Golden Globes’ Proposal to End Nonprofit Status Shredded by Legal Experts: ‘Conflicts All Over the Place’
The plan to reinvent the Golden Globes by turning the Hollywood Foreign Press Association into a for-profit company owned by billionaire Todd Boehly, the group’s interim CEO, raises a host of legal and ethical red flags, multiple legal experts told TheWrap
Four attorneys with expertise in nonprofits who spoke to TheWrap say that a for-profit structure would increase, not decrease, the lack of transparency that has bedeviled the organization in recent years and led to NBC canceling the 2022 broadcast. The notion of voters participating in the profits of the awards show raises ethical challenges, they added, and a two-tiered structure – with new voters pulled from a more racially diverse pool while being denied official membership (as well as income) – creates “a business where the white people are the owners and have a profit interest,” as one lawyer put it.
Any proposal would need to meet the approval of the California Attorney General, they said, though one noted it was unlikely to pass muster at that level. “This all feels like it’s totally inappropriate,” one lawyer concluded.
Boehly’s plan, first reported by TheWrap last November and publicly confirmed earlier this month, would transform the HFPA from a 501(c)(6) professional organization into for-profit company that Boehly himself would run through his parent company Eldridge Industries. The plan also includes adding 200 new voters who wouldn’t necessarily become members of the group but would boost the voting rolls to a more substantial 300 that Boehly believes would win over Netflix and other studios who have voiced opposition to the insular nature of the current Globes voting pool.
Boehly has pitched his plan as the best way to end the scathing criticism of HFPA, which has been accused of corruption, self-dealing and lack of diversity that led to a widespread boycott by Hollywood publicists, studios and networks.
Even before HFPA members formally consider the proposal, a company of entertainment and business leaders led by former Academy of Motion Picture Arts and Sciences President Cheryl Boone Isaacs and Yusef Jackson — an investor and son of civil rights activist Jesse Jackson — have demanded to know how Boehly could oversee reforming the HFPA while also deciding on his own plan to turn the association into a for-profit group.
Here are a few of the burning questions on the table for both Hollywood and the State of California — which of course includes some overlap. Through a spokesperson, Boehly declined a request from TheWrap to discuss his plan.
None of the attorneys reached by TheWrap offered support for Boehly’s plan.
One of the complaints against the HFPA has been its lack of transparency. Would a for-profit structure solve that problem?
If anything, experts say that a for-profit business model would make things even murkier. While it’s not illegal to change an organization from a profit to a nonprofit, New York attorney J.J. Harwayne Leitner, a partner at Frankfurt Kurnit Klein and Selz and chair of the law firm’s Charitable Organizations Group told TheWrap, the company would no longer be required to disclose its revenues, losses and the salaries of top officers as it now does. “There’s no transparency when your records are not public anymore,” Leitner said. “You don’t know what people are getting.”
Arts and entertainment attorney Jan Breslauer added that a new for-profit company would be “playing by different rules… If you become a private corporation for profit, you’re no longer going to be showing everybody your finances every year.”
HFPA is a 501(c)6 membership organization rather than a 501(c)3 charitable organization. Is there a difference in terms of the type of transparency that’s called for?
No, Leitner said. “Whether you are a 501(c) 6 or a 501(c)3, your return to the IRS is the same form, Form 990. And everybody can look them up… you can look up how much money they make and what they spend, and what they spend it on.” For a membership organization with a voting body that has been challenged on transparency, Leitner said, a private company “just doesn’t make any sense to me. If I were taking this to the California Attorney General, I think it would be an uphill battle to get it approved at that level.”
San Francisco attorney David Levitt of Adler & Colvin said the rules are somewhat different for these two different types of nonprofits. “With respect to California, if the HFPA is indeed a business league, it typically would not be subject to the CA AG (Attorney General) registration and reporting requirements that are applicable to charities,” Levitt said via email.
However, “If the organization solicited donations for a charitable program or holds some of its assets for charitable purposes, it could have to register and report on those charitable assets,” Levitt said. Under the proposed for-profit structure, the HFPA would maintain a charitable trust as a separate entity. (The trust, which files its own 990, distributed roughly $1.9 million in charitable contributions annually between 2015 and 2019, the last year for which data is available.)
Under Boehly’s proposal, the HFPA would hire a third party to appraise the monetary value of the HFPA’s assets before selling them to a new for-profit entity that Boehly’s own Eldridge Industries would create and run. Would evaluating HFPA assets create a potential problem?
A San Francisco attorney specializing in nonprofits who asked not to be named said decidedly yes — especially when the “assets” include such hard-to-define items like the Golden Globes trademark. “Who are they going to engage in this valuation? Does it employ the standard methodology that is used for valuing these kinds of assets?” she asked. “Hopefully they are talking to an expert that is legitimate, but I’ve heard many of my clients say, ‘Oh, I’ll find an expert who values it at zero — certainly you can shop around for an expert that diminishes the value. Hopefully, the Attorney General will scrutinize that appraisal as well as the nonprofit fair market value for what they’re what they’re giving.”
Whatever entity does the appraisal, what about Boehly’s role as both interim CEO and eventual owner of the new company?
The San Francisco attorney added that Boehly’s involvement in making decisions about selling HFPA assets to a company he would then own “raises conflicts all over the place.” What’s more, Boehly also now owns MRC Entertainment, the production company that produces the Golden Globes broadcast and splits the $60 million annual licensing fee with the HFPA. “To be engaged on behalf of proposing this because he’s really also on the other side,” the attorney said, “hat’s where this all feels like it’s totally inappropriate.”
An HFPA insider has confirmed to TheWrap that per the proposal, the 102 current members of HFPA would be able to share in the profits of the new venture, most of which would derive from the annual $60 million licensing fee from NBC. Is it a conflict of interest for voters to profit from choosing award nominees and winners?
The attorneys said that while this may not be a legal issue, it’s potentially an ethical challenge. As soon as possible profit enters the picture, the San Francisco attorney said, there’s no guarantee that board members who are also HFPA members will vote in the best interest of the organization, rather than from personal profit motive. (And indeed, the HFPA has faced criticism in the past for handing nominations to critical flops like the 2010 Angelina Jolie-Johnny Depp caper film “The Tourist” to secure A-list talent for the broadcast.) However, in its recent reforms HFPA added several non-members to its board.
Along with floating the possibility of profits for HFPA members, Boehly has confirmed plans to add 200 nonmember voters, addressing the perception that the HFPA is less diverse because of its size. What questions are raised by adding a nonmember voting pool?
While voting organizations do sometimes create different levels of voting members, multiple attorneys said it’s more common to have nonvoting members than it is to have voters who are nonmembers.
Also in this case, Leitner said that giving a new, and presumably more diverse group the right to vote, but not to share in the proposed profits or salaries paid to members for committee work makes them second-class citizens within the organization. In its recent reforms, HFPA has brought in six new Black members, 10 women, six who identify as Latinx, five Asian and four of Middle Eastern/North African descent” — but has fallen short of the HFPA’s pledge last March to add at least 13 black members, reflective of the 13% Black U.S. population.
“Let’s say [they] want to bring in more voters who presumably will be let’s say somewhere in the BIPOC universe, LGBTQ+ or whatever, [it’s still a] business where the white people are the owners and have a profit interest,” Leitner said. “Other people, the new people who are the diversity class, don’t have any ownership. How can that possibly help them with a problem that they have?”