That's definitely a conflict of interest, but I wouldn't call it theft unless you prove the foundation was getting a bad deal. Could the foundation have gotten the work done better or cheaper hiring non-represented companies? That's the question you have to answer to call this theft.
It doesn't seem that is really what the foundation is arguing though, so I'm guessing it wasn't that bad. It seems more their argument is that this violates the non-profit laws they operate under.