Miami Herald - Sunday, October 12, 2003
Jay Weaver, jweaver@herald.com

The retired Miami Beach garment worker didn't get to enjoy his luck for long. He died six months later at the age of 67. In his will, he gave half his winnings to a few close friends and three charities, paid through a family trust.

But not all of the beneficiaries are happy.

United Foundation for AIDS is suing the man who holds the purse strings of the Mejia trust -- an aggressive legal strategy that is becoming more common among nonprofit groups as they fight for a shrinking pool of donations, especially since the Sept. 11, 2001, terrorist attacks.

The North Miami Beach-based foundation claims it was supposed to receive $44,700 annually to be paid over 20 years. But the tax-exempt group alleges Hernando Rivillas, Mejia's nephew, is wrongly holding back half that amount to pay taxes to the federal government.

Foundation President Marc Cohen said the group was reluctant to sue, but said Mejia intended that money to battle a devastating epidemic.

"We're grateful for the support by Francisco Mejia," said Cohen, adding that Mejia gave the money because he had many friends affected by AIDS. "He could have left it all to his family. He understood the tremendous need for funding the fight against HIV and AIDS."

The bold legal move comes at a time when nonprofits seem less concerned that the public might perceive such lawsuits as biting the hand that feeds them.

"The concern about looking bad for bringing a lawsuit is not as bad as it might have been historically," said Miami tax-exempt legal specialist Hank Raattama.

He cited a notorious dispute in the early 1980s between a duPont family trust and its beneficiaries -- a children's hospital and an elderly clinic. The conflict was over the value of the trust, which a Florida judge eventually set at $805 million.

The reason for the fight: Three percent of that money was willed to those charities annually.

This summer, the Dr. John T. MacDonald Foundation sued to stop the sale of Doctors Hospital in Coral Gables to Baptist Health South Florida. The charitable foundation alleged the sale did not include provisions ensuring it would receive funds owed to it.

Formed in the early 1990s with proceeds from the sale of Doctors, the foundation was to continue to receive $350,000 a year from the new owners, according to the lawsuit.

The AIDS foundation case is slightly different because it is turning to the court to force Rivillas to pay its full share of Mejia's bequest.

"The need is so overwhelming because of the rising rate of infection," Cohen said.

The AIDS foundation, which serves one of the most ravaged areas in the nation, has an annual operating budget of $155,000 -- subsidized by dwindling government grants and donations, Cohen said.

ENTIRE ENDOWMENT

Mejia's lottery donation accounts for the foundation's entire endowment, he said.

According to the Florida Lottery's policy, the state automatically withholds 25 percent of a winner's annual payments and transfers that money to the Internal Revenue Service.

IRS spokesman Mike Dobzinski said that ultimately the recipient of any lottery winnings -- an individual, a trust or a tax-exempt organization -- must resolve its income tax obligations at the end of the year.

But Dobzinski said a trust is not required to withhold any money for taxes from lottery payments to a beneficiary such as the AIDS foundation.

Rivillas' lawyer, Pedro Cofino, said he could not comment on the withholding allegation in the foundation's lawsuit, filed last week in Miami-Dade Circuit Court. But he said Rivillas did not approve of its latest plan for Mejia's gift.

According to court records, the AIDS organization wants to sell its next 11 annual lottery installments, totaling $491,700, at a discount to a third party so it can receive a lump sum of $311,500 today.

'ORIGINAL INTENT'

"Mr. Mejia left him in charge of the trust to make sure the United Foundation for AIDS receives that installment on an annual basis," Cofino said. "To consent to someone else is contrary to the original intent of Mr. Mejia."

Mejia's family members, who receive the other half of his lottery winnings through the trust, could not be reached for comment.

Attorney Eric Granitur, who represents the AIDS foundation, said it is not uncommon for lottery recipients to sell their annual payments up front because they may need the money today.

"It serves more of a purpose now and can be put to a lot better use," Granitur said about the foundation's strategy. He also said that while the Florida Lottery is required to withhold 25 percent, the Mejia trust must reimburse that money to the AIDS foundation because it qualifies for tax-exempt status.

"The trust acts as a conduit," he said. "What we're saying is the 25 percent taken out by the state lottery is supposed to go back to the charity through the trust."

He also said that Rivillas should only be withholding a small fee for the trust's administrative costs.

The dispute has become so controversial that another beneficiary of Mejia's will, La Liga Contra El Cancer, does not want to go to court, according to a volunteer for the Miami nonprofit group. Under Mejia's will, the cancer league is supposed to receive as much as the AIDS foundation -- $44,700 a year.

Georgina Prats, an executive vice president for the organization, said Rivillas also was withholding an unspecified amount of money from its trust payment.

"Let's be thankful that we're getting something," Prats said. "It doesn't mean we're not going to look into it, but we're not going to sue."

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