DATELINE: March 24, 2008, Chicago
The Buffalo News is reporting that Paul and Irene Bogoni have filed suit against St. Bonaventure University after Mr. and Mrs. Bogoni refused to complete payments due under a $2 million pledge for the construction of an addition to the university's Friedsam Memorial Library. Jay Rey, St. Bonaventure Supporters Won't Pay All of Big Donation, Sue School, Mar. 20, 2008. Caroline Preston of the Chronicle of Philanthropy provides more details, reporting that St. Bonaventure asked the Mr. and Mrs. Bogoni for additional...
The Desktop Guide is Quickly Becoming the Must Have Guide for Nonprofit Executives
Some of our readers have followed the link to the Amazon.com Web site, but apparently have not bought the Guide. If they were turned off by the price, they should reconsider. One prominent attorney in the exempt organization field grabbed a review copy of the Guide and couldn't put it down. She has instructed a number of her clients to buy it, pointing out to them that for less than 1/2 hour of her billable time, they receive a lesson (and resource) that tells it like she would like it told. If you are starting a new charity, the Guide could save you thousands of dollars in legal fees by teaching you how to better utilize your legal counsel and framing the issues so you don't spin your wheels at $400 an hour. |
funds when the project exceeded the agreed upon budget. Donors Sue University Over $2-Million Pledge, Mar. 20, 2008. Whatever the outcome of the suit, the university plans to complete the addition which will house 9,000 rare books and manuscripts.
St. Bonaventure officials have described the lawsuit as "meritless," according to the Chronicle. Ultimately that could prove to be true, but what institution wants the adverse publicity? Equally important, what institution wants to anger a wealthy donor who might have been a repeat one? In short, disputes over pledges can prove costly to any institution, particularly when there is no evidence that the donors are simply reneging on the pledge.
Mr. Bogoni is a real-estate executive, so it comes as no surprise that he would want to see why the project went over budget. He and Mrs. Bogoni must have been surprised because they paid for a feasibility study in 2003. Mr. Bogoni claims that the university changed the scope of the project beyond what he and Mrs. Bogoni originally agreed to. In an apparent effort to assert pressure on the university, they are asking for the return of the $1.1 million that they have funded to date unless additional information is provided. The Bogonis also claim that the university misdirected a portion of a $1.5 million gift which the couple expected would be used to fund a center for geriatric studies, according to the Chronicle.
St Bonaventure claims that the Bognois wanted to deal with the university trustees on day-to-day issues rather than the university's president, according to a March 20th article in Inside Higher Ed entitled, Defaulting Donor or Unresponsive Donees. The university also claims that it has never been asked for the level of detail that Mr. and Mrs. Bogoni had requested.
The bigger question in this story: How can institutions avoid these sorts of problems? Here are a few steps that institutions might want to consider in the case of major gifts for the construction of buildings and other facilities:
- Each side should be represented by separate legal counsel.
- If the institution is unfamiliar with the donor, it should run a background check to make sure that the donor has the wherewithal to fulfill the pledge.
- The agreement should be in writing and state that it is legally binding.
- The parties should address feasibility studies, including who bears the cost and timing.
- The institution and the donor should each appoint a contact person to handle all questions from the other side.
- The agreement should indicate whether the institution or the donor will select the contractors and whether the other side has any veto rights. A timetable should be set for contractor selection. If the donor has input into the selection process, the parties should agree whether the contracts be subject to the institution's conflicts-of-interest policy.
- The agreement should provide for progress reports from the institution to the donor.
- The donor's spouse should execute the agreement.
- The agreement should address what happens if the donor cannot fulfill her obligations or dies before the pledge is paid in full. The agreement should make the donor's estate liable.
- At least a third of the pledged amount should be paid by the donor before the groundbreaking. Some would argue for a higher number. Payment should be limited to cash or readily-marketable securities. The parties should specify what happens if the securities decline in value before can be converted to cash.
- The pledge's payment schedule should correspond with budgeted draws under the construction contracts.
- Both sides should sign off on the plans before construction begins.
- The agreement should clearly address: (i) who is responsible for financing any cost over runs; and (ii) who approves changes in design and change orders
- The agreement should determine how project repair, upkeep, and maintenance costs will be financed. Are these the responsibility of the donor or the institution? In either case, will a separate endowment be required?
- The agreement should define what happens when the building must be replaced due to wear, tear, and obsolesce. Will the donor (or the donor's family and foundation) have a right of first refusal to replace it? If someone else funds the replacement, what honors will continue to flow to the donor, if any?
- The agreement should address whether the donor has any input following a partial or complete involuntary conversion. For example, if there is a fire, will the building be restored to original appearances or will architectural issues be re-assessed at the time?
- The agreement should specify what ceremonies will be held when the building is opened for use. It should also address who will pay those expenses and who will be invited. The parties should also address media coverage.
- The agreement should specify how the donor's name will be physically manifested. Removable signage or chiseled in stone? Plague information should also be agreed upon.
- The agreement should include a bad girl clause, defining what happens if the donor subsequently becomes a pariah—bad publicity, criminal conviction or immorality. Can the institution automatically remove the donor's name? If so, does the donor get her money back?
- The pledge agreement should provide for a non-judicial dispute resolution process.
Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.
THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL. If you liked this post, please visit http://www.charitygovernance.com for a description of our training and consulting services. You will also want to acquire a copy of Jack Siegel's book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good."
Copyright 2008, Charity Governance Consulting LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for re-posting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "A Guide for Non-Profit Directors, Officers and Advisors: Avoiding Trouble While Doing Good" and this web blog. For additional information call 773-325-2124
