Dan Churney Jul. 7, 2016, 11:13am

The Illinois Attorney General's Office has stepped in to force the multi-million dollar suburban Arthur Foundation to abide by its original ground rules governing how it dispenses funds and to force the foundation to set term limits for its directors. 

An agreed order was inked June 22 in Cook County Circuit Court between Illinois Attorney General Lisa Madigan’s office and the Riverside-based foundation, prohibiting the foundation from providing grants outside certain areas in Cook County and limiting the board of directors to 10-year terms. 

IL Attorney Gen. Lisa Madigan
IL Attorney Gen. Lisa Madigan

MacNeal Memorial Hospital Association ran the not-for-profit MacNeal Hospital in Berwyn for a number of years until 1999, when it sold its assets to two for-profit corporations, Vanguard Health Services and VHS of Illinois. According to law, the proceeds from the sale were to be used for a charitable purpose as similar to that of running a non-profit hospital as possible. 

In line with this, the MacNeal Health Foundation was incorporated in 1999 to see that the proceeds were used for "charitable, educational and scientific purposes and specifically, to improve and promote health in the Chicago metropolitan area." In particular, the money was to address health needs within a 10-mile radius of the former MacNeal Hospital. Besides Berwyn, this radius would take in the communities of Cicero, Riverside, North Riverside, La Grange, Brookfield and others in central and western Cook County. 

Parties involved with the sale of the hospital also stated this would be the foundation’s aim during a public hearing conducted in 1999 in connection with the establishment of the foundation, according to the Attorney General’s office. 

The foundation has funded scholarships, medical programs and clinics. According to the foundation, it extended $101.8 million in grants between 2000 and 2015. 

The foundation’s original bylaws also established a seven-member board of directors, with none of the directors to serve more than three consecutive three-year terms. This stipulation was also made at the 1999 hearing, the Attorney General said. 

In 2006, the foundation changed its name to the Arthur Foundation. Also that year, the foundation changed its charter, eliminating the specification that restricted the use of funds to within the 10-mile radius; with the change, there was no longer any geographic confines. 

The foundation also deleted the provision limiting terms of service for the board.

Citing the Illinois Charitable Trust Act, the Attorney General initiated action this spring, saying the foundation has to adhere to the original articles of incorporation and bylaws, based on the principle of equity and the representations made at the 1999 hearing to abide by the donor’s wishes. The Attorney General added that the foundation did not file the new article of incorporation with the Illinois Secretary of State, as required. 

The Attorney General further pointed out all directors had been on the board more than 10 years, and so were allegedly in violation of the bylaws and must resign. 

The foundation differed, contending the changes were legal. 

Nonetheless, the directors agreed to step down in late May, with the understanding that future directors will follow the original charter governing the 10-mile radius and will serve on the board no more than 10 years. Also, any future proposed changes to the charter and bylaws have to first gain a judge’s approval and the Attorney General’s acknowledgment. For its part, the Attorney General’s office agreed to not challenge any grants already handed out by the foundation. 

Cook County Judge Diane Larsen oversaw the agreement. 

Assistant Attorney General Therese Harris represented the state. The Milwaukee-based nationwide firm of Quarles & Brady, which has a Chicago office, represented the foundation.

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