Los Angeles Times

Water accident leaves troubles for nonprofit

Sun Staff

His normally cheerful expression drawn and sober, his voice grave, Living Classrooms Foundation President James Piper Bond has been the public face of an organization in crisis since a Seaport Taxi it operated capsized in a sudden storm Saturday.

While Bond has emphasized his sorrow for the victims and their families and support for his crew, he has another reason to be worried: Lawsuits and bad publicity can devastate a nonprofit organization that depends on the good faith and generosity of donors and politicians.

"In some ways, not-for-profits suffer more, and quicker, than for-profits" in such situations, said Larry Smith, president of the Institute for Crisis Management, a public relations firm that advises businesses faced with sudden adversity.

"They certainly depend on the largesse of their supporters, their financial contributors," Smith said. "They have to respond quickly. They have to be decisive in whatever they do and say to build public support for them. They probably don't have much cushion in the bank."

But if Living Classrooms makes the right legal and public relations moves, say lawyers and crisis management experts, it could emerge relatively unscathed.

For Living Classrooms - which has grown from running a one-boat program for troubled youths to managing a small empire of tourist sites, training programs and a school - the accident is the first dark chapter in a local success story.

Though its name includes the word foundation, Living Classrooms is a charitable organization that uses the money it brings in - such as fees from operations such as Seaport Taxi - to subsidize educational and training programs for young people, including some in trouble with the law. The organization, founded in 1985 as the Lady Maryland Foundation, listed total assets of $11 million on its 2002 annual report.

But in the local nonprofit realm, it has been perceived as a favorite cause and a powerful fund-raiser. Raking in grant after grant while other nonprofit groups struggled, managing a string of tourist sites around the Inner Harbor, packing its board with an enviable roster of prominent business people and politicians, the Fells Point-based organization's star seemed to burn brighter each year.

The group is at work on a waterfront park, to be finished next year, that will expand its headquarters and honor the maritime contributions of African-Americans.

"Those folks do a good job," said Thomas Schweizer Jr., a trustee of the Alex. Brown Charitable Foundation and president of Brown Advisory Securities. In 2000, the foundation gave Living Classrooms $500,000 to stabilize and renovate the oldest industrial building on the Baltimore waterfront as part of the maritime park.

"If people think this was a [freak accident], then I don't think it's going to be too disruptive," Schweizer said. "If they think the pilot shouldn't have left the dock or that it was unsafe ... if it comes out that there was stuff like that, it's going to be negative to Living Classrooms because they own the boat."

Bond played down the notion that the accident would have any negative effects on his organization, saying it was inappropriate to worry about its liability at such a time. He said there is no evidence the organization did anything wrong.

The decisions about whether to change any aspect of water taxis' operations are being made "one day at a time," Bond said. Otherwise, the foundation's other programs are continuing.

Immunity from claims

Although lawsuits against the group in connection with the accident may be inevitable, several lawyers not associated with the case said it might be difficult for claimants to recover much for the accident from Living Classrooms.

Maryland is one of the few states in which the courts have conferred immunity on charitable organizations from tort claims. Insurers of charitable organizations are not necessarily immune from tort claims. Living Classrooms does carry liability insurance, said Bond, who declined to discuss details.

Owners of a vessel involved in an accident can ask a court to limit their liability to what the vessel was worth after the incident, said JoAnne Zawitoski, principal and chairwoman of the maritime law practice at Semmes, Bowen & Semmes in Baltimore.

Unless plaintiffs can show that the owners, not just the boat's captain, knew that an accident was likely to happen and failed to prevent it, any damages would be limited to that amount of money, she said.

"I would say it's definitely much more difficult under maritime law for plaintiffs to prevail under these kinds of casualty situations than if this were an automobile accident," Zawitoski said.

Under the right circumstances, though, a successful lawsuit could threaten an organization's existence. The National Spa and Pool Institute, a nonprofit trade group that issues voluntary standards for pool construction, filed for bankruptcy protection after a series of lawsuits, including one in which a Washington state teen-ager received a multimillion-dollar award in 1998 after a dive into a backyard swimming pool left him a quadriplegic.

Public relations

Then there is the court of public opinion, a key arena for damage control.

Smith, the crisis management expert, said it is important for Living Classrooms first to help victims of the accident, including its employees. Then it must thoroughly investigate its procedures behind the scenes - and share with the public what, if any, mistakes it made and what improvements it intends to make, he said.

"The public is willing to support organizations that generally do good work, even if they make a mistake in a certain situation," said Don Kramer, a Philadelphia lawyer who publishes a newsletter for nonprofit executives. "The real issue for charities is not to cover it up. When you're dependent on trust, you've got to be forthcoming."

So far, Bond has kept the focus on victims.

The Living Classrooms Web site features a letter from Bond about the accident that pops up immediately and repeatedly. The letter outlines how Living Classrooms is cooperating with investigators - and thanks them for their work - while expressing sympathy and subtly reminding the public of its charitable purpose.

"We are deeply concerned for the passengers and their families and we are taking the initiative to help in any way possible," the letter says. "The mission of the Living Classrooms Foundation is to help people and that is what we are here to do."

The water taxi service, which contributes about $1 million to the foundation's $11 million budget each year, was suspended Saturday out of deference to the victims. Seaport Taxi will resume limited service today, operating one boat in the Inner Harbor and Fells Point, Bond said. To avoid interfering with recovery efforts and out of respect to families of the victims, there will be no service to Fort McHenry or Canton.

Talking to donors

Living Classrooms' board of trustees was briefed on the harbor accident Monday night. Board Chairman Henry G. Hagan, president and chief executive of Monumental Life Insurance Co., said that along with expressing condolences, board and staff members are getting in touch with donors, key government partners and others to answer any questions.

Hagan said the response from outside has been heartening. "We have not only been overwhelmed, but lifted up by the outpouring and support of our friends," he said.

Donn Weinberg, vice president of the $2 billion Harry and Jeanette Weinberg Foundation, which has given large donations to Living Classrooms over the years, said his foundation's support for the organization is "unwavering."

"We really are so impressed by the work that the Living Classrooms does, and we are very familiar with their leadership and impressed with their leadership," he said.

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