Donor Intent

The left delights in grave robbing, which helps to explain why support for inheritance taxes (which go by the more honest moniker, death duties, in the U.K.) remains so high among progressive activists.

But having the tax man shake down corpses is only one way the left helps fund both the welfare state and the progressive movement’s broader program of activism. Liberals love taking money away from dead philanthropists by subverting their charitable foundations.

The topic of fidelity to donors’ intent came up on the “Glenn Beck Program” today (video here) during a discussion of the left-wing entitlemania group AARP’s (American Association of Retired Persons) support for House Speaker Nancy Pelosi’s (D-Calif.) version of ObamaCare, which the House barely approved in the dead of night over the weekend.

The guest host said he couldn’t figure out why AARP decided to back socialist medicine.

Suggesting that there was a time when AARP wasn’t liberal, commentator Ann Coulter said

I tend to think the simpler explanation is [conservative writer] John O’Sullivan’s, that any organization that is not an explicitly a conservative organization will be taken over by left-wing loons eventually, from Carnegie Foundation, Ford Foundation, the Catholic Church for a while. Unless, I mean, it could be the choral singers of East St. Louis. Any organization that is not an expressly right-wing organization will be taken over by left-wing loons and that has certainly been true of AARP going back years and years.

Indeed, the grants handed out nowadays by the Carnegie Foundation (proper name: Carnegie Corporation of New York) and the Ford Foundation have little in common with the beliefs of those two foundations’ creators.

As Martin Morse Wooster, senior fellow at Capital Research Center has written both Andrew Carnegie and Henry Ford “were heroic entrepreneurs who strongly believed in free enterprise and traditional virtues…[yet]liberals or leftists control the foundations that serve to perpetuate their names.”

Carnegie formed various nonprofits with specific objectives such as the Carnegie Institution of Washington, the Carnegie Hero Fund, and the Carnegie Endowment for International Peace, which still largely mirror the late industrialist’s wishes.

But Carnegie “ran out of ideas while he still had half his fortune to spend,” Wooster writes. He created the Carnegie Corporation without indicating that it was to spend money on. “Freed from any restrictions, the Carnegie Corporation became a pillar of liberalism.”

Henry Ford and Edsel Ford created their charity to avoid confiscatory inheritance taxes but they didn’t leave instructions on how the charity should be run. Henry Ford’s grandson, Henry Ford II, largely gave up control over the charity in 1948 and “[t]he result was that liberals quickly seized control of the foundation, and Henry Ford II resigned as a trustee of the Ford Foundation in a protest over the foundation’s leftward drift,” according to Wooster.

The longer a foundation exists, the farther it moves away from the ideals of the donor, Wooster writes. This “problem of donor intent”—is “a particularly acute problem for conservative and libertarian donors, given that the sorts of people who want to be program officers or presidents of foundations are usually liberals or leftists.”

Instead of temporarily dipping into its nation-sized endowment, Harvard University has decided to lay off 275 workers, Reuters reports:

The Ivy League school took the action to meet budget constraints caused by an estimated 30 percent fall in its endowment for its 2009 fiscal year, ending June 30. [...]

Another 40 staff were offered reduced work hours.

While the layoffs affect a fraction of Harvard’s 16,000 staff and faculty, they illustrate the recession’s toll on America’s oldest institute of higher learning and other universities which depend on endowments and donations.

Harvard’s endowment, which stood at $37 billion on June, 30 last year, tumbled to $29 billion by December and is projected to end this month at about $25 billion, hit by volatility in financial markets and a drop in donations. The endowment funded about a third of Harvard’s operating budget in 2008. [...]

Boo hoo. Poor Harvard and its $25 billion. I feel for the workers at Harvard and for its students who pay exorbitant tuitions while receiving politically correct indoctrination.

Some of the wealthiest universities in America are the biggest tightwads, Lynne Munson argued in an April 2008 Foundation Watch.

Harvard is notoriously tight-fisted. While tuition continues to skyrocket, institutional spending from tax-free higher education endowments (including Harvard’s) remains meager. By sitting on donations –which are largely intended to benefit students– for generations, they violate donor intent.

Don’t feel sorry for Harvard.

Last Friday the Hudson Institute’s Bradley Center held a symposium on a new monograph entitled “How Public is Private Philanthropy?” issued under the auspices of the Philanthropy Roundtable. The symposium addressed what might at first seem to be a legalistic or semantic question concerning the status of nonprofit organizations. In fact, the issue is decidedly political. It concerns who is entitled to decide what organizations will receive donors’ money?

