Serenity Place and IRS: Bankruptcy likelyBy MARK HAYWARD
New Hampshire Union Leader
February 04. 2018 9:14PM
MANCHESTER — Bankruptcy appears inevitable for Serenity Place, according to lawyers who say that without bankruptcy protection, leaders of the dismantled nonprofit organization could end up writing checks from their personal accounts to cover money owed the IRS.
Serenity Place, which provided drug-abuse treatment services, was a key player in Manchester’s efforts to fight the opioid crisis until its financial collapse in late December.
Among the creditors worried they will never be paid: Auburn resident Alan Villeneuve, a board member of Serenity Place who granted the organization a $66,000 no-interest loan just a month before the collapse. And Frank Rich, the owner of the property where Serenity Place headquarters is located. Rich said he invested $300,000 in interior remodeling after Serenity Place signed a lease that went to 2020.
“It’s likely Chapter 7 bankruptcy is the way to go,” said Tom Donovan, who directs the Charitable Trusts Unit for the New Hampshire Attorney General.
Donovan spoke last week in Hillsborough County Superior Court-North, where Judge Amy Messer is holding regular hearings after approving receivership for Serenity Place in late December.
Serenity Place wasn’t always struggling. In June 2016 it reported revenues of $1.9 million in revenues and $151,000 in the bank, according to filings available on Guidestar.org. When officials took over in late December, the nonprofit had $8,600 in its checking account.
Two weeks ago, Donovan said Serenity Place will not survive and obtained approval to dismantle the organization and divide its programs among similar nonprofit agencies.
$182,600 owed to IRS
Several implications grow out of that the financial collapse, including $182,600 that Serenity Place owed the IRS before it went into receivership. The amount reflects money withheld from employee paychecks for taxes and Social Security.
Federal law allows the IRS to “pierce the corporate veil” that protects CEOs, other officers and board members if the federal taxing agency needs to collect money it is owed, Donovan said. That can happen if the organization’s leaders did not act responsibly, he said.
By filing bankruptcy, officials would take advantage of bankruptcy court procedures that prioritize creditors.
The IRS has one of the highest priorities, so Serenity Place leaders would likely be off the IRS hook, according to Donovan.
Among those who would be helped by the bankruptcy filing: Serenity Place Executive Director Stephanie Bergeron, board President John FitzGerald III, a local lawyer; and 10 other local people who served on the board. Bergeron and FitzGerald have not responded to repeated attempts to reach them.
One of those directors — Villeneuve, a member of the Auburn school board — provided Serenity Place with a $66,000 loan on Nov. 28. On Jan. 24, Villeneuve filed paperwork with Messer asking the judge to approve an attachment to Serenity Place property. A week later, she refused.
In part, Messer said that as a board member, Villeneuve should have known about the financial difficulties of Serenity Place and the risks of making the loan.
“While neither the state nor the receiver question (Villeneuve’s) good intentions in making the loan, they do note that loans by insiders to insolvent entities must be closely scrutinized,” Messer wrote.
Value and red ink
Serenity Place is not without value.
It owns the three-story building at Manchester and Chestnut streets where it operates Lin’s Place, a sober house for women. The building is valued at $534,000 for tax purposes. That space is now occupied by the receiver, Families in Transition, which has taken over Lin’s Place and will remain in place at least until July 1.
Messer wants an independent review on how much rent Families in Transition should pay to lease the space. She said a half-year’s rent is a significant amount of money for the creditors.
However, Serenity Place has a lot of red ink:
• $180,000 owed to the state, which provided an emergency loan in December to cover back wages.
• $100,000 to Eastern Bank, which had granted Serenity Place a line of credit.
• $10,000 to the city of Manchester.
• $153,700 to tradesmen.
“What is owed people is important,” Messer said. “I want to make sure all efforts are made to make sure creditors are reimbursed.”
Joseph Foster, the former attorney general who is representing Families in Transition in the receivership, said he will eventually present a list to Superior Court that identifies the creditors.