Suit: Nonprofit took improper fees from special needs trusts

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An Indianapolis nonprofit is accused in a lawsuit of taking millions of dollars in excessive fees from trusts owned by people with disabilities.

In the lawsuit filed Monday, Monroe County resident Timothy Todd claims the National Foundation for Special Needs Integrity violated its fiduciary duty by taking the money to pay unjustified legal and other fees. The lawsuit seeks class-action status and also claims the nonprofit didn't respond to Todd's requests for information on the expenditures.

Special needs trusts are meant to help people retain eligibility for government benefits. Todd gets disability funds because he can't work following a job-related accident, and he has a special needs trust that includes money inherited from his mother.

Special Needs Integrity acts as Todd's trustee, and he became concerned after he received a letter from the nonprofit in July telling him thousands of dollars were taken from his trust for "general fees," according to court records. The nonprofit also took out "trustee fees," according to the lawsuit, and excessive annual fees.

The lawsuit accuses the nonprofit of improperly withdrawing $9,630.18 from Todd's trust.

The letter said money withdrawn from Todd's trust reflected his "proportionate share" of fees paid to an Indianapolis-based law firm for "various legal services." The lawsuit estimates the nonprofit has used beneficiary funds to pay about $2.4 million to the law firm since 2011.

In a review of IRS filings by The Indianapolis Star, the nonprofit reported $274,163 was spent on legal fees between 2011 and 2014. Another $146,411 was paid to a Carmel-based consulting firm for legal and adviser services.

More charges might be under the nonprofit's "program fees" line item, which rose 89.5 percent in the period reviewed.

Special Needs Integrity did not return calls from the newspaper seeking comment. The nonprofit says on its website that it would never "treat our beneficiaries as if they were means to an end," and that it will "never ignore them or dismiss their concerns."

The lawsuit seeks payment of damages and attorney fees, and costs for those affected.

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