National fraternities are shielded against lawsuits in hard-to-tap foundations and then cast the blame on local chapters.

National fraternities, which grant charters to campus chapters and collect dues from undergraduate members, have at least $170 million in annual revenue, along with valuable holdings ranging from real estate to Tiffany windows. The nonprofit organizations often protect their growing wealth by insulating themselves from legal and financial responsibility for a wave of alcohol and hazing-related deaths and injuries.

Besieged by lawsuits alleging negligent supervision, some of the biggest national fraternities have limited insurance coverage they provide to members, shielded funds in hard-to-tap foundations and cast blame on local chapters with few or no assets. Rather than intensify monitoring of branches, some fraternities have ceded daily supervision to undergraduates.

Such strategies are paying off. While at least 57 people have been killed or paralyzed since 2005 in incidents involving fraternities or their members, the low-profile national bodies have enjoyed increases of 13 percent in revenue and 29 percent in membership.

“It’s a curious business model,” said Peter Lake, a professor at Stetson University College of Law in Tampa, Florida, who specializes in higher-education law. “You’re establishing a national brand and franchising. And then when your core customers are in a pinch, you’re turning away.”

James Ewbank, a lawyer who has represented at least 10 national fraternities, urged them at a conference last summer to deflect blame when they are sued by bringing cases against chapter members and colleges.

“Share the fun,” he said, according to an outline of his remarks posted online by the Fraternity Executives Association.

The comment was hyperbole, Ewbank said in an interview.

While Cornell University in Ithaca, New York, and Trinity College in Hartford, Connecticut, have begun cracking down on local chapters, many schools have found it futile to prod national fraternities to take control, said Brett Sokolow, who has advised Lambda and other fraternities on risk management.

“Colleges have been trying to get a handle on these issues for a long time, and they haven’t seen nationals step up so they figure why should it change now,” Sokolow said.

The national fraternities’ success in avoiding liability reinforces their “intransigence,” he said. “They want to wash their hands of the problem and say it’s their brothers’ fault, it’s their chapters’ fault.

These are million-dollar organizations that sponsor activities that are harmful.”
 http://www.bloomberg.com/news/2013-03-28/frats-worse-than-animal-house-fail-to-pay-for-casualties.html