N.Y. Mental Hygiene Law § 32.33: Improper expenditures of money

§ 32.33 Improper expenditures of money.

Improper expenditures of money shall include, but not be limited to,

the following:

(a) No provider of services issued an operating certificate pursuant

to this article shall make any charitable contribution of state moneys,

medical assistance payments or social security or supplemental security

income or any interest or other income earned thereon, except as

authorized by the commissioner. Provided, however, the provision of this

section shall not apply to receipts or donations from private or

non-governmental sources and any interest or other income earned

thereon, or to monies advanced to employees in accordance with

performance of their official duties as employees.

(b) Notwithstanding the not-for-profit corporation law, no loans,

consisting in whole or in part of funding provided by the office, shall

be made by a not-for-profit corporation issued an operating certificate

as a provider of services pursuant to this article to any employee of

such corporation, or to any other corporation, firm, association or

other entity in which an employee is a director or officer or employee

or holds a direct or indirect substantial financial interest. A loan

made in violation of this section shall be a violation of the duty to

the not-for-profit corporation of the directors or officers authorizing

it or participating in it, but the obligation of the borrower with

respect to the loan shall not be affected thereby.

(c) 1. No contract or other transaction between a not-for-profit

corporation issued an operating certificate as a provider of services

pursuant to this article and one or more of its employees, or between a

not-for-profit corporation and any other corporation, firm, association

or other entity in which one or more of such persons are directors or

officers of the board or corporation, or employee who receives an annual

salary in excess of thirty thousand dollars, or have an indirect or

direct substantial financial interest, shall be either void or voidable

for this reason alone:

(i) If the material facts as to such person's interest in such

contract or transaction and as to any such common directorship,

officership or financial interest are disclosed in good faith or known

to the board or committee, the board or committee authorizes such

contract or transaction by a vote sufficient for such purpose without

counting the vote or votes of such interested person; or

(ii) If the material facts as to such person's interest in such

contract or transaction and as to any such common directorship,

officership or financial interest are disclosed in good faith or known

to the members entitled to vote thereon, if any, and such contract or

transaction is authorized by vote of such members.

2. If such good faith disclosure of the material facts as to the

person's interest in the contract or transaction and as to any such

common directorship, officership or financial interest, is made to the

directors or member, or known to the board or committee or members

authorizing such contract or transaction, as provided in paragraph one

of this subdivision, the contract or transaction may not be voided by

the corporation for the reasons set forth in paragraph one of this

subdivision. If there was no such disclosure of knowledge the

corporation may void the contract or transaction unless the party or

parties thereto shall establish affirmatively that the contract or

transaction was fair and reasonable as to the corporation at the time it

was authorized by the board, a committee or the members.