Leftwing activists argue that private foundations and charities are really “public.”  After all, they say, if the IRS rules that a nonprofit is a “public charity” serving a “public” purpose it will then exempt the organization from taxation and it will allow contributions to it to be treated as tax-deductible. Moreover, foundations and charities are chartered by government, which lays down strict rules under which they are permitted to operate. For instance, nonprofits may not undertake activities that principally benefit their trustees, they must not engage in for-profit business activities, and they must payout 5% of their assets annually to qualified charitable recipients. According to the activists, this means nonprofits are “public” not “private.”

Liberal foundation-watchers say the argument is just a matter of semantics, but conservatives suspect that radical activists are making the claim in order to prepare the way for more government regulation of the nonprofit sector. Conservatives point to efforts by California’s Greenlining Institute to promote AB 624, a bill introduced in the state legislature that would have required large California foundations to report on the extent of their efforts to assist charities designated as minority-led and serving minority and “marginalized” groups. The bill required foundations to report on the race and gender of their board members and it wanted reports on whether the foundation assisted charities serving seven designated minority groups. A California legislator withdrew the bill from consideration by the legislature only after the big foundations promised to voluntarily share this information and increase their giving to these specified groups.

Recently the leftist National Center for Responsive Philanthropy issued a report that also called upon foundations to be “inclusive,” which it defined as 1) giving 50% of their money to low-income groups, “communities of color” and other “marginalized” groups and 2) giving at least 25% of their money to advocacy groups promoting “equity, opportunity and justice” in our society.

This appears to be the start of an organized pressure campaign by activist groups working in concert with politicans to shakedown grantmakers. In its starkest terms, gifts to Jesse Jackson’s Operation Push could count as support for inclusive and marginalized giving; gifts to the Heritage Foundation won’t. One might also expect the zoo, the opera and the local historic preservation society to adapt their missions to include support for and representation from preferential groups in order to stay solvent. They and their donors will have an incentive to remain within the giving guidelines of the Greenlining Institute, the National Center for Responsive Philanthropy and potentially the California state legislature.

Glenn Lammi, legal counsel at the Washington Legal Foundation and a speaker at the Bradley symposium, said government oversight of charities is traditionally intended to assure donors that charities and foundations are fulfilling their chosen missions and that their managers are not using their positions to benefit themselves. But the new efforts to narrow the definition of what is in the ” public interest” or the interest of the “underserved” constitutes an attack on democratic pluralism and individual freedom. Lammi asks:

“Will the poor and disadvantaged really benefit from the political logrolloing and special interest favors that will ultimately result from a politicization of charity?”

To read Lammi’s statement, click here. (Word file)

The late hotel magnate Leona Helmsley wanted the bulk of her estate to be spent on the care and welfare of dogs, but her trustees had other ideas.

Instead, they have decided to give only $1 million of the $5 billion estate for canine care.

“This is a trifling and embarrassingly small amount,” according to Wayne Pacelle, president of the Humane Society of the United States. “Mrs. Helmsley’s wishes are clearly being subverted.”

With just one 5,000th of the total estate of the animal lover being devoted to dogs, I am inclined to agree with Pacelle for a change.

Perhaps Helmsley sabotaged herself by not being specific enough. As the New York Times reports

After Mrs. Helmsley’s death in 2007, it was revealed that she had drafted a mission statement four years earlier listing two specific priorities for the distribution of her estate. The first was helping the poor, which she struck from the document a year later. The second was to provide for the care of dogs, although she added “and such other charitable activities as the trustees shall determine.”

Our senior fellow, Martin Morse Wooster, has explored at length what happens when philanthropists are not specific in their bequests or when their fortunes are hijacked by trustees who have different views. Wooster’s book is called The Great Philanthropists and the Problem of “Donor Intent.”  The third edition of the book is available at Amazon.com.

Private foundations that have lost millions of dollars investing in Bernard Madoff’s Ponzi scheme could be subject to a 10 percent IRS penalty for failing to exercise due diligence and fiduciary responsibility, the New York Times reports. Among the biggest losers: The Picower Foundation (Palm Beach, FL) thought to have invested $958 million with Madoff, the Carl and Ruth Shapiro Family Foundation (Palm Beach)–$199 million; the Betty and Norman F. Levy Foundation (New York)–$244 million; and the Chais Family Foundation (Encino, CA)–$178 million. 

The Southern Poverty Law Center received  $495,000 from the Picower Foundation for ”intelligence project research and investigation,” according to the Foundation’s IRS 990 form (p.44). The Center was profiled by CRC here.

Jack Shafer, Slate‘s editor-at-large, doesn’t think much of proposals to save money-losing newspapers by converting them into charities, using their assets as endowments. Some pundits are starting to argue that this is the best way to save papers like the New York Times and Washington Post, which are losing subscribers and advertisers. They think financial cut-backs are hurting ”quality” journalism and that “legacy” newspapers like the Times and Post owe it to themselves and American democracy to re-organize themselves as nonprofit trusts. (I take it that the phrase “legacy newspapers” is comparable to “legacy airlines”: companies whose fixed costs put them on the verge of bankruptcy.)

