A tax-exempt nonprofit established by Dr. Bennet Omalu, portrayed by Will Smith in the film Concussion, funded a study on a product subsequently licensed exclusively by Omalu’s for-profit business.
The question of the gift by Omalu’s Brain Injury Research Institute (BIRI) ultimately benefitting Omalu’s limited-liability company (LLC) TauMark could potentially raise issues on the ethics of tax-exempt charities supporting research that buttresses for-profit business ventures.
“The Brain Injury Research Institute provided a gift of $73,000 to the UCLA Foundation in January 2011,” UCLA School of Medicine media relations staffer Mark Wheeler confirmed to Breitbart Sports. “The funding supported a study of concussions in NFL football players under the direction of Dr. Gary Small. The work was done on the Westwood campus of the David Geffen School of Medicine at UCLA.”
Omalu and TauMark refused to respond to a 2013 Breitbart Sports’ query asking whether the celebrity brain doctor owned a share in the company but Breitbart Sports discovered that he and several confederates launched the Louisiana-based TauMark under the name CTEM in West Virginia that year. TauMark features on its website just one product, FDDNP, the same radioactive compound used in the BIRI-funded UCLA study to see if a small group of former NFL players displayed indications of chronic traumatic encephalopathy (CTE).
The 2011 tax filing of BIRI shows the nonprofit taking in $136,955 in receipts that year. The grant to the UCLA Foundation constituted more than half of the group’s annual income, and, along with other spending, compelled BIRI to run a $116,738 deficit that year, according to its 2011 IRS 990 form. That 2011 grant eclipses the entirety of the group’s 2012 budget, and nears the group’s total expenditures for 2013, according to BIRI’s most recent 990 made available online.
The IRS outlines strict prohibitions on inurement and self-dealing by the people running tax-exempt, nonprofit entities.
“A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests,” the IRS warns. “No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
The agency similarly defines “self-dealing” as “any direct or indirect transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation.” BIRI lists Omalu as a co-director. Three of the four listed board members of the 501(c)3 group also appeared as co-founders of TauMark in the group’s official paperwork establishing CTEM in West Virginia.
Omalu founding his company two years after his nonprofit funded the UCLA study may provide a defense against any potential charges of self-dealing or inurement. “If inside directors of a charity make some sort of deal where the charity is getting something back, like a royalty, then there is a public benefit and it tends to make it look more legal,” James Lacy, a tax lawyer who advises numerous nonprofit entities, told Breitbart Sports about situations in which nonprofits grant money that ultimately aid moneymaking ventures. Lacy also pointed out that the presence of intermediary bodies between a nonprofit and a for-profit—in this instance UCLA—also offers a potential mitigating factor. TauMark’s status as a company promoting (as well as researching and developing) but not necessarily yet selling its product could also serve as a defense.
But with TauMark, BIRI, and Bennet Omalu silent on the matter, whether the grant stays the subject of a debate on ethics or becomes the catalyst for a legal investigation remains a matter for the IRS and state bodies to decide. Breitbart Sports attempted to contact BIRI, Omalu, and TauMark but received no response from BIRI, no answers to questions provided to Omalu, and in the latest attempt with TauMark encountered an out-of-service phone number.
Neither Omalu nor his fellow BIRI directors receive remuneration for their involvement with the 501(c)(3), according to the group’s tax filings. It’s unclear if TauMark has yet profited from the UCLA-licensed product that BIRI supported with a grant to study its effectiveness in diagnosing CTE among living former NFL players.
“On its face, such situations raise a potential inurement question, such that if a complaint is made to the IRS, it could draw an audit of an organization’s activities,” Lacy said of hypothetical situations in which nonprofit directors grant money that eventually benefits a for-profit venture launched by those same directors. “In an audit, if a private benefit is found, an organization could not only lose its tax status for inurement but if inside directors misused their insider status and received unreasonable benefits, they could be subject to severe monetary sanctions individually.”
Lacy points out, “An organization recognized as a charity is absolutely prohibited from having any of its assets inure to its inside directors private benefit, and if directors are to be compensated, it must be reasonable based on comparable data to avoid severe sanctions for giving themselves unreasonable benefits.”
The grant funded a study to determine if FDDNP, a radioactive material injected into patients that adheres to certain proteins in the brain to allow scans to spot possible problems, could help identify signs of CTE in former football players. Although a scholarly article co-authored by Omalu and published after studying the NFL players’ brains noted that CTE diagnosis comes only posthumously, sensationalistic press coverage deemed the study proof that science could finally diagnose the disease in living athletes. CBS, NBC, ABC, and the New York Times all falsely reported that Hall of Famer Tony Dorsett and other living former football players tested positive for CTE.
Omalu’s company also played into the confusion. TauMark’s website initially pointed out, “A definite diagnosis is only possible with autopsy when tau proteins are found in distinctive brain areas.” After Breitbart Sports outlined the contradiction between that line and media accounts purporting TauMark’s supposed scientific breakthrough, the site claimed: “Formerly a definite diagnosis was only possible with an autopsy when tau proteins are found in distinctive brain areas.”
TauMark subsequently scrubbed that language from its website. Currently, the company’s site contains links to various articles and the statement that “TauMark owns the exclusive license rights to FDDNP, an experimental imaging probe currently used in research with neurodegenerative disease subjects.”
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