A Breakdown of the DTH's Lawsuit Against the Sons of Confederate Veterans

The settlement between the university and the SVC bars the organization from displaying Confederate symbols on UNC campuses (Source)

In recent months, the Daily Tar Heel has published a series of articles regarding the $2.5 million lawsuit between the UNC Board of Governors and the North Carolina Sons of Confederate Veterans.

As a refresher, in late November 2019, the UNC System announced that it had settled a lawsuit with the SCV, and would be giving the group both legal possession of the Confederate monument known as Silent Sam and a $2.5 million “charitable trust” which could only be “used for certain limited expenses related to the care and preservation of the monument,” including potentially “a facility to house and display the monument.”

The New York Times wrote an article about this settlement, and one specific sentence in the article caught the eye of Durham-based lawyer T. Greg Doucette: that the commander of the SCV, Kevin Stone, “did not know specifically when his group had sued the university.” 

Doucette proceeded to look up the case, NC Division Sons of Confederate Veterans v. UNC and UNC Board of Governors, and found a timeline that seemed suspicious to him. The UNC Board of Governors announced the scheduling of a closed teleconference meeting to take place on Nov. 27, 2019.  On the same day, the settlement was approved by the BOG, then the lawsuit was filed. UNC was served the suit at 11 a.m., a mere hour after the Board of Governors meeting. UNC’s answer was filed, and the consent judgment was entered later that same day.

You read that correctly: the Board of Governors carved a settlement with the SCV over a lawsuit that did not yet exist, and then a lawsuit appeared.

According to public records released in early December, the UNC System had given the SCV $74,999 a week before the $2.5 million settlement in exchange for the SCV agreeing “not to display Confederate flags, banners or signs at events on property controlled by” the UNC System. The consent order for this deal was the one previously mentioned as having been approved on Nov. 27. 

The exact amount of this settlement meant that it would avoid review by the state’s attorney general, who is required to review settlements over $75,000.

Recently, it has been alleged that the SCV had been violating federal tax law for years. In 2016, the SCV, which is listed as a 501(c)(3) nonprofit organization, launched a political action committee called the NC Heritage PAC, in direct violation of a tax and campaign finance law that prohibits such organizations from creating and operating PACs. 

The SCV routes the money for the PAC through the “mechanized cavalry,” a “nationwide subgroup of motorcycle-riding SCV members” who are also listed as a 501(c)(3) and are required to hold SCV membership. Former cavalry leader and current SCV legislative officer Bill Starnes has membership fees given to him in cash or a check made out to him, and he then donates that money to the PAC as an individual. 

According to the North Carolina State Board of Elections, the SCV donated over 40 percent of the PAC’s reported contributions in the first fiscal quarter of 2016. That same year, the PAC was audited by the campaign finance division of the SBE, who noted the SCV’s multiple donations to the PAC.

The SCV argued, however, that under this general statute, their contributions are not prohibited because the organization “has an express purpose promoting social, educational, or political ideas and not to generate business income.”

According to John Wallace, former assistant attorney general in the N.C. Department of Justice's antitrust division whom the Daily Tar Heel interviewed for its article, this rule does not apply to nonprofit organizations. “If you are a 501(c)(3), you are absolutely prohibited from intervening in political campaigns,” he told the DTH.

There is a form of tax-exempt organization that is allowed to use its funds for political purposes: the 501(c)(4). These supposed “social welfare” organizations, as they are described in the Internal Revenue Code, may engage in political lobbying and related activities as long as their primary work is not election-related.

The Los Angeles Times editorial board argued in 2013 that this rule had been hopelessly abused by both Democrats and Republicans, who create organizations under the guise of social welfare and use them to support political candidates and causes. And after President Trump’s election in 2016, many liberal 501(c)(3) organizations began to dedicate more of their time toward either creating parallel (c)(4) organizations or a (c)(4) arm of their original organization. But finding a loophole in the tax code is very different from blatantly abusing it.

Two weeks ago, a veteran government watchdog filed a complaint with the SBE asking for an investigation of the SCV and its PAC. 

Bob Hall, the former executive director of Democracy NC, cited the DTH’s reporting along with his own research in a letter he wrote to the SBE. Among other demands, Hall asked for the PAC to be terminated and heavy penalties to be levied against the SCV.

Two lawsuits, one from the Lawyers’ Committee for Civil Rights Under Law and one from the DTH, have been filed against the SCV in an effort to stop the $2.5 million deal. The Lawyers’ Committee for Civil Rights under Law is arguing that the deal is “without legal merit.” The DTH is arguing that the settlement should be rendered void because it was approved “in total secrecy” in violation of the North Carolina Open Meetings Law.

The episode is bizarre, and suggests that not all of the operations in the UNC halls of power are totally above board. It remains to be seen if the settlement will be reversed.