DT Global head decries ‘frivolous’ lawsuit, while agreeing to changes

Leaders of a U.S.-based development organization and the former board member who sued them are each claiming victory in a lawsuit that probed the line between an innovative business model for global development and alleged violations of nonprofit law. The Office of the Attorney General for the District of Columbia has withdrawn its case against the for-profit development organization DT Global and its affiliated nonprofit, DT Institute, after the nonprofit agreed to change its bylaws to address concerns about its financial relationship with its for-profit counterpart. James Prince, the former DT Institute board member who brought the initial allegations against the nonprofit to the D.C. Superior Court, told Devex the withdrawal of the case reflects that they “cleaned up their act” after months of legal pressure. Meanwhile, John DeBlasio, board chair of DT Institute and general partner of DT Global, told Devex that the attorney general backed away from a “frivolous lawsuit” after it found nothing wrong, with DT Institute agreeing to a handful of minor stipulations so that both parties could end the legal battle. Devex first reported on the allegations against the two organizations, both of which implement projects for the U.S. Agency for International Development, in April 2022. The complaints alleged that DT Institute’s leaders violated nonprofit law in a scheme designed to benefit DT Global and enrich themselves by using the nonprofit as a business development tool and drawing salaries from it while working on the for-profit’s behalf. Lawyers involved in the case told Devex it holds lessons for other development organizations considering an affiliated for-profit and nonprofit model. In July, more than a year after it filed the lawsuit, the D.C. attorney general agreed to withdraw the case in response to “recent additions to the DT Institute Board of Directors, and associated changes to its bylaws.” Lawyers representing DT Institute, DT Global, and Prince signed on to that agreement. These changes included ensuring that a majority of DT Institute’s board members and all of its executives have no financial interest in DT Global or other associated trusts and instituting a term limit for DT Institute’s chairperson, currently DeBlasio. “None of those things materially changed anything we did,” said DeBlasio, who launched DT Global in 2019 and previously owned a logistics contractor that worked in Iraq and Afghanistan. The attorney general’s office declined to comment and referred Devex to the dismissal agreement. Blurring the line Prince, who is the executive director of the Democracy Council of California, a nonprofit international development organization, became a board member and executive director of DT Institute through an agreement to merge DT Institute and DCC. Prince was terminated as DTI’s executive director in March 2021, one year after he was appointed, but retained his seat on the nonprofit’s board of directors until his removal on Jan. 24, 2022, after he filed his petition against the organization. Prince first brought the case against DT Institute in November 2021. In April 2022, the D.C. attorney general joined the legal action with a suit that also included DT Global, the for-profit company. “They found everything I said was consistent, and they expanded the case,” Prince told Devex this month. DT Global has received about $50 million in contracts from USAID this fiscal year, according to USASpending.gov. Last year the company announced the acquisition of IMC Worldwide and Cardno International Development, roughly tripling the size of its staff to well over 2,000 and making it one of the larger implementers of global development projects worldwide. According to the complaints, DT Institute executives regularly performed work on DT Global’s behalf while receiving pay from the nonprofit organization, allowing the for-profit to benefit from their efforts without having to pay them. DT Institute’s former CEO, Hugh Doyle, was also a shareholder in DT Global and worked for the for-profit as a paid consultant, they alleged. “Chairman DeBlasio and CEO Doyle exercise unfettered control over DTI’s activities and affairs,” the D.C. attorney general wrote in its complaint. In their motion to dismiss the petition, DTI’s lawyers argued that Prince put forward “nothing more than vague, conclusory allegations which are not sufficient to allege a plausible claim sounding in fraud.” “Simply labeling an action as fraudulent does not make it so,” they wrote. In June, a month before the attorney general withdrew its case, DT Institute’s board announced it had appointed a new CEO to succeed Doyle. Under the bylaw changes outlined in the withdrawal agreement, it appears Doyle would no longer be permitted to serve as DT Institute’s CEO because of his financial interest in DT Global. But when asked about this by Devex, DeBlasio bristled at the suggestion that Doyle had resigned. “At no time has he resigned. He is in a status of transition, whatever you want to call it, but it isn’t resigning,” DeBlasio said, describing Doyle as “100% honorable,” and Prince’s allegations as “vindictive and personal.” ‘Without prejudice’ Prince repeatedly emphasized that he stood to gain nothing from the lawsuit’s outcome, but filed the complaint as a concerned citizen and board member and to protect himself from “wrongdoing.” He told Devex that DT Institute was “started and run in a way that wasn't appropriate” and “set up for purposes other than public benefit.” DeBlasio strongly disagreed and told Devex that DT Institute was structured with “an excellent system of checks and balances” between the nonprofit and the for-profit with advice from the law firm Dorsey & Whitney. In bringing the case forward, Prince pushed for changes to the organization that would address the problems he described — or alternatively, that DT Institute be dissolved and its assets redistributed. The case was withdrawn “without prejudice,” according to the signed agreement, meaning that claims could be brought again in the future. Learning opportunity Jason Matechak, a lawyer with Impresa Legal Group who represented Prince, wrote to Devex that the case holds lessons for other global development organizations. The stipulation signed by DT Institute and DT Global to end litigation outlines some of the basic legal requirements — at least to satisfy the D.C. attorney general — for those considering “the use of for-profit and non-profit sibling organizations in tandem,” he wrote. These include term limits for a board chair if that person is affiliated with the for-profit, a “supermajority” of non-profit board members who are not affiliated with the for-profit, and excluding for-profit owners from the executive team of the sibling non-profit. “These steps may not be the only steps that need to be taken, but they remain good guidance for all in our community who are seeking to serve partners and beneficiaries through innovative non-profit -- for-profit sibling corporate structures,” Matechak wrote.