Charity Governance

FROM T. BOONE PICKENS TO THE UNIVERSITY OF CHICAGO IN JUST ONE WEEK: ARE SENATORS BAUCUS AND GRASSLEY ALREADY CHANGING BEHAVIOR?

Dateline: May 31, 2007, Chicago

Last week we wrote an article about two $50 million gifts made by T. Boone Pickens to two institutions. Each gift carried the stipulation that the money could not be spent until the $50 million gift and the income thereon had grown to $500 million. Pickens clearly exhibited a preference to help future generations rather than the one that is currently alive.

Today, the Chicago Sun Times devoted a full page article to an anonymous University of Chicago alum's $100 million gift to the U of C. The article, by reporter Dave Newbart, is headlined "$100 Million Loan-Killer." The alum's gift can be viewed as the antithesis to T. Boone Pickens' gift. The Sun Times reports that the funds are to be used...

IS THE BAUCUS/GRASSLEY FIX IN? WE CERTAINLY HOPE SO

Dateline: May 30, 2007, Chicago

At the ABA's Exempt Organizations Committee meeting a couple of weeks ago, IRS officials were excited when they talked about the long-awaited revised Form 990. A draft is expected to hit the streets sometime in June, with the IRS asking that the public file comments before the end of summer. We wouldn't expect to see a new Form 990 for the 2007 tax year, but maybe one for 2008.

With so much attention on the nonprofit sector during the last five years, everybody is hoping that the revised Form 990 will provide far more insight into the finances and operations of nonprofit filers. We expect to see lots of comments from the public, including all the good governance folks.

That brings us to yesterday's....

T. BOONE PICKENS SHOULD DO WHAT HE WANTS, BUT WHAT HE DID HAS SOME INTERESTING IMPLICATIONS

Dateline, May 21, 2007, Chicago

Debra Blum of the Chronicle of Philanthropy reported last week that T. Boone Pickens gave Texas Southwestern Medical Center and M.D. Anderson Cancer Center each $50 million. Oil Tycoon Gives $100 Million—With Strings Attached, May 16, 2007. Hard to argue with his generosity, but it is worth noting that the each gift carried some unusual restrictions. Had we been either of these institutions, we would have...

MADDOX FOUNDATION SETTLEMENT: WINNER—SENATOR CHARLES GRASSLEY; LOSERS— JUDGE RANDALL KENNEDY AND THE PEOPLE OF TENNESSEE AND MISSISSIPPI

Dateline, May 19, 2007, Chicago

This past Friday, the Maddox Foundation litigation settled. Tennessee Attorney General Robert E. Cooper, Jr. and Nashville District Attorney General Tory Johnson have made a serious mistake in agreeing to this settlement, which takes place on the eve of a trial...

BULLETIN: MADDOX FOUNDATION LITIGATION MAY BE HEADED FOR SETTLEMENT

Dateline: May 16, 2007, Chicago

Richard Lawson of the Nashville Post reported yesterday that the battle over the Maddox Foundation assets may be headed toward a settlement.  Maddox Foundation Legal Battle Could Be Near Settlement, May 15, 2007.  According to Lawson, the costs of litigation have caused everyone to consider whether seeking a definitive court resolution of the dispute is worth the additional cost, particularly when there are likely to be appeals from any verdict.  Lawson reports that the parties may agree to a division of the assets, with some presumably returning to Tennessee and others staying in Mississippi.

Settlement is of course always an option in any litigation. Normally, we would not object to a settlement, but in this case will object strongly.  This is not simply a dispute between two parties to a business transaction.  There are serious allegations of misuse of charitable assets.   

Particularly troubling is the fact that millions of dollars have apparently been spent over the last several years by both sides to prepare the case for trial.  With a trial finally in sight, settlement makes little sense to us--yes, we know about sunk costs.  Those costs were foreseeable two years ago.  Consequently, there is little or no excuse for a decision to settle on the eve of a trial.

