The trustees of one of Cincinnati's largest charitable foundations have enriched themselves for nearly a decade at the expense of the charities they are supposed to help, state law enforcement officials say.

Charles H. Dater

        The accusation is spelled out in a recent lawsuit that Ohio Attorney General Betty Montgomery filed against the five trustees who oversee the Charles H. Dater Foundation.

        The foundation, with assets of more than $50 million, donates hundreds of thousands of dollars a year to social service groups, hospitals and cultural institutions such as the Cincinnati Opera.

        But the attorney general claims those charitable organizations have lost out because the leaders of the Dater Foundation have wasted money, violated their “fiduciary obligations” and paid themselves excessive fees and salaries.

        “The individual defendants have been unjustly enriched,” the attorney general states in her lawsuit, which was filed in Hamilton County Common Pleas Court. “From the time of the formation of the foundation, the individual defendants began a pattern of using their relationship with the foundation ... for their personal benefit.”

        The lawsuit seeks the removal of the five trustees and demands that they pay unspecified restitution to the foundation, which was formed in 1993 after the death of reclusive millionaire Charles H. Dater.

        A spokesman for the foundation, Roger Ruhl, said the trustees deny all of the allegations. He said the five trustees — Stanley Frank Jr., David Olberding, John Silvati, Bruce Krone and Mr. Krone's mother, Dorothy — have always acted in the best interests of the foundation and the charities it serves.

        “The foundation is disappointed that the attorney general has taken this action,” Mr. Ruhl said Tuesday. “We believe the facts and the data available do not support it.”

        The attorney general's lawsuit is the latest blow to a foundation that has been under fire for several years. An Enquirer investigation in 1999 and a lawsuit filed in 1997 by Mr. Dater's widow, Ann, have raised questions about the foundation's structure and finances.

        Ms. Montgomery investigated many of those same issues before taking action with the lawsuit, which state officials describe as “an extraordinary” step. “This is not something that's done every day,” said Bret Crow, spokesman for the attorney general.

        The lawsuit does not address Mrs. Dater's claims that the five trustees took advantage of her late husband's fading mental health and installed themselves as overseers of his $100 million fortune, which was split between the foundation and a series of family trusts.

        But the attorney general does support Mrs. Dater's claim that the trustees used the foundation's assets for their personal benefit. The allegations include:

        A failure by the trustees to stop the disbursement of $1.45 million in fees from the Dater family trust to Mr. Krone's law firm. Because most of the family trust funds will eventually go to the foundation, the disbursement deprives the foundation of a substantial sum.

        The “further waste” of another $600,000 in fees paid to Mr. Olberding, Mr. Frank and Mr. Silvati. The trustees' approval of the payment was in “violation of their fiduciary obligations,” the lawsuit states.

        The payment of a $70,000 salary to each of the trustees, an amount the attorney general deemed excessive when compared to the national median salary of $11,400 for trustees. The lawsuit claims Mrs. Krone is paid her salary despite working only about 80 hours a year on behalf of the foundation.

        “The individual defendants' conversion of the funds of the foundation was intentional and beyond the scope of their authority,” the lawsuit states.

        Mr. Ruhl said the lawsuit's criticism of the foundation's expenses and operations are unfair. He said the Dater Foundation has expenses that many foundations of its size do not because it lacks the backing of a large corporation and does not receive additional funds from the family.

        He said the five trustees are full-time caretakers of the foundation. They review some 500 grant applications a year, go on site visits, meet at least 10 times annually and disburse thousands of dollars without the aid of any full-time employees.

        “We strongly believe a closer examination of all the data available will find no problem with the Dater Foundation,” Mr. Ruhl said.

        Mrs. Dater, however, has said that she hopes the attorney general's investigation leads to the eventual removal of the trustees. “Betty Montgomery is my hero,” Mrs. Dater said Tuesday.

        The trustees are expected to file a response to the lawsuit in the next few weeks. The case will then be scheduled for trial, at which time a judge or jury will decide whether the trustees should be removed and forced to pay restitution.

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