Serving on a nonprofit board or as a trustee is not a ceremonial honor — it’s a legal role that carries binding fiduciary duties of care, loyalty, and obedience. When board members treat their position as symbolic rather than substantive, the results can range from costly litigation to full-blown Ponzi schemes. Recent high-profile cases, including questions raised around the Kennedy Center’s governance, illustrate exactly how these failures unfold and why nonprofits and their leadership need experienced legal counsel before problems escalate.
Nonprofit board seats are often treated as prestige appointments. A recognizable name on a letterhead, a photo at the gala, a title that looks good on a resume. But underneath the honorary veneer sits a legal reality that too many board members and trustees never fully grasp: accepting a board seat means accepting personal legal responsibility for the organization’s conduct.
That gap between perception and legal reality is where nonprofit governance failures are born.
What this means is, if one or more board members on a nonprofit aren’t honoring their fiduciary duties, the nonprofit itself runs the risk of significant legal consequences, causing at a minimum embarrassment for the board members and in some worst case situations, personal liability. Imagine having your name attached to newspaper headlines that talk about financial mismanagement, double-dealing and/or failure of fiduciary duties?
What Fiduciary Duty Actually Requires
When someone joins a nonprofit board, they take on three well-established fiduciary duties:
- Duty of Care — Actively participating in oversight, asking questions, reviewing financials, and making informed decisions rather than rubber-stamping whatever leadership presents.
- Duty of Loyalty — Putting the organization’s interests ahead of personal interests, and avoiding conflicts of interest or self-dealing.
- Duty of Obedience — Ensuring the organization operates within its stated mission, its bylaws, and applicable law.
These aren’t abstract legal concepts. They are enforceable standards. Attorneys general, courts, and the IRS all have authority to investigate nonprofit governance, and board members who fail these duties can face personal liability, removal, or worse.
A Current Case Study: Governance Questions at the Kennedy Center
The Kennedy Center for the Performing Arts offers a timely illustration of how quickly governance questions can surface — and why they matter regardless of who sits in the chairman’s seat.
In a September 2026 NPR Morning Edition interview, attorney Greg Werkheiser of Cultural Heritage Partners raised a critical distinction: when an individual serves as a chairman and/or a trustee of a nonprofit organization, they are acting as a fiduciary, not merely a donor or figurehead. Werkheiser noted that if a trustee were to withhold assistance to the organization in order to secure a personal honor — such as having a building named after them — it raises serious fiduciary questions about whose interests are being served.
This point deserves emphasis, separate from any political context: the moment someone accepts a trustee role, their obligation shifts from personal benefit to institutional benefit. A federal judge has since blocked plans to add a name to the Kennedy Center building, ruling that such a change requires Congressional approval — a reminder that nonprofit and quasi-governmental institutions often operate under layered legal constraints that go beyond ordinary corporate governance. Reports that the Kennedy Center is also facing significant financial strain only heighten the stakes: when an organization’s fiscal health is at risk, fiduciary scrutiny of its leadership tends to intensify.
Whatever your view of the individuals involved, the legal principle stands on its own: trustees are accountable for institutional stewardship, not personal legacy-building. That principle applies equally to every nonprofit board member in the country, from the largest cultural institution to the smallest local charity.
While the board itself hasn’t yet been accused of any wrongdoing, there exists the circumstances where people could start questioning the competence of the board, and by extension, the individual board members.
The Pattern Behind Nonprofit Governance Failures
The Kennedy Center situation is not an isolated case. It fits a recognizable pattern seen in several major nonprofit governance failures over the past three decades:
The NRA: Self-Dealing and Board Passivity
In the civil trial People v. LaPierre, a New York jury found that the National Rifle Association’s former leadership engaged in self-dealing, including excessive personal spending at the organization’s expense. Central to the findings was the board’s failure to exercise meaningful oversight — a textbook breach of the duty of care that allowed misconduct to continue unchecked for years.
Fortunately, the individual board members in this case were not named in the lawsuit, but the consequences to the nonprofit itself and some of the executives were severe.
The Donald J. Trump Foundation: Dissolution Under Court Supervision
The Donald J. Trump Foundation was dissolved under court supervision after the New York Attorney General’s office found the foundation had engaged in self-dealing and improperly coordinated with a political campaign. The case demonstrated how a foundation’s assets can be misused when there is insufficient separation between an organization’s leadership and its personal or political interests.
Foundation for New Era Philanthropy: When Deference Enables Fraud
Perhaps the starkest cautionary tale is the Foundation for New Era Philanthropy, whose founder ran a Ponzi scheme that defrauded charitable organizations and prominent donors out of enormous sums before collapsing in 1995. The scheme thrived in part because sophisticated boards and donors extended trust without adequate verification — a failure of due diligence that fiduciary duty exists specifically to prevent.
Wounded Warrior Project: Oversight Catches Up
Wounded Warrior Project faced intense scrutiny after media investigations revealed lavish spending on conferences, travel, and events that critics argued diverted resources from the organization’s stated mission. The fallout led to a full leadership overhaul — a reminder that oversight failures don’t just create legal exposure for the nonprofit; they can destroy public trust that took years to build.
The Common Thread
Across every one of these cases, the same governance failures recur:
- Excessive deference to founders, executives, or high-profile figures, rather than independent scrutiny of their decisions
- Failure of oversight, where board members approve actions without understanding or questioning them
- Ignorance of fiduciary duties, often because board members never received proper training on their legal obligations
- Conflicts of interest and self-dealing that go unaddressed because no one on the board is willing — or equipped — to challenge them
None of these failures require malice to cause serious harm. In many cases, board members genuinely believed they were doing their job. They simply didn’t understand what the job actually required.
Why This Matters for Every Nonprofit — Not Just the Famous Ones
It’s tempting to view these examples as problems unique to large, high-visibility organizations. They aren’t. The same legal exposure exists for a five-person board running a local charity, a school foundation, or a community arts nonprofit. State attorneys general have authority to investigate nonprofits of any size, and board members can be held personally liable for breaches of fiduciary duty regardless of the organization’s profile.
The lesson is straightforward: nonprofit governance situations become legal situations the moment fiduciary duties are ignored. Waiting until a crisis hits — a resignation, a subpoena, a media investigation — is far more costly than addressing governance gaps proactively.
Protect Your Organization Before Governance Becomes Litigation
Whether you’re a nonprofit board member trying to understand your legal obligations, an executive director navigating a difficult board relationship, or an organization facing questions about a trustee’s conduct, the time to get legal guidance is before the situation escalates.
At L4SB, we help nonprofits and their leadership understand fiduciary responsibilities, structure sound governance practices, and address conflicts before they become lawsuits. If you’re seeing warning signs — unchecked deference to leadership, unclear conflict-of-interest policies, or board members who don’t fully understand their legal role — don’t wait for a crisis to force the issue.
Contact L4SB today to talk with an attorney about your nonprofit’s governance structure, your board’s fiduciary obligations, or a specific situation that may be crossing into legal territory. A brief conversation now can prevent a far more serious problem later.
