n September, federal prosecutors alleged that the founder of Modest Needs, a New York–based nonprofit, diverted more than $2.5 million in donor funds to cover personal expenses. Reports from the Department of Justice and multiple news outlets detail that donations meant to help struggling families were instead used for luxury rent, restaurants, and personal spending.
This case is more than shocking headlines. It illustrates a broader and deeply troubling pattern: when those entrusted with charitable donations misrepresent how funds will be used, the result is fraudulent misrepresentation. When donors give with the understanding that their contributions will advance a charitable mission, secretly redirecting those funds for other purposes undermines both public trust and the rule of law.
That same principle lies at the heart of a new class action lawsuit filed in Harris County District Court against Cal and Hannah McNair, leaders of the Houston Texans Foundation. The case, brought on behalf of thousands of Foundation donors, alleges that the McNairs diverted charitable funds—including proceeds from the team’s popular 50/50 lottery—to subsidize an elite youth baseball program benefiting their own children and other affluent families.
The petition, filed by attorney Ramon de Jesus Rodriguez, opens with the line:
“Greed is a great poverty; the more it possesses, the more it craves.”
It goes on to claim that the McNairs breached their fiduciary duties as trustees by using charitable assets for purposes unrelated to the Foundation’s stated mission to serve “underserved youth.”
According to the lawsuit, families participating in the private youth baseball program paid only a fraction of normal costs, while Foundation funds allegedly covered uniforms, travel, and tournament expenses. The petition argues that these expenditures bear no relation to the Foundation’s stated mission, representing a systematic diversion of resources away from those the charity was created to serve.
Under Texas law, such conduct—if proven—fits squarely within the realm of fraudulent misrepresentation and deceptive practices.
The McNair petition invokes several key legal provisions, including:
The lawsuit also seeks a full accounting of Foundation funds from 2019–2025, potentially revealing how millions in charitable assets were managed and whether other expenditures departed from the Foundation’s mission.
Beyond Texas, research titled “Pirates of Charity” (published on arXiv) highlights a growing problem: fraudulent appeals on social media and online fundraising platforms. Fraudsters exploit emotional giving and the lack of oversight in digital fundraising. Some create entirely fictitious causes; others misrepresent legitimate charities’ purposes to siphon off donations.
This trend mirrors the allegations in both the Modest Needs and McNair Foundation cases—where charitable intent was allegedly co-opted for private benefit. Whether through online deception or institutional mismanagement, the result is the same: donor intent is betrayed, and confidence in legitimate nonprofits erodes.
To safeguard against misrepresentation:
The Modest Needs scandal and the McNair Foundation lawsuit share a common theme: when charitable organizations misrepresent the use of donations, they not only violate donor trust—they risk civil liability for fraudulent misrepresentation and statutory penalties under Texas law.
These cases remind us that charitable accountability is not optional. Donors have the right to expect honesty, and trustees have a legal duty to ensure it.
👉 In our next post, we’ll explore how the Tennessee Attorney General’s lawsuit against the National Foundation for Transplants raises similar questions about restricted funds and donor misrepresentation—and what lessons Texas donors can draw from it.