Shafer thinks newspapers need to respond to changing market conditions, and they are fooling themselves if they think the foundation model can insulate them from hard times, new technologies, and evolving customer preferences. Foundations also change over time, and their officers can be expected to meddle in matters about which they know nothing. Shafer cites CRC’s book The Great Philanthropists and the Problem of ‘Donor Intent’ by Martin Morse Wooster to highlight the probem. 

Says Shafer: “Foundations can evade ideological takeover by setting “term limits” on their operations, spending down their cash, and vanishing, as the John M. Olin Foundation did. But if the point is to stake the Times for perpetuity, the biggest problem will be keeping the foundation hustlers from taking over. In my experience, foundations that fund journalism directly—as opposed to journalistic education—are more interested in promoting what they consider “social justice” than promoting journalism. For them, a newspaper is just a means to an end.”

The Wall Street Journal has an interesting interview with conservative philanthropist Bill Simon.

To safeguard the donor intent of its founder (his father), Simon’s foundation will spend itself out of existence by 2029. In the article Simon also offers his reflections on the Robertson v. Princeton case.

A settlement has been announced in the Robertson family’s important donor intent lawsuit against Princeton University.

From the CRC website:

Robertson v. Princeton
A settlement has been announced in the Robertson family’s important donor intent lawsuit against Princeton University. Princeton will give Robertson Family Charities $100 million rather than face trial over the family’s charges that it ignored the wishes of their parents, Charles and Marie Robertson, whose gift of $35 million in 1961 was intended to prepare students for careers in government service. The case is the largest donor intent settlement ever. CRC senior fellow Martin Morse Wooster says the case shows that donors must be very careful in making gifts that will continue over decades. He warns that “universities can and will exploit every available loophole to divert a gift to causes they prefer.” However philanthropy watcher Neal Freeman stresses that Princeton’s six-year war of attrition against the Robertson family failed. “The next time a nonprofit executive is seized by larcenous impulse it may be necessary only to whisper in his ear the magic word, ‘Princeton.’”

Is this Hawaii’s future?

A real-life secessionist movement seizes a historic American landmark and major media outlets treat the uprising as a curiosity of mere passing interest. Meanwhile, that same media gives a thumbs-up to a seditious, balkanizing plan for Aloha State apartheid.

AP’s Mark Niesse reported yesterday, “Native Hawaiian sovereignty advocates” who are members of the group known as the Hawaiian Kingdom Government occupied the grounds of the palace of Hawaii’s final monarch, Queen Lili`uokalani. “Hawaiian activists have long used the palace as the site for protests of what they call the United States’ occupation of the islands, but never before had they physically taken control,” wrote Niesse.

Pacific Business News reported that the “protesters” surrounded the Iolani Palace in Honolulu, chained palace gates, posted no-trespassing signs, and told “palace officials that the palace is their rightful seat of government.” The PBN story noted that “Only those with Hawaiian blood, as well as news media, were initially allowed onto palace grounds.”

The Honolulu Advertiser reported that the “sovereignty group” claimed its actions were “not a protest or demonstration but a reoccupying of its legitimate seat of government.” CNN called the occupiers simply a “group of native Hawaiians.”

Are members of groups like the Hawaiian Kingdom Government serious insurgents or fringe-element kooks who are best ignored? Only time will tell, but one thing is for certain: a Hawaiian segregation bill will only make things worse, guaranteeing more such occupations and perhaps future violence.

Many mainstream media outlets have treated the pro-segregation, pro-secession bill, sponsored by Sen. Daniel Akaka (D-Hawaii), that would create a new government for “Native Hawaiians” in Hawaii, as just another bill. A sunny piece called “Freshman senators hold key to Native Hawaiian bill’s hopes,” appearing in The Hill, a Capitol Hill newspaper focused on Congress, noted cheerfully that “the bill has a fighting chance.”

Both Honolulu papers, the Advertiser and the Star-Bulletin have editorialized in favor it.

Der Stürmer The New York Times salivated over the bill (which Akaka keeps reintroducing with each new Congress). In an editorial called “A Chance for Justice in Hawaii,” the NYT says fears about the bill are all hype:

The bill’s central aim is protecting money and resources – inoculating programs for Native Hawaiians from race-based legal challenges. It is based on the entirely defensible conviction that Native Hawaiians – who make up 20 percent of the state’s population but are disproportionately poor, sick, homeless and incarcerated – have a distinct identity and deserve the same rights as tribal governments on the mainland.

The Akaka bill does not supersede the Constitution or permit Zimbabwe-style land grabs. It explicitly forbids casinos, a touchy subject in Hawaii. Any changes a Hawaiian government seeks would have to be negotiated with state or federal authorities. As has always been the case on those eight little islands, everyone will have to find a way to get along.

