Catalyst for Foundation Reform Dies

The death of financier Louis Wolfson, whose dubious foundation payments to Supreme Court Justice Abe Fortas led to the Justice’s resignation in 1969, was reported yesterday [and here]. Wolfson was appealing a conviction for securities fraud when the press revealed that Fortas had earlier accepted a lifetime annual payment of $20,000 from Wolfson’s foundation while his criminal behavior was under investigation. This was perceived as a preemptive bribe and provoked a great public outcry. Fortas resigned before Wolfson’s appeal reached the Supreme Court, where it was rejected.

In his book for Capital Research Center, Should Foundations Live Forever?, my colleague Martin Wooster points out that the Wolfson scandal  was one of the catalysts fror the Tax Reform Act of 1969. After much debate the Act required foundations to pay out a minimum annual distribution (originally 6 percent, later reduced to 5 percent), banned self-dealing and prohibited foundations from holding more than 20 percent of the stock of one corporation.

Wooster notes, “The Senate, but not the House, passed a rule that would have imposed a 40-year time limit on foundations. Foundations then existing would have been allowed to continue until 2009.  After a lobbying effort by foundations that historian Thomas C. Reeves calls the “most extensive publicity campaign in their history,” the government-mandated term limit was dropped in conference committee.” (p.11)

Today it takes an obituary to recall how a personal scandal affected the public policy treatment of private foundations forty years ago. But the news media is now reporting about the individuals, foundations and foreign governments that made gifts of over $1 million to the William J. Clinton Foundation, an adjunct to the Clinton presidential library, and wondering whether they might also be donors to the presidential campaign of Sen. Hillary Clinton. The Clinton foundation is citing its charity status in declining to reveal donors’ names.

Share this post!