Charity Governance

MADOFF TRUSTEE THROWS DOWN THE GAUNTLET: REGULATORS FACED WITH HARD CHOICE

DATELINE: September 1, 2009, Chicago

Well we wondered if this would happen.  Irving Picard, the bankruptcy trustee in the Bernard Madoff case, has indicated that charities that “benefited” from their participation in the Madoff Ponzi scheme may be asked to return the profits.  Amir Efrati, Trustee for Madoff Case May Seek Charity Gains, Wall St. J. (Sept. 1, 2009). Yes, you read that correctly.  Picard is now considering whether to exercise his clawback power.  Even though a charity may be out money in an absolute sense, it would be forced...

STOP WASTING MONEY: DEATH PANELS FOR NONPROFITS

DATELINE: August 20, 2009, Chicago

Larry Handfield, the interim chairman of the James E. Scott Community Association (known as JESCA) told the Miami Harold,   “This is the prudent thing to do…To stay in existence and not let 84 years be in vain.”  Matthew Haggman, Social Services Agency JESCA Files for Bankruptcy Protection (August 18, 2009).  Nonsense.  The Miami Herald’s story recounts a train wreck that appears to have been long in the making.  There is no reason to waste resources on this failed enterprise and doing so is not be prudent.  Liquidate it.

According to the Miami Herald, JESCA is one of South Florida’s oldest anti-poverty agencies.  That’s nice, but is it one of South Florida’s most effective agencies?  Sunk costs and time don't mean anything when it comes to making decisions about the future use of resources.  Longevity shouldn’t count for anything if a nonprofit isn’t doing the job.

The Miami Herald doesn’t talk about effectiveness, but given the financial stewardship, it is hard for us to believe that this was an agency that got results. JESCA filed bankruptcy on August 5, 2009, seeking to reorganize under Chapter 11.  We don’t think reorganization...

ANOTHER TERM THAT SHOULD GO IN PLEDGE AGREEMENTS: MORE LESSONS FROM BRANDEIS UNIVERSITY AND THE ROSE MUSEUM

DATELINE: August 5, 2009, Chicago

The ongoing controversy surrounding Brandeis University’s decision to close the Rose Art Museum continues to yield interesting tidbits.  On July 27. 2009,  Meryl Rose, Jonathan O. Lee, and Lois Foster filed lawsuit against Brandeis University in Supreme Judicial Court for Suffolk County.  The suit asks for somewhat open-ended relief.  Essentially, the court is asked to either...

A BAD BOY CLAUSE WON’T DO A BANKRUPT MUSUEM MUCH GOOD

DATELINE: April 3, 2009, Chicago

Stuart Pfeifer of the Los Angeles Times is reporting another sad story about a nonprofit that relied too heavily on a pledge that will most likely go unpaid.  Donor’s Legal Troubles May Force Museum into Bankruptcy.  The Children’s Museum of Los Angeles was relying on a $10 million pledge from one Bruce F. Friedman that he made last year.  The museum’s new facility was completed in 2007 so the pledge apparently was not for construction costs.  It appears that it was to be used to purchase exhibits and cover operating costs.

Unfortunately for the museum, the SEC recently filed a...

TO DREAM THE IMPOSSIBLE DREAM: BERNIE MADOFF AND THE WORLD OF PHILANTHROPY

DATELINE: December 14, 2008, Chicago (Updated Dec. 15, 2008)

For our December 16, 2008 post on Yeshiva University's Board of Trustees and the Madoff scandal, click here.

On our journey to New York this past weekend, we had the opportunity to see Horton Foote’s Dividing the Estate.  The ending is obvious and lacks punch, but everything that precedes it will bring knowing smiles from estate planning lawyers.  Probably the best part of the play was intermission, when we were eavesdropping on audience members who were talking tax and family.  We love war stories.

Our journey also provided us a front-row seat as the New York media buzzed...

ENDOWMENT, ENDOWMENT, AND ENDOWMENT: THE BALTIMORE OPERA COMPANY

DATELINE: December 10, 2008, Chicago

Tim Smith of the Baltimore Sun reported on December 8, 20008 that the 58-year old Baltimore Opera Company planned to file for Chapter 11 bankruptcy.  Baltimore Opera Co. To File For Bankruptcy, Cancel Remainder of Season.  It has now filed a petition.  Smith attributes the filing to “dwindling ticket sales and contributions."  That’s the immediate cause.  The real cause was...

“I’M IN DEBT UP TO MY EYEBALLS:” ARE CHARITIES BECOMING THE NEW STANLEY JOHNSONS?

Dateline, April 15, 2007, Chicago

We were amused by Jennifer Levitz's article in Saturday's Wall Street Journal, Hedge Funds Roil Charity Fundrasing-Raising. The headline characterizes the new involvement of hedge fund managers in philanthropy as "roiling," but we suspect many charities, after reading the article, are already looking for a hedge fund manager or two to sit on their boards. The attire worn at fundraising events may change from black-tie to drag, but the take from the event may jump from $200,000 to $1.8 million, as was the case with one charity mentioned in the article. The article does raise some interesting fundraising questions. Levitz writes about one instance where the new money told the old money that an annual...