Of course, to find out what’s really in the bill it’s necessary to read George Will. Will scathingly criticized the legislation and pointed out that Akaka doesn’t even deny the bill could set the stage for Hawaii to exit the Union. Will wrote:

Today, the Native Hawaiian Government Reorganization Act, when accurately described, is opposed by a large majority of Hawaiians and supported by only a bare majority of the approximately 240,000 Native Hawaiians in the state. The legislation, sponsored by Sen. Daniel Akaka, is a genuflection by “progressives,” mostly Democrats, to “diversity” and “multiculturalism.”

It would foment racial disharmony by creating a permanent caste entitled to its own government — the Native Hawaiian Governing Entity — within the United States. The NHGE presumably would be exempt, as Indian tribes are, from the Constitution’s First, Fifth and 14th amendments. It would, Akaka says, negotiate with the state of Hawaii and the United States concerning “lands, natural resources, assets, criminal and civil jurisdiction, and historical grievances.”

Reparations? We shall see. Independence — secession? “That could be,” Akaka, 83, has said, depending on “my grandchildren and great-grandchildren.”

Predictably, Akaka himself denounced Will for writing the op-ed, calling the factually accurate column “disgusting.” Will had noted in the column that the racial purity panel the bill creates will determine who is a Native Hawaiian and therefore eligible to receive any entitlements or programs created by the new office.

My guess is Will got Akaka’s goat when at the top of the op-ed he inserted this entirely appropriate quotation that associates the bill with Nazism:

“I decide who is a Jew around here.” — Hermann Goering in 1934, when told that a favorite Munich art dealer was Jewish.

But I digress.

Just about anybody who’s anybody in the Hawaiian establishment supports this bill, including Hawaii’s Republican Gov. Linda Lingle, who has visited Washington, D.C., repeatedly to lobby federal lawmakers. The Republican In Name Only (RINO) governor has been pushing for the legislation for years.

Passed in the fall of 2007 by the U.S. House of Representatives, the proposed Native Hawaiian Government Reorganization Act of 2007 (a companion bill to Akaka’s legislation), introduced by U.S. Representative Neil Abercrombie (D-Hawaii), could be taken up by the Senate as soon as this month. According to http://www.nativehawaiians.com/, the measure is endorsed by: the Mexican American Legal Defense Education Fund (MALDEF); the National Council of La Raza; the League of United Latin American Citizens (LULAC); and the National Association for the Advancement of Colored People (NAACP).

Congressional horse-trading has allowed Akaka-Abercrombie supporters to win the support of several Republican lawmakers. Four of the Senate bill’s nine cosponsors are Republicans: Norm Coleman (Minnesota), Gordon Smith (Oregon), and both Alaska senators, Ted Stevens and Lisa Murkowski. Among the House bill’s seven cosponsors are two Republicans: Tom Cole (Oklahoma), and Don Young (Alaska).

Senator John Kyl (R-Arizona) is the Senate’s foremost opponent of the legislation. He calls it a “recipe for permanent racial conflict … motivated by a desire to immunize government preferences for Native Hawaiians from constitutional scrutiny.” Senator Lamar Alexander (R-Tennessee) said the legislation “is about sovereignty. It is about race. We are taking a step toward being a United Nations and not the United States.”

Contrary to an article in The Nation, the GOP presumptive presidential candidate, Senator John McCain of Arizona, does not support the bill (though in 2005 he did send out confusing signals about it). Democratic Senators Hillary Clinton and Honolulu-born Barack Obama both support it.

It should also surprise no one that Hawaii’s Kamehameha Schools, arguably the most powerful private entity in Hawaii, wants to safeguard its privileges and racially discriminatory admissions policy by supporting the measure the Akaka bill.

For more on the Akaka bill, the racial separatism of the Kamehameha Schools, and accusations of abuse of power that surround the Schools, read “Racial Separatism in the Aloha State: The Bishop Estate Trust and Hawaii’s Kamehameha Schools,” by Phil Brand, James Dellinger, and Karl Crow, which Capital Research Center (my employer) just published.

(crossposted at NewsBusters)

Yes, says Lynne Munson, a fellow at the Center for College Affordability and Productivity, writing in CRC’s Foundation Watch this month.

Even if Harvard gave all its undergraduates a free ride, the school wouldn’t come close to spending even half of the interest it is receiving on the aid-restricted portion of its endowment alone

Munson, a former deputy chairman at the National Endowment for the Humanities, is also quoted in Sunday’s New York Times story on donor restrictions on gifts to higher education. Munson rejects claims that the restrictions prevent colleges from spending more of their endowments on keeping down the cost of tuition.

 Congress is considering legislation to require colleges to spend at least five percent of their assets each year, a requirement similar to the law governing private foundations.