DOING GOOD MAY NOT BE ENOUGH: WHEN A NONPROFIT RELIES ON TAXPAYER MONEY, IT HAD BETTER KNOW THE RULES

Dateline: May 14, 2007, Chicago

Steve Bailey of the Boston Globe used his May 11, 2007 column to lament the closure of Environmental Careers Organization, a Boston-based nonprofit organization that channeled students and professionals to careers focused on protecting the environment.  The organization had been around for over 35 years, placing more than 10,000 people, according to Bailey.   ECO’s 2005 Form 990 indicates that  ECO received $377,908 in direct public support and over $13.4 million in program service revenue, including government fees and contracts.

Bailey is disturbed by the closure, which apparently stems from an investigation...

MAINE STATE SENATOR PREFERS WINDOW DRESSING OVER COMPETENCE: BILL TO LIMIT NONPROFIT SALARIES IS UNWISE (CHARITABLY SPEAKING)

Dateline: May 8, 2007, Chicago

The Kennebec Journal reported yesterday that Maine State Senator Elizabeth Schneider is sponsoring Senate Bill 1792, a bill that would limit compensation paid to the top executives of nonprofits if the nonprofit receives more than 25% of its funding from government sources, including the federal government and the State of Maine. The cap would be set at $250,000 per year, but excludes provision for a motor vehicle, insurance, and housing allowances.  Housing allowances are separately capped at $20,000 per year.  Interestingly, the cap only applies to officers and directors.  That would seem to exclude heart surgeons working for nonprofit hospitals.  Does it exclude the executive director if the director is an employee, but not an officer or director?  We assume the final version of the bill, if there is one, will do a better job of defining officer. 

We are a bit surprised by Senator Scneider's proposal. Why not set the cap at the level paid...

THE SIXTIES COUNTERCULTURE MEETS MONEY: NOW WE HAVE A FOURTH SECTOR

Dateline: May 8, 2007, Chicago

Stephanie Strom of the New York Times is well known as the beat reporter for nonprofits and charities, so imagine our surprise when we picked up last Sunday's Times and saw her byline in the business section. Make Money, Save the World: Businesses and Nonprofits are Spawning Corporate Hybrids, May 6, 2007. Hmm, a pinstripe suit and sandals. That picture, appearing above the article, immediately told us that Strom had not strayed far from her usual beat, although at first we thought we were reading the fashion section. She was focused on the latest rage to hit the nonprofit sector,...

AN ANSWER, MORE QUESTIONS: WILL INSURING THE LIVES OF ATHLETIC BOOSTERS PRODUCE THE SWEET SMELL OF LILACS?

Dateline: May 4, 2007, Chicago

World spreads fast.  Greetings to all our new visitors from the life insurance industry.  Feel free to drop us an e-mail.  We really want to understand the planned giving device that we wrote about yesterday.

To summarize, a number of university athletic departments are considering purchasing insurance on the lives of their boosters.  Apparently, at sometime in the future, these universities will sell these policies to settlement companies (viaticals).  Note, it is the university, not the booster, that pays the premiums on the insurance policies.  Although this arrangement might be characterized as a planned giving device, the booster receives no charitable contribution, unless the booster is donating the money to pay the annual premium.  As far as we can tell, that is not part of the plan.  Yesterday, we raised...

WE ARE PUZZLED BY BRAD WOLVERTON’S ARTICLE IN TODAY’S CHRONICLE OF HIGHER EDUCATION: BRAD TELL US MORE

Dateline: May 3, 2007, Chicago

Click here for a second and updated post.

Brad Wolverton of the Chronicle of Higher Education has written a fascinating article entitled Athletics Programs Consider Taking Out Life-Insurance Policies on Boosters appearing in today's Chronicle. Wolverton reports that at least 40 athletic departments are considering programs involving life insurance purchased on the lives of program boosters. The idea apparently originated with Oklahoma State University. According to Wolverton, the university secured...