Court names receiver to decide fate of beleaguered foundation
by Kay Moore, Marty Racine
Houston Chronicle; Houston, Tex.; Apr 1, 1986

Action for Research into Multiple Sclerosis of America, the Houston-based charity started with a gift of more than $1 million from British rock stars, is in the hands of a court-appointed receiver who will recommend whether to rehabilitate or liquidate the 15-month-old corporation.

State District Judge Louis Moore Monday appointed attorney Ron Sommers, who recently served in the Rainbow Foundation receivership case, to take charge of ARMS' assets. Sommers will determine whether lawsuits need to be filed against former ARMS officials.

The five remaining ARMS board members agreed to the receivership, saying it ``is in the best interest of the public and especially of victims of multiple sclerosis,'' ARMS attorney J. Randolph Ewing said after the agreement was reached Monday in the attorney general's Houston office.

As part of the agreement, the state promised not to sue ARMS President Ira Morel and the four other board members, all recently appointed.

Assistant Attorney General John Vasquez said the five ``acted in the best interests of the corporation by agreeing to the receivership.'' Allegations by British rock star Ronnie Lane, who initiated the investigation, seem to pertain to people formerly on the board, Vasquez said.

Lane and his Scottish physician, Dr. Phillip James, say ARMS officials misappropriated and mismanaged funds designed for multiple sclerosis research. Records furnished to the attorney general's office show that former ARMS director Mae Nacol was paid $206,202 in salaries, legal fees and reimbursements. Nacol, who resigned in November, says an audit last fall found no wrongdoing.

The attorney general's office said Monday the organization spent no more than $200,000 on research and education, including some brochures and a grant to Texas A&M University.

Sommers will tell the court by April 25 whether he thinks ARMS should continue to function. Moore will hold a hearing at 1:30 p.m. April 28.

However, Vasquez says it is likely the receiver could initiate separate suits against former officials and directors, possibly even before the April 25 date.

``I think there have been some allegations made that have good basis,'' said Vasquez, head of the attorney general's charitable trust division.

Vasquez said his examination of ARMS' records revealed that ARMS is ``in imminent danger of insolvency,'' with only $100,000 remaining from the $400,000 on the books Oct. 1.

Ewing said that after Monday's two-hour meeting, the board members unanimously agreed to enter the consent order with the state rather than commit the remaining $100,000 to attorneys to fight the state's threatened suit.

He said their decision ``shall in no way constitute an admission of guilt or wrongdoing by the corporation or any of its directors, officers or employees.''

Larry Hysinger, attorney for Lane, said he applauds the attorney general's action, because ``the most important thing at this point is to stop their (the current ARMS) spending.''

But he said he regrets the five are exempt from litigation, because ``it's not the spirit of the law to have a charitable foundation bargaining away its immunity by granting a receivership on it. Everyone should stand on their own liability.''

Although current board members have some tie to Nacol, Hysinger called them ``minor characters'' in the drama. Lane, contacted in Austin, said, ``It feels a lot better knowing they're not getting away with it scot-free.''

The receiver will also look at whether ARMS can likely raise funds in the future and whether there is a need for the organization.

If the judge allows ARMS to continue, a new board will be appointed. If ARMS is dissolved, the assets could be transferred to another charity, possibly ARMS of England, the parent charity of ARMS of America, Ewing said.