, a non-profit responsible for beautifying a downtown area has acted improperly if it landscapes an area that primarily benefits a single large donor to the nonprofit.
That raises the question: Who should worry about self-dealing? The answer is complex, but the IRS and other taxing authorities typically look to board members, officers, and highest-paid organizational employees. Since Bob Malm is a member of the vestry, and far and away the church’s highest paid employee, it seems clear he is within the purview of persons who could engage in self-dealing.
Now, let’s look at some specific transactions and decisions that could involve self-dealing:
  • The decision, which parishioners allege Bob made, to have Grace School serve grades K-5 in order to accommodate his desire to have his son James close to home. While I understand the desire to have one’s children nearby, if this allegation is true it would be highly improper, and a case of clear self-dealing. (Note that this is not a slap at James, whom I like and respect.)
  • The decision to tear down the rectory and pay for a private residence to Bob. In this instance, the fact that Bob allegedly remained in the room while the vestry considered the matter may have been improper influence that made the decision a case of self-dealing on Bob’s part.
  • The decision to offer Bob a $100K bonus. While he was not in the room when the executive committee/vestry considered the mater, Bob’s appointment of the executive committee usurps the arms-length negotiation that would otherwise occur if the church adhered to deonominational canons.
  • Allegations that Bob has repeatedly taken leave in excess of that permitted under his letter of agreement, and without vestry approval. If those allegations are true, some organizations would treat the unauthorized leave as theft of wages.
  • The employment of Bob’s daughter Lindsey in the church office.
Of course, one must remember that neither the IRS, nor a court of competent jurisdiction, has determined that Bob Malm has engaged in self-dealing. But there are enough instances that involve questionable fact patterns to raise serious concerns about the potential use of parish resources for Bob Malm’s personal benefit.
My advice to anyone considering membership in the parish, or considcring giving money to the church: Don’t be afraid to ask tough questions about these and other governance issues. Bob’s job is to serve you, not the other way around.