Noah Bierman of the Miami Herald reported yesterday that the Dr. Herbert & Nicole Wertheim Family Foundation had withdrawn a $20 million pledge...
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to Florida International University that was to fund a new planned medical school to be named after the foundation’s namesake. See Noah Bierman, Hurt Feelings Cost FIU Med School $20 Million, Miami Herald, November 10, 2006. We have to say, we are not particularly sympathetic to either side in this dispute. Yet, we acknowledge that the circumstances are most unfortunate.
According to a November 8, 2006 letter from Dr. Wertheim in his capacity as the chairman of the foundation, the foundation requested a change to the payment timetable because the foundation’s accountant had determined that Dr. Wertheim would lose “approximately $4-$6 million dollars of tax deductibility in the case of a single lump sum payment.” In his letter, Dr. Wertheim states:
One week after the trustees met and named the medical college in my honor, I called our accountants to be sure that all the tax matters were in order for the $20 million transfer to the FIU Foundation. At that time, they explained to me that I would lose approximately $4 million-$6 million dollars of tax deductibility in the case of a single lump sum payment.
The lesson for all donors who are contemplating major gifts: Do your tax planning before you make the commitment. A pledge is something that should not be approached lightly (not to suggest that the foundation did so).
We should note that there are circumstances that if present, would make us much more sympathetic to Dr. Wertheim. According to the Miami Herald article, Dr. Wertheim made the pledge in 2004. There could have been unexpected events during the intervening two years that might have adversely affected his tax situation. If that is the case, Florida International might have been more flexible; although a university official noted the lump sum payment was a “pivotal” aspect of the pledge because it allowed for a matching grant from the state. Dr. Wertheim indicated in his letter, however, that his proposed modified payment schedule wouldn’t have affected the matching grant and would have still provided the university with the money before needed.
On another score, Florida International University behaved in a “boorish” manner if the facts portrayed in the Miami Herald article and referred to in Dr. Wertheim's letter are as indicated. Specifically, Dr. Wertheim claimed in his letter that a university official told him that he got the naming rights “on the cheap,” with the official claiming, according to Dr. Wertheim, that the university could have sold the naming rights for “as much as $100 million.” For obvious reasons, that’s something that you simply don’t say to someone who has committed to a $20 million donation. That observation is particularly true in the case of Dr. Wertheim, who led the school’s first capital campaign, raising $204 million in four years. According to the Miami Herald article, that was four times the goal. Moreover, it appears that the $20 million was not his first donation to the school. The article doesn’t state the amount of his past contributions, but we suspect that those contributons were large given the fact that a conservatory, a performing arts center, and a lecture series are named after him (and in at least two cases, also his wife). Most importantly, the Miami Herald potrays Dr. Wertheim as a genuinely interested and passionate donor.
There is some indication that the parties may patch up their differences, particularly because Dr. Wertheim and the university’s president appear to have been good friends. Nevertheless, this sad story certainly holds lessons for charities about donor relations and perceptions. It also holds an important lesson for donors that their commitments are ones on which the charities are likely to rely.
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